<PAGE>
As filed with the Securities and Exchange Commission on September 2, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
MEDIAPLEX, INC.
(Exact name of Registrant as specified in its charter)
----------------
<TABLE>
<S> <C> <C>
Delaware 7372 94-3295822
(State or other jurisdiction
of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
131 Steuart Street, Fourth Floor
San Francisco, California 94105-1230
(415) 808-1900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
Gregory R. Raifman
Chairman and Chief Executive Officer
Mediaplex, Inc.
131 Steuart Street, Fourth Floor
San Francisco, California 94105-1230
(415) 808-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
Aaron J. Alter, Esq. Laird H. Simons, III, Esq.
Tamara G. Mattison, Esq. Robert A. Freedman, Esq.
Linda M. Cuny, Esq. R. Gregory Roussel, Esq.
Robert E. Dawson, Esq. Fenwick & West LLP
Wilson Sonsini Goodrich & Rosati Two Palo Alto Square
Professional Corporation Palo Alto, California 94306
650 Page Mill Road (650) 494-0600
Palo Alto, California 94304-1050
(650) 493-9300
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1) Registration Fee
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.0001 par value............. $70,000,000.00 $19,460
- -----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in the prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated September 2, 1999
PROSPECTUS
Shares
[LOGO OF MEDIAPLEX]
Common Stock
- --------------------------------------------------------------------------------
This is our initial public offering of shares of common stock. We are
offering shares. No public market currently exists for our shares.
We propose to list the shares on the Nasdaq National Market under the symbol
"MPLX." Anticipated price range of $ to $ per share.
Investing in the shares involves risks. "Risk Factors" begin on page 7.
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discount............................................... $ $
Proceeds to Mediaplex............................................... $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to
additional shares of common stock on the same terms and conditions as
set forth above solely to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Lehman Brothers expects to deliver the shares on or about , 1999.
- --------------------------------------------------------------------------------
Lehman Brothers
SG Cowen
U.S. Bancorp Piper Jaffray
, 1999
<PAGE>
[INSIDE FRONT COVER OF PROSPECTUS]
[Graphics of MOJO application appears here]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Selected Pro Forma Financial Data........................................ 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business................................................................... 32
Management................................................................. 46
Related Party Transactions................................................. 55
Principal Stockholders..................................................... 57
Description of Capital Stock............................................... 59
Shares Eligible for Future Sale............................................ 62
Underwriting............................................................... 64
Legal Matters.............................................................. 66
Experts.................................................................... 66
Where You Can Find Additional Information.................................. 66
Index to Financial Statements.............................................. F-1
</TABLE>
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We 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 common stock.
This preliminary prospectus is subject to completion prior to this offering.
Among other things, this preliminary prospectus describes our company as we
currently expect it to exist at the time of this offering.
See the section of this prospectus entitled "Risk Factors" for a discussion
of various factors that you should consider before investing in the common
stock offered by this prospectus.
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere in this prospectus are
forward-looking statements. These forward-looking statements include, but are
not limited to, statements about our plans, objectives, expectations and
intentions and other statements contained in the prospectus that are not
historical facts. When used in this prospectus, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks" and "estimates" and
similar expressions are generally intended to identify forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements, including our plans, objectives, expectations and intentions and
other factors discussed under "Risk Factors."
Mediaplex(TM), MOJO(TM), the Mediaplex logo, Storyboard Messaging(TM),
Multiple Messaging(TM) and eBusiness Messaging(TM) are our trademarks. We have
applied to register Mediaplex and MOJO. All trademarks and trade names
appearing in this prospectus are the property of their respective holders.
Until , 1999, all dealers selling shares of the common stock, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and the financial statements and notes to those statements appearing
elsewhere in this prospectus.
Except as otherwise indicated, all information in this prospectus assumes
that the underwriters do not exercise the option granted by Mediaplex to
purchase additional shares in this offering, assumes the conversion of all of
our preferred stock into common stock upon the closing of this offering, and
reflects our reincorporation into Delaware to be effected prior to the
effectiveness of this offering. See "Underwriting."
Mediaplex
We provide technology-based eBusiness marketing solutions that enable
advertisers to optimize their online marketing efforts. eBusiness marketing
allows companies to combine their online direct marketing and branding
activities with critical enterprise business data in order to effectively use
the Internet to manage and transact business. Our services encompass the
planning, execution, monitoring and analysis of advertising campaigns over the
Internet. Our proprietary mobile Java objects technology platform, MOJO,
enables advertisers to deliver, in real time, customized advertising messages
to a targeted consumer. Our MOJO platform interfaces with companies' existing
enterprise data and software applications to access critical business
information that is used to customize the advertising message. We believe
customized, real-time messaging will increase the consumer response to online
advertisements, thereby improving the return on advertising spending. Our
services are offered as a comprehensive solution, or individually as part of a
complementary service in partnership with other advertising and technology
providers.
The rapid growth in the worldwide online population and e-commerce spending
has established the Internet as an important advertising medium. Forrester
Research, Inc. anticipates that U.S. online advertising spending will grow from
$2.8 billion in 1999 to $17.2 billion in 2003. We believe online advertising
spending will increase even more dramatically as new technologies improve the
effectiveness of online advertising and attract more traditional media
advertisers to the Internet.
We believe we are the first company to offer a complete eBusiness marketing
solution that integrates a company's enterprise software applications and
business data with its online advertising campaign to deliver the most
relevant, customized message to a targeted consumer in real time. Our
technology-enabled solution provides the following benefits:
. Comprehensive Online Advertising Campaigns. We provide a full range of
online advertising campaign services including strategic planning,
consumer targeting, media buying, ad serving, and measurement and
reporting of results.
. Real-Time Tracking and Measuring of Campaign Results. We monitor multiple
performance metrics in real time and provide Internet access to
performance reports 24 hours a day.
. Sophisticated Data Capture and Analysis. Using our data capture
capabilities and those of our strategic partners to target and re-target
consumers, we match advertiser-related profiles with audience profiles
based on geographic, demographic, psychographic and site visitation
information.
. Real-Time Messaging. We can change the graphics, content and site
placement of online advertisements in real time. This enables a company
to tailor a message based on predefined parameters and a consumer's
profile in order to deliver the most relevant message.
. Integration of Enterprise Business Information. Our MOJO technology
enables us to integrate business information with an online advertising
campaign to dynamically tailor and deliver advertisements based on
consumer profiles and relevant business information such as inventory and
pricing levels.
3
<PAGE>
Our objective is to be the preeminent eBusiness marketing solution provider.
The principal elements of our strategy are as follows:
. Target Global 1000 and e-Commerce Companies and Advertising Agencies. We
can provide significant benefits to large companies that require online
advertising management and technology expertise for the Internet medium
and are looking to implement an eBusiness strategy. We also intend to
target companies that rely on the Internet to conduct electronic
commerce, and traditional advertising agencies that require critical
online media technology expertise.
. Maintain Technology Leadership. Our proprietary MOJO technology platform
is a key competitive differentiator that we intend to extend by
incorporating additional functionality and services.
. Enhance Sales Capabilities Through Strategic Relationships. We plan to
broaden our strategic relationships, such as those with online
advertising service providers, online strategy consultants and enterprise
software consultants, to extend our market penetration and the acceptance
of our MOJO technology.
. Deliver Flexible Online Marketing Solutions. We can unbundle our
technology services to expand our revenue sources by partnering with
other online advertising and technology providers, such as with our
partner, DoubleClick, to deliver complementary products.
. Broaden International Presence. We plan to continue to expand our
international presence to capitalize on the global reach and acceptance
of the Internet.
Our clients include DATEK Online Brokerage Services, Corp., OfficeMax,
ShopNow.com, Strong Funds, and advertising agencies including McCann-Erickson
and Publicis & Hal Riney, which use our services on behalf of their clients
such as Hewlett-Packard, Siebel Systems, Silicon Graphics, Inc. and Sprint PCS.
We currently generate the majority of our revenues from advertising campaign
management services. We have completed live testing of the enterprise
integration components of our MOJO technology and expect to quickly roll-out
new services based on this technology. Our accumulated deficit as of June 30,
1999 was $8.6 million. In addition, we had net losses of approximately
$2.0 million in 1998 and $5.2 million in the six months ended June 30, 1999.
We were incorporated in California in September 1996 as Internet Extra
Corporation. On April 1, 1998, we set up a wholly-owned subsidiary, MediaPlex,
Inc., a California corporation, to carry out our current business. We expect to
merge MediaPlex, Inc. with Internet Extra Corporation and reincorporate the
merged entity under the name "Mediaplex, Inc." in Delaware in September 1999.
Our principal executive offices are located at 131 Steuart Street, Fourth
Floor, San Francisco, California 94105-1230 and our telephone number is (415)
808-1900. Our Web site is located at www.mediaplex.com. Information contained
on our Web site does not constitute part of this prospectus.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by Mediaplex..... shares
Common stock outstanding after the
offering............................. shares
Use of proceeds....................... We estimate that we will receive net
proceeds from this offering of
$ , or $ if the
underwriters exercise their over-
allotment option in full. We expect to
use the net proceeds for general
corporate purposes, including working
capital and potential acquisitions. See
"Use of Proceeds."
Proposed Nasdaq National Market
symbol............................... "MPLX"
</TABLE>
In addition to the shares of common stock outstanding after the
offering, as of the closing of this offering and based on the number of shares
issued and options and warrants granted as of June 30, 1999, we expect to have
issue additional shares of common stock available for issuance under the
following plans and arrangements:
. 12,243,000 shares issuable under our stock plans, consisting of:
. 8,625,698 shares underlying options outstanding at a weighted average
exercise price of $0.56 per share, of which 4,077,687 were exercisable;
and
. 3,617,302 shares available for future issuance;
. 875,000 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $0.97 per share; and
. 400,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan.
5
<PAGE>
Summary Financial Data
The following table is a summary of our statement of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The financial results for the six months ended June 30, 1998 are
unaudited.
<TABLE>
<CAPTION>
September 10, Years Ended Six Months
1996 (inception) December 31, Ended June 30,
to December 31, -------------------- ---------------------
1996 1997 1998 1998 1999
---------------- --------- --------- --------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ -- $ 426 $ 3,588 $ 1,522 $ 7,323
Gross profit (loss)..... -- (19) 817 309 1,562
Loss from operations.... (255) (1,115) (1,772) (782) (5,200)
Net loss................ (255) (1,117) (2,019) (1,016) (5,186)
Net loss per share--
basic and diluted...... $(0.07) $ (0.13) $ (0.25) $ (0.11) $ (0.43)
Weighted average shares
outstanding............ 3,795,714 8,457,464 8,186,127 9,408,557 12,070,449
Pro forma net loss per
share-basic and
diluted................ $(0.25) $(0.38)
Shares used in pro forma
net loss per share
calculation--basic and
diluted................ 8,186,127 13,501,001
</TABLE>
The following table is a summary of our balance sheet as of June 30, 1999.
The pro forma column reflects the sale of 4,000,000 shares of our convertible
preferred stock in August 1999 for gross proceeds of $14.4 million and the
conversion of all outstanding shares of preferred stock into common stock upon
the closing of this offering. The pro forma as adjusted column also reflects
our receipt of the estimated net proceeds from the sale of the shares of
common stock offered in this offering at an assumed initial public offering
price of $ per share after deducting the estimated underwriting discount
and offering expenses payable by us. See "Use of Proceeds" and
"Capitalization."
<TABLE>
<CAPTION>
As of June 30, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 7,602 $22,002
Working capital................................... 5,120 19,520
Total assets...................................... 15,430 29,830
Long-term debt.................................... 373 373
Total stockholders' equity........................ 8,623 23,023
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making a
decision to buy our common stock. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occurs, our business could
be harmed. In that case, the trading price of our common stock could decline,
and you might lose all or part of your investment. You should also refer to the
other information set forth in this prospectus, including our financial
statements and the related notes.
We Have Only a Short Operating History, Making It Difficult for You to Evaluate
Our Business and Your Investment
We have only a limited operating history upon which you can evaluate our
business. Our business model is evolving and relies substantially upon the sale
of advertising on the Internet. Our prospects for financial and operational
success must be considered in light of the risks, expenses, delays and
difficulties frequently encountered by early-stage companies in the Internet
advertising market, many of which may be beyond our control. These risks
include our ability to:
. purchase appropriate media space at reasonable costs;
. attract new advertisers and maintain current client relationships;
. achieve effective ad campaign results for our clients;
. develop new relationships and maintain existing relationships with
advertising agencies, our marketing alliance partners and other third
parties;
. continue to develop and upgrade our MOJO and other technology to keep
pace with the growth of the Internet advertising industry and changes in
technology; and
. continue to expand the number of services we offer.
If we do not successfully address these risks, our business, results of
operations and financial condition could be harmed.
We Have a History of Losses and Anticipate Continued Losses
Our accumulated deficit as of June 30, 1999 was approximately $8.6 million.
For the year ended December 31, 1998 and the six months ended June 30, 1999, we
incurred losses of $2.0 million and $5.2 million, respectively. We have not
achieved profitability in any period to date and, given the level of planned
operating and capital expenditures, we expect to continue to incur losses and
negative cash flows for the foreseeable future. If our revenues grow more
slowly than we anticipate, or if our operating expenses exceed our expectations
and cannot be adjusted accordingly, our business will be harmed.
Our Quarterly Operating Results Are Subject to Fluctuations and Seasonality
Which May Cause Our Stock Price to Decline
It is possible that in future periods our results of operations will be below
the expectations of securities analysts. If so, the market price of your shares
would likely decline. Our quarterly operating results have fluctuated in the
past and are likely to continue to do so in the future. We believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance and should not be relied upon to predict
our future performance or our stock price.
We believe that our revenues will be subject to seasonal fluctuations because
advertisers generally place fewer advertisements during the first and third
calendar quarters of each year. In addition, expenditures by
7
<PAGE>
advertisers tend to be cyclical, reflecting overall economic conditions as well
as budgeting and buying patterns. A decline in the economic prospects of
advertisers or the economy generally could cause companies to discontinue,
delay or reduce online advertising spending. These events could harm our
business.
In addition, we derive a significant portion of our revenues from the sale of
advertising services under short-term advertising campaign management
contracts. These contracts are generally cancelable upon 30 days' or less
notice. The non-renewal, cancellation or deferral of existing advertising
contracts or the failure to obtain new advertising contracts in any quarter
could severely harm our results of operations and financial condition for that
quarter.
Our quarterly revenues, expenses and operating results could vary
significantly from quarter-to-quarter for several other reasons, many of which
are beyond our control. These factors include:
. demand for our advertising solutions and mix of advertisements sold;
. commitment of advertisers to Internet advertising generally;
. addition of new or loss of current advertisers and advertising agencies;
. timing variations on the part of advertisers or advertising agencies to
implement campaigns;
. deployment of new services we may offer;
. changes in availability and pricing of advertising space;
. changes in our pricing policies or the pricing policies of our
competitors; and
. costs related to acquisitions of technology or businesses.
Our current and future expense estimates are based, in large part, on
estimates of future revenues, which are difficult to predict, and on our
investment plans. In particular, we plan to increase our operating expenses
significantly in order to expand our sales and marketing operations, to enhance
our proprietary software and to expand internationally. We may be unable to, or
may elect not to, adjust spending quickly enough to offset any unexpected
revenues shortfall. If these expenses are not accompanied by increased
revenues, our results of operations and financial condition would be harmed.
We Rely on a Limited Number of Clients, and the Loss of a Major Client Could
Significantly Reduce Our Revenues
Our revenues have been derived from a limited number of advertisers and
advertising agencies that use our services. In 1998, DATEK Securities, Inc. and
uBid accounted for approximately 56% and 21% of our revenues, respectively. In
the first half of 1999, DATEK Online Brokerage Services, Corp., Publicis & Hal
Riney and uBid accounted for approximately 15%, 10% and 10% of our revenues,
respectively, and five of our clients accounted for approximately 68% of our
total revenues. In addition, four customers accounted for 76% of our
outstanding accounts receivable at December 31, 1998 and three customers
accounted for 48% of our outstanding accounts receivable at June 30, 1999. We
expect that some of these entities may continue to account for a significant
percentage of our revenues for the foreseeable future. Advertisers typically
purchase advertising that runs for a limited time. Current advertisers may not
continue to purchase advertising from us or we may not be able to successfully
attract additional advertisers. Consequently, our quarterly and annual results
of operations would be harmed by the loss of any of these clients. In addition,
the non-payment or late payment of amounts due to us from a significant
advertiser or ad agency could harm our financial condition.
If We Fail to Establish, Maintain and Expand Our Alliances with Business and
Marketing Partners, Our Ability to Grow Could Be Limited
In order to grow our business, we must generate, retain and strengthen
successful strategic alliances with companies in industries including:
. Internet and traditional media advertising, such as DoubleClick and
Publicis & Hal Riney;
8
<PAGE>
. enterprise software, such as SAP Labs;
. Web site development and consulting, such as Icon Medialab; and
. information technology consultants.
We depend, and expect to continue to depend, on these partners to refer
business from their clients and customers to us. We currently expect that a
significant amount of our future revenues will need to be generated through
these relationships. If our strategic alliances and partners do not refer their
clients and customers to us to do their online campaign management or banner
serving, our revenues and results of operations would be severely harmed. In
addition, if our partners do not provide high quality products and services to
our mutual clients, our sales could suffer. We have little control over the
amount of resources these companies will devote to online advertising or
referring their clients to our services. We may not be able to generate and
maintain adequate strategic relationships to offset the significant resources
that are necessary to develop marketing efforts to reach clients of our
strategic alliances.
Our MOJO Technology Is Relatively New and Untested; If Our MOJO Technology Does
Not Perform as Anticipated, Our Business Will Be Harmed
Our MOJO technology is complex and has had, and may have in the future,
errors, defects or performance problems. In particular, we may encounter
problems when it is more broadly used or when it is updated to expand and
enhance its capabilities. Although we have internally tested our MOJO
technology extensively, we have deployed it with only a few select clients to
date. Consequently, our technology may still malfunction or suffer from design
defects. If our technology malfunctions or contains such defects, our services
may not be reliable or compatible in certain online environments used by our
clients. In such instances, we would need to devote significant resources to
address these defects, and any problems could result in lost revenues and
damage to our reputation.
If Our MOJO Technology Suffers From Design Defects, We May Be Subject To
Product Liability Claims
Our business will be harmed if our MOJO technology suffers from design
defects and, as a result, we become subject to significant product liability
claims. Technology as complex as ours may contain design defects which are not
detectable even after extensive internal testing. Such defects may become
apparent only after widespread commercial use. Our contracts with our clients
currently do not contain provisions to limit our exposure to liabilities
resulting from product liability claims. We currently do not carry any
insurance against product liabilities. Although we have not experienced any
product liability claims to date, we cannot assure you that we will not do so
in the future. Any product liability claim brought against us could materially
harm our business.
If We Fail to Effectively Manage Our Growth, Our Ability to Capture New
Business Could Suffer
We have grown significantly since our inception and expect to grow quickly in
the future. As we continue to increase the scope of our operations, we will
need an effective planning and management process to implement our business
plan successfully in the rapidly evolving market for Internet advertising. Our
failure to manage this growth could seriously harm our business. We have
increased our number of employees from 7 at September 30, 1998 to 100 at August
31, 1999. In addition, we have recently opened a sales office in Germany and we
anticipate that we will further expand international operations in late 1999.
Future expansion could be expensive and strain our management and other
resources. In order to effectively manage growth, we must:
. hire, train and integrate new personnel;
. augment our financial and accounting systems;
. expand and manage our sales operations, which are in several locations;
and
. expand our facilities.
9
<PAGE>
The Loss of Key Personnel or Any Inability to Attract and Retain Additional
Personnel Could Harm Our Future Success
Our future success depends to a significant extent on the continued service
of our key senior management, technical and professional service and support
personnel. The loss of the services of any member of our management team or
certain other key employees would harm our business. Because many of our
executives, including our chief financial officer, have only recently joined
us, our management team has only worked together for a short time and may not
work effectively together. We would also be harmed if one or more of our
officers or key employees decided to join a competitor or otherwise compete
with us.
Our future success also depends on our continuing ability to attract, retain
and motivate highly skilled employees. Competition for qualified personnel in
the high technology industry is intense, particularly in the San Francisco Bay
region of Northern California, where our principal offices are located. If we
fail to hire and retain a sufficient number of sales, marketing, technical,
service and support personnel, we will not be able to maintain or expand our
business.
Our Sales and Implementation Cycle is Lengthy and Subject to Delays, Which
Could Result in Delayed Revenues
If the sales and implementation cycle of our services is delayed, our
revenues will likewise be delayed. Our sales and implementation cycle is
lengthy, causing us to recognize revenues long after our initial contact with a
client. During our sales effort, we spend significant time educating
prospective clients on the use and benefit of our campaign management
solutions. As a result, the sales cycle for our products and services is long,
ranging from a few weeks to several months for our larger clients. The sales
cycle for new sophisticated enterprise-based services is likely to be longer
than the sales cycle for our other current campaign management services because
we believe that clients may require more extensive approval processes related
to integrating enterprise business data with their online advertising
campaigns. In addition, in order for a client to implement our services, the
client must commit a significant amount of resources over an extended period of
time. Furthermore, even after a client purchases our services, the
implementation cycle is subject to delays. These delays may be caused by
factors within our control, such as possible technology defects, as well as
those outside our control, such as clients' budgetary constraints, internal
acceptance reviews and the complexity of clients' online advertising needs.
If We are Unable to Develop Relationships with Suppliers of Profiling Services
or Obtain or Develop Profiling Technology, Our Ability to Attract New Clients
and Retain Our Existing Clients Could be Harmed
In order for our solution to gain market acceptance, we must be able to
leverage the technology of third-party vendors who successfully implement
sophisticated targeting solutions. Our solution depends upon the proven or
perceived success of third-party profiling technologies that can identify the
particular audience to be targeted with an advertising message. If we are
unable to develop relationships with suppliers of profiling services or obtain
or develop profiling technology, our clients will not be able to realize the
full potential that our services and technology offer. As a result, our ability
to attract new clients will be hampered and we may lose clients demanding a
more complete solution. We cannot assure you that we can partner with companies
to provide profiling services and technology, or obtain and develop this
technology in a cost-effective and timely manner, if at all.
Future Restrictions or Regulations Related to Privacy Concerns and Inadequate
Security on the Internet Could Limit the Effectiveness of Our Services and
Technology
The effectiveness of our services and technology rely on the effectiveness of
techniques for profiling Internet users, which may raise privacy concerns. Due
to privacy concerns, some Internet commentators, advocates and governmental
bodies have suggested that the use of some of these techniques for profiling
users
10
<PAGE>
be limited or eliminated altogether. It is possible in the future that federal,
state or other governmental entities may restrict the gathering and use of such
profile information. If the gathering of profiling information were to be
curtailed in any way, our services would be less effective, which would harm
our business.
The effectiveness of our MOJO technology depends upon the utilization of user
profile data collected by our clients. Our clients generally have implemented
security features to protect the privacy and integrity of the data collected
from their users. However, this data may be susceptible to hacker interception,
break-ins and disruption. If any of these were to occur, or if a well-
publicized compromise of security were to occur, Internet usage may not
increase at the rate we expect and consequently, our services would be
perceived as less effective or desirable by our clients.
The European Union has recently adopted a directive addressing data privacy
that may result in limitations on the collection and use of certain information
regarding Internet users. These limitations may limit our ability to target
advertising or collect and use information in most European countries.
Our Business Model Depends Upon Broad Market Acceptance of Internet Advertising
Our business model is to generate revenues primarily by providing Internet
advertising solutions to response-oriented advertisers. The Internet as an
advertising medium has not been in existence for a sufficient period of time to
demonstrate its effectiveness. Internet banner advertising, response-oriented
marketing and other types of Internet advertising, as well as technology-based
methods for targeting advertising and tracking, measuring and reporting the
results of Internet advertising may not achieve broad market acceptance. Our
ability to generate significant revenues from advertisers will depend, in part,
on our ability to:
. demonstrate to advertisers that banner advertising and direct response
advertising on the Internet will add value and increase marketing
effectiveness;
. attract and retain advertisers and advertising agencies by
differentiating the services and technology we offer; and
. obtain adequate available advertising inventory from a large base of
Internet sites.
There are filter software programs available that limit or prevent
advertising from being delivered to a user's computer. The commercial viability
of Internet advertising would be limited by widespread adoption of these
programs.
Intense Competition in the Internet Advertising Industry Could Reduce Our
Ability to Gain Clients and May Require Us to Reduce Prices, Which Could Harm
Our Revenues
We face intense competition in the Internet advertising services industry. We
primarily compete with companies that provide online media buying and planning,
ad serving companies, advertising networks which provide services directly to
clients, advertising agencies with in-house online media management
capabilities and organizations that manage affiliate programs.
We believe that our ability to compete depends upon many factors both within
and outside of our control, including:
. the effectiveness, ease of use, performance and features of our
technology;
. client perceptions of the effectiveness of our services and technology;
. the price of our services;
. our ability to service our clients effectively over a broad geographic
basis; and
. the timing and acceptance of new solutions and enhancements to existing
solutions developed by us or our competitors.
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<PAGE>
The intense competition among Internet sites has led to the creation of a
number of pricing alternatives for Internet advertising. These alternatives
make it difficult for us to project future levels of advertising revenues and
applicable gross margins that can be sustained either by us or the Internet
advertising industry in general.
We expect competition to continue to increase in our industry because there
are no substantial barriers to entry. Competition may also increase as a result
of industry consolidation. Companies doing business on the Internet, including
ours, must also compete with television, radio, cable and print media for a
share of advertisers' total advertising budgets. Advertisers may be reluctant
to devote a significant portion of their advertising budget to Internet
advertising if they perceive the Internet to be a limited or ineffective
advertising medium. In addition, as we expand the scope of our Internet
advertising and direct marketing services, we may compete with a greater number
of Internet sites and other media companies across a wide range of different
Internet services. Competitive pressures could prevent us from growing, reduce
our market share or require us to reduce prices on our solutions, any of which
could harm our business.
Many of our existing competitors have significantly greater financial,
technical, marketing, service and other resources, have a larger installed base
of users, have been in business longer or have greater name recognition than we
do. Some of our competitors' services may be more effective than our services
at performing particular functions or be more customized for particular needs.
Some large companies may attempt to build functions into their solutions that
are similar to functions of our solutions. Even if these functions are more
limited than those provided by our solutions, those solutions could discourage
potential clients from purchasing our solutions, as well as lead to price
reductions that could harm our revenues. In addition, companies larger than
ourselves may be more successful in purchasing advertising space.
Sustained or Repeated System Failures Could Significantly Affect Our Operations
and Lead to Client Dissatisfaction
The continuing and uninterrupted performance of our computer systems is
critical to our success. Our operations depend on our ability to protect our
computer systems against damage from fire, power loss, water damage,
telecommunications failures, viruses, vandalism and other malicious acts, and
similar unexpected adverse events, including earthquakes. Clients may become
dissatisfied by any system failure that interrupts our ability to provide our
services to them, including failures affecting the ability to deliver
advertisements quickly and accurately to the targeted audiences. Sustained or
repeated system failures would reduce significantly the attractiveness of our
solutions to advertisers.
In addition, interruptions in our solutions could result from the failure of
our telecommunications providers to provide the necessary data communications
capacity in the time frame required. Our ad network operations and MOJO
computer hardware is primarily housed at Verio, Inc. and AboveNet
Communications, Inc., third-party providers of Internet communication services
located in San Francisco and San Jose, California, respectively. In addition,
the failure of any advertising server system such as ours or DoubleClick's,
including failures that delay the delivery of advertisements to Internet sites,
could reduce client satisfaction and severely harm our business, results of
operations and financial condition.
We also depend upon Internet browsers and Internet service providers that
provide consumers with access to our products and services. In the past, users
have occasionally experienced difficulties due to software incompatibility or
system failures unrelated to our systems. Any disruption in the Internet access
provided by third-party providers or any failure of third-party providers to
handle higher volumes of user traffic could seriously harm our business,
results of operations and financial condition.
We May Experience Capacity Constraints That Could Reduce Our Advertising
Revenues
An increase in the volume of advertising delivered through our servers could
strain the capacity of our MOJO technology platform, which could lead to slower
response times or system failures. This would adversely affect the availability
of advertisements, the number of impressions received by advertisers and our
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<PAGE>
advertising revenues. If we do not effectively address capacity constraints or
system failures, our business, results of operations and financial condition
would be harmed.
Acquisitions or Strategic Investments May Divert Our Management Attention and
Consume Resources
In March 1999, we acquired Netranscend Software, Inc., a Java-based
enterprise automation solutions software company. We intend to continue
pursuing selective acquisitions of businesses and technologies to complement
our current business. Any future acquisition or investment may result in the
use of significant amounts of cash, potentially dilutive issuances of equity
securities, incurrence of debt and amortization expenses related to goodwill
and other intangible assets. In addition, acquisitions involve numerous risks,
any of which could harm our business, operating results or financial conditions
including:
. difficulties in the integration and assimilation of the operations,
technologies, services and personnel of an acquired business;
. diversion of management's attention from other business concerns;
. availability of favorable financing for future acquisitions; and
. potential loss of key employees in any acquired business.
Potential Clients in Similar Industries May Require Us to Contract With Them
Exclusively, Limiting Our Business Opportunities
To use our services more effectively, advertisers may integrate their
enterprise business information into their advertising campaigns to deliver a
targeted message. To accomplish this task, we must have access to their
proprietary enterprise data. Many companies are wary of third parties having
access to their enterprise business information, because access by third
parties increases the risk that confidential enterprise data may become known,
even if unintentionally, to outsiders that are not the intended recipients of
the data. These privacy concerns may be so great as to prompt our clients to
attempt to contractually prohibit us from managing the online advertising
campaigns of their competitors. If our potential client base in a particular
industry was limited in this way, our business and future revenues could be
harmed.
Our Patent Application Related to Our MOJO Technology is Pending and May Not
Issue
In July 1999, we filed a patent application related to our key proprietary
technology platform, MOJO, with the U.S. Patent and Trademark Office. Our
application is subject to current review by the U.S. Patent and Trademark
Office and we have no assurance that a patent will issue. If no patent issues
we will rely primarily on trade secret law to protect our MOJO technology,
which may be more difficult to monitor and enforce. Even if we are issued a
patent, third parties could successfully design around the patent to offer a
competing service and we will still be subject to claims of infringement from
third parties.
We Must Keep Pace with Rapidly Changing Internet Advertising Technologies to be
Successful
The Internet advertising markets are characterized by rapidly changing
technologies, evolving industry standards, frequent new product and service
introductions and changing client demands. The introduction of new products and
services embodying new technologies and the emergence of new industry standards
and practices could render our existing products and services obsolete and
unmarketable or require unanticipated investments in research and development.
Our failure to adapt successfully to these changes could harm our business,
results of operations and financial condition.
Our future success will depend on our ability to adapt to rapidly changing
technologies, to enhance existing solutions and to partner or develop and
introduce a variety of new solutions to address our clients' changing demands.
For example, advertisers may require the ability to deliver advertisements
utilizing new rich media formats and more precise consumer targeting
techniques. In addition, increased availability of broadband
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<PAGE>
Internet access is expected to enable the development of new products and
services that take advantage of this expansion in delivery capability. We may
also experience difficulties that could delay or prevent the successful design,
development, introduction or marketing of our solutions. In addition, any new
solutions or enhancements that we develop must meet the requirements of our
current and prospective clients and must achieve significant market acceptance.
Material delays in introducing new solutions and enhancements may cause clients
to forego purchases of our solutions and purchase those of our competitors.
A key component of our strategy is to enhance the return on investment and
other performance measurements for our advertiser and advertising agency
clients. We have limited experience in implementing and following such a
strategy and this strategy may not succeed.
We Plan to Expand Internationally, Exposing Us to New Risks
We opened a sales office in Germany in August 1999 and expect to initiate
operations in selected additional international markets in the second half of
1999. Expansion into international markets will require extensive management
attention and resources. We also may enter into a number of international
alliances as part of our international strategy and rely extensively on these
business partners to conduct operations, establish local networks, aggregate
Internet sites and coordinate sales and marketing efforts. Our success in such
markets will depend on the success of our business partners and their
willingness to dedicate sufficient resources to our relationships.
International operations are subject to other inherent risks, including:
. difficulties and costs of staffing and managing foreign operations;
. seasonal reductions in business activity;
. the impact of recessions in economies outside the United States;
. changes in regulatory requirements;
. export restrictions, including export controls relating to encryption
technology;
. reduced protection for intellectual property rights in some countries;
. potentially adverse tax consequences;
. political and economic instability;
. tariffs and other trade barriers; and
. fluctuations in currency exchange rates.
Our failure to address these risks adequately may severely harm our business.
Third Parties May Claim That We Are Infringing Their Intellectual Property,
Causing Us to Suffer Significant Expenses or Be Prevented From Selling Our
Products
Third parties may claim that we are infringing their intellectual property
rights. While we do not believe that our technology infringes the proprietary
rights of third parties, we may be unaware of intellectual property rights of
others that may cover some of our technology.
Any litigation regarding our intellectual property could be costly and time-
consuming and divert the attention of our management and key personnel from our
business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require us to enter into royalty
or license agreements; however, we may not be able to obtain royalty or license
agreements on terms acceptable to us, or at all. We also may be subject to
significant damages or an injunction against the use of our products. A
successful claim of patent or other intellectual property infringement against
us would immediately harm our business and financial condition.
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<PAGE>
We May Not Be Able to Protect Our Technology From Unauthorized Use, Which Could
Diminish the Value of Our Products and Services
Our success depends in large part on our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. We may be required to spend significant resources to
monitor and police our intellectual property rights. If we fail to successfully
enforce our intellectual property rights, the value of our solutions could be
diminished and our competitive position may suffer.
Third-party software providers could copy or otherwise obtain and use our
technology without authorization or develop similar technology independently
which may infringe our proprietary rights. We may not be able to detect
infringement and may lose competitive position in the market before we do so.
In addition, competitors may design around our technology or develop competing
technologies. Intellectual property protection may also be unavailable or
limited in some foreign countries.
We generally enter into confidentiality or license agreements with our
employees, consultants, vendors, clients and corporate partners, and generally
control access to and distribution of our technologies, documentation and other
proprietary information. Despite these efforts, unauthorized parties may
attempt to disclose, obtain or use our solutions or technologies. Our
precautions may not prevent misappropriation of our solutions or technologies,
particularly in foreign countries where laws or law enforcement practices may
not protect our proprietary rights as fully as in the United States.
Government Regulation and Legal Uncertainties of Doing Business on the Internet
May Inhibit the Commercial Acceptance of the Internet
Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent. These regulations could affect the
costs of communicating on the Internet and adversely affect the growth in use
of the Internet. In turn, these regulations could result in decreased demand
for our solutions or otherwise harm our business.
Recently, the United States Congress enacted Internet legislation regarding
children's privacy, copyrights and taxation. A number of other laws and
regulations may be adopted covering issues such as user privacy, pricing,
acceptable content, taxation and quality of products and services. This
legislation could hinder growth in the use of the Internet generally and
decrease the acceptance of the Internet as a communications, commercial and
advertising medium. In addition, the growing use of the Internet has burdened
existing telecommunications infrastructure and has caused interruptions in
telephone service. Certain telephone carriers have petitioned the government to
regulate and impose fees on Internet service providers and online service
providers in a manner similar to long distance carriers.
Due to the global nature of the Internet, it is possible that, while our
transmissions originate in California, 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 remain
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws including 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 could be adversely affected by the adoption or modification of laws or
regulations relating to the Internet.
Potential Year 2000 Problems with Our Internal Systems or Third-Party Systems
Could Harm Our Business
Many currently installed computer systems and software products worldwide are
coded to accept only two-digit entries to identify a year in the date code
field. Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they are not able to distinguish between the year 1900 and
the year
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<PAGE>
2000. Accordingly, many companies, including ourselves and our clients,
potential clients, vendors and strategic partners, may need to continue to
upgrade their systems to comply with applicable year 2000 requirements.
Because we and our clients depend, to a very substantial degree, upon the
proper functioning of computer systems, a failure of these systems to correctly
recognize dates beyond December 31, 1999 could disrupt operations. Any
disruptions could harm our business. Additionally, our failure to provide year
2000 compliant solutions solely or in connection with our strategic partners to
our clients could result in financial loss, reputational harm and legal
liability to us. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance."
Spending by Our Clients to Evaluate and Address Year 2000 Compliance Could
Result in Lower Demand for Our Services
In 1999, a significant number of companies, including some of our current
clients, may be required to devote a substantial amount of their information
technology resources to test systems for year 2000 compliance and fix existing
year 2000 problems. If these clients also defer purchases of our services until
year 2000 problems have been resolved, it will depress our sales in the near
term.
Because Our Directors and Executive Officers Own a Large Percentage of Our
Voting Stock, Your Voting Power May Be Limited
After this offering, it is anticipated that our executive officers and
directors will beneficially own or control, directly or indirectly, 19.3
million shares of common stock, which in the aggregate will represent
approximately % of the outstanding shares of common stock. As a result, if
these persons act together, they will have the ability to control all matters
submitted to our stockholders for approval, including the election and removal
of directors and the approval of any business combination. This may delay or
prevent an acquisition or affect the market price of our stock.
As a New Investor, You Will Experience Immediate and Substantial Dilution
If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution in pro forma net tangible book
value of $ per share. If the holders of outstanding options and warrants
exercise those options, you will experience further dilution.
An Active Public Market for Our Common Stock May Not Develop, Which Could
Impede Your Ability to Sell Your Shares and Depress the Market Price of Your
Shares
Before this offering, you could not buy or sell our common stock on a public
market. An active public market for our common stock may not develop or be
sustained after the offering, which could affect your ability to sell your
shares and depress the market price of your shares. The market price of your
shares may significantly vary from the offering price.
Future Sales of Shares by Existing Stockholders Could Depress the Market Price
of Your Shares
Sales of a substantial number of shares of our common stock in the public
market by our stockholders after this offering could depress the market price
of our common stock and could impair our ability to raise capital through the
sale of additional equity securities. Based on shares outstanding as of August
15, 1999,
upon completion of this offering we will have outstanding shares of
common stock, assuming no exercise of the underwriters' overallotment option.
Of these shares, the shares of common stock sold in this offering
and an additional 195,000 shares of common stock will be freely tradable,
without restriction, in the public market. An additional 85,814 shares of
common stock will become freely tradeable 90 days from the date of this
prospectus. After the lockup agreements pertaining to this offering expire 180
days from the date of this prospectus, an additional 15,880,717 shares will be
eligible for sale in the public market.
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<PAGE>
In addition, the 4,952,687 shares subject to outstanding options and warrants
will be exercisable, and if exercised, available for sale 180 days after the
date of this prospectus. Please see "Shares Eligible for Future Sale" for a
description of shares of common stock that are available for future sale.
We Have Adopted Anti-takeover Provisions That Could Make the Sale of Mediaplex
More Difficult
Our certificate of incorporation and bylaws contain provisions, such as
undesignated preferred stock, a staggered board and the restriction on the
persons that can call special board or stockholder meetings, which could make
it more difficult for a third-party to acquire us without the consent of our
board of directors. While we believe these provisions provide for an
opportunity to receive a higher bid by requiring potential acquirors to
negotiate with our board of directors, these provisions may apply even if the
offer may be considered beneficial by some stockholders.
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<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock offered
in this offering at an assumed initial public offering price of $ per share,
after deducting the estimated underwriting discount and offering expenses will
be approximately $ . If the underwriters' over-allotment option is exercised
in full, our net proceeds will be approximately $ .
We expect to use approximately $ of such proceeds for capital
expenditures and the majority of the net proceeds for working capital and
general corporate purposes. In addition, we may use a portion of the net
proceeds to acquire complementary products, technologies or businesses;
however, we currently have no commitments or agreements and are not involved in
any negotiations to do so.
Pending use of the net proceeds of this offering, we intend to invest the net
proceeds in short-term, interest-bearing, investment-grade marketable
securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation
and expansion of our business and do not anticipate paying any cash dividends
in the foreseeable future.
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999. Our
capitalization is presented:
. on an actual basis;
. on a pro forma basis to give effect to the sale of 4,000,000 shares of
convertible preferred stock subsequent to June 30, 1999 for gross
proceeds of $14.4 million and the automatic conversion of all outstanding
shares of convertible preferred stock into shares of common stock
effective upon the closing of this offering; and
. on a pro forma as adjusted basis to reflect our receipt of the estimated
net proceeds from the sale of the shares of common stock offered
in this offering at an assumed initial public offering price of $
per share and after deducting the estimated underwriting discount and
offering expenses payable by us.
<TABLE>
<CAPTION>
June 30, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term debt.................................. $ 373 $ 373 $373
------- ------- ----
Stockholders' equity:
Convertible preferred stock, $.0001 par value,
8,206,000 shares authorized, 5,706,000 issued
and outstanding, actual; 10,000,000 shares
authorized, no shares issued or outstanding,
pro forma and pro forma as adjusted............ $ 1 --
Common stock, $.0001 par value; 40,000,000
shares authorized, 14,838,865 shares issued and
outstanding, actual; 150,000,000 shares
authorized, 24,544,865 shares issued and
outstanding, pro forma; 150,000,000 shares
authorized, shares issued and
outstanding, pro forma as adjusted............. 1 2
Additional paid-in capital...................... 20,239 34,639
Warrants........................................ 432 432
Deferred stock-based compensation............... (3,232) (3,232)
Receivable from sale of Series B preferred
stock.......................................... (240) (240)
Accumulated deficit............................. (8,578) (8,578)
------- ------- ----
Total stockholders' equity...................... 8,623 23,023
------- ------- ----
Total capitalization.......................... $ 8,996 $23,396
======= ======= ====
</TABLE>
In addition to the shares of common stock to be outstanding after the
offering, as of the closing of this offering and based on the number of shares
issued and options and warrants granted as of June 30, 1999, we expect to have
additional shares of common stock available for issuance under the following
plans and arrangements:
. 12,243,000 shares issuable under our stock plans, consisting of:
. 8,625,698 shares underlying options outstanding at a weighted average
exercise price of $0.56 per share, of which 4,077,687 were exercisable;
and
. 3,617,302 shares available for future issuance;
. 875,000 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $0.97 per share; and
. 400,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan.
Please read the capitalization table together with the sections of this
prospectus entitled "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements included in this prospectus.
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DILUTION
As of June 30, 1999, our net tangible book value on a pro forma basis, giving
effect to the sale of 4,000,000 shares of our convertible preferred stock
subsequent to June 30, 1999 for gross proceeds of $14.4 million and the
conversion of our preferred stock at the closing of this offering, was
$ , or $ per share of common stock. "Net tangible book value"
per share represents the amount of our total tangible assets reduced by the
amount of our total liabilities, divided by the number of shares of common
stock outstanding. As of June 30, 1999, our net tangible book value, on a pro
forma basis as adjusted for the sale of shares offered in the offering
at an assumed initial public offering price of $ per share and after
deducting the estimated underwriting discount and offering expenses, would have
been approximately $ per share. This represents an immediate increase 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 as of June 30, 1999..... $
Increase per share attributable to new investors....................
----
Pro forma net tangible book value per share after the offering.......
-----
Dilution per share to new investors.................................. $
=====
</TABLE>
The following table summarizes on a pro forma basis, as of June 30, 1999,
giving effect to the sale of 4,000,000 shares of our convertible preferred
stock subsequent to June 30, 1999, the differences between the total
consideration paid and the average price per share paid by our existing
stockholders and the new investors with respect to the number of shares of
common stock purchased from us, based on an assumed initial public offering
price of $ per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------- ---------------------- Price
Number Percentage Amount Percentage Per Share
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 24,604,865 % $20,240,901 % $ 0.82
New investors...........
---------- ----- ----------- -----
Total.................. 100.0% 100.0%
========== ===== =========== =====
</TABLE>
In addition to the shares of common stock outstanding after the
offering, as of the closing of this offering and based on the number of shares
and options and warrants granted as of June 30, 1999, we expect to have
additional shares of common stock available for issuance under the following
plans and arrangements:
. 12,243,000 shares issuable under our stock plans, consisting of:
. 8,625,698 shares underlying options outstanding at a weighted average
exercise price of $0.56 per share, of which 4,077,687 were exercisable;
and
. 3,617,302 shares available for future issuance;
. 875,000 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $0.97 per share; and
. 400,000 shares available for issuance under our 1999 Employee Stock
Purchase Plan.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere
in this prospectus. The selected balance sheet as of December 31, 1997 and 1998
and June 30, 1999 and the selected statement of operations data for the period
from September 10, 1996 (inception) to December 31, 1996, the years ended
December 31, 1997 and 1998 and the six months ended June 30, 1999 have been
derived from our audited financial statements and related notes included
elsewhere in this prospectus. The statement of operations data for the six-
month period ended June 30, 1998 are derived from our unaudited interim
financial statements included elsewhere in this prospectus. In management's
opinion, the unaudited financial statements have been prepared on substantially
the same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods. Historical results
are not necessarily indicative of the results to be expected in the future, and
the results of interim periods are not necessarily indicative of results for
the entire year.
<TABLE>
<CAPTION>
September 10,
1996
(inception) Years Ended Six Months Ended
to December 31, June 30,
December 31, ---------------------- -----------------------
1996 1997 1998 1998 1999
------------- ---------- ---------- ---------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ -- $ 426 $ 3,588 $ 1,522 $ 7,323
Cost of revenues........ -- 445 2,771 1,213 5,762
---------- ---------- ---------- ---------- -----------
Gross profit (loss).... -- (19) 817 309 1,561
Operating expenses:
Sales and marketing.... 23 481 820 395 1,647
Research and
development........... 49 347 556 220 815
General and
administrative........ 31 256 635 325 1,082
Stock-based
compensation.......... 152 11 578 151 2,966
Amortization of
goodwill and
intangibles........... -- -- -- -- 251
---------- ---------- ---------- ---------- -----------
Total operating
expenses............. 255 1,095 2,589 1,091 6,761
---------- ---------- ---------- ---------- -----------
Loss from operations.... (255) (1,114) (1,772) (782) (5,200)
Interest income
(expense), net......... -- (3) (247) (234) 14
---------- ---------- ---------- ---------- -----------
Net loss................ $ (255) $ (1,117) $ (2,019) $ (1,016) $ (5,186)
========== ========== ========== ========== ===========
Net loss per share--
basic and diluted...... $ (0.07) $ (0.13) $ (0.25) $ (0.11) $ (0.43)
Weighted average shares
outstanding............ 3,795,714 8,457,464 8,186,127 9,408,557 12,070,449
Pro forma net loss per
share--basic and
diluted................ $ (0.25) $ (0.38)
Weighted average shares
used to compute
pro forma net loss per
share--basic and
diluted................ 8,186,127 13,501,001
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------- June 30,
1996 1997 1998 1999
---- ----- ------- --------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $ 27 $ 142 $ 375 $ 7,602
Working capital.................................. (46) (586) (1,863) 5,119
Total assets..................................... 52 262 1,444 15,430
Long-term debt .................................. -- 65 232 373
Shareholders' equity (deficit):.................. (22) (558) (1,962) 8,623
</TABLE>
21
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
On March 25, 1999, we acquired Netranscend Software, Inc., a Java-based
enterprise automation solutions software company. The acquisition was accounted
for using the purchase method of accounting and, accordingly, the purchase
price was allocated to the tangible and intangible assets acquired and
liabilities assumed on the basis of their fair values on the acquisition date.
The following unaudited pro forma statement of operations data reflects the
acquisition of Netranscend Software, Inc. as if the acquisition had occurred on
January 1, 1998. The pro forma statement of operations data may not be
indicative of the results of operations had the acquisition actually occurred
on January 1, 1998, nor do they purport to indicate our future results of
operations.
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
--------------
(in thousands,
except share
and per share
data)
<S> <C>
Pro Forma Statement of Operations Data:
Revenues....................................................... $ 3,588
Cost of sales.................................................. 2,771
----------
Gross profit.................................................. 817
----------
Operating expenses
Sales and marketing........................................... 828
Research and development...................................... 557
General and administrative.................................... 636
Stock-based compensation...................................... 578
Amortization of goodwill and intangibles...................... 1,003
----------
Total operating expenses..................................... 3,602
Loss from operations........................................... (2,785)
----------
Interest income (expense), net................................. (247)
----------
Net loss....................................................... $(3,032)
==========
Pro forma net loss per share--basic and diluted(1)............. $ (0.30)
==========
Shares used in computing pro forma net loss per share--basic
and diluted(1)................................................ 10,164,844
==========
</TABLE>
- --------
(1) See Note B of Notes to Pro Forma Financial Information for a description of
the method used to compute basic and diluted net loss per share.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read together with the financial statements and related notes that
are included later in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those set forth under "Risk Factors" or in
other parts of this prospectus.
Overview
We are a leading provider of technology-enabled eBusiness marketing services
for companies and advertising agencies that seek to optimize their Internet
marketing campaigns. Although we were incorporated in September 1996, we did
not begin offering our advertising campaign management services until April
1998. Before April 1998, we operated under our prior business model, which
consisted of generating our revenues primarily from the sale of advertising
space on our Internet content sites. During the first half of 1998, we devoted
most of our resources to developing our new business plan and technology and
establishing our technical and sales organizations.
In the second quarter of 1998 we began generating revenue from our
advertising campaign management services and since the fourth quarter of 1998
have derived substantially all of our revenues from this source. Our campaign
management services include planning the online campaign, coordinating the
online and offline portions of the campaign, purchasing and placing online
media, and tracking, analyzing and reporting the results of the media campaign.
In the second quarter of 1999, we began utilizing our mobile Java objects, or
MOJO, architecture to enhance our service offerings and expand our business. We
plan to expand our revenue sources by leveraging the capabilities of our MOJO
architecture to offer enhanced banner management services, which will allow
advertisers to integrate their enterprise business information into the online
advertising campaign and to tailor the advertising message in real time.
We currently charge our clients a fixed fee for advertising campaign
management, which varies from client to client. This fee is principally based
on the extent of services provided and the direct cost of media placement, or
the cost of purchasing advertising space on an Internet site, which is
typically determined by the cost per thousand impressions, or CPM. Revenues
from advertising campaign management services are recognized in the period that
advertising impressions are delivered, or placed on an Internet site, provided
that no significant obligations on our part remain and the collection of the
trade receivable is probable. Our obligations often include, for instance,
guarantees of a minimum number of impressions. To the extent that obligations
remain, we defer recognition of the corresponding portion of the revenues until
these obligations are met.
Cost of revenues consists primarily of the cost of procuring advertising
space on third-party Internet sites and, to a lesser extent, of the
telecommunications and other costs related to maintaining our ad servers at
third-party locations. These costs are recorded in the period that the
advertising impressions are delivered and the related revenues are recorded.
Currently, we purchase advertising space on Internet sites for a particular
media campaign. In the future, we may enter into purchase commitments to obtain
advertising space in bulk without a particular media campaign identified in
order to obtain more favorable pricing.
We expense all of our research and development costs in the period in which
we incur these costs. The period from achievement of technological feasibility
to the general availability of our software to clients has been short, and
therefore software development costs qualifying for capitalization have been
insignificant. Accordingly, we have not capitalized any software development
costs to date.
In March 1999, we acquired Netranscend Software, Inc., a Java-based
enterprise automation solutions software company, for a note payable of
$430,000 due in four annual installments beginning in March 2000,
23
<PAGE>
and 1,979,000 shares of common stock. This acquisition was accounted for under
the purchase method of accounting. We recorded $3.0 million of goodwill and
other identifiable intangible assets in connection with this acquisition, which
are being amortized over a three-year period.
We have a limited operating history upon which you may evaluate our business
and prospects. We incurred losses of $255,000 in 1996, $1.1 million in 1997,
$2.0 million in 1998 and $5.2 million in the first six months of 1999. At June
30, 1999, our accumulated deficit was $8.6 million. We anticipate that we will
incur additional operating losses for the foreseeable future.
Results of Operations
The following table sets forth our statement of operations data expressed as
a percentage of total revenues:
<TABLE>
<CAPTION>
Six Months
Years Ended Ended
December 31, June 30,
-------------- -------------
1997 1998 1998 1999
------ ----- ----- -----
<S> <C> <C> <C> <C>
Revenues.................. 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues.......... 104.6 77.2 79.7 78.7
------ ----- ----- -----
Gross profit............. (4.6) 22.8 20.3 21.3
Operating expenses:
Sales and marketing...... 112.9 22.8 25.9 22.5
Research and
development............. 81.5 15.5 14.5 11.1
General and
administrative.......... 60.0 17.8 21.4 14.8
Stock-based
compensation............ 2.6 16.1 9.9 40.5
Amortization of
goodwill................ -- -- -- 3.4
------ ----- ----- -----
Total operating
expenses............... 257.0 72.2 71.7 92.3
------ ----- ----- -----
Loss from operations...... (261.6) (49.4) (51.4) (71.0)
Interest income (expense),
net...................... (0.6) (6.9) (15.4) 0.2
------ ----- ----- -----
Net loss.................. (262.2)% (56.3)% (66.8)% (70.8)%
====== ===== ===== =====
</TABLE>
Six Months Ended June 30, 1999 and 1998
Revenues. Revenues increased to $7.3 million for the six months ended June
30, 1999 from $1.5 million for the six months ended June 30, 1998. The period
to period increase was primarily due to our commencement of selling media
campaign management services to a broad set of advertisers, including
advertising agencies in April 1998. In the first six months of 1999,
substantially all of our revenues consisted of advertising fees received from
advertising campaign management services. In the first six months of 1998, our
revenues were derived from the sale of advertising on our content sites.
In the six months ended June 30, 1999, five of our clients represented
approximately 68% of our revenues and in the six months ended June 30, 1998,
four of our clients represented approximately 80% of our revenues.
Cost of Revenues. Cost of revenues increased to $5.8 million, or 78.7% of
revenues, for the six months ended June 30, 1999 from $1.2 million, or 79.7% of
revenues, for the six months ended June 1998. The increase in cost of revenues
in the 1999 period was primarily due to the increase in our revenues. The cost
of revenues in the first six months ended June 30, 1999 was comprised primarily
of media placement costs, while the cost of revenues in the first six months
ended June 30, 1998 consisted primarily of the cost of maintaining our content
Web sites.
24
<PAGE>
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation expenses, including salaries, commissions and related payroll
expenses, and recruiting costs, and marketing expenses, including those
expenses associated with customer service and support. Sales and marketing
expenses increased to $1.6 million, or 22.5% of revenues, for the six months
ended June 30, 1999 from $395,000, or 25.9% of revenues, for the six months
ended June 30, 1998. The dollar increase in sales and marketing expenses during
the 1999 period was primarily due to the significant growth of our sales and
marketing organization in 1999 as we focused on selling advertising campaign
management services. The number of sales and marketing personnel increased from
5 as of June 30, 1998 to 41 as of June 30, 1999. The decrease in sales and
marketing expenses as a percentage of revenues was primarily due to the
significant growth in revenues. We expect that sales and marketing expenses
will continue to increase in dollars.
Research and Development. Research and development expenses consist primarily
of compensation expenses for our internal development staff and contractor
services. Research and development expenses increased to $816,000, or 11.1% of
revenues, for the six months ended June 30, 1999 from $220,000, or 14.5% of
revenues, for the six months ended June 30, 1998. This dollar increase in
research and development expenses was due primarily to an increase in the
number of development engineers in our research and development organization.
The number of development engineers increased from 2 as of June 30, 1998 to 19
as of June 30, 1999. The decrease in research and development expenses as a
percentage of revenues was primarily due to the significant growth in revenues.
We expect to continue to spend significant amounts on research and development
as we continue to develop and upgrade our technology. Accordingly, we expect
that research and development expenses will continue to increase in dollars.
General and Administrative. General and administrative expenses consist
primarily of compensation and related expenses and cost of outside contractor
services for administrative personnel. General and administrative expenses
increased to $1.1 million, or 14.8% of revenues, for the six months ended June
30, 1999 from $325,000, or 21.4% of revenues, for the six months ended June 30,
1998. The dollar increase in general and administrative expenses was due
primarily to an increase in personnel. The number of general and administrative
personnel increased from none as of June 30, 1998 to 17 as of June 30, 1999.
The decrease in general and administrative expenses as a percentage of revenues
was primarily due to the significant growth in revenues. We expect that general
and administrative expenses will continue to increase in dollars in the future,
reflecting additional costs associated with increasing our infrastructure and
headcount as we grow and the costs of being a public company.
Stock-based Compensation. Stock-based compensation expense increased to $3.0
million for the six months ended June 30, 1999 from $151,000 for the six months
ended June 30, 1998. For accounting purposes, we recognize stock-based
compensation in connection with the issuance of shares of our common stock and
the granting of options to purchase our common stock to employees and
consultants with purchase or exercise prices that are less than the deemed fair
market value at the grant date. Stock-based compensation related to the
issuance of shares of common stock has been expensed in the period in which the
common stock was issued. Stock-based compensation related to the issuance of
options to purchase common stock is being amortized over the vesting period of
the stock options through 2003. Total deferred stock-based compensation as of
June 30, 1999 was $3.2 million. These deferred amounts and the related
amortization charges will increase if we record further deferred stock-based
compensation in future periods.
Amortization of Goodwill and Intangible Assets. Amortization expense was
$251,000 for the six months ended June 30, 1999, due to the amortization of
goodwill and intangible assets recorded in connection with our acquisition of
Netranscend Software, Inc. in March 1999. We recorded no goodwill amortization
expense for the first six months of 1998. We expect to recognize $250,000 of
amortization expense for this transaction in each quarter through the first
quarter of 2002.
Interest Income (Expense), Net. Interest income, net was $14,000 in the six
months ended June 30, 1999, representing primarily interest earned on the $9.6
million of cash and cash equivalents we generated in the
25
<PAGE>
period from private placements of convertible preferred stock. The net interest
expense of $234,000 in the six months ended June 30, 1998 was primarily due to
the beneficial conversion feature of a note payable to stockholders.
Periods Ended December 31, 1998, 1997 and 1996
Revenues. Revenues were $3.6 million in 1998 and $426,000 in 1997. We did not
have any revenues in 1996. The increase in revenues from 1997 to 1998 was
primarily due to the commencement of selling advertising campaign management
services. In 1997, we were selling advertising space on our Internet sites
under our prior business model. In 1998, we began providing our advertising
campaign management services and increased our sales force, resulting in
significant revenue growth in 1998.
Cost of Revenues. Total cost of revenues was $2.8 million, or 77.2% of
revenues, in 1998 and $445,000, or 104.6% of revenues, in 1997. The dollar
increase in cost of revenues was primarily due to the increase in revenues from
1997 to 1998. The decrease in cost of revenues as a percentage of revenues in
1998 as compared to 1997 was primarily due to the commencement of selling
advertising campaign management services.
Operating Expenses
Sales and Marketing. Sales and marketing expenses were $820,000, or 22.8% of
revenues, in 1998, $481,000, or 112.9% of revenues, in 1997, and $23,000 in
1996. The dollar increases in sales and marketing expenses from 1996 to 1997,
and from 1997 to 1998 were primarily due to the increases in the number of
sales personnel. The decrease in sales and marketing expenses as a percentage
of revenues was primarily due to the rate of increase in revenues in 1998
exceeding the rate of increase in sales and marketing expenses in 1998.
Research and Development. Research and development expenses were $556,000, or
15.5% of revenues, in 1998, $347,000, or 81.5% of revenues, in 1997, and
$49,000 in 1996. The dollar increases in research and development expenses from
1996 to 1997, and from 1997 to 1998 were primarily due to the increases in the
number of development engineers we employed. The decrease in research and
development expenses as a percentage of revenues was primarily due to the rate
of increase in revenues in 1998 exceeding the rate of increase in research and
development expenses in 1998.
General and Administrative. General and administrative expenses were
$636,000, or 17.8% of revenues, in 1998, $256,000, or 60.0% of revenues, in
1997, and $31,000 in 1996. The dollar increases in general and administrative
expenses from 1996 to 1997, and from 1997 to 1998 were primarily due to the
increases in the number of administrative personnel and outside administrative
services costs. The decrease in general and administrative expenses as a
percentage of revenues was primarily due to the rate of increase in revenues in
1998 exceeding the rate of increase in general and administrative expenses in
1998.
Stock-based Compensation. Stock-based compensation expense was $578,000, in
1998, $11,000 in 1997, and $152,000 in 1996.
Interest Income (Expense), Net. Net interest expense was $247,000 in 1998 and
$3,000 in 1997. There was no interest income or expense in 1996.
26
<PAGE>
Quarterly Results of Operations
The following table presents statement of operations data for the six
quarters ending with the quarter ended June 30, 1999. We believe that this
unaudited information has been prepared on the same basis as the audited annual
financial statements and includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the unaudited
financial information for the quarters presented. You should read this in
conjunction with our financial statements, including the accompanying notes,
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------
June
March 31, June 30, Sept. 30, Dec. 31, March 31, 30,
1998 1998 1998 1998 1999 1999
--------- -------- --------- -------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenues................ $ 586 $ 935 $1,069 $ 997 $ 1,633 $ 5,689
Cost of revenues........ 480 733 756 802 1,340 4,421
----- ----- ------ ----- ------- -------
Gross profit........... 106 203 313 195 294 1,268
Operating expenses:
Sales and marketing.... 193 201 87 338 543 1,104
Research and
development........... 125 95 195 140 308 507
General and
administrative........ 117 208 132 180 456 626
Stock-based
compensation.......... -- 151 -- 427 1,953 1,013
Amortization of
goodwill.............. -- -- -- -- -- 251
----- ----- ------ ----- ------- -------
Total operating
expenses............. 435 656 414 1,085 3,260 3,501
----- ----- ------ ----- ------- -------
Loss from operations.... (329) (453) (101) (890) (2,966) (2,233)
Interest income
(expense), net......... (1) (1) (230) (15) 1 12
----- ----- ------ ----- ------- -------
Net loss................ $(330) $(454) $ (331) $(905) $(2,965) $(2,221)
===== ===== ====== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1998 1998 1998 1998 1999 1999
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
As a Percentage of
Revenues:
Revenues................ 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues........ 81.9 78.3 70.7 80.4 82.0 77.7
----- ----- ----- ----- ------ -----
Gross profit........... 18.1 21.7 29.3 19.6 18.0 22.3
Operating expenses:
Sales and marketing.... 33.0 21.5 8.1 33.9 33.2 19.4
Research and
development........... 21.3 10.2 18.3 14.1 18.9 8.9
General and
administrative........ 19.9 22.3 12.3 18.0 27.9 11.0
Stock-based
compensation.......... -- 16.2 -- 42.8 119.6 17.8
Amortization of
goodwill.............. -- -- -- -- -- 4.4
----- ----- ----- ----- ------ -----
Total operating
expenses............. 74.2 70.2 38.7 108.8 199.6 61.5
----- ----- ----- ----- ------ -----
Loss from operations.... (56.0) (48.5) (9.4) (89.3) (181.6) (39.3)
Interest income
(expense), net......... (0.2) (0.1) (21.5) (1.5) 0.1 0.2
----- ----- ----- ----- ------ -----
Net loss................ (56.2)% (48.5)% (30.9)% (90.8)% (181.5)% (39.1)%
===== ===== ===== ===== ====== =====
</TABLE>
Due to the early stage of our company and the commencement of selling
advertising campaign management services in April 1998, the period-to-period
comparisons of our historical operating results should not be relied upon as
indicative of future performance. During the second and third quarters of 1998,
our results reflect the transition from our prior content-based business model
to our media campaign management
27
<PAGE>
business model. Beginning in the fourth quarter of 1998, our financial
performance solely reflected our current advertising campaign management
services.
The quarter ended September 30, 1998 was the last quarter in which we
generated revenues from our prior business model. In the quarters ended
December 31, 1998, March 31, 1999 and June 30, 1999, revenues were $1.0
million, $1.6 million and $5.7 million, respectively, and were generated solely
from our advertising campaign management services business.
The increases in sales and marketing expenses, research and development
expenses, and general and administrative expenses from the quarter ended
December 31, 1998 through the quarter ended June 30, 1999 are primarily due to
increased compensation and related expenses as a result of the increased
headcount required to support the growth in advertising campaign management
services revenues.
The stock-based compensation expense for the quarter ended June 30, 1998
represented the non-cash expense related to the issuance of shares of our
common stock for services rendered. The stock-based compensation expense for
the quarters ended December 31, 1998 and March 31, 1999 represented expense for
the issuance of shares in exchange for services, and the amortization of
deferred stock compensation recorded for options granted to employees and
consultants to purchase common stock with exercise prices that were less than
the deemed fair market value at the grant date. The stock-based compensation
expense for the quarter ended June 30, 1999 consisted solely of the
amortization of the deferred stock compensation recorded for options granted to
employees to purchase common stock at exercise prices that were less than the
deemed fair market value at the grant date.
Although we have experienced revenue growth in recent periods, we anticipate
that we will incur operating losses for the foreseeable future due to the high
level of planned operating and capital expenditures.
Liquidity and Capital Resources
Since our inception in September 1996 through June 1999, we have financed our
operations primarily through the private placement of preferred stock, which
has generated an aggregate of $10.5 million. As of June 30, 1999, we had
$7.6 million in cash and cash equivalents. In August 1999, we raised an
additional $14.4 million from the gross proceeds of sale of additional shares
of preferred stock.
Net cash used in operating activities in the six months ended June 30, 1999
and 1998, the years ended December 31, 1998, 1997 and the period from September
10, 1996 (inception) through December 31, 1996, was $1.4 million, $165,000,
$240,000, $150,000 and $28,000, respectively. Net cash used in operating
activities in each of these periods was primarily the result of net losses
before non-cash charges, and increases in accounts receivable, offset by stock-
based compensation expense and increases in accounts payable and accrued
liabilities, and, with respect to the year ended December 31, 1998 and the six
months ended June 30, 1999, depreciation and amortization charges.
Net cash used in investing activities in the six months ended June 30, 1999
and 1998, the years ended December 31, 1998, 1997 and the period from September
10, 1996 (inception) through December 31, 1996, was $840,000, $38,000, $79,000,
$70,000 and $24,000, respectively. Net cash used in investing activities in all
periods presented was due principally to the acquisition of computer equipment
and software.
Net cash provided by financing activities in the six months ended June 30,
1999 and 1998, the years ended December 31, 1998, 1997 and the period from
September 10, 1996 (inception) through December 31, 1996, was $9.4 million,
$306,000, $551,000, $335,000 and $80,000, respectively. Net cash provided by
financing activities in all periods was primarily due to sales of shares of our
common stock and, in the six months ended June 30, 1999, our preferred stock,
as well as in 1998 and the six months ended June 30, 1998, funds borrowed from
stockholders under notes payable. A portion of these notes payable were paid
off in the six months ended June 30, 1999.
28
<PAGE>
Although we have no material commitments for capital expenditures, we
anticipate an increase in the rate of capital expenditures consistent with our
anticipated growth in operations, infrastructure and personnel. We believe that
the net proceeds from this offering, combined with current cash balances and
cash equivalents, will be sufficient to meet our anticipated liquidity needs
for working capital and capital expenditures for at least twelve months from
the date of this prospectus. Our forecast of the period of time through which
our financial resources will be adequate to support operations is a forward-
looking statement that involves risks and uncertainties, and actual results
could vary materially as a result of the factors described above. If we require
additional capital resources to grow our business internally or to acquire
complementary technologies and businesses, we may seek to sell additional
equity or debt securities or secure a bank line of credit. The sale of
additional equity or convertible debt securities could result in additional
dilution to our stockholders. We cannot assure you that any financing
arrangements will be available in amounts or on terms acceptable to us.
Market Risk Disclosure
The following discusses our exposure to market risk related to changes in
foreign currency exchange rates and interest rates. This discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors including
those set forth in the risk factors section of this prospectus.
Foreign Currency Exchange Rate Risk. To date, we have not had any revenues
from international operations, and all of our recognized revenues have been
denominated in U.S. dollars from clients in the United States. We expect,
however, that future revenues may also be derived from international markets
and may 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 the exchange rates of foreign currencies in relation to the U.S.
dollar. Furthermore, to the extent that we engage in international sales
denominated in U.S. dollars, an increase in the value of the U.S. dollar
relative to foreign currencies could make our products less competitive in
international markets. Although we expect to monitor our exposure to currency
fluctuations as we expand into international markets, and, when appropriate,
may use financial hedging techniques in the future to minimize the effect of
these fluctuations, we cannot assure you that exchange rate fluctuations will
harm our financial results in the future.
Interest Rate Risk. As of June 30, 1999, we had cash and cash equivalents of
$7.6 million which consist of cash and highly liquid short-term investments.
Our short-term investments will decline in value by an immaterial amount if
market interest rates increase. Declines of interest rates over time will,
however, reduce our interest income from our short-term investments.
Recent Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee, or ASEC, issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 provides guidance on when
costs related to software developed or obtained for internal use should be
capitalized or expensed. SOP 98-1 is effective for transactions entered into
for fiscal years beginning after December 15, 1998. We have reviewed the
provisions of SOP 98-1 and we do not believe adoption of this standard will
have a material effect upon our statement of operations.
In April 1998, the ASEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires the cost of start-up activities, including
organization costs, to be expensed as incurred. We do not expect this
pronouncement to have a material effect upon our statement of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which requires companies to record derivative
financial instruments on the balance sheet as assets or liabilities, measured
at fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedging accounting. The key criterion for
29
<PAGE>
hedge accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999. We do not anticipate that this statement will have a material effect upon
our statement of operations.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with
Respect to Certain Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4 by
extending the deferral of the application of certain provisions of SOP 97-2
amended by SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. We do not anticipate that these
statements will have a material effect upon our statement of operations.
Year 2000 Compliance
Many currently installed computer systems and software products worldwide are
coded to accept only two-digit entries to identify a year in the date code
field. Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they are not able to distinguish between the year 1900 and
the year 2000. Accordingly, many companies, including ourselves and our
clients, potential clients, vendors and strategic partners, may need to upgrade
their systems to comply with applicable year 2000 requirements.
Because we and our clients depend, to a very substantial degree, upon the
proper functioning of computer systems, a failure of these systems to correctly
recognize dates beyond December 31, 1999 could disrupt operations. Any
disruptions could harm our business. Additionally, our failure to provide Year
2000 compliant solutions to our clients could result in financial loss,
reputational harm and legal liability to us.
Substantially all of our computer equipment and software was purchased in the
past twelve months. As such, we believe that this software is generally Year
2000 compliant, meaning that the use or occurrence of dates on or after January
1, 2000 will not materially affect the performance of this software or the
ability of this software to correctly create, store, process and output data
involving dates.
We typically use industry-standard third-party hardware and software. We have
not, to date, sought assurances from our suppliers that their products are Year
2000 compliant. We also generally do not have any contractual rights with these
providers if their software or hardware fails to function due to Year 2000
issues. If these failures do occur, we may incur unexpected expenses to remedy
any problems, including purchasing replacement hardware and software.
Because our computer equipment and software is substantially new, we have not
engaged any third parties to independently verify our Year 2000 readiness, nor
have we assessed potential costs associated with Year 2000 risks or made any
contingency plans to address these risks. Further, we have not deferred any of
our ongoing development efforts to address Year 2000 issues. Unanticipated
costs associated with any Year 2000 compliance could materially harm our
quarterly and annual results of operations.
We are currently implementing a new accounting and management reporting
system for business reasons unrelated to Year 2000. We have been assured that
our new system is also Year 2000 compliant by the vendor. If any of our
vendors' representations regarding their products are not accurate, or if we
encounter unknown Year 2000 problems relating to the interaction of our
systems, we could incur significant expenses to resolve these issues or damages
resulting from a failure of our systems to perform correctly. For example, if
our accounting system fails to properly record our transactions, we would need
to devote additional staff or hire a third-party to correct the problem, could
lose important data and would have difficulty planning without accurate
financial information.
We depend on the uninterrupted availability of the Internet infrastructure to
conduct our business as a centralized ad delivery and management service. We
also rely on the continued operations of our clients, in
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particular Web sites hosting advertisements, for our revenues. We are heavily
dependent upon the success of Year 2000 compliance efforts of our clients.
Interruptions in the Internet infrastructure affecting us or our clients, or
failure of the Year 2000 compliance efforts of one or more of our clients,
could harm our ability to generate revenue.
In the event we discover Year 2000 problems in our products or internal
systems, we will endeavor to resolve these problems by making modifications to
our products or systems or purchasing new systems, on a timely basis. In
addition, the effect of Year 2000 issues on our clients generally, or on our
banks, stock markets and other infrastructure functions is unknown. We cannot
assure you that our systems will be Year 2000 compliant or that we will not
incur material expenses or liability relating to the Year 2000 problem.
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BUSINESS
We provide technology-based eBusiness marketing solutions that enable
advertisers to optimize their online marketing efforts. eBusiness marketing
allows companies to combine their online direct marketing and branding
activities with critical enterprise business data in order to effectively use
the Internet to manage and transact business. Our services encompass the
planning, execution, monitoring and analysis of advertising campaigns over the
Internet. Our proprietary MOJO technology platform enables advertisers to
deliver, in real time, customized advertising messages to a targeted consumer.
Our MOJO platform interfaces with companies' existing enterprise data and
software applications to access critical business information that is used to
customize the advertising message. We believe customized, real-time messaging
will increase the consumer response to online advertisements, thereby improving
the return on advertising spending. Our services are offered as a comprehensive
solution, or individually as part of a complementary service in partnership
with other advertising and technology providers. Some of our clients include
companies such as DATEK Online Brokerage Services, Corp., OfficeMax,
ShopNow.com, Strong Funds, and advertising agencies including McCann-Erickson
and Publicis & Hal Riney using our services on behalf of their clients such as
Hewlett-Packard, Siebel Systems, Silicon Graphics, Inc. and Sprint PCS.
Industry Background
The Internet as an Advertising Medium for Direct Marketing, Branding and
eBusiness
The Internet is rapidly becoming an important advertising medium for direct
marketing and product branding. Forrester Research, Inc. anticipates that U.S.
online advertising spending will grow from $2.8 billion in 1999 to $17.2
billion in 2003, driven by a number of factors, including the growing online
population, the acceleration of e-commerce and the advancement of online
marketing technologies. According to International Data Corporation, the U.S.
online population is projected to grow from 80.8 million in 1999 to 177.0
million by 2003, and U.S. e-commerce spending is projected to increase from
$74.4 billion in 1999 to $707.9 billion by the end of 2003.
To date, the major spenders in online advertising have been Internet,
computer and technology companies and financial institutions. We believe other
advertisers, who have historically used more traditional media, are
increasingly becoming attracted to the Internet because of its global reach,
potential to enable one-to-one marketing and ability to track and measure
campaign results in real time. Advertisers are beginning to recognize the
effectiveness of the Internet to build long-term brand awareness, perform
valuable market testing, and facilitate immediate trial and sales of products
and services. In contrast to traditional, or off-line advertising, the
interactive nature of the Internet gives companies the ability to send
advertising messages to consumers and enables consumers to immediately respond
to the advertising. Furthermore, the Internet enhances client-specific
marketing campaigns to promote customer retention and loyalty.
Despite the emergence of the Internet as a medium for advertising,
expenditures for online advertising represent only a small portion of all media
spending. Forrester Research, Inc. estimates that by 2003, U.S. total media
spending will reach approximately $260.6 billion, of which the online component
of $17.2 billion will represent only 6.6%. We believe online media spending has
the potential to capture a larger portion of total media spending as new
technologies improve the effectiveness of online advertising and attract more
traditional media advertisers to the Internet.
We believe the rapid growth of e-commerce has changed the nature and pace of
business operations and competition. Companies are increasingly realizing the
importance of conducting "eBusiness," which goes beyond the simple sale of
products and services over the Internet. eBusiness is the use of the Internet
to manage and transact business, and communicate with consumers, clients,
suppliers and partners. In addition, eBusiness leverages the significant
financial and technical resources that companies have made in software
applications which manage and store critical business information, such as
enterprise resource planning and supply and distribution management systems. We
believe that it is increasingly becoming a competitive necessity for companies
to operate as eBusiness enterprises.
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The Challenges of Online Advertising
An effective online marketing campaign requires a wide range of
implementation, management and technology expertise in campaign development,
advertising execution and results analysis. The real-time delivery, measurement
and analysis of multiple advertising campaigns encompassing thousands of Web
sites is complex and difficult to execute and manage. Traditional advertising
agencies and most companies typically do not have the expertise in the Internet
medium to address these delivery and management requirements.
The increase in online advertising spending has heightened expectations for
more effective advertising campaigns and improved return on investment, or ROI.
The standard benchmarks to measure the impact of an advertising campaign are
banner impressions, viewer click-through rates to advertisers' sites from
online messages, and conversion rates, which are the percentage of consumers
who complete a purchase or other transaction. Recently, click-through rates
have been declining and advertisers are increasingly competing for the
attention of online consumers. As a result, companies are currently searching
for more effective advertising messaging techniques in order to increase click-
through and conversion rates.
To date, online advertising has not achieved effective one-to-one marketing,
which requires delivery of the right message to the right consumer at the right
time. Ideally, advertisers seek to identify potential customers most likely to
purchase their products, send them a message tailored to their individual
preferences, and do so at a time when they are most likely to make a purchase
decision. Most current technologies are focused on identifying the right
consumer based on their demographic, geographic or psychographic
characteristics. Identifying the right consumer, however, represents only one
component of true one-to-one marketing. The ability to send the right message
at the right time remains a significant challenge.
Sending the right message at the right time would enable companies to use
advertising as an effective online marketing and sales channel. The right
message includes appropriate product information for a particular consumer,
based on the existing operating profile of the enterprise including, for
example, pricing and availability. In order to achieve this, companies must
access and integrate their existing business information into the online
advertising process, enabling them to incorporate critical business information
in targeted messages and turn an advertisement into an effective eBusiness
tool. For example, a hotel with excess availability in New York City would seek
to advertise discounts to consumers booking flights to New York.
We believe that there is a significant opportunity for a vendor who can
provide a comprehensive, technology-based solution for online advertising
campaigns. We believe that this solution must provide the following key
capabilities:
. Expertise to Manage and Execute All Stages of Online Marketing
Campaigns. A comprehensive solution must encompass campaign planning and
execution, measuring results, analyzing data and thereafter optimizing
the ongoing and future campaigns. This requires the use of complex
technologies that allow real-time campaign adjustments. In addition,
integration with off-line advertising is essential to deliver a
consistent brand and direct marketing message.
. Data Accumulation and Analysis. A complete solution must include
accumulation and analysis of valuable profiling data about consumers to
target and re-target these consumers effectively in future campaigns.
. Detailed ROI Analysis. An optimal solution should provide advertisers and
advertising agencies with customizable, comprehensive, real-time return
on investment analyses of both content and placement to optimize campaign
performance and improve ROI.
. Tailored Messaging Capabilities. To maximize the effectiveness of a
campaign and achieve one-to-one marketing, an online advertiser must have
the ability to tailor an advertisement in real time, either manually or
automatically, based on parameters such as product selection, consumer
profile and location, and campaign performance.
. Leverage Enterprise Data. The ability to integrate existing enterprise
data into online advertising campaigns through dynamic messaging would
enable companies to increase conversion rates and sales and utilize the
Internet more effectively as a medium for eBusiness. Dynamic messaging is
the ability to change advertisements in real time based on business
parameters, such as product pricing or inventory levels.
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Solution
We provide technology-enabled eBusiness marketing services that enable
companies to use online advertising as a sales and marketing channel. We plan,
execute, measure and report the effectiveness of online campaigns. Our MOJO
platform is a Java object-based technical architecture which allows us to offer
a broad range of technologically-advanced services that can scale across the
Internet to accommodate a large number of advertising campaigns, which are
simultaneously delivered to a broad universe of Web sites and consumers. Our
MOJO technology interfaces with companies existing product databases or
enterprise software applications to access critical business information, which
is used to deliver the most relevent message customized to a targeted consumer
in real time. Our technology is designed to maximize the effectiveness of
online advertising, resulting in higher click-through and conversion rates,
thereby delivering a higher ROI on advertising spending. Our services are
offered as a comprehensive solution, or individually as part of a complementary
service in partnership with other advertising and technology vendors, such as
DoubleClick.
Our solution includes the following benefits:
. Comprehensive Online Advertising Campaigns. Using our technology platform
and expertise in online advertising, we provide a full range of services
that optimize online campaigns, including strategic planning, execution
of media buys, ad serving and reporting capabilities. We work with
traditional advertising agencies to integrate online and off-line
advertising and marketing strategies to increase the return on the total
advertising investment.
. Real-time Tracking and Measuring Campaign Results. To optimize any given
campaign, we monitor its effectiveness by tracking the return on
advertising investments through multiple metrics, including click-through
and conversion rates, as well as revenues derived from these conversions.
This monitoring enables campaigns to be automatically or manually
modified in real time to maximize effectiveness.
. Sophisticated Data Capture and Analysis. Using our data capture
capabilities and those of our strategic partners, we match advertiser-
selected profiles with consumer profiles based on geographic, demographic
and psychographic information, including purchasing and site visitation
patterns, to target and re-target consumers.
. Real-time Messaging Capabilities. We have the ability to change the
content of online advertisements in real time. This enables a company to
tailor its marketing messages based on consumer profiles as well as
predefined parameters or business rules, such as product rotations or
pricing. We also enable a company to test advertising graphics, messages
and sites, and adjust them in real time to optimize campaign performance.
. Integration of Enterprise Business Information. Our MOJO technology
enables us to integrate online advertising campaigns with enterprise
data, allowing us to dynamically tailor and deliver advertisements based
on a consumer's profile and on a company's real-time inventory, pricing
or other pertinent product data. We believe that this integration leads
to more effective messaging, increased sales and improved inventory yield
management. In this sense, our technology will not only be used to report
ROI figures, but will also be used to produce higher ROI results.
Strategy
Our objective is to become the leading provider of technology-enabled
eBusiness marketing solutions. Our strategy includes the following key
elements:
. Target Global 1000 Companies and e-Commerce Companies. We believe we can
deliver significant value to Global 1000 companies that require online
management and technology expertise to develop and execute effective
direct marketing and branding campaigns. We plan to identify Global 1000
companies that want to leverage the potential of the Internet for
eBusiness to strengthen their competive position. In addition, we intend
to target e-commerce companies of all sizes that rely significantly on
the Internet to extend their business presence and to market, sell and
purchase products and services.
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. Partner with Advertising Agencies. We intend to expand and strengthen our
partnerships with traditional advertising agencies to extend our direct
sales efforts. We will continue to provide agencies with critical online
media technology expertise, which we believe will accelerate our
penetration of medium to large-sized corporate clients. We have already
established partnerships with leading agencies such as McCann-Erickson
and Publicis & Hal Riney. We intend to pursue relationships with other
advertising agencies by providing technology-enabled services and support
for online advertising that can be fully integrated with their off-line
initiatives.
. Maintain Technology Leadership. We believe that our technology is a key
competitive differentiator. Our MOJO technology platform enables us to
efficiently deploy services that give our clients innovative advertising
capabilities while providing the ability to integrate enterprise
information into their online messages in real time. Our Java objects-
based architecture enables our solutions to scale geographically across
the Internet and a large number of transactions and advertisers. We
intend to extend our technology leadership by incorporating additional
functionality and services into our platform, such as e-commerce-enabled
messages.
. Enhance Sales Capabilities Through Strategic Relationships. We plan to
broaden our existing strategic relationships with companies such as
DoubleClick, SAP Labs and Icon Medialab, and to build relationships with
additional companies for our campaign management and MOJO technology
capabilities. We are seeking to work with traditional and interactive
advertising agencies, online ad serving companies, ad publishing
representatives, Web development and consulting firms, enterprise
application companies and systems integrators. Our objective is to
establish alliances with these companies and accelerate our sales
penetration into enterprises in need of our services. In addition, we
expect to develop and manage affiliate and sponsorship programs which
generate shared revenues derived from prospective e-commerce-based
services.
. Deliver Flexible Online Marketing Solutions. We believe that online
advertisers will increasingly demand greater flexibility and
accountability in their advertising programs. Because we can unbundle our
technology-enabled services, our solutions can be deployed together with
the capabilities offered by other advertising and technology providers,
such as DoubleClick. By working with third-party providers, we can offer
specific services, such as dynamic tailored messaging, that complement
their advertising services. This flexibility creates enhanced revenue
opportunities and accelerates market adoption of our services and
technology by targeting clients interested in unbundled elements of our
solution.
. Broaden International Presence. We plan to expand our capabilities and
presence internationally in order to capitalize on the global reach of
the Internet. We also believe there is a significant opportunity to
provide our solutions to companies based outside of the United States
that require technology-enabled advertising services tailored for their
local markets. We have recently opened a sales office in Hamburg, and by
the end of 1999, we expect to have established an office in Tokyo and
offices in London, Paris and Stockholm.
Our Services
Our technology-enabled eBusiness marketing services encompass all aspects of
an online advertising initiative, including campaign planning and execution,
online message management and campaign analysis. Our technology-enabled
offerings can be delivered individually or as a suite of services and are
principally priced based on cost per thousand impressions, cost per click, or
cost per acquisition, which can include sales and registrations.
Our services can be offered as part of a complementary solution provided in
partnership with other advertising and technology vendors. In particular, our
MOJO technology can be deployed with the serving capabilities provided by other
companies, such as DoubleClick, and interactive ad agencies. This allows us to
work with clients of these service and technology providers who do not need all
of our campaign management capabilities, but still want to deploy our MOJO
technology or any of our other services.
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- --------------------------------------------------------------------------------
Services Description of Services
- --------------------------------------------------------------------------------
. Develop an online media strategy based on the
client's business objectives and the
appropriate Internet media opportunities
Campaign Planning and Execution
. Plan and purchase media across Internet
advertising networks and independent Web
sites, employing various price structures
. Manage the ad serving process
- --------------------------------------------------------------------------------
Online Message Management . Apply targeting goals based on the specific
capabilities of each Web site or advertising
network considered for the marketing campaign
. Adjust campaigns in real time across all Web
sites based on predetermined schedules or the
occurrence of defined events
. Customize messages in real time based on
customer profiling, defined business rules
determined by enterprise data, market events
and campaign performance as measured by
standard metrics or ROI analysis
. Use data capture capabilities to refine the
database and re-target consumers
- --------------------------------------------------------------------------------
Campaign Analysis
. Track and monitor campaigns for results as
measured by Web site and advertisement
. Provide real-time reports customized by
performance data, including impressions,
click-throughs and conversions for each Web
site and advertisement
. Generate campaign ROI statistics summarizing
results by categories such as user-targeting
data, inventory changes, Internet sites and
date/time
. Optimize campaigns based on ongoing
performance data
- --------------------------------------------------------------------------------
Campaign Planning and Execution
. Campaign Planning. We develop Internet media strategies based on
advertisers' business goals and advertising objectives, such as brand
awareness, product trial and sales, and previous online performance, if
available. We determine target audiences using demographic, geographic
and psychographic information, or consumers' areas of interest. Our
online media programs are integrated with clients' off-line campaigns to
deliver a consistent brand message at each point of contact.
. Media Buying and Placement. We leverage our wholesale buying power in
planning and buying across all advertising networks and independent Web
sites. Each campaign is customized, incorporating sponsorships, keywords,
run of site, specific position and remnant space, where applicable. Media
purchases can be based on several models including cost per thousand
impressions, cost per click, cost per acquisition and revenue-sharing
programs. Our MOJO technology processes insertion orders systematically
across networks and individual Web sites to deliver accurate ad
placement.
. Ad Serving. Our third-party ad serving capabilities allow adjustments to
be managed quickly and efficiently because the only change required to
the advertisement is effected on our server instead of on each individual
Web site.
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. Re-Targeting. During a campaign, we use extensive data capture
capabilities through strategic partners like DoubleClick to further
refine the database and re-target advertising to prospects who have
visited a client's Web site. Information can include site visitation
patterns and online purchasing activity. For example, we can track which
product pages a consumer visits, how far they proceed in the shopping
process, and if they have made previous online purchases. This data can
then be used to optimize audience and message targeting for the ongoing
campaign.
Online Message Management
. Dynamic Messaging. We enable advertisers to modify advertising messages
dynamically, that is, at any point in time. Online advertisements contain
"data fields" where messages can change, such as products, prices or
special offers. Message modification can be automated by establishing
predefined events that determine message content, such as product
rotations or price reductions. Advertisers can also make modifications
manually, directly from their desktop computers.
. Targeted Messaging Integrated with Enterprise Data. Our eBusiness
messaging capability enables advertisers to use real-time business
information, such as product inventory, pricing and availability, to
deliver the most relevant message to each viewer. We assist advertisers
with the development of business rules based on product database or
enterprise system information. During the campaign, our MOJO technology
can make automatic modifications to the advertising on the basis of these
business rules. We believe that clients with time-sensitive inventory are
particularly well-suited to take advantage of these capabilities. For
example:
. An airline promotes roundtrip fares between San Francisco and New
York. Fourteen days prior to the flight, the airline advertises seats
at $956. The airline could specify that seven days before the flight,
the price on the banner message would systematically change to
$1,499. Based on excess seat availability two days prior to
departure, the fare offered for a limited number of the seats would
be automatically discounted to $799.
. A hotel chain focuses its advertising campaign on reaching an 80%
occupancy rate. When the occupancy rate of a particular hotel reaches
this level, the message is automatically directed to promote another
property within the chain.
. Integration of Data From Third-Party Vendors. In addition to customer
profiling data that we compile, we have access to the extensive profiling
data of our strategic partner, DoubleClick. Our MOJO technology utilizes
this data in creating, in real time, the appropriate message to a
profiled consumer based on enterprise and market data.
. Storyboard Messaging. Using our technology, a "storyboard" of advertising
messages can be constructed in a series. The campaign can be designed to
show a set of advertisements in a predefined sequence for a particular
consumer, regardless of which Web site in the campaign is viewed. This
choreographs a series of customized messages based on the consumer's
interests and online activity. For example, a viewer purchasing a
computer online will be presented with advertisements for accessories the
next time he or she accesses a Web site within the campaign.
. Multiple Messaging. MOJO technology enables single advertisements to
provide multiple click-through message options. The choice of message is
determined by the location of the advertisement on which the consumer
clicks. For example, if a consumer received a banner depicting a map of
the United States and clicked on the state of California, the consumer
would receive a different message than if he or she were to click on the
state of Maryland.
Campaign Analysis
. Campaign Tracking. We track impressions, click-throughs and conversions,
which include sales and other types of transaction activity such as
registrations and requests for information, across all campaign sites.
Activity is monitored by site, creative unit, such as a banner or side
panel, and message content.
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Our technology enables tracking of performance metrics for standard
advertisements and for the more difficult to monitor advertisements
utilizing rich media that may incorporate audio and video components. We
can also track advertising that is served by independent third-party ad
servers.
. Campaign Reporting. We provide a full range of accurate and timely
reporting capabilities customized to meet individual advertiser's needs.
Clients are able to view secure, real-time campaign reports by
performance metrics, including impressions, click-throughs, conversion
rates and sales, at any time over the Internet in a summary format that
provides results categorized by site and by advertisement.
. ROI Analysis. ROI reporting is customized to each advertiser and
integrates sales and conversion data to dynamically generate campaign
statistics in real time. Reports provide measurements on performance by
tracking sales and other conversions criteria, such as registrations and
information requests, as well as by tracking visitors who did not act
immediately, but subsequently returned to the Web site and purchased.
. Real-Time Campaign Optimization. Our MOJO technology allows predefined
business rules to automatically optimize campaigns. In addition, we can
make real-time changes to campaigns based on ongoing performance data.
Our customized, real-time reports facilitate quick determination of the
effectiveness of sites and advertisements based on performance metrics,
such as lowest cost per sale and highest sales volume.
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Technology
Our proprietary MOJO technology platform utilizes a mobile Java object
architecture that facilitates timely, efficient and accurate campaign execution
and management as well as a secure and efficient means of integrating a
client's proprietary enterprise business data with the online advertising
campaign. Our architecture is designed for scalability and high performance, to
manage multiple advertising campaigns across thousands of Web sites. All data
for an advertising campaign are captured in the form of intelligent Java
objects, each of which perform discrete functions. These objects store critical
information relevant to their function, can be controlled remotely, and can
exchange data with each other using the Java language over our publish and
subscribe-based messaging backbone. These objects, programmed using Java
language, are platform- independent and can reside on servers operated by
Mediaplex, the advertiser, a network publisher or any other third-party ad
server.
[Graphic depiction of MOJO technology platform appears here]
Mediaplex's MOJO architecture has three primary technical components:
advertising objects, network services and enterprise integration:
Advertising Objects. Advertising objects contain all information relevant
to a campaign and manage the serving of each advertisement. Targeting rules
residing in an ad-serving object determine, for example, which targeting
profile upon which to focus and which message to send to a particular
consumer.
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Tracking functions for an advertising campaign are also performed by these
objects, which can be stored and executed on any server. The advertising
objects are configurable in real time from remote locations.
Network Services. This component manages the entire campaign and
coordinates communication between other objects and with our clients
through our publish and subscribe messaging capability. This messaging
capability intelligently receives events published or transmitted by
various objects and forwards that information to other objects that have
subscribed to or are authorized to receive such information. This component
contains the business rules for a campaign that determine, for example,
which product information will be advertised and at what price, in response
to changes in inventory levels. Reporting functions are also performed in
this layer, which also manages access to relevant campaign data, through
the publish and subscribe messaging capability. This network services layer
effectuates dynamic messaging by applying predefined business rules to
modify an advertising message within a preset graphic template on the basis
of events encapsulated within other objects within the network. This
component is administered remotely, residing in our two co-location data
centers, and communicates with the advertising objects and enterprise
integration components while executing the campaign.
Enterprise Integration. This component consists of objects that
encapsulate the client's enterprise data relevant to the campaign and
generate events that are communicated to the network services layer and
advertising objects. The underlying enterprise data is not transferred and
as such the integrity of a client's enterprise data is protected and
preserved under our architecture. In addition to communicating client
events to the campaign, actual campaign results are communicated back to
the client's enterprise data. This two-way communication facilitates
optimization of a business' operating systems and performance based on
campaign results, as well as optimization of a campaign based upon current
business data.
We believe our technology architecture provides these distinct competitive
advantages:
Real Time. Campaign optimization occurs in or near real time. Our MOJO
technology is structured to enable our clients to establish business rules
which will automatically optimize results in response to pre-defined events.
Real-time manual adjustments can be made interactively based on reports
received during ongoing campaigns.
Flexibility. Our MOJO platform is designed to be flexible, supporting both
simple systems such as remote banner serving and click-through tracking as well
as more sophisticated ROI tracking and automated feedback. Marketing campaigns
can be modified in real time automatically or manually, based on changes in the
data encapsulated in various objects. These changes are communicated between
objects through a continuous communication loop facilitated by the publish and
subscribe messaging capabilities. Our architecture is also designed to be open
and compatible with most major enterprise software applications and systems.
Our MOJO technology is easy to integrate and implement because it uses an
industry standard language, XML, for its data encoding and communication.
MOJO's support for major industry standards also includes HTTP, CORBA and LDAP.
Scability and Reliability. Our MOJO architecture is designed to scale in
anticipation of increased transaction demand and system load. Our architecture
is scalable by simply adding more servers to accommodate system data traffic.
The application logic is designed to remain unchanged as the transaction volume
grows. In addition, our technology uses automatic failure protection combined
with fault tolerance, which allows campaign requests to be served even if one
or more servers are down.
We have invested significant amounts toward research and development to date.
Our expenses in this area totaled approximately $347,000, $556,000 and $816,000
in 1997, 1998 and the six months ended June 30, 1999, respectively.
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Sales and Marketing
We market and sell our services primarily through our field sales force,
which included 53 sales people as of August 31, 1999. Currently, we have sales
offices and support operations in San Francisco, New York City and Hamburg, and
plan to open additional sales offices in Western Europe and Tokyo by the end of
1999. We intend to broaden our global presence by expanding our international
sales force and by entering into marketing agreements with international
partners.
Sales leads are obtained primarily from two sources: direct leads and
strategic alliance leads. Direct leads are derived through field sales, client
referrals, our Web site, trade shows, and responses to our public relations and
marketing efforts. Strategic alliance leads are derived through companies that
offer complementary Internet solutions services. These companies include
traditional advertising agencies, Web site design, development and consulting
firms, enterprise resource planning vendors, interactive agencies, system
integrators, and creative and software tool kit companies. Our sales account
teams typically include an account manager, associate account managers, a
campaign manager and an account coordinator.
We use a variety of marketing programs to build awareness of Mediaplex and
its service offerings. These include collateral marketing materials, online and
off-line advertising, press coverage and other public relations efforts, direct
marketing, trade shows, seminars and conferences, relationships with recognized
industry analysts, and the Mediaplex Web site.
Strategic Alliances
An integral part of our strategy is to develop alliances with complementary
partners for sales, marketing and client development in the United States,
Europe and Asia. We currently have strategic relationships with companies in
the following categories:
Internet Advertising. In August 1999, DoubleClick Inc., a leading provider of
online advertising services, and Mediaplex established a strategic alliance to
bridge the gap between non-personally identifiable online target data and an
advertiser's enterprise data. Through this relationship, we are able to
integrate our MOJO technology with DoubleClick's targeting system, known as
DART, thereby enabling creative messages in real time that are specifically
targeted to a consumer profile. Under our agreement with DoubleClick, we will
coordinate our efforts in DART-enabling the MOJO technology and jointly
marketing our services to prospective clients. The relationship also allows us
to use the DART system, where appropriate, and reduce our own serving costs as
we manage an increasing number of advertisements.
Enterprise Resource Planning. In August 1999, we entered into an agreement
with SAP Labs, Inc., a subsidiary of SAP AG, an enterprise resource planning,
or ERP, software company. Under the terms of our agreement, we will create an
interface to SAP's R3 ERP system that will enable SAP's enterprise customers to
implement our MOJO technology in their e-commerce marketing initiatives.
Internet Development and Consulting. In July 1999, we entered into a
preferred provider agreement with Icon Medialab, a global Internet architect
for companies integrating Internet-based technology with business strategies.
Icon Medialab's services include strategy consulting, system integration,
interface design and usability testing for enhanced customer relations. Under
our agreement with Icon Medialab, we will cross-refer clients and collaborate
on joint marketing and strategic consumer development programs. We also believe
that we will benefit from Icon Medialab's presence and marketing capabilities
in Europe.
Cable Television Providers. In August 1999, Mediaplex and Across Media
Networks entered into a partnership to offer marketers the capability to match
a specific consumer with a specific offer, both on cable television and the
Internet, driven by business rules and relevant marketing data. Across Media
Networks designs and operates private label cable channels to enable cable
operators to outsource the creation of branded, advertiser-supported subscriber
information channels, and serves over three million subscribers in more than
75 cities nationwide. We will provide MOJO technology to Across Media Networks
exclusively in conjunction with online marketing and advertising programs for
its CityHits Internet business and clients.
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International Alliances. In April 1999, Zeron Capital Ltd., a Japanese
merchant bank, investment management and venture capital firm, invested $2.0
million in us, and in June 1999, invested an additional $3 million in us. Zeron
Capital Ltd. has agreed to use its best efforts to help secure our presence in
Japan, establish alliances with major companies in Japan and develop an
international presence in Asia. We believe that the Japanese market represents
significant growth opportunities for us and will allow us to expand in other
Asian markets. We are currently in discussions with Zeron Capital, Ltd. to
establish a joint venture to develop Japanese leads for our MOJO technology and
our campaign management services.
Our Clients
As of June 30, 1999, Mediaplex had over 50 active clients. The following is a
list of our clients that purchased more than $50,000 in services from January
1, 1998 to June 30, 1999:
Direct Clients
<TABLE>
<S> <C>
Ashford Investor's Business Daily
Buy Software MacMall/Creative Computers
Capstone Studio Majestic International
DATEK Online Brokerage Services, Corp. Music Maker
DriveSavers MyShopNow.com
eCost/Creative Computers OfficeMax
efax.com PCMall/Creative Computers
Flower Farm ShopNow
FreeShop Strong Funds
Fresh Flower Source uBid
Hitachi Data Systems 1800 DAYTRADE.com
</TABLE>
Advertising Agencies
. McCann-Erickson for Silicon Graphics, Inc. and Siebel Systems
. Publicis & Hal Riney for Sprint PCS and Hewlett-Packard's Vectra, Brio,
Kayak and Omnibook products
In 1998, DATEK Online Brokerage Services, Corp. and uBid accounted for
approximately 56% and 21% of our revenues, respectively. In the first half of
1999, DATEK Online Brokerage Services, Corp., Publicis & Hal Riney and uBid
accounted for approximately 15%, 10% and 10% of our revenues, respectively.
Technical Support
We provide extensive technical strategy and support throughout the
implementation and maintenance phases of the deployment of our services. This
support is comprised of three key components: Network Operations, Technical
Account Coordination and MOJO Implementation.
Network Operations
Our network operations organization is responsible for ensuring our network
and servers are fault-tolerant. We have organized our network of servers to
provide significant protection against potential breakdown or outages.
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Technical Account Coordination
We believe that our technical account procedures protect the client from data
loss. Each account team, comprised of a customer support manager, software
engineer and director of systems operations, holds frequent meetings to discuss
each ad campaign currently being conducted. These teams review each client's
campaign for which the team is responsible to ensure the client's program is
operating trouble-free.
Our account coordinators also work with each publisher to provide smooth
technical implementation of the campaign, and test each technical aspect of the
campaign before it is launched.
MOJO Implementation
Our engineering organization takes an in-depth and focused approach to the
implementation of our MOJO technology for each client's online campaign. Each
team meets with its clients to fully understand the client's environment, its
enterprise system and exactly how the MOJO technology needs to work within the
client's specific enterprise design. The team also works with the client to
define the campaign needs and then implements an appropriate plan based on the
campaign goals set by the client. Once MOJO is installed, the team performs
ongoing implementation and support of the client's campaign.
Intellectual Property
To protect our proprietary rights, we rely generally on patent, copyright,
trademark and trade secret laws, and confidentiality agreements or licenses
with employees, consultants, vendors, clients and corporate parties. Despite
these protections, a third-party could, without authorization, disclose, copy
or otherwise obtain and use our technology or develop similar technology
independently.
We currently have one patent pending in the United States relating to our
MOJO product architecture and technology. We cannot assure you that our
pending, or any future, patent application will be granted, that any existing
or future patent will not be challenged, invalidated or circumvented, or that
the rights granted under the patent that has issued 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, the 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 trademarks and service marks in the U.S.
and in other countries, although we have not secured registration of all of our
marks. As of June 30, 1999, we had no registered U.S. trademarks or service
marks; however, we have applied for registration of our Mediaplex and MOJO
trademarks. In addition, the laws of some foreign countries will not protect
our proprietary rights to the same extent as do the laws of the U.S., and
effective patent, copyright, trademark and trade secret protection may not be
available in these jurisdictions.
We may, in the future, license our proprietary rights, in particular our MOJO
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.
We attempt to avoid infringing known proprietary rights of third parties in
our product development efforts. We have conducted an independent patent search
for prior art related to our MOJO architecture. This patent search did not
uncover any references that would anticipate our patent claim; however, this
patent search was not exhaustive and may not have uncovered all prior art
applicable to our MOJO architecture. In addition, it is difficult to proceed
with certainty in a rapidly evolving technological environment in which there
exists numerous patent applications pending, many of which are confidential
when filed, with regard to similar technologies. If we were to discover that
our technology violates third-party proprietary rights, we might not be
43
<PAGE>
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 license technology that will be integrated with our
internally developed software and used in our services. We cannot assure you
that third-party technology licenses will become or will continue to be
available to us on commercially reasonable terms. The loss of any of these
technologies could harm our business. In addition, by licensing technology from
third parties, we may become susceptible to claims for infringement with
respect to this third-party technology. Even if we receive broad
indemnification from our licensors, third-party indemnitors are not always well
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.
Competition
The Internet media services market, which includes planning media campaigns,
buying advertising space, ad serving and tracking and reporting results of
advertising, is extremely competitive and likely to become more intense due to
the lack of significant barriers of entry. We believe that, in addition,
competition will continue to increase as a result of industry mergers,
partnerships and consolidation. Many of our existing competitors, as well as a
number of potential new competitors, have longer operating histories, greater
name recognition, larger client bases and significantly greater financial,
technical and marketing resources than we have. The following categories
represent current and potential competition:
. online media planning and buying services, such as Avenue A;
. ad serving companies, such as AdForce, DoubleClick and Engage
Technologies, Inc.;
. publisher networks which provide services directly to clients, such as
Flycast Communications and 24/7 Media, Inc.;
. organizations that manage affiliate programs, such as LinkShare; and
. advertising agencies with in-house online media management capabilities,
such as Lowe Interactive.
We believe that our ability to compete depends upon many factors both within
and outside of our control, including:
. effectiveness, ease of use, performance and features of our technology;
. client perceptions of the effectiveness of our services and technology;
. the price of our services;
. our ability to service our clients effectively over a broad geographic
basis; and
. the timing and acceptance of new solutions and enhancements to existing
solutions developed by us or our competitors.
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<PAGE>
Employees
As of August 31, 1999, we had 100 full-time employees. Of these employees, 24
were engaged in research and development, 53 were engaged in sales and
marketing and 23 were engaged in finance and administration. None of our
employees is represented by a labor union or a collective bargaining agreement.
We have not experienced any work stoppages and consider our relations with our
employees to be good.
Facilities
We currently lease approximately 11,600 square feet of office space for our
headquarters in one building, located in San Francisco, California. We believe
we will need additional space in the near future and are currently in
negotiations to lease approximately 10,500 square feet of office space near our
headquarters in San Francisco. We cannot assure you that we will find adequate
space at a reasonable price. We also lease approximately 13,200 square feet of
a facility in San Jose, California that houses our research and development
organization and approximately 7,700 square feet in New York City for a sales
office. In addition, we use two third-party, fully-redundant co-location
facilities that house our Web servers in San Francisco and San Jose, California
and we are currently seeking to obtain additional co-location facilities in
other areas in the United States. We cannot assure you that we will be able to
locate and lease additional acceptable co-location space at a reasonable price.
Legal Proceedings
From time to time, we may become involved in litigation relating to claims
arising from the ordinary course of our business. We believe that there are no
claims or actions pending or threatened against us, the ultimate disposition of
which would have a material adverse effect on us.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information with respect to our
directors and executive officers as of August 31, 1999:
<TABLE>
<CAPTION>
Name Age Position
--------------------------- --- --------------------------------------------
<C> <C> <S>
Gregory R. Raifman......... 40 Chairman of the Board of Directors and Chief
Executive Officer
Jon L. Edwards............. 39 President and Director
Walter Haefeker............ 38 Chief Operating Officer
Ruiqing "Barclay" Jiang.... 37 Chief Technology Officer
Executive Vice President, Sales and
Timothy M. Favia........... 37 Development
Senior Vice President, Chief Financial
Sandra L. Abbott........... 52 Officer and Secretary
Robert M. Henely........... 47 Senior Vice President, Technical Operations
M. Joy Fauvre.............. 48 Senior Vice President, Marketing
Alan M. Raifman............ 45 Vice President, Business and Legal Affairs
James DeSorrento .......... 56 Director
Lawrence D. Lenihan, Jr. .. 34 Director
Peter S. Sealey ........... 59 Director
A. Brooke Seawell ......... 51 Director
</TABLE>
Gregory R. Raifman has served as our Chairman of the Board of Directors and
Chief Executive Officer since September 1998, and Chief Executive Officer and
sole director of MediaPlex, Inc., our former wholly-owned subsidiary since
April 1998. Since August 1993, Mr. Raifman has also served as a general partner
of Raifman & Edwards LLP, a law firm. Since September 1994, Mr. Raifman has
served as a managing member of PointBreak Ventures, LLC, a venture capital
firm. Mr. Raifman received an A.B. in economics and history from the University
of Michigan and a J.D. from Georgetown University Law Center.
Jon L. Edwards has served as our President and a member of our board of
directors since April 1998. Since August 1993, Mr. Edwards has also served as a
general partner of Raifman & Edwards LLP. Since September 1994, Mr. Edwards has
served as a managing member of PointBreak Ventures, LLC. Mr. Edwards received
an A.B. in engineering science from Dartmouth College and a J.D. from
Georgetown University Law Center.
Walter Haefeker has served as our Chief Operating Officer since September
1998. Since September 1994, Mr. Haefeker has served as a managing member for
PointBreak Ventures, LLC. From March 1994 to April 1995, Mr. Haefeker served as
chairman of the board of directors for CADIS Software, Ltd., a software
company. Mr. Haefeker received an Abitur in chemistry and physics from Theodor-
Heass Gymnasium, Pinneberg, Germany.
Ruiqing "Barclay" Jiang has served as our Chief Technology Officer since
March 1999. Prior to joining Mediaplex, Mr. Jiang served as president of
Netranscend Software, Inc., an enterprise software company, from November 1996
until it was acquired by Mediaplex in March 1999. From October 1993 to
September 1997, Mr. Jiang served as an engineering manager for FutureLabs,
Inc., a software company. Mr. Jiang received a B.S. in computer science from
Xi'an Jiaotong University, China and an M.S. in applied statistics from
Louisiana State University.
Timothy M. Favia has served as our Executive Vice President, Sales and
Development since January 1999. Prior to joining Mediaplex, Mr. Favia was a co-
founder of Oxygen Electronics, LLC, a distributor of electronic components,
where he served as managing partner from June 1997 to December 1998. From
January 1996 to May 1997, Mr. Favia served as vice president, western region,
of Open Port Technology, an Internet messaging
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services company. From July 1988 to January 1996, he served as director of
international sales for Thomson Software Products, a software company. Mr.
Favia received a B.A. in political science from Fairfield University.
Sandra L. Abbott has served as a Senior Vice President and our Chief
Financial Officer and Secretary since August 1999. Prior to joining Mediaplex,
Ms. Abbott served as chief financial officer for 8x8, Inc., a manufacturer of
digital telecommunication products, from June 1995 to August 1999. From April
1991 to June 1995, Ms. Abbott served as controller for 8x8, Inc. Ms. Abbott
received a B.A. in political science from the University of California,
Riverside and an M.B.A. from Santa Clara University.
Robert M. Henely has served as our Senior Vice President, Technical
Operations since March 1999. Prior to joining Mediaplex, Mr. Henely served as
director of engineering for Boole & Babbage, Inc., a software company, from
December 1997 to March 1999. From November 1981 to December 1997, Mr. Henely
served as a research and development manager at Hewlett-Packard Company.
Mr. Henely received a B.S. in economics from California State University, Chico
and an M.S. in econometrics from the University of California, San Diego.
M. Joy Fauvre has served as our Senior Vice President, Marketing since July
1999. Prior to joining Mediaplex, Ms. Fauvre served as a marketing director for
Heller Financial, a commercial lender, from October 1994 to July 1999. From
June 1994 to October 1994, Ms. Fauvre served as acting advertising manager for
Qantas Airways, a commercial airline, and from August 1991 to January 1994, she
served as an account supervisor for D'Arcy Masius Benton & Bowles, an
advertising agency. Ms. Fauvre received a B.A. in theatre from the University
of California, Santa Barbara and an M.A. in theatre from Ball State University.
Alan M. Raifman has served as our Vice President, Business and Legal Affairs
since October 1998. Prior to joining Mediaplex, Mr. Raifman served as an
associate for Albert A. Rettig & Associates, a business services company, from
June 1997 through January 1999. Since July 1989, Mr. Raifman has also served as
a member of the board of directors for Little Cargo, Inc., a juvenile product
development company that he co-founded. Mr. Raifman received a B.A. in history
and a J.D. from Washington University.
James DeSorrento has served as a member of our board of directors since
August 1999. Since June 1982, Mr. DeSorrento has served as chief executive
officer and chairman of the board of Triax Telecommunications Company, LLC and
its predecessor, Triax Communications Corporation, a cable television operating
company. Mr. DeSorrento received a B.A. in English from St. Michael's College.
Lawrence D. Lenihan, Jr. has served as a member of our board of directors
since August 1999. Since January 1999, Mr. Lenihan has served as fund manager
for Pequot Capital Management, Inc., a venture capital firm. From October 1996
to December 1998, Mr. Lenihan served as fund manager for Dawson-Sanberg Capital
Management, a venture capital firm. From August 1993 to October 1996, Mr.
Lenihan served as a principal for Broadview Associates, an investment bank. Mr.
Lenihan also serves as a member of the boards of directors of Digital
Generation Systems, Inc., a provider of distribution services for ad agencies
and broadcasters, STM Wireless, Inc., a satellite and wireless-based
communications company, and Triken Technologies, Inc., a semiconductor-
processing equipment company, as well as several private companies. Mr. Lenihan
received a B.S.E.E. in electrical engineering from Duke University and an
M.B.A. from the Wharton School of Business at the University of Pennsylvania.
Peter S. Sealey has served as a member of our board of directors since August
1999. Since September 1994, Dr. Sealey has served as an adjunct professor of
marketing at the Haas School of Business at the University of California,
Berkeley where he also has served as a co-director of the Center for Marketing
and Technology. Prior to that, Dr. Sealey was employed by the Coca Cola Company
for 24 years, where he held a series of senior management positions, including
senior vice president, global marketing. Dr. Sealey serves as a member of the
boards of directors of US Web/CKS, an Internet professional services firm,
Autoweb.com Inc., a consumer automotive Internet site, bamboo.com, a producer
of virtual tours for the real estate industry on the
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Internet, and Cybergold, Inc., an Internet-based direct marketing and
advertising company, as well as several private companies. Dr. Sealey received
a B.S.B.A. in business from the University of Florida, an M.I.A. in industrial
administration from Yale University, and an M.A. in management and Ph.D. in
management and information technology from the Peter F. Drucker Graduate
Management Center at The Claremont Graduate University.
A. Brooke Seawell has served as a member of our board of directors since
August 1999. From January 1997 to August 1998, Mr. Seawell served as the
executive vice president of NetDynamics Inc., an enterprise network
applications server software company. From March 1991 to January 1997, Mr.
Seawell served as the senior vice president of finance and operations of
Synopsys Inc., an electronic design automation company. Mr. Seawell serves as a
member of the boards of directors of NVIDIA Corporation, a three-dimensional
graphics processor, Informatica Corporation, a data integration software
company and Accrue Software, Inc., an internet data collection and analysis
software company, as well as several private companies. Mr. Seawell received a
B.A. in economics and an M.B.A. in finance from Stanford University.
Board of Directors
Our board of directors is currently comprised of six directors. Our restated
certificate of incorporation, to be filed upon the closing of this offering,
states that the board of directors will be divided into three classes as nearly
equal in size as possible with staggered, three-year terms. The term of office
of our Class I directors will expire at the annual meeting of stockholders to
be held in 2000; the term of office of our Class II directors will expire at
the annual meeting of stockholders to be held in 2001; and the term of office
of our Class III directors will expire at the annual meeting of the
stockholders to be held in 2002. Messrs. Lenihan and Sealey have been
designated as Class I directors; Messrs. Edwards and DeSorrento have been
designated as Class II directors; and Messrs. Raifman and Seawell have been
designated as Class III directors. At each annual meeting of the stockholders
after the initial classification, the successors to the directors whose terms
have expired will be elected to serve from the time of election and
qualification until the third annual meeting following their election or until
their successors have been duly elected and qualified, or until their earlier
resignation or removal, if any. In addition, our bylaws, to be adopted upon the
closing of this offering, provide that the authorized number of directors may
be changed by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors. The classification
of our board of directors could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring,
control of Mediaplex. See "Description of Capital Stock."
Each officer is elected by, and serves at the discretion of, the board of
directors or until his or her successor has been duly elected and qualified.
Each of our executive officers and directors, other than non-employee
directors, devotes his or her full time to our affairs. Our non-employee
directors devote the amount of time necessary to discharge their duties to us.
Gregory R. Raifman, our Chairman of the Board of Directors and Chief Executive
Officer is the brother of Alan M. Raifman, our Vice President, Business and
Legal Affairs. There are otherwise no family relationships among any of our
directors, officers or key employees.
Board Committees
The board of directors has established an audit committee to meet with and
consider suggestions from members of management and our internal accounting
personnel, as well as our independent accountants, concerning our financial
operations. The audit committee also has the responsibility to review our
audited financial statements and consider and recommend the employment of, and
approve the fee arrangements with, independent accountants for both audit
functions and for advisory and other consulting services. The audit committee
is currently comprised of Messrs. DeSorrento and Seawell.
The board of directors has also established a compensation committee to
review and approve the compensation and benefits for our key executive
officers, administer our equity incentive plans and make
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<PAGE>
recommendations to the board of directors regarding such matters. The
compensation committee is currently comprised of Messrs. Lenihan and Sealey.
Compensation Committee Interlocks and Insider Participation
Prior to establishing the compensation committee, the board of directors as a
whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of
directors or compensation committee.
Director Compensation
Directors do not currently receive any cash compensation from us for their
service as members of the board of directors; however, directors are reimbursed
for all reasonable expenses incurred by them in attending board and committee
meetings. Employee and non-employee directors are also eligible to receive
options under our 1999 Stock Plan and employee directors are eligible to
participate in our 1999 Employee Stock Purchase Plan. In August 1999, Messrs.
DeSorrento and Seawell and Dr. Sealey were each granted an option to acquire
50,000 shares of common stock at an exercise price of $3.25 per share upon such
director's appointment to our board of directors. The options vest over a four
year period but may be exercised at any time. See "--Equity Incentive Plans."
Executive Compensation
The following table sets forth the total compensation received for services
rendered to us during 1998 by our Chief Executive Officer and two of our other
executive officers. Except as set forth below, no other employee received
salary and bonus in 1998 in excess of $100,000. These three officers are
referred to as the named executive officers in this prospectus. In 1998,
Messrs. Gregory Raifman and Jon Edwards, general partners of Raifman & Edwards,
LLP, provided legal and management services to us, for which Raifman & Edwards,
LLP was paid approximately $197,000. See "Related Party Transactions." Except
as disclosed below and in "Related Party Transactions," we gave no bonuses,
stock-based compensation or other compensation to our named executive officers
in 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal Position Salary ($)
- ------------------------------------------------------------ -------------------
<S> <C>
Gregory R. Raifman, Chief Executive Officer (1)............. $180,000
Jon L. Edwards, President (2)............................... 180,000
Walter Haefeker, Chief Operating Officer (3)................ 150,000
</TABLE>
- --------
(1) The salary amount represents the amount Mr. Raifman would have earned if he
had been employed by us for the entire year. Mr. Raifman's actual salary
earned was $35,000.
(2) The salary amount represents the amount Mr. Edwards would have earned if he
had been employed by us for the entire year. Mr. Edward's actual salary
earned was $35,000.
(3) The salary amount represents the amount Mr. Haefeker would have earned if
he had been employed by us for the entire year. Mr. Haefeker's actual
salary earned in 1998 was $41,100.
The 1999 annual base salary rates for Messrs. Raifman, Edwards and Haefeker
are $250,000, $250,000 and $225,000, respectively. In addition, we hired the
following executive officers in 1999 at the following annual salaries: Ruiqing
"Barclay" Jiang, $180,000; Timothy M. Favia, $175,000; Sandra L. Abbott,
$170,000; Robert Henely, $150,000; M. Joy Fauvre, $140,000; and Alan M.
Raifman, $90,000.
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Option Grants and Exercises in Last Fiscal Year and Fiscal Year End Option
Values
No named executive officers were granted or held any options to purchase our
common stock at any time in 1998. In February 1999, however, Gregory R.
Raifman, Jon L. Edwards and Walter Haefeker were each granted options to
purchase 1,750,000, 1,500,000 and 1,250,000 shares of common stock,
respectively, at a purchase price of $0.50 per share, under our 1999 Stock Plan
of which 388,889 shares, 333,333 shares and 138,889 shares, respectively, had
vested as of December 31, 1998.
Employment Agreements
In connection with our hiring and retention of each of Gregory R. Raifman,
Jon L. Edwards and Walter Haefeker, we entered into employment agreements in
which we agreed to pay each of them a specified base salary and options to
purchase our common stock, and each executive officer agreed to enter into a
three-year employment term with us. Upon the expiration of the three-year term,
employment with us becomes terminable at-will. All options vest at the rate of
1/6th of the shares on the six-month anniversary of the vesting commencement
date, and 1/36th of the shares per month thereafter as long as such optionee is
employed by us. The following table sets forth the stock options granted to
each executive officer under his employment agreement with us:
<TABLE>
<CAPTION>
Exercise Price
Name Options Granted Per Share
- ------------------------------------------------- --------------- --------------
<S> <C> <C>
Gregory R. Raifman............................... 1,750,000 $0.50
Jon L. Edwards................................... 1,500,000 0.50
Walter Haefeker.................................. 1,250,000 0.50
</TABLE>
Under the terms of each employment agreement, if we terminate employment with
the executive officer without cause, we are required to pay him severance
payments of 1/13th of his base salary for each complete month previously
worked; however, the aggregate severance payments are not to exceed his annual
base salary. Additionally, each executive officer has agreed to not compete
with us or not solicit others from us for a period of one year following his
termination with us.
Equity Incentive Plans
1997 Stock Plan. Our 1997 Stock Plan provides for the granting to employees
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and for the granting to employees and
consultants of nonstatutory stock options and stock purchase rights. As of
August 15 1999, options to purchase 243,000 shares of common stock were
outstanding under our 1997 Stock Plan. Our board of directors has determined
that no further options will be granted under the 1997 Stock Plan after this
offering. The 1997 Stock Plan provides that, if we merge with or into another
corporation or sell substantially all of our assets, each outstanding option
must be assumed or substituted for by the successor corporation. If the
successor corporation refuses to assume or substitute for the Mediaplex
options, the Mediaplex options will terminate as of the closing of the merger
or sale of assets.
Amended and Restated 1999 Stock Plan. Our 1999 Stock Plan was initially
adopted by our board of directors and shareholders in February 1999. It was
amended and restated by our board of directors in August 1999, and we expect to
submit it to our stockholders for their approval prior to the closing of this
offering. If approved by the stockholders, the Amended and Restated 1999 Stock
Plan will become effective upon the closing of this offering.
The Amended and Restated 1999 Stock Plan provides for the grant of incentive
stock options to employees, including officers and employee directors, and for
the grant of nonstatutory stock options and stock purchase rights to employees,
directors and consultants.
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We have reserved 12,000,000 shares of our common stock for issuance pursuant
to the Amended and Restated 1999 Stock Plan. In addition, commencing January 1,
2000, the number of shares reserved for issuance under the Amended and Restated
1999 Stock Plan will be increased by an amount equal to the least of (a)
1,000,000 shares, (b) 4% of the outstanding shares or (c) an amount determined
by our board of directors.
Unless terminated sooner, the Amended and Restated 1999 Stock Plan will
automatically terminate ten years from the effective date of this offering.
The administrator of our stock plan has the power to determine:
. the terms of the options or stock purchase rights granted, including the
exercise prices of the options or stock purchase rights;
. the number of shares subject to each option or stock purchase right;
. the exercisability of each option or stock purchase right; and
. the form of consideration payable upon the exercise of each option or
stock purchase right.
In addition, the administrator has the authority to amend, suspend or
terminate the stock plan, so long as this action does not affect any shares of
common stock previously issued and sold or any option previously granted under
the Amended and Restated 1999 Stock Plan. The maximum number of shares covered
by an option that each optionee may be granted during a fiscal year is 500,000
shares. In addition, in connection with an optionee's initial employment with
us, the optionee may be granted an option covering an additional
500,000 shares.
Options and stock purchase rights granted under our Amended and Restated 1999
Stock Plan are generally not transferable by the optionee, and each option and
stock purchase right is exercisable during the lifetime of the optionee only by
the optionee. Options granted under the Amended and Restated 1999 Stock Plan
must generally be exercised within three months after the end of the optionee's
status as an employee, director or consultant of Mediaplex, or within 12 months
after the optionee's termination by death or disability, but in no event later
than the expiration of the option's term.
In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement must grant us a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment or consulting relationship with us for any reason,
including death or disability. The purchase price for shares repurchased
pursuant to the restricted stock purchase agreement will be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to us. The repurchase option will lapse at a rate determined by
the administrator.
The exercise price of all incentive stock options granted under the Amended
and Restated 1999 Stock Plan must be at least equal to the fair market value on
the date of grant of the common stock underlying the option. The exercise price
of nonstatutory stock options and stock purchase rights granted under the
Amended and Restated 1999 Stock Plan is determined by the administrator, but
with respect to nonstatutory stock options intended to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the Code, the
exercise price must be at least equal to the fair market value on the date of
grant of the common stock underlying the option. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of our outstanding capital stock, the exercise price of any incentive
stock option granted must be at least equal 110% of the fair market value on
the grant date and the term of the incentive stock option must not exceed five
years. The term of all other options granted under the Amended and Restated
1999 Stock Plan may not exceed ten years.
The Amended and Restated 1999 Stock Plan provides that, in the event of a
merger of Mediaplex with or into another corporation, or a sale of
substantially all of our assets, each option and stock purchase right must be
assumed, or an equivalent option or stock purchase right substituted, by the
successor corporation. If the
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outstanding options and stock purchase rights are not assumed or substituted
for by the successor corporation, the optionees will fully vest in and have the
right to exercise their options or stock purchase rights. If an option or stock
purchase right becomes fully vested and exercisable in the event of a merger or
sale of assets, the administrator must notify the optionee that the option or
stock purchase right will be fully exercisable for a period of 15 days from the
date of notice and that the option or stock purchase right will terminate upon
the expiration of the 15-day period.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan was
adopted by our board of directors in August 1999, and we expect to submit it to
our stockholders for their approval prior to the closing of this offering. If
approved by the stockholders, the 1999 Employee Stock Purchase Plan will become
effective upon the closing of this offering. This plan is designed to allow our
eligible employees and the eligible employees of any participating subsidiaries
to purchase shares of common stock, at semi-annual intervals, with their
accumulated payroll deductions.
We have reserved 400,000 shares of our common stock for issuance pursuant to
the 1999 Employee Stock Purchase Plan. In addition, commencing January 1, 2000,
the number of shares reserved for issuance under the 1999 Employee Stock
Purchase Plan will be increased by an amount equal to the least of: (a) 400,000
shares, (b) 2% of the outstanding shares on such date or (c) an amount
determined by our board of directors. As of the date of this prospectus, no
shares have been issued under the 1999 Employee Stock Purchase Plan.
Our 1999 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Code, contains consecutive, overlapping, 24-month offering
periods. Each offering period includes four six-month purchase periods. The
offering periods generally start on the first trading day on or after May 1 and
November 1 of each year, except for the first offering period which commences
on the first trading day on or after the effective date of this offering and
ends on the last trading day on or before October 31, 2001.
Employees are eligible to participate if they are customarily employed by us
or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, employees may not be granted an
option to purchase stock under the 1999 Employee Stock Purchase Plan if they
either:
. immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or
. hold rights to purchase stock under our 1999 Employee Stock Purchase Plan
that accrue at a rate which exceeds $25,000 worth of stock for each
calendar year.
The 1999 Employee Stock Purchase Plan permits each participant to purchase
our common stock through payroll deductions of up to 10% of his or her
"compensation." Compensation is defined as the participant's base straight-time
gross earnings, overtime, shift premium and bonuses, but excludes other
compensation. The maximum number of shares a participant may purchase during a
single purchase period is 1,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 1999 Employee Stock Purchase Plan is generally 85% of the
lower of the fair market value of the common stock either:
. at the beginning of the offering period; or
. at the end of the purchase period.
In the event the fair market value at the end of a purchase period is less
than the fair market value at the beginning of the offering period, the
participants will be withdrawn from the current offering period following
exercise and automatically re-enrolled in a new offering period. The new
offering period will use the lower fair market value as of the first date of
the new offering period to determine the purchase price for future purchase
periods. Participants may end their participation at any time during an
offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with us.
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Rights granted under the 1999 Employee Stock Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the 1999 Employee Stock Purchase
Plan. The 1999 Employee Stock Purchase Plan provides that, in the event of a
merger of Mediaplex with or into another corporation or a sale of substantially
all of our assets, each outstanding option may be assumed or substituted for by
the successor corporation. If the successor corporation refuses to assume or
substitute for the outstanding options, the offering period then in progress
will be shortened and a new exercise date will be set.
Our board of directors has the authority to amend or terminate the 1999
Employee Stock Purchase Plan, except that no such action may adversely affect
any outstanding rights to purchase stock under the 1999 Employee Stock Purchase
Plan, provided that the board of directors may terminate an offering period on
any exercise date if the board of directors determines that the termination of
the 1999 Employee Stock Purchase Plan is in our best interests and the best
interests of our stockholders. The board of directors may in its sole
discretion amend the 1999 Employee Stock Purchase Plan to the extent necessary
and desirable to avoid unfavorable financial accounting consequences by
altering the purchase price for any offering period, shortening any offering
period or allocating remaining shares among the participants. Unless sooner
terminated by our board of directors, the 1999 Employee Stock Purchase Plan
will terminate automatically ten years from the effective date of this
offering.
401(k) Plan
In February 1997, we adopted a 401(k) plan to provide eligible employees with
a tax preferential savings and investment program. Employees become eligible to
participate in the 401(k) plan on the first day they perform an hour of service
for us, at which point we classify them as participants. They may elect to
reduce their current compensation by up to the lesser of 15% of eligible
compensation or the statutorily prescribed annual limit, currently $10,000, and
have this reduction contributed to the 401(k) plan. The 401(k) plan permits,
but does not require, us to make additional matching contributions to the
401(k) plan on behalf of eligible participants. All contributions made by and
on behalf of participants are subject to a maximum contribution limitation
currently equal to the lesser of 25% of their compensation or $30,000 per year.
At the direction of each participant, the trustee of the 401(k) plan invests
the assets of the 401(k) plan in selected investment options. Contributions by
participants or by us to the 401(k) plan, and income earned on plan
contributions, are generally not taxable to the participants until withdrawn,
and contributions by us, if any, are generally deductible by us when made. To
date, we have made no contributions to the 401(k) plan on behalf of
participants.
Limitations on Directors' Liability and Indemnification
Our amended and restated certificate of incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for any of the following:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation provides that we may
indemnify our directors, officers and employees to the fullest extent permitted
by law. We believe that indemnification under our bylaws
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covers at least negligence and gross negligence on the part of indemnified
parties. Our bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in such capacity, regardless of whether our bylaws would permit
indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors
and executive officers for expenses, judgments, fines and settlement amounts
incurred by them in any action or proceeding arising out of their services as
directors or executive officers or at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
At present, there is no material litigation or proceeding pending involving
any of our directors or officers in which indemnification is required or
permitted, and we are not aware of any threatened material litigation or
proceeding that might result in a claim for indemnification.
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RELATED PARTY TRANSACTIONS
Since our inception in September 1996, we have never been party to, and we
have no plan to be a party to, any transaction or series of similar
transactions in which the amount involved exceeded or will exceed $60,000 and
in which any director, executive officer or holder of more than 5% of our
common stock had or will have an interest, other than as described under
"Management" and the transactions described below.
Michael Schwartz, Raifman & Edwards LLP, PointBreak Ventures, LLC and Eugene
Jarvis were involved in our initial funding. Michael Schwartz and Eugene Jarvis
served as our initial officers and directors. Neither Mr. Schwartz nor Mr.
Jarvis is currently affiliated with us. Gregory R. Raifman and Jon L. Edwards,
two of our current executive officers, are general partners of Raifman &
Edwards LLP and are managing members of, and hold substantial interests in,
PointBreak Ventures, LLC. Walter Haefeker, also a current executive officer,
holds a substantial interest in PointBreak Ventures, LLC. Following our
inception in September and October 1996, we issued 2,460,000 shares to Michael
Schwartz for a nominal amount, 350,000 shares to Raifman & Edwards LLP in
consideration primarily for legal services rendered, and 250,000 shares to
PointBreak Ventures, LLC, in consideration primarily for business and financial
consulting services rendered. All shares initially issued to Raifman & Edwards
LLP have been transferred to R&E Holdings, LLC, a limited liability company in
which Messrs. Gregory R. Raifman and Jon L. Edwards are managing members. In
October 1996, we also issued 800,000 shares to Eugene Jarvis for $40,000 and in
January 1997, we issued an additional 800,000 shares to Mr. Jarvis for $40,000.
In March 1999, R&E Holdings, LLC acquired 947,009 shares of our common stock
by converting a promissory note from us in the amount of $71,000 that had been
issued for unpaid legal fees, and 4,643,228 shares of our common stock by
converting a promissory note in the amount of $232,000 acquired by R&E
Holdings, LLC from Michael Schwartz.
Raifman & Edwards LLP provided legal and management services to us in the
period from inception to December 31, 1996, and the years ended December 31,
1997 and 1998 of approximately $22,000, $67,000 and $197,000, respectively. No
legal services were provided by Raifman & Edwards LLP to us in the six months
ended June 30, 1999.
In connection with his employment by us in January 1999, we issued a warrant
to purchase 500,000 shares of our common stock at an exercise price of $0.50
per share to Timothy M. Favia, one of our current executive officers. The
warrant may be exercised prior to January 10, 2002 by Mr. Favia only if a
number of milestones that are in the control of Mr. Favia, ourselves, or both
of us, are met prior to January 2000. As of the date of this prospectus,
several of these milestones have been met.
In connection with our acquisition of Netranscend Software, Inc. in March
1999, we issued to Ruiqing "Barclay" Jiang, one of our current executive
officers and formerly the sole shareholder of Netranscend Software, Inc., a
promissory note in the principal amount of $430,000, payable in four annual
installments and an aggregate of 1,979,000 shares of common stock valued at
$2.6 million. Of the shares issued, 300,000 are currently being held in escrow
to cover breaches of representations and warranties made by Mr. Jiang and
Netranscend Software, Inc. in the agreement and plan of reorganization executed
in connection with the acquisition.
In February 1999, we sold an aggregate of 1,206,000 shares of Series A
preferred stock to investors at a purchase price of $1.25 per share. In June
1999, we sold an aggregate of 4,500,000 shares of Series B preferred stock to
investors at a purchase price of $2.00 per share. In August 1999, we sold an
aggregate of 4,000,000 shares of Series C preferred stock to investors at a
purchase price of $3.59 per share. The shares of Series A, Series B and Series
C preferred stock will automatically convert into an aggregate of 9,706,000
shares of common stock upon the closing of this offering. The holders of
converted shares of Series C preferred stock are entitled to demand and piggy-
back registration rights. See "Description of Capital Stock--Registration
Rights."
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The investors in the preferred stock included the following entities that
hold 5% or more of our stock or that are affiliated with our directors or
executive officers, or both:
<TABLE>
<CAPTION>
Shares of Shares of Shares of
Series A Series B Series C
Investor Preferred Stock Preferred Stock Preferred Stock
- ------------------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
5% Stockholder Entities
Affiliated with a Mediaplex
Director or Executive
Officer:
Entities affiliated with
James DeSorrento (1)(2)..... 160,000 140,000 --
Entities affiliated with A.
Brooke Seawell (1)(3)....... -- 75,000 --
Entities affiliated with
Gregory R. Raifman and
Jon L. Edwards (1)(4)....... -- -- 19,360
Entities affiliated with
Lawrence D. Lenihan,
Jr.(1)(5)................... -- -- 1,671,309
Other 5% Stockholders
Zeron Capital Ltd. (6)....... -- 2,625,000 --
The Goldman Sachs Group, Inc.
(7)......................... -- -- 1,392,758
</TABLE>
- --------
(1) James DeSorrento, A. Brooke Seawell, Gregory R. Raifman, Jon L. Edwards and
Lawrence D. Lenihan, Jr. are each members of our board of directors.
(2) All shares are held of record by DeSorrento Revocable Trust under an
agreement dated 12/17/80.
(3) All shares are held of record by Seawell Revocable Trust, A. Brooke Seawell
& Patricia C. Seawell, trustees.
(4) All shares are held of record by R&E Holdings, LLC. Messrs. Gregory R.
Raifman and Jon L. Edwards are the managing members and beneficial owners
of R&E Holdings, LLC. Each of Mr. Raifman and Mr. Edwards disclaims
beneficial ownership of these shares, except to the extent of his
respective pecuniary interest therein.
(5) Represents 1,483,484 shares of Series C preferred stock held of record by
Pequot Private Equity Fund, L.P. and 187,825 shares of Series C preferred
stock held or record by Pequot Offshore Private Equity Fund, Inc. Mr.
Lenihan is the fund manager for Pequot Capital Management, Inc. He
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(6) Includes 1,500,000 shares held of record by Odyssey Venture Partners and
1,000,000 shares held of record by Argossy Limited. Argossy Limited and
Odyssey Venture Partners are funds affiliated with Zeron Capital Ltd. Zeron
Capital Ltd. also holds a warrant to purchase 125,000 shares of Series B
preferred stock.
(7) Includes 139,276 shares of Series C preferred stock purchased by Stone
Street Fund L.P., an affiliate of The Goldman Sachs Group, Inc.
- --------
In connection with the sale of our Series B preferred stock in June 1999, we
issued a warrant to purchase 125,000 shares of Series B preferred stock, at an
exercise price of $2.00 per share, to Zeron Capital, Ltd., a 5% stockholder.
After this offering, the warrant will be exercisable into a like number of
shares of our common stock. The warrant may be exercisable at any time prior to
its expiration in June 2002.
In connection with the sale of our Series B preferred stock in June 1999 to
Zeron Capital, Ltd., we issued a warrant to purchase 150,000 shares of Series B
preferred stock, at an exercise price of $2.00 per share, and a warrant to
purchase 100,000 shares of common stock, at a purchase price of $0.50 per
share, to Retail Ventures International, Inc., a financial advisor to us. After
this offering, the warrant to purchase Series B preferred stock will be
exercisable into a like number of shares of our common stock. The warrants may
be exercisable at any time prior to their expiration in June 2002.
In September 1999, we entered into an oral agreement with R&E Holdings, LLC
to sublease a portion of the space we currently occupy at our headquarters in
San Francisco, California. The sublease terms and payments paid by us to R&E
Holdings, LLC are substantially similar to the lease terms and payments paid by
R&E Holdings, LLC to the landlord. To date, we have paid R&E Holdings, LLC a
total of approximately $74,000 for these lease payments.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock before and after the offering by:
. each person or entity who beneficially owns more than 5% of our common
stock;
. each of our named executive officers;
. each of our directors; and
. all directors and executive officers as a group.
Except as otherwise noted, the address of each 5% stockholder listed in the
table is c/o Mediaplex, Inc., 131 Steuart Street, Fourth Floor, San Francisco,
California 94105. The table includes all shares of common stock issuable within
60 days of August 15, 1999, upon the exercise of options and warrants
beneficially owned by the indicated stockholders on that date based on options
and warrants outstanding as of August 15, 1999. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to shares. To
our knowledge, except under applicable community property laws or as otherwise
indicated, the persons named in the table have sole voting and sole investment
control with respect to all shares beneficially owned. The applicable
percentage of ownership for each stockholder is based on shares of common stock
outstanding as of August 15, 1999, together with applicable options and
warrants for that stockholder. Shares of common stock issuable upon exercise of
options and warrants beneficially owned are deemed outstanding for the purpose
of computing the percentage ownership of the person holding those options and
warrants, but are not deemed outstanding for computing the percentage ownership
of any other person.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding
Shares of ----------------------
Common Stock Before After
Name Beneficially Owned Offering Offering
- ----------------------------------- ------------------ --------- ----------
<S> <C> <C> <C>
R & E Holdings, LLC (1)............ 10,296,265 41.8%
Zeron Capital Ltd. (2)............. 2,625,000 10.7
44 Church Street
Hamilton HM12
Bermuda
Pequot Capital Management, Inc.
(3)............................... 1,671,309 6.8
500 Nyala Farm Road
Westport, CT 06880
The Goldman Sachs Group, Inc. (4).. 1,392,758 5.7
85 Broad Street
New York, NY 10002
Gregory R. Raifman (5)............. 12,296,265 46.7
Jon L. Edwards (6)................. 12,046,265 46.1
Ruiqing "Barclay" Jiang (7)........ 2,001,000 8.1
Walter Haefeker (8)................ 1,250,000 4.8
Lawrence D. Lenihan, Jr. (9)....... 1,671,309 6.8
James DeSorrento (10).............. 350,000 1.4
A. Brooke Seawell (11)............. 125,000 *
Peter S. Sealey (12)............... 50,000 *
All executive officers and
directors as a group (13 persons)
(13).............................. 19,276,907 65.8
</TABLE>
- --------
*Less than 1%
(1) Messrs. Raifman and Edwards are the managing members and the beneficial
owners of R&E Holdings, LLC.
(2) Includes 1,500,000 shares held of record by Odyssey Venture Partners and
1,000,000 shares held of record by Argossy Limited. Argossy Limited and
Odyssey Venture Partners are venture funds affiliated with Zeron Capital
Ltd. Also includes a warrant held by Zeron Capital Ltd. to purchase
125,000 shares.
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<PAGE>
(3) Represents 1,483,484 shares held of record by Pequot Private Equity Fund,
L.P. and 187,825 shares held of record by Pequot Offshore Private Equity
Fund, Inc. Pequot Private Equity Fund, L.P. and Pequot Offshore Private
Equity Fund, Inc. are managed by Pequot Capital Management, Inc.
(4) Includes 139,276 shares held of record by Stone Street Fund 1999, L.P., an
affiliate of The Goldman Sachs Group, Inc.
(5) Represents 10,296,265 shares held of record by R&E Holdings, LLC, 250,000
shares held of record by PointBreak Ventures, LLC and 1,750,000 shares
issuable upon the exercise of options exercisable within 60 days of August
15, 1999. Mr. Raifman is one of the beneficial owners of R&E Holdings, LLC
and PointBreak Ventures, LLC. Mr. Raifman disclaims beneficial interest of
the shares held by R&E Holdings, LLC and PointBreak Ventures, LLC, except
to the extent of his pecuniary interest in those entities.
(6) Represents 10,296,265 shares held of record by R&E Holdings, LLC, 250,000
shares held of record by PointBreak Ventures, LLC and 1,500,000 shares of
common stock issuable upon the exercise of options exercisable within 60
days of August 15, 1999. Mr. Edwards is one of the beneficial owners of
R&E Holdings, LLC and PointBreak Ventures, LLC. Mr. Edwards disclaims
beneficial interest of the shares held by R&E Holdings, LLC and PointBreak
Ventures, LLC, except to the extent of his pecuniary interest in those
entities.
(7) Includes 22,000 shares issuable upon the exercise of options exercisable
within 60 days of August 15, 1999.
(8) Represents 1,250,000 shares issuable upon the exercise of options
exercisable within 60 days of August 15, 1999.
(9) Represents 1,671,309 shares beneficially owned by Pequot Capital
Management, Inc. See note (3). Mr. Lenihan is the fund manager of Pequot
Capital Management, Inc. Mr. Lenihan disclaims beneficial ownership of
these shares, except to the extent of his pecuniary interest in that
entity.
(10) Represents 300,000 shares held of record by DeSorrento Revocable Trust, of
which Mr. DeSorrento is the beneficial owner and 50,000 shares issuable
upon the exercise of options exercisable within 60 days of August 15,
1999.
(11) Represents 75,000 shares held of record by Seawell Revocable Trust, A.
Brooke Seawell & Patricia C. Seawell, trustees. Mr. Seawell is one of the
beneficial owners of the Seawell Revocable Trust and 50,000 shares
issuable upon the exercise of options exercisable within 60 days of August
15, 1999.
(12) Represents 50,000 shares issuable upon the exercise of options exercisable
within 60 days of August 15, 1999.
(13) See notes (5) through (12). Includes an aggregate of 4,705,333 shares
issuable upon exercise of options held by our officers exercisable within
60 days of August 15, 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our restated certificate of incorporation, which will become effective upon
the closing of this offering, authorizes the issuance of up to 150,000,000
shares of common stock, par value $0.0001 per share, and 10,000,000 shares of
undesignated preferred stock, par value $0.0001 per share, the rights and
preferences of which may be established from time to time by our board of
directors. As of August 15, 1999, we had outstanding 14,898,865 shares of
common stock and 9,706,000 shares of redeemable convertible preferred stock,
which will automatically convert into 9,706,000 shares of common stock upon the
completion of this offering. As of August 15, 1999, we had 120 stockholders.
Common Stock
Each holder of common stock will be entitled to one vote for each share on
all matters to be voted upon by the stockholders, and there will be no
cumulative voting rights. Subject to preferences to which holders of preferred
stock issued after the sale of the common stock in this offering may be
entitled, holders of common stock will be entitled to receive ratably any
dividends that may be declared from time to time by the board of directors out
of funds legally available for that purpose. Please see "Dividend Policy." In
the event of our liquidation, dissolution or winding up, holders of our common
stock will be entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights and there
are no redemption or sinking fund provisions applicable to the common stock.
All outstanding shares of common stock are, and the shares of common stock
offered by us in this offering, when issued and paid for, will be, fully paid
and nonassessable. The rights, preferences and privileges of the holders of
common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock that we may designate in
the future.
Preferred Stock
Upon the closing of this offering, the board of directors will be authorized,
subject to any limitations prescribed by law, without stockholder approval,
from time to time to issue up to an aggregate of 10,000,000 shares of preferred
stock, $0.0001 par value per share, in one or more series, each series to have
rights and preferences, including voting rights, dividend rights, conversion
rights, redemption privileges and liquidation preferences, as may be determined
by the board of directors. The rights of the holders of common stock will be
subject to, and may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of our outstanding voting stock. We have
no present plans to issue any shares of preferred stock.
Warrants
At August 15, 1999, there were outstanding warrants to purchase up to 275,000
shares of Series B preferred stock at an exercise price of $2.00 per share and
warrants to purchase up to 600,000 shares of common stock at an exercise price
of $0.50 per share. Upon completion of this offering, the warrants to purchase
shares of Series B preferred stock will become exercisable to purchase 275,000
shares of common stock.
Registration Rights
The holders of 4,000,000 shares of Series C preferred stock, referred to as
"registrable securities," are entitled to certain rights with respect to
registration of such shares under the Securities Act. These rights are provided
under the terms of an investor rights agreement between us and the holders of
registrable securities.
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Beginning 180 days following the date of this prospectus, holders of at least
25% of the then outstanding registrable securities may require on up to two
occasions that we register their shares for public resale. We are obligated to
register these shares only if the outstanding registrable securities have an
anticipated public offering price of at least $5.5 million. Also, holders of
registrable securities may require once per 12-month period that we register
their shares for public resale on Form S-3 or similar short-form registration,
provided we are eligible to use that form, if the value of the securities to be
registered is at least $1.0 million; however, we may defer this registration
for 120 days in view of market conditions. 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 reduce the number
of shares proposed to be registered in view of market conditions. These
registration rights will not be applicable with respect to this offering. All
expenses in connection with any registration, other than underwriting discounts
and commissions, will be borne by us. All registration rights will terminate
five years following the consummation of this offering, or, with respect to
each holder of registrable securities, at the time the holder is entitled to
sell all of its shares in any three-month period under Rule 144 of the
Securities Act.
Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and
Delaware Law
Certain provisions of Delaware law and our amended and restated certificate
of incorporation and bylaws could make the following more difficult:
. the acquisition of us by means of a tender offer;
. the acquisition of us by means of a proxy contest or otherwise; or
. the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of us to
negotiate first with our board. We believe that the benefits of increased
protection of our potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging such proposals because negotiation of these
proposals could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class will serve for a three-year term,
one class being elected each year by our stockholders. For more information on
the classified board, see the section entitled "Management--Board of
Directors." This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us because it generally makes it more difficult for
stockholders to replace a majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board, the chief executive officer and the president may call
special meetings of stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or a committee of the board.
Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years
following the date the person became an interested stockholder, unless the
business combination or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
business combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested
60
<PAGE>
stockholder. Generally, an interested stockholder is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status did own, 15% or more of a
corporation's voting stock. The existence of this provision may have an anti-
takeover effect with respect to transactions not approved in advance by the
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
Elimination of Stockholder Action By Written Consent. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.
Elimination of Cumulative Voting. Our certificate of incorporation and bylaws
do not provide for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock
with voting or other rights or preferences that could impede the success of any
attempt to change control of us. These and other provisions may have the effect
of deferring hostile takeovers or delaying changes in control or management of
us.
Amendment of Charter Provisions. The amendment of any of the above provisions
would require approval by holders of at least 66 2/3% of the outstanding common
stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Chase Mellon
Shareholder Services.
Nasdaq National Market Listing
We have applied for the listing of our shares on the Nasdaq National Market
under the symbol "MPLX."
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market after
the offering could adversely affect the market price of our common stock and
our ability to raise equity capital in the future on terms favorable to us.
After this offering, shares of our common stock will be outstanding,
assuming that the underwriters do not exercise the over-allotment option, and
based on shares outstanding as of August 15, 1999. Of these shares, all of the
shares sold in this offering will be freely tradable without restriction
or further registration under the Securities Act, unless these shares are
purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rule 144 or 701 under the Securities Act, which rules are summarized
below.
As a result of the contractual restrictions described below and the
provisions of Rules 144, 144(k) and 701, the 24,604,865 restricted shares will
be available for sale in the public market as follows:
Eligibility of Restricted Shares for Sale in the Public Market
<TABLE>
<S> <C>
At the effective date............................................. 45,000
90 days after the effective date.................................. 85,814
180 days after the effective date................................. 15,880,717
More than 180 days after the effective date....................... 8,593,334
</TABLE>
Resale of 15,730,717 of the restricted shares that will become available for
sale in the public market starting 180 days after the effective date will be
limited by volume and other resale restrictions under Rule 144 because the
holders are our affiliates.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year is entitled to sell, within any three-month
period, a number of shares that is not more than the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks before a notice of the
sale on Form 144 is filed.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us.
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the three months before a sale, and who has beneficially owned the
restricted shares for at least two years, is entitled to sell the shares
without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchase shares from us under a
stock option plan or other written agreement can resell those shares 90 days
after the effective date of this offering in reliance on Rule 144, but without
complying with some of the restrictions, including the holding period,
contained in Rule 144.
62
<PAGE>
Lock-Up Arrangements
Including our executive officers and directors, holders of a total of
24,304,051 shares of common stock (including preferred stock convertible into
common stock), warrants to purchase a total of 875,000 shares of common stock
and options to purchase 4,705,333 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 Lehman Brothers Inc. In addition, all options granted under our
Amended and Restated 1999 Stock Plan are subject to similar lock-up
arrangements pursuant to an agreement between the optionee and us.
63
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, the underwriters named
below, for whom Lehman Brothers Inc., SG Cowen Securities Corporation and U.S.
Bancorp Piper Jaffray Inc. are acting as representatives, have each agreed to
purchase from us the number of shares of common stock shown opposite its name
below:
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Lehman Brothers Inc............................................
SG Cowen Securities Corporation................................
U.S. Bancorp Piper Jaffray Inc. ...............................
--------
Total..........................................................
========
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement. It also provides that, if any of the
shares of common stock are purchased by the underwriters under the underwriting
agreement, all of the shares of common stock that the underwriters have agreed
to purchase under the underwriting agreement, must be purchased. The conditions
contained in the underwriting agreement include the requirement that:
. the representations and warranties made by us to the underwriters are
true;
. that there is no material change in the financial markets; and
. we deliver to the underwriters customary closing documents.
The representatives have advised us that the underwriters propose to offer
the shares of common stock directly to the public at the public offering price
set forth on the cover page of this prospectus. The representatives have also
advised us that the underwriters propose to offer the shares of common stock to
dealers, who may include the underwriters, at this public offering price less a
selling concession not in excess of $ per share. The underwriters may
allow, and the dealers may reallow, a concession not in excess of $ per
share to brokers and dealers. After the offering, the underwriters may change
the offering price and other selling terms.
We have granted to the underwriters an option to purchase up to
additional shares of common stock, exercisable solely to cover over-allotments,
if any, at the public offering price less the underwriting discount shown on
the cover page of this prospectus. The underwriters may exercise this option at
any time until 30 days after the date of the underwriting agreement. If this
option is exercised, each underwriter will be committed, so long as the
conditions of the underwriting agreement are satisfied, to purchase a number of
additional shares of common stock proportionate to the underwriter's initial
commitment as indicated in the table above and we will be obligated, under the
over-allotment option, to sell the shares of common stock to the underwriters.
We have agreed, that, without the prior consent of Lehman Brothers Inc., we
will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of common stock or any securities that may be converted into or
exchanged for any shares of common stock for a period of 180 days from the date
of this prospectus. All of our executive officers and directors and
stockholders holding 24,304,051 shares of our capital stock, including our
preferred stock, and holders of options and warrants to purchase 5,580,333
shares, have agreed under lock-up agreements that, without the prior written
consent of Lehman Brothers Inc., they will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of common stock or any securities that
may be converted into or exchanged for any shares of common stock for the
period ending 180 days after the date of this prospectus. See "Shares Eligible
for Future Sale."
Before this offering, there has been no public market for the shares of
common stock. The initial public offering price will be negotiated between the
representatives and us. In determining the initial public offering
64
<PAGE>
price of the common stock, the representatives will consider, among other
things and in addition to prevailing market conditions:
. our historical performance and capital structure;
. estimates of our business potential and earning prospects;
. an overall assessment of our management; and
. the above factors in relation to market valuations of companies in
related businesses.
We have applied to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "MPLX."
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
the representations and warranties contained in the underwriting agreement, and
to contribute to payments that the underwriters may be required to make for
these liabilities.
Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters
and selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purposes of pegging, fixing or
maintaining the price of the common stock.
The underwriters may create a short position in the common stock in
connection with the offering. This means that they may sell more shares than
are set forth on the cover page of this prospectus. If the underwriters create
a short position, then the representatives may reduce that short position by
purchasing common stock in the open market. The representatives also may elect
to reduce any short position by exercising all or part of the over-allotment
option.
The representatives also may impose a penalty bid on underwriters and selling
group members. This means that, if the representatives purchase shares of
common stock in the open market to reduce the underwriters' short position or
to stabilize the price of the common stock, they may reclaim the amount of the
selling concession from the underwriters and selling group members that sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of these purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.
Neither we nor any of the underwriters makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. In addition, neither we nor
any of the underwriters makes any representation that the representatives will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
the sale is made.
Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the offering price listed on the cover
page of this prospectus.
The representatives have informed us that they do not intend to confirm sales
to discretionary accounts that exceed 5% of the shares of common stock offered
by them.
At our request, the underwriters have reserved up to shares of the
common stock offered by this prospectus for sale to our officers, directors,
employees and their family members and to our business associates at the
initial public offering price set forth on the cover page of this prospectus.
These persons must commit to purchase no later than the close of business on
the day following the date of this prospectus. The number of shares available
for sale to the general public will be reduced to the extent these persons
purchase the reserved shares.
65
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon
for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Fenwick & West LLP, Palo Alto, California will pass upon
legal matters for the underwriters. As of the date of this prospectus, WS
Investments, an investment partnership composed of certain current and former
members of and persons associated with Wilson Sonsini Goodrich & Rosati,
Professional Corporation, and certain individual attorneys of this firm,
beneficially own a total of 43,116 shares of our common stock.
EXPERTS
The financial statements of Mediaplex, Inc., as of and for the six months
ended June 30, 1999, as of December 31, 1998 and 1997, for each of the two
years in the period ended December 31, 1998, and for the period from September
10, 1996 (inception) to December 31, 1996 included in this prospectus and the
financial statement schedule included in the registration statement have been
so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The financial statements of Netranscend Software, Inc. (a development stage
company) as of December 31, 1998 and 1997, for each of two years in the period
ended December 31, 1998, and for the period from November 27, 1996 (inception)
to December 31, 1998 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 accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission under the
Securities Act of 1933 a registration statement on Form S-1, including the
exhibits filed with the registration statement, with respect to the shares to
be sold in this offering. 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 Commission's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee, by writing to the
Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our Commission
filings, including the registration statement, will also be available to you on
the Commission's Internet site, http://www.sec.gov.
We intend to send to 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.
66
<PAGE>
Mediaplex, Inc.
Index to Financial Statements
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
MEDIAPLEX, INC.
Report of Independent Accountants......................................... F-2
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statements of Changes in Stockholders' Equity (Deficit)................... F-5
Statements of Cash Flows.................................................. F-6
Supplemental Disclosure of Cash Flows..................................... F-7
Notes to Financial Statements............................................. F-8
PRO FORMA FINANCIAL INFORMATION
Overview.................................................................. F-21
Pro Forma Statement of Operations......................................... F-22
Notes to Pro Forma Financial Information.................................. F-23
NETRANSCEND SOFTWARE, INC.
Report of Independent Accountants......................................... F-24
Balance Sheets............................................................ F-25
Statements of Operations.................................................. F-26
Statements of Shareholders' Equity (Deficit).............................. F-27
Statements of Cash Flows.................................................. F-28
Notes to Financial Statements............................................. F-29
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of Mediaplex, Inc.
The recapitalization described in Note 1 to the financial statements has not
been consummated at September 2, 1999. When it has been consummated, we will be
in a position to furnish the following report:
"In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of Mediaplex, Inc. (the "Company") at
December 31, 1997 and 1998, and June 30, 1999, and the results of operations
and its cash flows for the period from September 10, 1996 (inception) to
December 31, 1996, the years ended December 31, 1997 and 1998, and the six
months ended June 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above."
/s/ PricewaterhouseCoopers LLP
San Francisco, California
July 30, 1999
except for Note 10,
which is as of
September 1, 1999
F-2
<PAGE>
Mediaplex, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents............. $ 141,994 $ 374,567 $ 7,602,205
Accounts receivable, net of allowance
of $20,211, $37,367 and $183,367 as
of December 31, 1997 and 1998 and
June 30, 1999, respectively.......... 3,967 936,497 3,888,361
Other current assets.................. -- -- 62,933
----------- ----------- -----------
Total current assets................. 145,961 1,311,064 11,553,499
Property and equipment, net........... 110,546 105,921 1,030,699
Goodwill and intangible assets, net of
accumulated amortization of $250,811
as of June 30, 1999.................. -- -- 2,758,924
Other assets.......................... 5,000 27,030 86,573
----------- ----------- -----------
Total assets......................... $ 261,507 $ 1,444,015 $15,429,695
=========== =========== ===========
Liabilities and Stockholders' Equity
(Deficit)
Current Liabilities:
Accounts payable...................... $ 379,122 $ 1,528,600 $ 1,941,756
Payables to stockholders.............. 48,873 139,701 127,281
Advance from stockholder.............. -- 262,750 --
Accrued liabilities................... 150,067 422,177 2,930,697
Deferred revenues..................... 142,400 479,764 1,364,096
Notes payable to stockholders, current
portion.............................. -- 339,569 50,000
Capital lease obligations, current
portion.............................. 11,463 -- --
Other liabilities..................... -- 1,039 19,854
----------- ----------- -----------
Total current liabilities............ 731,925 3,173,600 6,433,684
Notes payable, stockholders............. 64,569 232,161 372,765
Capital lease obligations............... 23,072 -- --
----------- ----------- -----------
Total liabilities.................... 819,566 3,405,761 6,806,449
Commitments (Note 6)
Stockholders' Equity (Deficit):
Convertible preferred stock; issuable
in series; $0.0001 value; authorized
8,206,000 shares; 5,706,000 shares
issued and outstanding; liquidation
preference of $10,507,500 at June 30,
1999................................. -- -- 571
Common stock, $0.0001 par value;
authorized 10,000,000, 40,000,000,
and 40,000,000 shares, respectively;
11,318,566, 6,984,302 and 14,839,539
shares issued and outstanding at
December 31, 1997 and 1998 and June
30, 1999, respectively............... 1,132 698 1,484
Additional paid-in capital............ 813,355 1,482,685 20,238,846
Warrants.............................. -- -- 432,354
Deferred stock compensation........... -- (53,371) (3,232,130)
Receivable from sale of Series B
preferred stock...................... -- -- (240,000)
Accumulated deficit................... (1,372,546) (3,391,758) (8,577,879)
----------- ----------- -----------
Total stockholders' equity
(deficit)........................... (558,059) (1,961,746) 8,623,246
----------- ----------- -----------
Total liabilities and stockholders'
equity (deficit).................... $ 261,507 $ 1,444,015 $15,429,695
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Mediaplex, Inc.
Statements of Operations
<TABLE>
<CAPTION>
September 10,
1996 Years Ended Six Months Ended
(inception) to December 31, June 30,
December 31, ------------------------ ------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $ -- $ 425,877 $ 3,588,094 $ 1,521,895 $ 7,322,572
Cost of revenues........ -- 445,372 2,770,567 1,212,773 5,761,199
--------- ----------- ----------- ----------- -----------
Gross profit.......... -- (19,495) 817,527 309,122 1,561,373
Operating expenses:
Sales and marketing... 22,704 480,756 819,641 394,626 1,647,288
Research and
development.......... 48,834 347,130 555,736 220,003 815,659
General and
administrative....... 30,948 256,413 636,651 325,073 1,081,697
Stock-based
compensation......... 152,694 11,000 577,525 151,427 2,965,683
Amortization of
goodwill and
intangibles.......... -- -- -- -- 250,811
--------- ----------- ----------- ----------- -----------
Total operating
expenses........... 255,180 1,095,299 2,589,553 1,091,129 6,761,138
--------- ----------- ----------- ----------- -----------
Loss from
operations......... (255,180) (1,114,794) (1,772,026) (782,007) (5,199,765)
Interest income
(expense), net......... -- (2,572) (247,186) (233,934) 13,644
--------- ----------- ----------- ----------- -----------
Net loss.............. $(255,180) $(1,117,366) $(2,019,212) $(1,015,941) $(5,186,121)
========= =========== =========== =========== ===========
Net loss per share--
basic and diluted...... $ (0.07) $ (0.13) $ (0.25) $ (0.11) $ (0.43)
========= =========== =========== =========== ===========
Weighted average shares
used to compute net
loss per share--basic
and diluted............ 3,795,714 8,457,464 8,186,127 9,408,557 12,070,449
========= =========== =========== =========== ===========
Pro forma net loss per
share--basic and
diluted (unaudited).... $ (0.25) $ (0.38)
=========== ===========
Weighted average shares
used to compute pro
forma net loss per
share--basic and
diluted (unaudited).... 8,186,127 13,501,001
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Mediaplex, Inc.
Statements of Changes in Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock
---------------- ------------------
Receivable
from sale of
Additional Deferred Series B
Paid-in Stock Preferred Accumulated
Shares Amount Shares Amount Capital Warrants Compensation Stock Deficit Total
--------- ------ ---------- ------ ----------- -------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
September 10,
1996
(inception)..... -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of
common stock for
cash and for
services........ 3,060,000 306 152,419 152,725
Issuance of
common stock.... 1,600,000 160 79,840 80,000
Net loss........ (255,180) (255,180)
--------- ---- ---------- ------ ----------- -------- ----------- --------- ----------- -----------
Balance,
December 31,
1996............ -- -- 4,660,000 466 232,259 -- -- -- (255,180) (22,455)
Issuance of
common stock.... 1,795,338 180 338,421 338,601
Conversion of
payable to
stockholder for
common stock.... 4,643,228 464 231,697 232,161
Issuance of
common stock for
services........ 220,000 22 10,978 11,000
Net loss........ (1,117,366) (1,117,366)
--------- ---- ---------- ------ ----------- -------- ----------- --------- ----------- -----------
Balance,
December 31,
1997............ -- -- 11,318,566 1,132 813,355 -- -- -- (1,372,546) (558,059)
Repurchase of
common stock for
convertible note
payable......... (4,643,228) (464) (231,697) (232,161)
Beneficial
conversion
feature of note
payable to
stockholder..... 232,161 232,161
Issuance of
common stock.... 76,000 7 37,993 38,000
Issuance of
common stock for
services........ 232,290 23 151,404 151,427
Stock-based
compensation.... 286,079 286,079
Deferred stock
compensation.... 193,390 (193,390) --
Amortization of
deferred stock
compensation.... 140,019 140,019
Net loss........ (2,019,212) (2,019,212)
--------- ---- ---------- ------ ----------- -------- ----------- --------- ----------- -----------
Balance,
December 31,
1998............ -- -- 6,983,628 698 1,482,685 -- (53,371) -- (3,391,758) (1,961,746)
Issuance of
common stock for
services........ 23,333 3 27,935 27,938
Issuance of
common stock
upon acquisition
of Netranscend.. 1,979,000 198 2,569,068 2,569,266
Issuance of
common stock
upon exercise of
options......... 62,667 6 9,029 9,035
Issuance of
Series A
preferred stock,
net of issuance
cost of
$46,701......... 1,206,000 121 1,460,678 1,460,799
Conversion of
note payable to
stockholder for
common stock.... 947,009 95 70,931 71,026
Issuance of
Series B
preferred stock,
net of issuance
cost of
$741,632........ 4,500,000 450 8,257,918 432,354 (240,000) 8,450,722
Conversion of
note payable for
common stock.... 4,643,228 464 231,697 232,161
Issuance of
common stock
upon exercise of
options in
connection with
waiver of
payable......... 200,000 20 12,400 12,420
Deferred stock
compensation.... 6,116,505 (6,116,505) --
Amortization of
deferred stock
compensation.... 2,937,746 2,937,746
Net loss........ (5,186,121) (5,186,121)
--------- ---- ---------- ------ ----------- -------- ----------- --------- ----------- -----------
Balance, June
30, 1999........ 5,706,000 $571 14,838,865 $1,484 $20,238,846 $432,354 $(3,232,130) $(240,000) $(8,577,879) $ 8,623,246
========= ==== ========== ====== =========== ======== =========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Mediaplex, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
September 10,
1996
(inception) Years Ended Six Months Ended
to December 31, June 30,
December 31, ------------------------ ------------------------
1996 1997 1998 1998 1999
------------- ----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net loss............... $(255,180) $(1,117,366) $(2,019,212) $(1,015,941) $(5,186,121)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and amor-
tization.............. 1,726 20,023 54,810 25,181 376,082
Write-off of property
and equipment......... -- -- 18,853 -- --
Allowance for doubtful
accounts.............. -- 20,211 17,156 5,147 146,000
Stock-based compensa-
tion expense.......... 152,694 11,000 577,525 151,427 2,965,683
Interest expense re-
lated to beneficial
conversion feature of
notes payable, stock-
holder................ -- -- 232,161 232,161 --
Changes in assets and
liabilities:
Accounts receivable... -- (24,178) (949,686) (627,475) (3,097,826)
Other assets.......... (1,650) (3,350) (22,030) (28,662) (122,476)
Accounts payable...... 800 378,322 1,149,477 729,760 203,566
Payables to stock-
holders.............. 35,982 309,621 90,828 62,248 --
Accrued liabilities... 37,203 112,864 272,110 236,946 2,447,236
Deferred revenue...... -- 142,400 337,364 61,093 884,332
Other liabilities..... -- -- 1,039 3,038 18,815
--------- ----------- ----------- ----------- -----------
Net cash used in op-
erating activities.. (28,425) (150,453) (239,605) (165,077) (1,364,709)
--------- ----------- ----------- ----------- -----------
Cash flows from invest-
ing activities:
Purchase of property
and equipment......... (24,488) (69,892) (78,819) (37,535) (840,459)
--------- ----------- ----------- ----------- -----------
Net cash used in in-
vesting activities.. (24,488) (69,892) (78,819) (37,535) (840,459)
--------- ----------- ----------- ----------- -----------
Cash flows from financ-
ing activities:
Net proceeds from issu-
ance of common stock.. 80,031 338,601 38,000 38,000 --
Net proceeds from issu-
ance of Series A pre-
ferred stock.......... -- -- -- -- 1,198,049
Net proceeds from issu-
ance of Series B pre-
ferred stock.......... -- -- -- -- 8,450,722
Proceeds from exercise
of stock options...... -- -- -- -- 9,035
Payments of capital
lease obligations..... -- (3,380) (24,753) (6,834) --
Proceeds from notes
payables--stockhold-
ers................... -- -- 275,000 275,000 --
Payment of notes pay-
able--stockholders.... -- -- -- -- (225,000)
Advance from sharehold-
ers................... -- -- 262,750 -- --
--------- ----------- ----------- ----------- -----------
Net cash provided by
financing activi-
ties................ 80,031 335,221 550,997 306,166 9,432,806
--------- ----------- ----------- ----------- -----------
Net change in cash
and cash equiva-
lents............... 27,118 114,876 232,573 103,554 7,227,638
Cash and cash equiva-
lents at beginning of
period................. -- 27,118 141,994 141,994 374,567
--------- ----------- ----------- ----------- -----------
Cash and cash equiva-
lents at end of peri-
od..................... $ 27,118 $ 141,994 $ 374,567 $ 245,548 $ 7,602,205
========= =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Mediaplex, Inc.
Supplemental Disclosure of Cash Flows
<TABLE>
<CAPTION>
September 10,
1996 Years Ended Six Months Ended
(inception) to December 31, June 30,
December 31, ----------------- ----------------------
1996 1997 1998 1998 1999
-------------- -------- -------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash paid for interest.. $ -- $ 2,572 $ 1,804 $ 541 $ 13,621
====== ======== ======== ======== ==========
Noncash financing and
investing activities:
Issuance of common
stock for
acquisition........... $ -- $ -- $ -- $ -- $2,552,910
====== ======== ======== ======== ==========
Issuance of note
payable for
acquisition........... $ -- $ -- $ -- $ -- $ 430,000
====== ======== ======== ======== ==========
Conversion of payables
to stockholders to
common stock.......... $ -- $232,161 $ -- $ -- $ --
====== ======== ======== ======== ==========
Conversion of
stockholders' notes
payable to common
stock................. $ -- $ $ -- $ -- $ 303,187
====== ======== ======== ======== ==========
Repurchase of common
stock in exchange for
a note payable........ $ -- $ -- $232,161 $232,161 $ --
====== ======== ======== ======== ==========
Issuance of note
payable to shareholder
for settlement of
outstanding payable to
shareholder........... $ -- $ 64,569 $ -- $ -- $ --
====== ======== ======== ======== ==========
Issuance of warrant to
purchase common stock
in connection with
completing Series B
preferred stock
financing............. $ -- $ -- $ -- $ -- $ 432,354
====== ======== ======== ======== ==========
Conversion of advance
from shareholder to
Series A preferred
stock................. $ -- $ -- $ -- $ -- $ 262,750
====== ======== ======== ======== ==========
Issuance of Series B
preferred stock in
exchange for note
receivable............ $ -- $ -- $ -- $ -- $ 240,000
====== ======== ======== ======== ==========
Exercise of common
stock options in
connection with waiver
of payable to
stockholder........... $ -- $ -- $ -- $ -- $ 12,420
====== ======== ======== ======== ==========
Purchase of equipment
under capital leases.. $ -- $ 37,915 $ 3,036 $ 3,036 $ --
====== ======== ======== ======== ==========
Deferred stock
compensation from
issuance of options... $ -- $ -- $193,390 $ -- $6,116,505
====== ======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements
1. Business Activities and Summary of Significant Accounting Policies
Nature of Business
Mediaplex, Inc. provides e-commerce and eBusiness solutions for online
marketing companies, advertisers and their advertising agencies. The Company's
service offerings include planning and execution of online media and marketing
campaigns, proprietary third-party ad serving to advertisers, and tracking and
reporting of an advertiser's return on investment ("ROI"), including evaluation
of online transactions.
Reincorporation
In August 1999, the Company approved reincorporating in Delaware, changing
the name to Mediaplex, Inc. In connection with the reincorporation, the Company
authorized (i) an increase in the amount of authorized shares of common stock
to 150,000,000 and (ii) 10,000,000 shares of undesignated preferred stock. All
share data and stock option plan information has been restated to reflect the
reincorporation. The reincorporation is expected to be completed in 1999.
Netranscend Software, Inc. Acquisition
On March 25, 1999, the Company acquired Netranscend Software, Inc., a Java-
based enterprise automation solutions software company, for a note payable of
$430,000, due in four annual installments (Note 5) beginning on the first
anniversary of the acquisition, and 1,979,000 shares of the Company's common
stock with an estimated fair value of $1.29 per share. Transaction costs of
$68,231 were incurred.
The acquisition was accounted for using the purchase method of accounting.
The aggregate purchase price of $2,993,906, together with $15,836 of net
liabilities assumed, has been allocated based on the fair value of the assets
acquired. Goodwill and intangible assets, consisting of proprietary technology,
totaling $3,009,732 are being amortized over three years.
The following pro forma results of operations reflect the combined results of
the Company and Netranscend Software, Inc. for the fiscal years ended December
31, 1997 and 1998 and have been prepared as though the entities had been
combined as of January 1, 1997 and 1998. The pro forma results do not reflect
any nonrecurring charges which resulted directly from the transaction.
<TABLE>
<CAPTION>
1997 1998
----------- -----------
(unaudited)
<S> <C> <C>
Revenues......................................... $ 425,877 $ 3,558,094
Net loss......................................... $(2,124,951) $(3,032,444)
Net loss per share--basic and diluted............ $ (0.20) $ (0.30)
Shares used in computing net loss per share--
basic and diluted............................... 10,436,464 10,165,127
</TABLE>
Unaudited Interim Financial Information
The accompanying interim statements of operations and cash flows for the six
months ended June 30, 1998 are unaudited. The unaudited interim financial
statements have been prepared on the same basis as the annual financial
statements and, in the opinion of management, reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
Company's results of operations and cash flows for the six months ended June
30, 1998. The financial data and other information disclosed in these notes to
consolidated financial statements related to this period are unaudited. Results
for the six months ended June 30, 1999 are not necessarily indicative of
results that may be expected for the full year.
F-8
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company has cash equivalents and short-term investment policies that
require placement of these funds in financial institutions evaluated as highly
credit-worthy. The Company's credit risk is mitigated by the Company's ongoing
credit evaluation of its customers' financial condition. The Company does not
require collateral or other security to support accounts receivable and
maintains allowances for potential bad debts. At December 31, 1997, one
customer accounted for 67% of the outstanding accounts receivable. Four
customers accounted for 76% of the outstanding accounts receivable at December
31, 1998. At June 30, 1999, three customers represent 48% of outstanding
accounts receivable. One, two, four and five customers accounted for 91%, 77%,
80%, and 68% of revenues for the years ended December 31, 1997 and 1998, and
the six months ended June 30, 1998 and 1999, respectively.
Risks and Uncertainties
The Company is subject to all of the risks inherent in an early stage company
in the Internet advertising industry. These risks include, but are not limited
to, a limited operating history, limited management resources, dependence upon
a consumer acceptance of the Internet, Internet related security risks and the
changing nature of the electronic commerce industry. The Company's operating
results may be materially affected by the foregoing factors.
Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
borrowings, and accounts payable, and are carried at cost, which approximates
their fair value due to their short-term maturities.
Cash and Cash Equivalents
All highly liquid instruments purchased with an original maturity of three
months or less are considered to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Maintenance and repairs are charged to operations as incurred.
Depreciation and amortization are based on the straight-line method over the
estimated useful lives of the related assets, which range from three to five
years. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation and amortization are removed from the accounts, and
any resulting gain or loss is reflected in operations in the period realized.
Goodwill and Intangible Assets
Goodwill and intangible assets consist of the excess of the purchase price
paid over identified intangible and tangible net assets resulting from the
acquisition of Netranscend Software, Inc. Due to the rapid
F-9
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
technological changes occurring in the Internet industry, the goodwill and
intangible assets are amortized using the straight-line method over three
years, the period of expected benefit. Valuation of goodwill and intangible
assets is based on forecasted discounted cash flows and is reassessed
periodically. Cash flow forecasts are based on trends of historical performance
and management's estimate of future performance, giving consideration to
existing and anticipated competitive and economic conditions.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Revenue Recognition
Revenues are generated primarily from fixed fees from advertising campaign
management services. Advertising revenues are recognized ratably as impressions
are delivered over the period in which the advertisement is displayed, provided
that no significant Company obligations remain at the end of a period and
collection of the resulting receivable is probable. Company obligations
typically includes guarantees of minimum number of "impressions," or times that
an advertisement appears in pages viewed by users of the Company's online
properties. To the extent minimum guaranteed impressions are not met, the
Company defers recognition of the corresponding revenues until the remaining
guaranteed impression levels are achieved.
Amounts payable to third-party Web sites for providing advertising space are
recorded as cost of revenues in the period the advertising impressions are
delivered.
Deferred Revenues
Deferred revenues consist of advertising fees received or billed in advance
of delivery of the advertisement.
Research and Development
Research and development costs are charged to expense as incurred.
Advertising Expenses
The Company expenses the cost of advertising and promoting its services as
incurred. These costs are included in sales and marketing on the statements of
operations. The Company has not incurred any advertising expenses to date.
Stock-based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation cost is recognized based on the difference, if any, on the date of
grant between the fair value of the Company's stock and the amount an employee
must pay to acquire the stock.
F-10
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
No. 96-18, "Accounting for Equity Instruments that are Issued to Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."
The Company amortizes stock-based compensation recorded in connection with
certain stock option grants over the vesting periods of the related options.
Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes," deferred
income taxes are recognized for the differences between the tax bases of assets
and liabilities and their financial reporting amounts based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. A valuation allowance is recognized for
deferred tax assets when it is more likely than not, based on available
evidence, that some portion or all of the deferred tax asset will not be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in
deferred tax assets and liabilities.
Net Loss Per Share
Net loss per share is presented in accordance with the provisions of SFAS No.
128, "Earnings per Share," and Staff Accounting Bulletin No. 98. Basic net loss
per share is computed based on weighted average number of shares of common
stock outstanding, while diluted net loss per share reflects the potential
dilution that would occur if preferred stock had been converted and stock
options and warrants had been exercised. Common equivalent shares from
preferred stock, stock options and warrants have been excluded from the
computation of diluted net loss per share as their effect would be
antidilutive.
Pro Forma Net Loss Per Share (unaudited)
Pro forma net loss per share for the year ended December 31, 1998 and the six
months ended June 30, 1999 is computed based on the weighted average number of
common shares outstanding, including the exercise of all outstanding warrants
at June 30, 1999, and the assumed conversion of the Company's Series A and
B preferred stock into shares of the Company's common stock that will be
effective upon the closing of the Company's initial public offering, as if such
conversion had occurred on January 1, 1998 or at the date of original issuance,
if later. The resulting pro forma adjustment includes an increase in the
weighted average shares used to compute basic and diluted net loss per share of
0 and 1,430,552 for the year ended December 31, 1998 and the six months ended
June 30, 1999, respectively. The calculation of pro forma diluted net loss per
share excludes common stock subject to repurchase rights and incremental common
shares issuable upon the exercise of stock options.
Comprehensive Income
The Company complies with the provisions of SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined, includes all changes in equity (net assets) during a period
from non-owner sources. To date, the Company has not had any significant
transactions that are required to be reported in comprehensive income.
F-11
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
Segment Information
The Company complies with the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company operates in a
single business segment providing advertising campaign management services in
the United States.
2. Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedge accounting
when certain conditions are met. SFAS No. 133 is effective for the Company in
fiscal 2000. Although the Company has not fully assessed the implications of
SFAS No. 133, the Company does not believe the adoption of this statement will
have a material effect on the Company's financial position, results of
operations, or cash flows.
In March 1998, the Accounting Standards Executive Committee ("ASEC") issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
when costs related to software developed or obtained for internal use should
the capitalized or expensed. The SOP is effective for transactions entered into
for fiscal years beginning after December 15, 1998. The Company has reviewed
the provisions of the SOP and does not believe the adoption of this standard
will have a material effect on the Company's financial position, results of
operations, or cash flows.
In April 1998, the ASEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires the cost of start-up activities, including
organization costs, to be expensed as incurred. The Company does not expect
this pronouncement to have a material effect on the Company's financial
position, results of operations, or cash flows.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 and SOP 98-4 by extending the deferral of the application of
certain provisions of SOP 97-2 amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. We do not anticipate adoption of this pronouncement to have a
material effect on the Company's financial position, results of operations, or
cash flows.
3. Balance Sheet Data
Property and equipment as of December 31, 1997, 1998 and June 30, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------ June 30,
1997 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
Property and equipment, net:
Computer equipment and software.............. $ 90,056 $161,336 $1,123,678
Furniture.................................... 4,321 5,369 93,076
Leased equipment............................. 37,915 -- --
Less: Accumulated depreciation and
amortization................................ (21,746) (60,784) (186,055)
-------- -------- ----------
$110,546 $105,921 $1,030,699
======== ======== ==========
</TABLE>
Depreciation and amortization expense was $20,023, $54,810, $25,181 and
$376,082 for the years ended December 31, 1997, 1998 and six-months ended June
30, 1998 and 1999, respectively.
F-12
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
Accrued liabilities as of December 31, 1997, 1998 and June 30, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------- June 30,
1997 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
Accrued liabilities:
Accrued cost of revenues........................ $ 94,440 $293,590 $2,628,865
Accrued payroll-related costs................... 12,383 24,090 133,303
Other accrued liabilities....................... 43,244 104,497 168,529
-------- -------- ----------
$150,067 $422,177 $2,930,697
======== ======== ==========
</TABLE>
4. Income Taxes
The Company has incurred losses from inception through June 30, 1999.
Management believes that, based on the history of losses and other factors, the
weight of available evidence indicates it is more likely than not that the
Company will not be able to realize its deferred tax assets. Thus, a full
valuation reserve has been recorded at December 31, 1997 and 1998 and June 30,
1999. At December 31, 1997 and 1998, and June 30, 1999, the Company's fully
reserved deferred tax assets totaled $482,000, $1,057,000 and $1,937,000,
respectively.
As of June 30, 1999, the Company has net operating loss carry forwards of
approximately $3,052,000 and $3,092,000 for federal and state income tax
purposes, respectively. The carryforwards will begin to expire in 2017 and 2012
for federal and state income tax purposes, respectively. For federal and state
tax purposes, a portion of the Company's net operating loss may be subject to
certain limitations on annual utilization due to changes in ownership, as
defined by federal and state tax laws. The amount of such limitations, if any,
has not yet been determined.
5. Notes Payable to Stockholders
The Company's notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------- June 30,
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Convertible note payable to stockholder, 6% per
annum, due July 1999............................... $64,569 $ 64,569 $ --
Convertible note payable to stockholder, 6% per
annum, due April 2000.............................. -- 232,161 --
Convertible notes payable to stockholder, 6% per
annum, due August 1999............................. -- 150,000 --
Notes payable to stockholder, 6% per annum, due
August 1999........................................ -- 125,000 50,000
Note payable to stockholder......................... -- -- 372,765
------- -------- --------
Total notes payable to stockholders................. 64,569 571,730 422,765
Less current portion................................ -- 339,569 50,000
------- -------- --------
64,569 232,161 372,765
======= ======== ========
</TABLE>
A law firm affiliated with a stockholder performed legal services for the
Company during 1996 and 1997. In July 1997, the Company issued a convertible
note payable to the law firm for $64,569 for these services. This note bore
interest at a rate of 6% per annum, and had a due date of July 1999. In March
1999, the Company converted the outstanding amount and accrued interest of
$6,458 into 947,009 shares of common stock at $0.075 per share. The law firm
subsequently transferred the shares to the stockholder.
During 1996 and 1997 a founder of the Company purchased certained assets and
incurred expenses on behalf of the Company (Note 8). In June 1997, $232,161 of
the outstanding amount was converted into 4,643,228 shares of common stock at
$0.05 per share. In April 1998, the Company repurchased the
F-13
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
4,643,228 shares from the founder at the original conversion price of $0.05 per
share with a convertible promissory note payable. The note bore interest at the
rate of 6% per annum, was due in April 2000, and was convertible into common
stock at $0.05 per share. The Company recorded the difference between the
conversion price of the note and the fair value of the common stock, or the
beneficial conversion feature, on the date the note was issued as additional
interest expense. In March 1999, this outstanding promissory note payable was
converted into 4,643,228 shares of common stock at $0.05 per share.
In May 1998, the Company entered into two senior subordinated secured
convertible promissory notes and two senior subordinated secured promissory
notes with a stockholder. Under these agreements the stockholder advanced to
the Company a total of $275,000 bearing interest at the rate of 6% per annum.
The unpaid principal and accrued interest were payable on August 1, 1999,
however could be prepaid without penalty. In the event of any default, as
defined in the agreement, the holder could convert the outstanding amount and
accrued interest into preferred stock at the price that is applicable to the
preferred stock issued in the most recent round of financing. At December 31,
1998, the outstanding notes payable balance was $275,000. In May 1999, the
Company paid $225,000 along with the accrued interest to the stockholder. At
June 30, 1999, $50,000 remained outstanding.
In connection with the Netranscend Software, Inc. acquisition in March 1999,
the Company agreed to pay $430,000 as a part of the purchase consideration.
This note is payable over four years, with the first payment of $110,000 due on
the first anniversary, $110,000 on the second anniversary, $100,000 on the
third anniversary and $110,000 on the fourth anniversary. The note payable has
been recorded at $372,765, net of a discount. The discount will be amortized as
interest expense over the four-year term of the note.
The Company incurred interest expense of $17,015, $3,403 and $12,976 during
1998 and for the six months ended June 30, 1998 and 1999, respectively, in
connection with the notes payable to stockholders.
6. Commitments and Contingencies
Lease Agreements
The Company leases office space under noncancelable operating lease
agreements that expire in 2002. The terms of the leases provide for rental
payments on a graduated scale. The Company recognizes rent expense on a
straight-line basis over the lease period, and has accrued for rent expense
incurred but not paid.
Future minimum lease payments under noncancelable operating leases as of June
30, 1999 are as follows:
<TABLE>
<CAPTION>
Six month period
Ended December 31,
------------------
<S> <C>
1999........................................................ $ 212,883
<CAPTION>
Year Ended December 31,
-----------------------
<S> <C>
2000........................................................ 327,966
2001........................................................ 338,583
2002........................................................ 332,176
2002........................................................ 148,295
----------
$1,359,903
==========
</TABLE>
Rent expense was $5,366, $41,555, $92,550, $12,105 and $125,704 for the
period ended December 31, 1996, the years ended December 31, 1997 and 1998 and
the six months ended June 30, 1998 and 1999, respectively.
F-14
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
Severence Payments
The Company has entered into employment agreements under which the employees
are entitled to receive severence payments totalling $825,000 if their
employment were terminated under certain conditions.
Legal Proceedings
From time to time, the Company is subject to legal proceedings and claims in
the ordinary course of business. The Company is not currently aware of any
legal proceedings or claims that it believes will have, individually or in the
aggregate, a material adverse effect on its business, financial condition and
operating results.
7. Stockholders' Equity (Deficit)
Convertible Preferred Stock
The Company is authorized to issue 8,206,000 shares of preferred stock, of
which 1,206,000 shares are designated as Series A preferred stock and 7,000,000
shares of which are designated as Series B preferred stock.
Preferred stock at June 30, 1999 consisted of the following:
<TABLE>
<CAPTION>
Shares Cash Proceeds
---------------------- Net of
Issued and Liquidation Issuance
Series Authorized Outstanding Amount Costs
- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
A.............................. 1,206,000 1,206,000 $ 1,507,500 $1,460,799
B.............................. 7,000,000 4,500,000 9,000,000 8,258,368
--------- --------- ----------- ----------
Total.......................... 8,206,000 5,706,000 $10,507,500 $9,719,167
========= ========= =========== ==========
</TABLE>
The holders of convertible preferred stock have various rights and
preferences as follows:
Voting Rights
Each holder of Series A and Series B preferred stock is entitled to the
number of votes equal to the number of shares of common stock into which the
shares of preferred stock held by the holder can be converted. As of June 30,
1999, all preferred stock converts on a one-for-one basis into common stock.
Preferred stockholders can vote on all matters on which common stockholders are
entitled to vote.
Dividends
Holders of Series A and Series B preferred stock are entitled to
noncumulative dividends at the rate of $0.10 per share and $0.16 per share per
annum, respectively, before any dividend is paid on common stock. No dividends
on preferred stock or common stock have been declared by the Board of Directors
from inception through June 30, 1999.
Liquidation
In the event of (i) any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, or (ii) merger or consolidation of
the Company with or into another corporation, the holders of Series A and
Series B preferred stock are first entitled to receive, in preference to the
holders of common stock, an amount of $1.25 and $2.00, respectively, per share
plus all accrued but unpaid dividends. If assets and funds
F-15
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
are insufficient for such distribution, the available funds will be distributed
ratably among the holders of Series A and Series B preferred stock in
proportion to the preferential amount each holder would have otherwise been
entitled to receive. After such distribution, any remaining funds will be
distributed ratably among the holders of common stock.
Conversion Rights
Each share of Series A and Series B preferred stock is convertible into
common shares, at the option of the holder, according to a conversion ratio,
subject to adjustment for dilution. Each share of preferred stock will
automatically be converted into common stock, at the then applicable conversion
rate, (i) in the event of the closing of an underwritten public offering of the
Company's securities in which the aggregate gross proceeds to the Company
exceeds $10,000,000 and an offering price per share exceeds $5.00, or (ii) when
the Company obtains the consent of a majority of the outstanding shares of
preferred stock.
At June 30, 1999, the Company had reserved 1,206,000 shares and 7,000,000
shares of common stock for conversion of its Series A and Series B convertible
preferred stock.
Common Stock
The Company is authorized to issue 40,000,000 shares of common stock. In July
1999, the Company amended its certificate of incorporation to increase the
number of authorized shares of common stock to 75,000,000 shares.
The Company recognizes stock-based compensation upon the issuance of common
stock for less than the deemed fair market value and upon the issuance of
common stock in exchange for services. Accordingly, the Company recorded stock-
based compensation of $152,694, $11,000, $151,427, $151,427 and $27,938 for the
period ended December 31, 1996, the years ended December 31, 1997 and 1998 and
the six months ended June 30, 1998 and 1999, respectively.
Warrants
In January 1999, the Company issued a warrant to an employee to purchase
500,000 shares of common stock at $0.50 per share upon completing certain
defined milestones. The warrant expires in January 2002. The holder of the
warrant is not entitled to any rights as a stockholder until the warrant is
exercised. The warrant was not exercisable at June 30, 1999, as the milestones
were not completed. The Company will recognize stock compensation expense
associated with the warrants based on the difference between the exercise price
and the fair value of the warrants on the date each of the milestones are met.
In June 1999, in connection with services provided related to the issuance of
Series B preferred stock, the Company granted warrants to a non-employee,
exercisable for 275,000 shares of Series B convertible preferred stock and
100,000 shares of common stock at exercise prices of $2.00 per share and $0.50
per share, respectively. The warrants are exercisable by the holder at any time
until June 2002. The holder of warrant is not entitled to any voting rights.
The fair value of the warrants calculated using Black-Scholes model was
$432,354 and has been included in the offering costs of Series B convertible
preferred stock.
1997 Stock Plan
The Company's 1997 Stock Plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code and for the granting to employees and consultants of nonstatutory
stock options and stock purchase rights.
F-16
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
In November 1998, the Company granted options to purchase 505,667 shares of
common stock with exercise prices ranging from $0.05 to $0.30 to both former
and current employees for services previously rendered under the 1997 Stock
Plan. The options granted to former employees were immediately exercisable
until February 1999. For those options granted to current employees, the
Company recorded $193,390 in deferred stock compensation for the difference
between the exercise price and the assumed fair value of the common stock. For
the year ended December 31, 1998, the Company recorded stock compensation
expense of $140,019.
The Company recorded the fair value for the options granted to former
employees as stock-based compensation expense of $286,079 in 1998. The fair
value of the options granted to the former employees were determined using a
Black-Scholes option-pricing model using a weighted average risk-free rate of
4.65% and a weighted average expected life of three months. No price volatility
was assumed because the Company's equity securities were not traded publicly.
No dividend yield was assumed as the Company has not paid dividends and has no
plans to do so.
1999 Stock Plan
In February 1999, the Company adopted the 1999 Stock Plan (the "1999 Plan").
Options granted under the 1999 Plan may be either incentive stock options
("ISOs") or nonstatutory stock options ("NSOs"). ISOs may be granted only to
Company employees. NSOs may be granted to Company employees, directors and
consultants. The Company has reserved 9,000,000 shares of common stock for
issuance under the 1999 Plan. The 1997 Plan was amended in August 1999, raising
the number of shares reserved for issuance to 12,000,000.
In the case of ISOs granted to an employee who, at the time of the option was
granted, owns stock representing more than 10% of the voting power of all
classes of stock, the term of the option will be five years from the date of
grant or shorter term as determined by the Board of Directors. The exercise
price of an ISO or NSO may not be less than 100% or 85%, respectively, of the
estimated fair value of the underlying stock on the date of grant and the
exercise price of an ISO or NSO granted to a 10% shareholder shall not be less
than 100% of the estimated fair value of the underlying stock on the date of
grant. Options generally become exercisable in equal increments over a four-
year vesting period and expire at the end of ten years from the date of grant,
or sooner if terminated by the Board of Directors.
The following table summarizes option activity through June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding
Shares ---------------------------------------------------
Available Number of Exercise Aggregate Weighted Average
for Grants Shares Price Price Exercise Price
---------- --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Share authorized under
the 1997 Plan 505,667
Granted................. (505,667) 505,667 $0.05-$0.30 $91,935 $0.18
Cancelled............... -- -- -- -- --
Exercised............... -- (262,667) $0.05-$0.30 (19,035) 0.07
---------- --------- ----------- ---------- -----
Balance, December 31,
1998................... -- 243,000 $ 0.30 72,900 $0.30
Shares authorized under
the 1999 Plan.......... 9,000,000
Granted................. (8,393,398) 8,393,398 $0.50-$1.80 4,775,841 0.57
Cancelled............... 10,700 (10,700) $0.50-$1.80 (18,350) 1.71
Exercised............... -- -- -- -- --
---------- --------- ----------- ---------- -----
Balance, June 30, 1999.. 617,302 8,625,698 $0.50-$1.80 $4,830,391 $0.56
========== ========= =========== ========== =====
</TABLE>
F-17
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
The following table summarizes information for stock options outstanding at
June 30, 1999:
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
----------------------------------------------------- -----------
Weighted
Average
Remaining
Contractual
Exercise Number Life Number
Price Outstanding (Years) Exercisable
-------- ----------- ----------- -----------
<S> <C> <C> <C>
$0.30 243,000 8.0 123,854
0.50 7,992,360 9.7 1,781,970
1.80 390,338 9.9 --
--------- ---------
8,625,698 1,905,824
========= =========
</TABLE>
In connection with the stock option grants made during the six months ended
June 30, 1999, the Company recorded deferred stock compensation of $6,116,505,
which will be amortized over the vesting periods of the related stock options
through 2003. For the six months ended June 30, 1999, the Company recorded
stock compensation expense of $2,937,746 in connection with stock option
grants.
Under SFAS No. 123, the Company is required to calculate the pro forma fair
market value of options granted and report the impact that would result from
recording the compensation expense. The fair value of option grants has been
estimated on the date of grant using the Black-Scholes option-pricing model
using a weighted average risk-free interest rate of 4.82% and a weighted
average expected life of 3.2 years. No price volatility was assumed because the
Company's equity securities were not traded publicly. No dividend yield was
assumed as the Company has not paid dividends and has no plans to do so.
The weighted average expected life was calculated based on the vesting period
and the expected life at the date of grant. The risk-free interest rate was
calculated based on rates prevailing during the grant periods and expected
lives of options at the date of grants.
The weighted average fair values of options granted to employees for the year
ended December 31, 1998 and the six months ended June 30, 1999 were $1.06 and
$0.80, respectively.
Had compensation expenses for option grants to employees been determined
under SFAS No. 123 the Company's net loss would have been as follows:
<TABLE>
<CAPTION>
September 10,
1996
(inception) Six Months Ended
to Year Ended December 31, June 30,
December 31, ------------------------- ------------------------
1996 1997 1998 1998 1999
------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net loss--as reported... $(255,180) $(1,117,366) $ (2,019,212) $(1,015,941) $(5,186,121)
Net loss--pro forma..... $(255,180) $(1,117,366) $ (2,019,212) $(1,015,941) $(5,431,121)
Net loss per share--
basic and diluted as
reported............... $ (0.07) $ (0.13) $ (0.25) $ (0.11) $ (0.43)
Net loss per share--
basic and diluted
pro forma.............. $ (0.07) $ (0.13) $ (0.25) $ (0.11) $ (0.45)
</TABLE>
The pro forma net loss disclosures made above are not necessarily
representative of the effects on pro forma net income (loss) for future years
as options typically vest over several years and additional option grants are
expected to be made in future years.
F-18
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
8. Related Party Transactions
Related party balances consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------- June 30,
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Payables to stockholders............................. $19,203 $ 71,781 $ 71,781
Payables to founders................................. 29,670 67,920 55,500
------- -------- --------
Total payables to stockholders................... $48,873 $139,701 $127,281
======= ======== ========
</TABLE>
The Company incurred expenses of $21,547, $66,546, and $196,611 for the
period from September 10 (inception) to December 31, 1996 and the years ended
December 31, 1997 and 1998, respectively, in connection with legal and
consulting services performed by a law firm affiliated with a stockholder.
During 1996 and 1997, founders of the Company purchased certain assets and
incurred expenses on behalf of the Company for a total of $274,661. In June
1997, $232,161 of the outstanding amount was converted into common stock (see
Note 5). During 1997 and 1998, $12,830 and $11,750 was paid back to the
founders, respectively. In 1998, a founder advanced the Company $50,000.
In January 1999, the Company converted $12,420 of the payables to founders
into 200,000 shares of common stock in connection with the founder's exercise
of stock options.
In May 1998, the Company entered into a sublease agreement, on a month-to-
month basis, for office space with a stockholder, who was the original tenant
of the office space. The Company paid $41,000, $9,000, and $42,000 during the
year ended December 31, 1998 and the six months ended June 30, 1998 and 1999,
respectively, to the shareholder.
In June 1999, the Company entered into an agreement with a former employee
and stockholder, under which the stockholder will receive commissions on the
net proceeds (defined as gross revenue minus associated costs) generated from
certain customers. The agreement expires in July 2000.
9. Employee Benefit Plan
The Company maintains a retirement and deferred savings plan for its
employees (the "401(k) Plan") that is intended to qualify as a tax-qualified
plan under the Internal Revenue Code. The 401(k) Plan provides that each
participant may contribute up to 15% of his or her pre-tax gross compensation
(up to a statutory limit). However, to date, the Company has not made
discretionary contributions under the 401(k) Plan. All amounts contributed by
participants and earnings on these contributions are fully vested at all times.
10. Subsequent Events
In August 1999, the Company issued 4,000,000 shares of Series C convertible
preferred stock for net proceeds of $14,237,113. Included in this issuance a
stockholder also converted an outstanding note payable for $50,000 (Note 5) and
related accrued interest of $3,250 into 14,833 shares of Series C convertible
preferred stock, and this same stockholder also converted $16,252 of interest
accrued on a separate note payable into 4,527 shares of Series C convertible
preferred stock.
F-19
<PAGE>
Mediaplex, Inc.
Notes to Financial Statements--(Continued)
In July and August 1999 the Company granted options to purchase 910,700
shares of common stock at an exercise price of $3.25 per share to employees and
directors. The Company expects to record deferred stock compensation of
approximately $3.4 million in conjunction with these grants, which is being
amortized over the four year vesting period of the related options.
In August 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan (the "Purchase Plan") effective on the date of the Company's
initial public offering. The Purchase Plan reserved 400,000 shares for issuance
thereunder. Employees generally will be eligible to participate in the Purchase
Plan if they are customarily employed by the Company for more than 20 hours per
week and more than five months in a calendar year and are not 5% or greater
shareholders. Under the Purchase Plan, eligible employees may select a rate of
payroll deduction up to 10% of their compensation subject to certain maximum
purchase limitations. The Purchase Plan will be implemented in a series of
overlapping twenty-four month offering periods and beginning on the effective
date of the Company's initial public offering and subsequent offering periods
will begin on the first trading day on or after May 1 and November 1 of each
year. Purchases will occur on each April 30 and October 31 (the "purchase
dates") during each participation period. Under the Purchase Plan, eligible
employees will be granted an option to purchase shares of Common Stock at a
purchase price equal to 85% of the fair market value per share of Common Stock
on either the start date of the offering period or the end date of the offering
period, whichever is less. If the fair market value of the Common Stock at the
end of the purchase period is lower than the fair market value on the start
date of that offering period, then all participants in that offering period
will be automatically withdrawn from such offering period and re-enrolled in
the offering period immediately following. The Company amended the 1999 Stock
Plan in August 1999, increasing the number of shares reserved for issuance to
12,000,000.
11. Pro Forma Stockholders' Equity (unaudited)
Pro forma stockholders' equity is computed to include the automatic
conversion of the pro forma outstanding shares of Series A and Series B
preferred stock into approximately 1,206,000 and 4,500,000 shares,
respectively, of common stock.
At June 30, 1999, the pro forma effects of these transactions are as follows:
<TABLE>
<CAPTION>
Pro Forma
Stockholders' Equity
June 30,1999 At June 30, 1999
------------ --------------------
<S> <C> <C>
Preferred stock............................ $ 571 $ --
Common stock............................... 1,484 2,055
Additional paid-in capital................. 20,238,846 20,238,846
Warrants................................... 432,354 432,354
Deferred stock compensation................ (3,232,130) (3,232,130)
Receivable from sale of Series B preferred
stock..................................... (240,000) (240,000)
Accumulated deficit........................ (8,577,879) (8,577,879)
----------- -----------
Total stockholders' equity............... $ 8,623,246 $ 8,623,246
=========== ===========
</TABLE>
F-20
<PAGE>
Mediaplex, Inc.
Pro Forma Financial Information
Overview
On March 25, 1999, the Company acquired Netranscend Software, Inc.,
("Netranscend") a Java-based enterprise automation solution software company.
The acquisition was accounted for using the purchase method of accounting and,
accordingly, the purchase price was allocated to the tangible and intangible
assets acquired and liabilities assumed on the basis of their fair values on
the acquisition date.
The aggregate purchase price of $2,993,906 consisted of a note payable of
$430,000, due in four annual installments beginning on the first anniversary of
the acquisition, 1,979,000 shares of the Company's common stock with an
estimated fair value of $2,552,910, acquisition-related expenses of $68,231 for
miscellaneous transaction fees and $15,826 of net liabilities assumed. Of the
total purchase price, $3,009,732 was allocated to goodwill and intangible
assets, consisting of proprietary technology. The acquired goodwill and
intangible assets will be amortized over their estimated useful lives of three
years.
The following unaudited pro forma consolidated statement of operations gives
effect to this acquisition as if it had occurred on January 1, 1998, by
consolidating the results of operations of Netranscend Software, Inc. for the
year ended December 31, 1998 with the results of operations of the Company for
the year ended December 31, 1998.
The unaudited pro forma consolidated statement of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of January 1, 1998 and should not be
construed as being representative of future operating results.
The historical financial statements of the Company and Netranscend are
included elsewhere in this Prospectus and the unaudited pro forma consolidated
financial information presented herein should be read in conjunction with those
financial statements and related notes.
F-21
<PAGE>
Mediaplex, Inc.
Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
---------------------------------------------------
Mediaplex Netranscend Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.................. $ 3,588,094 $ -- $ -- $ 3,588,094
Cost of sales............. 2,770,567 -- -- 2,770,567
----------- ------- ----------- -----------
Gross profit.......... 817,527 -- -- 817,527
Operating expenses:
Sales and marketing..... 819,641 8,271 -- 827,912
Research and
development............ 555,736 1,717 -- 557,453
General and
administrative......... 636,652 -- -- 636,652
Stock-based
compensation........... 577,525 -- -- 577,525
Amortization of goodwill
and intangibles........ -- -- 1,003,244(A) 1,003,244
----------- ------- ----------- -----------
Total operating
expenses............. 2,589,553 9,988 1,003,244 3,602,785
----------- ------- ----------- -----------
Loss from operations.. (1,772,026) (9,988) (1,003,244) (2,785,238)
Interest expense, net..... (247,186) -- -- (247,186)
----------- ------- ----------- -----------
Net loss.............. $(2,019,212) $(9,988) $(1,003,244) $(3,032,444)
----------- ------- ----------- -----------
Net loss per share--basic
and diluted(B)........... $ (0.30)
-----------
Weighted average shares
outstanding(B)........... 10,165,518
-----------
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information
F-22
<PAGE>
Mediaplex, Inc.
Notes to Pro Forma Financial Information
(unaudited)
The following adjustments were applied to the Company's historical financial
statements and those of Netranscend Software, Inc. to arrive at the pro forma
consolidated financial information.
(A) To record amortization of goodwill and purchased proprietary
technology totaling $1,003,244 over the estimated period of benefit
of three years.
(B) Pro forma basic and diluted net loss per share for the year ended
December 31, 1998 was computed using the weighted average number of
common shares outstanding. Differences between historical weighted
average shares outstanding and pro forma weighted average shares
outstanding used to compute net loss per share result from the
inclusion of shares issued in conjunction with the acquisition as if
these shares were outstanding from January 1, 1998.
F-23
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Netranscend Software, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Netranscend Software, Inc. (a
development stage company) (the "Company") at December 31, 1997 and 1998 and
the results of its operations and its cash flows for period from November 27,
1996 (inception) to December 31, 1996, years ended December 31, 1997 and 1998,
and the period from November 27, 1996 (inception) to December 31, 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
July 23, 1999
F-24
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................. $ -- $ 530
Prepaid expenses.......................................... 114 78
------- --------
Total current assets.................................... 114 608
Property and equipment, net................................. 3,149 1,746
------- --------
Total assets............................................ $ 3,263 $ 2,354
======= ========
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Payable due to shareholder................................ $ 6,126 $ 16,356
Accrued liabilities....................................... 1,171 --
------- --------
Total current liabilities............................... 7,297 16,356
------- --------
Shareholders' equity (deficit):
Common stock: No par value; 10,000,000 shares authorized;
3,000,000 shares issued and outstanding at December 31,
1997 and 1998............................................ 3,030 3,030
Deferred stock compensation............................... (30) (10)
Deficit accumulated during the development stage.......... (7,034) (17,022)
------- --------
Total shareholders' equity (deficit).................... (4,034) (14,002)
------- --------
Total liabilities and shareholders' equity (deficit).... $ 3,263 $ 2,354
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
Period from
November 27,
1996
Year Ended (inception)
December 31, through
---------------- December 31,
1997 1998 1998
------- ------- ------------
<S> <C> <C> <C>
Operating expenses:
Research and development....................... $ 1,405 $ 1,717 $ 3,219
Selling, general and administrative............ 2,936 8,271 13,803
------- ------- --------
Total operating expenses..................... 4,341 9,988 17,022
------- ------- --------
Net loss..................................... $(4,341) $(9,988) $(17,022)
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Statements of Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Deferred during the Shareholders'
---------------- Stock Development Equity
Shares Amount Compensation Stage (Deficit)
--------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 3,000,000 $3,000 $-- $ (2,693) $ 307
Deferred stock
compensation........... -- 30 (30) -- --
Net loss ............... -- -- -- (4,341) (4,341)
--------- ------ ---- -------- --------
Balance at December 31,
1997................... 3,000,000 3,030 (30) (7,034) (4,034)
Amortization of deferred
stock compensation..... -- -- 20 -- 20
Net loss................ -- -- -- (9,988) (9,988)
--------- ------ ---- -------- --------
Balance at December 31,
1998................... 3,000,000 $3,030 $(10) $(17,022) $(14,002)
========= ====== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
November 27,
1996
Year Ended (inception)
December 31, through
---------------- December 31,
1997 1998 1998
------- ------- ------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(4,341) $(9,988) $(17,022)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 1,404 1,618 3,119
Stock compensation expense.................... -- 20 20
Changes in current assets and liabilities:
Prepaid expenses............................ (114) 36 (78)
Accrued liabilities......................... 1,171 (1,171) --
------- ------- --------
Net cash used in operating activities..... (1,880) (9,485) (13,961)
------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............. (1,174) (215) (4,865)
------- ------- --------
Net cash used in investing activities..... (1,174) (215) (4,865)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock......... -- -- 3,000
Proceeds from payables due to shareholder...... 3,054 10,230 16,356
------- ------- --------
Net cash provided by financing
activities............................... 3,054 10,230 19,356
------- ------- --------
Net increase (decrease) in cash and cash
equivalents.................................... -- 530 530
Cash and cash equivalents at beginning of
period......................................... -- -- --
------- ------- --------
Cash and cash equivalents at end of period...... $ -- $ 530 $ 530
======= ======= ========
Supplemental disclosure of cash flow
information:
Deferred stock compensation from issuance of
common stock.................................. $ 30 $ $ 30
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Notes to Financial Statements
1. Nature of Business
Netranscend Software, Inc. (the "Company") was incorporated on November 27,
1996 as a California Corporation. The Company provides Java-based enterprise
automation solutions on the Internet and for intranets.
2. Summary of Significant Accounting Policies
Basis of presentation
The Company has had limited operations to date and its activities have
consisted primarily of developing products and recruiting personnel.
Accordingly, the Company is considered to be in the development stage at
December 31, 1998, as defined in Statement of Financial Accounting Standards
("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises."
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment are stated at cost and depreciated on the straight-
line basis over the estimated useful lives of the asset, which is generally
three years. Upon sale or disposal, the Company removes the asset and
accumulated depreciation from its records and recognizes the related gain or
loss in results of operations.
Research and development costs
The costs of establishing the technological feasibility of the Company's
software products or product enhancements are expensed as research and
development costs when incurred. The costs incurred subsequent to the
establishment of technological feasibility and prior to a product's general
release will be capitalized. All costs have been expensed to date.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of APB No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost
is recognized based on the difference, if any, on the date of grant between the
fair value of the Company's Stock and the amount an employee must pay to
acquire the stock.
F-29
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Notes to Financial Statements--(Continued)
The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
Comprehensive Income
The Company complies with the provisions of SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined, includes all changes in equity (net assets) during a period
from non-owner sources. The Company has not had any significant transactions
that are required to be reported in comprehensive income.
Income Taxes
Deferred tax assets and liabilities are determined based on the difference
between the financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents. The Company
deposits its cash and cash equivalents with a single major financial
institution, which deposits may exceed federal deposit insurance limits.
3. Related Party Transactions
During the period from November 27, 1996 (inception) to December 31, 1998,
the sole principal shareholder purchased certain assets and incurred expenses
on behalf of the Company. The Company recorded such amounts due to the
shareholder as an interest-free loan. The amounts due to the shareholder at
December 31, 1997 and 1998 were $6,126 and $16,356, respectively.
4. Property and Equipment
Property and equipment as of December 31, 1997 and 1998 is summarized as
follows:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Property and equipment, net:
Computer equipment and software............................ $4,651 $4,866
Less: Accumulated depreciation and amortization............ (1,502) (3,120)
------ ------
$3,149 $1,746
====== ======
</TABLE>
F-30
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Notes to Financial Statements--(Continued)
5. Income Taxes
During the period from November 27, 1996 (inception) through December 31,
1998 no income tax provision or benefit was recognized due to net operating
losses incurred during the periods for which a full valuation allowance was
recorded.
The difference between the income tax benefit at the federal statutory rate
of 34% and the Company's effective tax rate is due to the recording of the
valuation allowance.
6. Shareholders' Equity
Common stock
The Company is authorized to issue 10,000,000 shares of common stock. In
November 1996, the Company issued 3,000,000 shares of common stock to the sole
principal shareholder in exchange for a capital contribution made by the
shareholder. At December 31, 1998, total of 3,000,000 shares of common stock
was issued and outstanding.
Stock option plan
The Company did not have a formal stock option plan. However, during 1997,
the Company issued nonstatutory stock options to three non-employees. The
Company did not reserve any specific number of shares of common stock for
issuance of the stock options. The options generally become exercisable in
equal increments over a eighteen-month vesting period and expire at the end of
five years from the date of grant or sooner if terminated by the Board of
Directors.
In connection with the stock options grants made, the Company recorded a
deferred stock compensation of $30, which will be amortized over the vesting
period through February 1999.
The following table summarizes option activity through December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding
-------------------------------------------
Weighted
Number of Exercise Aggregate Average
Shares Price Price Exercise/Price
--------- -------- --------- --------------
<S> <C> <C> <C> <C>
Shares:
Granted....................... 59,000 $0.002 $118 $0.002
Cancelled..................... -- -- -- --
Exercised..................... -- -- -- --
------ ------ ---- ------
Balance, December 31, 1997...... 59,000 $0.002 118 0.002
Granted....................... -- -- -- --
Cancelled..................... -- -- -- --
Exercised..................... -- -- -- --
------ ------ ---- ------
Balance, December 31, 1998...... 59,000 $0.002 $118 $0.002
====== ====== ==== ======
</TABLE>
As of December 31, 1997 and 1998 options to purchase 5,000 and 56,000 shares
of common stock were exercisable.
F-31
<PAGE>
Netranscend Software, Inc.
(a development stage company)
Notes to Financial Statements--(Continued)
The following table summarizes information for stock options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
---------------------------------------------
Weighted
Average
Remaining
Contractual
Exercise Number Life Number
Price Outstanding (Years) Exercisable
-------- ----------- ----------- -----------
<S> <C> <C> <C>
$ 0.002 59,000 3.7 56,000
====== ======
</TABLE>
The pro forma disclosures for net loss and net loss per share have not been
presented as the results would be the same as the net loss and net loss per
share as reported.
7. Subsequent Events
On March 25, 1999, the Company was acquired by Mediaplex, Inc. ("Mediaplex")
in exchange for a note issued to the Company's sole shareholder payable in four
annual installments, and for 1,979,000 shares of Mediaplex's common stock. The
note will be paid in annual installments of $110,000 due on March 25, 2000,
2001 and 2004 and $100,000 on March 25, 2003. Mediaplex delivered 1,679,000
common shares immediately after the closing date and deposited the remaining
300,000 common shares into an escrow fund. The escrow fund period expires two
years after the closing date, subject to fulfilling pending unsatisfied claims,
if any. At the end of the escrow period or resolution of the unsatisfied
claims, the remaining 300,000 common shares will be delivered to the sole
shareholder.
All vested and unvested options of the Company were cancelled at the closing
date.
F-32
<PAGE>
[INSIDE BACK COVER OF PROSPECTUS CONTAINS CLIENTS' NAMES AND LOGOS]
<PAGE>
Shares
[LOGO OF MEDIAPLEX]
Common Stock
-------------
PROSPECTUS
, 1999
-------------
Lehman Brothers
SG Cowen
U.S. Bancorp Piper Jaffray
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discount payable by Mediaplex in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 19,460
NASD filing fee.................................................. 7,500
Nasdaq National Market listing fee............................... 95,000
Printing and engraving costs..................................... 250,000
Legal fees and expenses.......................................... 350,000
Accounting fees and expenses..................................... 275,000
Blue Sky fees and expenses....................................... 5,000
Transfer agent and registrar fees................................ 10,000
Miscellaneous expenses........................................... 38,040
----------
Total.......................................................... $1,050,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article IX of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article VI of the Registrant's Amended and Restated Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of
the Registrant if such persons act in good faith and in a manner reasonably
believed to be in and not opposed to the best interests of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its directors
and executive officers, in addition to indemnification provided for in the
Registrant's Amended and Restated Bylaws, and intends to enter into
indemnification agreements with any new directors and executive officers in the
future.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the Underwriters of the Registrant and its executive officers and directors
for certain liabilities, including liabilities arising under the Securities
Act, in connection with matters specifically provided in writing by the
Underwriters for inclusion in the Registration Statement.
Item 15. Recent Sales of Unregistered Securities
During the past three years, the Registrant has issued unregistered
securities to a limited number of entities and persons as described below:
(a) From September 1996 to August 15, 1999, the Registrant issued and
sold common stock to various entities and persons at per share purchase
prices, as follows:
(1) In September and October 1996, the Registrant issued and sold to
Michael Schwartz an aggregate of 2,460,000 shares at a purchase
price of $0.0001 per share, in connection with the Registrant's
founding;
II-1
<PAGE>
(2) In September 1996, the Registrant issued and sold 350,000 shares
and 250,000 shares, to Raifman & Edwards LLP and PointBreak
Ventures, LLC, respectively, at a purchase price of $0.0001 per
share, in payment for past services rendered to the Registrant;
(3) In October 1996 and January 1997, the Registrant issued and sold
1,600,000 shares to Eugene Jarvis, at a purchase price of $0.05
per share;
(4) In December 1996, the Registrant issued and sold an aggregate of
800,000 shares to Kuni Research, at a purchase price of $0.05 per
share;
(5) During 1997, the Registrant issued and sold 220,000 shares and
995,338 shares to various employees and non-employee investors at
a purchase price of $0.05 per share and $0.30 per share,
respectively;
(6) In June 1997, the Registrant issued a convertible promissory note
to Michael Schwartz in payment for past services rendered, which
was converted into 4,643,228 shares at a conversion rate of $0.05
per share in June 1997. In April 1998, the Registrant repurchased
these shares, and issued in exchange a convertible promissory note
to Michael Schwartz. In July 1998, Michael Schwartz transferred
these shares to Raifman & Edwards, LLP. In March 1999, Raifman &
Edwards converted the principal and interest of this note into
4,643,228 shares at a conversion rate of $0.05 per share;
(7) In July 1997, the Registrant issued a convertible promissory note
to Raifman & Edwards, LLP, in payment for past services rendered,
which in March 1999 was converted into 947,009 shares at a
conversion rate of $0.075 per share;
(8) In February 1998, the Registrant issued and sold to employees and
non-employee investors 76,000 shares at a purchase price of $0.50
per share;
(9) In June 1998, the Registrant issued and sold to an employee
232,964 shares at a purchase price of $0.65 per share;
(10) In January and March 1999, the Registrant issued and sold to two
employees 13,333 shares and 10,000 shares, respectively, in
payment for past services rendered; and
(11) In January 1999, the Registrant, as part of a settlement agreement
issued and sold to an employee 200,000 shares for an aggregate
purchase price of $12,420 under our 1997 Stock Plan.
(b) From October 31, 1996 to August 15, 1999, the Registrant issued to
certain of its employees, officers, directors and consultants options to
purchase an aggregate of 8,781,777 shares of common stock of the
Registrant, at exercise prices ranging from $0.05 per share to $3.25 per
share, pursuant to the Registrant's 1997 Stock Plan and 1999 Stock Plan,
and Amended and Restated 1999 Stock Plan.
(c) From October 31, 1996 to August 15, 1999, the Registrant issued an
aggregate of 62,667 shares of common stock of the Registrant upon the
exercise of options at exercise prices ranging from $0.05 to $0.30 per
share.
(d) On January 11, 1999, the Registrant issued to an employee a warrant
to purchase an aggregate of 500,000 shares of common stock at an exercise
price of $0.50 per share.
(e) On January 26, 1999, the Registrant issued and sold an aggregate of
1,206,000 shares of Series A preferred stock to 37 investors at a purchase
price of $1.25 per share or an aggregate purchase price of $1,507,500.
(f) On March 25, 1999, the Registrant issued and sold an aggregate of
1,979,000 shares of common stock valued at $2,600,000 to Ruiquing Jiang in
connection with the Registrant's acquisition of Netranscend Software, Inc.,
of which Mr. Jiang was the sole shareholder.
(g) On June 15, 1999, the Registrant issued and sold an aggregate of
4,500,000 shares of Series B preferred stock to 36 investors at a purchase
price of $2.00 per share, or an aggregate purchase price of $9,000,000.
II-2
<PAGE>
(h) On June 15, 1999, the Registrant issued to two investors warrants to
purchase an aggregate of 275,000 shares of Series B preferred stock at an
exercise price of $2.00 per share.
(i) On June 19, 1999, the Registrant issued to an investor a warrant to
purchase an aggregate of 100,000 shares of common stock at an exercise
price of $0.50 per share.
(j) On August 6, 1999, the Registrant issued and sold an aggregate of
4,000,000 shares of Series C preferred stock to 14 investors at a purchase
price of $3.59 per share, or an aggregate purchase price of $14,360,000.
The issuances described in paragraphs (a) (1) through (10) and (d) through
(j) above were deemed to be exempt from registration under the Securities Act
in reliance on Section 4(2) of the Securities Act as transactions by an issuer
not involving a public offering. The sales of securities described in
paragraphs a(11), (b) and (c) above were deemed to be exempt from the
registration requirements of the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act as transactions by an
issuer pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. The issuance of
warrants to purchase stock described in paragraphs (h) and (i) above did not
require registration under the Securities Act, or an exemption therefrom,
insofar as such grants did not involve a "sale" of securities as such term is
used in Section 2(3) of the Securities Act. All recipients either received
adequate information about the Registrant or had access, through employment or
other relationships, to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization between Registrant, Netranscend
Software, Inc. and Ruiqing "Barclay" Jiang, dated March 8, 1999.
3.1 Form of the Amended and Restated Certificate of Incorporation of the
Registrant to be in effect after the closing of the offering made
under this Registration Statement.
3.2 Form of the Amended and Restated Bylaws of the Registrant to be in
effect after the closing of the offering made under this Registration
Statement.
4.1 Warrant to purchase 500,000 shares of Common Stock of the Registrant,
dated January 11, 1999, held by Timothy Favia.
4.2 Warrant to purchase 100,000 shares of Common Stock of the Registrant,
dated June 15, 1999, held by Retail Ventures International, Inc.
4.3 Warrant to purchase 150,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999, held by Retail Ventures
International, Inc.
4.4 Warrant to purchase 125,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999, held by Zeron Capital, Inc.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between the Registrant and each of
its directors and officers.
10.2 Amended and Restated 1999 Stock Plan and form of agreements
thereunder.
10.3 1999 Employee Stock Purchase Plan and form of agreements thereunder.
10.4 1997 Stock Plan and form of agreements thereunder.
10.5 Basic Lease Agreement, First Amendment and Basic Lease Information
thereto, between R&E Holdings, LLC and Persis Corporation and BidCom,
Inc., dated September 24, 1999, February 1, 1997 and July 31, 1998,
respectively.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
10.6 Sublease, dated July 9, 1999, with Telocity, Inc.
10.7 Employment Agreement with Gregory R. Raifman, dated February 19, 1999.
10.8 Employment Agreement with Jon L. Edwards, dated February 19, 1999.
10.9 Employment Agreement with Walter Haefeker, dated February 19, 1999.
10.10 Employment Agreement with Ruiqing "Barclay" Jiang, dated March 24,
1999.
10.11 Employment Agreement with Sandra L. Abbott, dated August 6, 1999.
10.12+* Technology Integration and Services Agreement between the Registrant
and DoubleClick, Inc., dated July 22, 1999.
10.13 Investors' Rights Agreement, dated July 30, 1999.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.3* Consent of Counsel (see Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
+Confidential treatment requested.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced 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 a
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit 1 to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on the 2nd day of September, 1999.
MEDIAPLEX, INC.
/s/ Gregory R. Raifman
By:__________________________________
Gregory R. Raifman
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gregory R. Raifman and Sandra L. Abbott and each
of them singly, as 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 the Registration Statement filed herewith and
any or all amendments to said Registration Statement (including post-effective
amendments and registration statements filed pursuant to Rule 462 and
otherwise), 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 the full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the foregoing, as to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or his or her substitute, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gregory R. Raifman Chairman and Chief Executive September 2, 1999
____________________________________ Officer (Principal
Gregory R. Raifman Executive Officer)
/s/ Sandra L. Abbott Senior Vice President, Chief September 2, 1999
____________________________________ Financial Officer and
Sandra L. Abbott Secretary (Principal
Accounting Officer)
/s/ Jon L. Edwards President and Director September 2, 1999
____________________________________
Jon L. Edwards
/s/ Lawrence D. Lenihan, Jr. Director September 2, 1999
____________________________________
Lawrence D. Lenihan, Jr.
/s/ Peter S. Sealey Director September 2, 1999
____________________________________
Peter S. Sealey
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James DeSorrento Director September 2, 1999
____________________________________
James DeSorrento
/s/ A. Brooke Seawell Director September 2, 1999
____________________________________
A. Brooke Seawell
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization between Registrant, Netranscend
Software, Inc. and Ruiqing "Barclay" Jiang, dated March 8, 1999.
3.1 Form of the Amended and Restated Certificate of Incorporation of the
Registrant to be in effect after the closing of the offering made
under this Registration Statement.
3.2 Form of the Amended and Restated Bylaws of the Registrant to be in
effect after the closing of the offering made under this Registration
Statement.
4.1 Warrant to purchase 500,000 shares of Common Stock of the Registrant,
dated January 11, 1999, held by Timothy Favia.
4.2 Warrant to purchase 100,000 shares of Common Stock of the Registrant,
dated June 15, 1999, held by Retail Ventures International, Inc.
4.3 Warrant to purchase 150,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999, held by Retail Ventures
International, Inc.
4.4 Warrant to purchase 125,000 shares of Series B Preferred Stock of the
Registrant, dated June 15, 1999, held by Zeron Capital, Inc.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between the Registrant and each of
its directors and officers.
10.2 Amended and Restated 1999 Stock Plan and form of agreements
thereunder.
10.3 1999 Employee Stock Purchase Plan and form of agreements thereunder.
10.4 1997 Stock Plan and form of agreements thereunder.
10.5 Basic Lease Agreement, First Amendment and Basic Lease Information
thereto, between R&E Holdings, LLC and Persis Corporation and BidCom,
Inc., dated September 24, 1999, February 1, 1997 and July 31, 1998,
respectively.
10.6 Sublease, dated July 9, 1999, with Telocity, Inc.
10.7 Employment Agreement with Gregory R. Raifman, dated February 19, 1999.
10.8 Employment Agreement with Jon L. Edwards, dated February 19, 1999.
10.9 Employment Agreement with Walter Haefeker, dated February 19, 1999.
10.10 Employment Agreement with Ruiqing "Barclay" Jiang, dated March 24,
1999.
10.11 Employment Agreement with Sandra L. Abbott, dated August 6, 1999.
10.12+* Technology Integration and Services Agreement between the Registrant
and DoubleClick, Inc., dated July 22, 1999.
10.13 Shareholders' Rights Agreement, dated July 30, 1999.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.3* Consent of Counsel (see Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INTERNET EXTRA CORPORATION,
NETRANSCEND SOFTWARE, INC. AND
RUIQING "BARCLAY" JIANG AS PRINCIPAL SHAREHOLDER
Dated as of March 8, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I The Merger........................................................ 1
1.1 The Merger........................................................ 1
1.2 Effective Time.................................................... 2
1.3 Effect of the Merger.............................................. 2
1.4 Articles of Incorporation; Bylaws................................. 2
1.5 Directors and Officers............................................ 2
1.6 Effect of Merger on Netranscend Capital Stock..................... 2
(a) Conversion of Netranscend Capital Stock...................... 3
(b) Procedure for Payment........................................ 3
(c) Company Stock Options........................................ 3
1.7 No Further Ownership Rights in Netranscend Capital Stock.......... 3
1.8 Tax Consequences.................................................. 4
1.9 Taking of Necessary Action; Further Action........................ 4
ARTICLE II Representations and Warranties of Netranscend and the Princ....... 4
2.1 Organization of Netranscend....................................... 4
2.2 Netranscend Capital Structure..................................... 5
2.3 Subsidiaries...................................................... 5
2.4 Authority......................................................... 5
2.5 No Conflict....................................................... 6
2.6 Consents.......................................................... 6
2.7 Company Financial Statements...................................... 6
2.8 No Undisclosed Liabilities........................................ 7
2.9 No Changes........................................................ 7
2.10 Tax Matters....................................................... 8
2.11 Title of Properties; Absence of Liens and Encumbrances............ 8
2.12 Intellectual Property............................................. 9
2.13 Agreements, Contracts and Commitments............................. 12
2.14 Interested Party Transactions..................................... 12
2.15 Governmental Authorization........................................ 12
2.16 Litigation........................................................ 13
2.17 Minute Books...................................................... 13
2.18 Environmental Matters............................................. 13
2.19 Brokers' and Finders' Fees........................................ 13
2.20 Employee Benefit Plans and Compensation........................... 13
2.21 No Interference or Conflict....................................... 13
2.22 Compliance with Laws.............................................. 13
2.23 Warranties; Indemnities........................................... 13
2.24 Complete Copies of Materials...................................... 14
2.25 Representations Complete.......................................... 14
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III Representations and Warranties Of The Principal Shareholder....... 14
3.1 No Registration................................................... 14
3.2 Sophistication.................................................... 14
3.3 Access to Information............................................. 14
3.4 Preexisting Business Relationship................................. 14
3.5 Investment........................................................ 14
3.6 Tax Advisors...................................................... 15
3.7 Counsel........................................................... 15
3.8 Resale Under Rule 144............................................. 15
3.9 Residency......................................................... 15
ARTICLE IV Representations and Warranties of IEC............................. 16
4.1 Organization of IEC............................................... 16
4.2 IEC Capital Structure............................................. 16
4.3 Subsidiaries...................................................... 16
4.4 Authority......................................................... 17
4.5 No Conflict....................................................... 17
4.6 Consents.......................................................... 17
4.7 No Financial Statements........................................... 18
4.8 Tax Matters....................................................... 18
4.9 Title to Property; Absence of Liens and Encumbrances.............. 18
4.10 Intellectual Property............................................. 18
4.11 Agreements, Contracts and Commitments............................. 19
4.12 Interested Party Transactions..................................... 19
4.13 Governmental Authorization........................................ 19
4.14 Litigation........................................................ 19
4.15 Minute Books...................................................... 20
4.16 Environmental Matters............................................. 20
4.17 Brokers' and Finders' Fees........................................ 20
4.18 Employee Benefit Plans and Compensation........................... 20
4.19 No Interference or Conflict....................................... 20
4.20 Compliance with Laws.............................................. 20
4.21 Warranties; Indemnities........................................... 20
4.22 Complete Copies of Materials...................................... 20
4.23 Representations Complete.......................................... 21
ARTICLE V Conduct Prior to the Effective Time............................... 21
5.1 Conduct of Business of Netranscend................................ 21
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.2 No Solicitation................................................... 23
ARTICLE VI Additional Agreements............................................. 24
6.1 Shareholder Approval.............................................. 24
6.2 Restrictions on Transfer.......................................... 24
6.3 Access to Information............................................. 25
(a) Access by IEC................................................ 25
(b) Access by Netranscend........................................ 25
(c) No Modification.............................................. 25
6.4 Confidentiality................................................... 25
6.5 Expenses.......................................................... 26
6.6 Public Disclosure................................................. 26
6.7 Consents.......................................................... 26
6.8 FIRPTA Compliance................................................. 26
6.9 Reasonable Efforts................................................ 26
6.10 Notification of Certain Matters................................... 27
6.11 Additional Documents and Further Assurances....................... 27
6.12 Tax Free Reorganization........................................... 27
6.13 Employee Offers................................................... 27
ARTICLE VII Conditions to the Merger.......................................... 27
7.1 Conditions to Obligations of Each Party to Effect the Merger...... 27
(a) Shareholder Approval......................................... 27
(b) No Injunctions or Restraints; Illegality..................... 28
(c) Claims....................................................... 28
(d) Permits...................................................... 28
7.2 Additional Conditions to Obligations of Netranscend and the
Principal Shareholder........................................ 28
(a) Consideration Shares......................................... 28
(b) Employment Offers............................................ 28
(c) Stock Option Agreements...................................... 28
(d) Representations, Warranties and Covenants.................... 28
(e) No Material Adverse.......................................... 28
(f) Legal Opinion................................................ 29
(g) Certificate of IEC........................................... 29
(h) Good Standing Certificate.................................... 29
7.3 Additional Conditions to the Obligations of IEC................... 29
(a) Netranscend Share Certificates............................... 29
(b) Netranscend Options.......................................... 29
(c) Acceptance of Key Employee Offers............................ 29
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
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<S> <C>
(d) Representations, Warranties and Covenants.................... 29
(e) Third Party Consents......................................... 30
(f) Legal Opinion................................................ 30
(g) No Material Adverse Effect................................... 30
(h) Shareholder Approval......................................... 30
(i) Certificate of Netranscend................................... 30
(j) Certificate of the Principal Shareholder..................... 30
(k) Good Standing Certificate.................................... 30
(l) Certificate of Satisfaction.................................. 31
(m) Escrow Agreement............................................. 31
(n) Agreement of Merger.......................................... 31
ARTICLE VIII Survival of Representations and Warranties; Escrow................ 31
8.1 Survival of Representations and Warranties........................ 31
8.2 Indemnification................................................... 31
(a) Indemnification of Losses.................................... 31
(b) Claims Against the Escrow Fund............................... 31
8.3 Escrow Arrangements............................................... 32
8.4 Escrow Agreement.................................................. 32
ARTICLE IX Termination, Amendment and Waiver................................. 32
9.1 Termination....................................................... 32
9.2 Effect of Termination............................................. 33
9.3 Amendment......................................................... 33
9.4 Extension; Waiver................................................. 33
ARTICLE X General Provisions................................................ 34
10.1 Notices........................................................... 34
10.2 Interpretation.................................................... 35
10.3 Counterparts...................................................... 35
10.4 Entire Agreement; Assignment...................................... 35
10.5 Severability...................................................... 35
10.6 Other Remedies.................................................... 35
10.7 Governing Law..................................................... 36
10.8 Rules of Construction............................................. 36
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of March 8, 1999 by and among Internet Extra Corporation, a
California corporation ("IEC"), Netranscend Software, Inc., a California
corporation ("Netranscend"), and Ruiqing "Barclay" Jiang, the sole shareholder
of Netranscend (the "Principal Shareholder").
RECITALS
A. The Boards of Directors of IEC and Netranscend believe it is in the
best interests of each company and the shareholders of each company that IEC
acquire Netranscend through the statutory merger of Netranscend with and into
IEC (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, (i) all of the issued and
outstanding shares (each, a "Netranscend Share") of capital stock of Netranscend
(the "Netranscend Capital Stock") shall be canceled and converted into the right
to receive cash and shares of common stock of IEC ("IEC Common Stock") and (ii)
all options to acquire any shares of Netranscend Capital Stock shall be canceled
and replaced by options to acquire shares of IEC Common Stock.
C. A portion of the shares of IEC Common Stock otherwise payable by IEC
in connection with the Merger shall be placed in escrow and held by an escrow
agent pursuant to an Escrow Agreement, substantially in the form attached hereto
as Exhibit I as set forth in Section VIII hereof and the release of such shares
shall be contingent upon certain events and conditions.
D. It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
E. IEC and Netranscend desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
The Merger
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California General Corporation Law ("California
Law"), Netranscend shall be merged with and into IEC, the separate corporate
existence of Netranscend shall cease and IEC shall continue as the surviving
<PAGE>
corporation. IEC as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 9.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than five (5) business days following
satisfaction or waiver of the conditions set forth in Article VII, at the
offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page
Mill Road, Palo Alto, California, unless another place or time is agreed to in
writing by IEC and Netranscend. The date upon which the Closing actually occurs
is herein referred to as the "Closing Date." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing an Agreement of Merger
in the form attached hereto as Exhibit A (the "Merger Agreement") with the
---------
Secretary of State of the State of California, in accordance with the relevant
provisions of applicable law (the time of acceptance by the Secretary of State
of California of such filing being referred to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of California Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of Netranscend
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of Netranscend shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by IEC prior to the Effective Time, at
the Effective Time, the Articles of Incorporation of IEC, as amended, shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation.
(b) Unless otherwise determined by IEC prior to the Effective Time, at
the Effective Time, the Bylaws of IEC as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until thereafter
amended.
1.5 Directors and Officers. The directors of IEC immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation. The officers of IEC immediately prior to the Effective
Time shall be the officers of Surviving Corporation, each to hold office in
accordance with the Bylaws of the Surviving Corporation.
1.6 Effect of Merger on Netranscend Capital Stock. Subject to the terms
and conditions of this Agreement, as of the Effective Time, by virtue of the
Merger and without any action on the part of IEC, Netranscend or the Principal
Shareholder immediately prior to the Effective Time, the following shall occur:
<PAGE>
(a) Conversion of Netranscend Capital Stock. At and as of the
Effective Time, all Netranscend Shares shall be converted into the right to
receive an aggregate of 1,979,000 shares (the "Consideration Shares") of IEC
Common Stock and cash in the amount of $430,000 (the "Cash Consideration," and
together with the Consideration Shares, the "Consideration"). No Netranscend
Capital Stock shall be deemed to be outstanding or to have any rights other than
those set forth in this Section 1.6 (a) after the Effective Time.
(b) Procedure for Payment. At the Effective Time, the Principal
Shareholder will deliver a certificate or certificates representing all issued
and outstanding Netranscend Shares to IEC, endorsed in blank or accompanied by
stock powers or other instruments of transfer executed by such Principal
Shareholder. Immediately after the Effective Time, IEC shall (a) deliver to the
Principal Shareholder a certificate or certificates bearing the legend set forth
in Section 6.2 hereof representing 1,679,000 shares of IEC Common Stock and (b)
deliver to the Escrow Agent (as defined in Section 8.3(a) below) a certificate
bearing the legend set forth in Section 6.2 hereof, representing 300,000 shares
of IEC Common Stock (the "Escrow Shares") to be deposited into the Escrow Fund
(as defined in Section 8.3(a) below), pursuant to the terms and conditions set
forth in Article VIII. IEC shall pay the Cash Consideration to the Principal
Shareholder in four installments, as follows: (i) $110,000 on the one-year
anniversary of the Closing Date; (ii) $110,000 on the two-year anniversary of
the Closing Date; (iii) $100,000 on the three-year anniversary of the Closing
Date; and (iv) $110,000 on the four-year anniversary of the Closing Date. All
payments of Consideration Shares and Cash Consideration shall be made to the
address set forth in Section 10.1 below unless the Principal Shareholder
delivers an alternate address to IEC.
(c) Company Stock Options.
(i) Conversion of Netranscend Options. At the Effective Time,
each outstanding option and warrant to purchase Netranscend Capital Stock (each,
a "Netranscend Option"), whether vested or unvested, shall be canceled by
Netranscend in connection with the Merger. IEC shall grant options to purchase
IEC Common Stock for each Netranscend Option so canceled by Netranscend under
this Agreement, each of which shall be subject to the terms and conditions of
the IEC 1999 Stock Option Plan (the "IEC Plan"), shall have an option exercise
price of $0.50 per share, shall be fully vested and exercisable at the Effective
Time and shall have the same termination date as of the canceled Netranscend
Option for which it was granted. Each Netranscend Option will be exercisable for
the same number of shares of IEC Common Stock as the number of shares of
Netranscend Common Stock that were issuable upon exercise of such Netranscend
Option immediately prior to the Effective Time.
(ii) Notice of Issuance. Promptly following the Effective
Time, IEC will issue to each holder of an outstanding Netranscend Option a stock
option agreement evidencing the foregoing conversion of such Netranscend Option
by IEC.
1.7 No Further Ownership Rights in Netranscend Capital Stock. The shares
of IEC Common Stock issued in accordance with the terms hereof shall be deemed
to be full satisfaction of all rights pertaining to shares of Netranscend
Capital Stock outstanding prior to the Effective Time,
<PAGE>
and there shall be no further registration of transfers on the records of
Netranscend or the Surviving Corporation of shares of Netranscend Capital Stock
that were outstanding prior to the Effective Time.
1.8 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. Each party has consulted with its own tax advisers with
respect to the tax consequences of the Merger.
1.9 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Netranscend and IEC, the officers and directors of Netranscend
and IEC are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE II
Representations and Warranties of
Netranscend and the Principal Shareholder
Netranscend and the Principal Shareholder hereby represent and warrant to
IEC, subject to such exceptions as are specifically disclosed in the disclosure
schedule (referencing the appropriate section and paragraph numbers) supplied by
Netranscend to IEC and attached hereto as Exhibit D (the "Disclosure Schedule")
---------
and dated as of the date hereof, that on the date hereof and as of the Effective
Time:
2.1 Organization of Netranscend. Netranscend is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has the requisite corporate power and authority to carry on its
business as presently conducted and as presently proposed to be conducted.
Netranscend is duly qualified to transact business and is in good standing in
the State of California and in each jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification in which
the failure to be so qualified would have a Material Adverse Effect. As used in
this Agreement, the term "Material Adverse Effect" with respect to a party means
any change, event or effect that is materially adverse to the business, assets
(including intangible assets), results of operations or financial condition of
such party. Netranscend has delivered a true and correct copy of its Articles
of Incorporation and Bylaws, each as amended to date, to IEC. Section 2.1 of the
-----------
Disclosure Schedule lists the directors and officers of Netranscend. The
operations now being conducted by Netranscend have not been conducted under any
other name.
<PAGE>
2.2 Netranscend Capital Structure.
(a) As of the Closing Date, the authorized capital stock of
Netranscend consists of 10,000,000 shares of authorized Common Stock, of which
3,000,000 are issued and outstanding and held by the Principal Shareholder as of
the date hereof, and no shares of Preferred Stock. All outstanding shares of
Netranscend Capital Stock are duly authorized, validly issued, fully paid and
non-assessable, are not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of Netranscend or any agreement to which
Netranscend is a party or by which it is bound and have been issued in
compliance with federal and state securities laws. There are no declared but
unpaid dividends with respect to any shares of Netranscend Capital Stock. The
Merger is not a dissolution, liquidation or winding up as defined in
Netranscend's Articles of Incorporation. Netranscend has no treasury shares or
other capital stock authorized, issued or outstanding.
(b) Section 2.2(b) of the Disclosure Schedule sets forth, the name of
--------------
each stock option plan or other plan providing for equity compensation of any
person adopted or maintained by Netranscend. Section 2.2(b) of the Disclosure
--------------
Schedule sets forth for each outstanding Netranscend Option the name of the
holder of such option, the domicile address of such holder, the number of shares
of Netranscend Capital Stock subject to such option, the exercise price of such
option and the vesting schedule for such option, including the extent vested to
date. There are no other options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Netranscend is a party or
by which it is bound obligating Netranscend to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of Netranscend Capital Stock or obligating Netranscend to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to Netranscend. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting stock of Netranscend. There are no warrants to purchase Netranscend
Capital Stock.
2.3 Subsidiaries. Netranscend does not have, and never has had, any
subsidiaries or affiliated companies and has not otherwise owned, any shares in
the capital of or any interest in, or control, directly or indirectly, any other
corporation, partnership, association, joint venture or other business entity.
2.4 Authority. Netranscend has all requisite power and authority to enter
into this Agreement and any Related Agreements (as hereinafter defined) to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any Related
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Netranscend, and no further action is required
on the part of Netranscend to authorize the Agreement, any Related Agreements to
which it is a party and the transactions contemplated hereby and thereby,
subject only to approval of this Agreement by the Principal Shareholder. This
Agreement and the Merger have been approved by all members of the Board of
Directors of Netranscend. This Agreement and any Related Agreements to which
Netranscend is a
<PAGE>
party have been duly executed and delivered by Netranscend and, assuming the due
authorization, execution and delivery by the other parties hereto and thereto,
constitute the valid and binding obligation of Netranscend, enforceable in
accordance with their respective terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and to
rules of law governing specific performance, injunctive relief or other
equitable remedies. The "Related Agreements" with respect to a party shall mean
all such ancillary agreements required in this Agreement to be executed and
delivered by such party in connection with the transactions contemplated hereby.
2.5 No Conflict. The execution and delivery of this Agreement and any
Related Agreements to which Netranscend is a party do not, and the consummation
of the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict") (i) any provision of the Articles of Incorporation and
Bylaws of Netranscend, (ii) any mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, covenant or
commitment (each a "Contract") to which Netranscend or any of its properties or
assets are subject, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Netranscend or its properties or
assets.
2.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party, including a party to any Contract with Netranscend (so as not to
trigger any Conflict), is required by or with respect to Netranscend and no
consent, waiver or approval of any party to any Contract is required for such
Contract to remain in effect without modification in connection with the
execution and delivery of this Agreement and any Related Agreements to which
Netranscend is a party or the consummation of the transactions contemplated
hereby and thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, and (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of California, and except that the
consummation of the transactions contemplated hereby requires the approval of
the shareholders of Netranscend.
2.7 Company Financial Statements. Section 2.7 of the Disclosure Schedule
-----------
sets forth Netranscend's unaudited balance sheets as of December 31, 1998 and
the related unaudited statements of income and cash flow for the year ended
December 31, 1998 (collectively, the "Netranscend Financials"). Netranscend
Financials are correct in all material respects and have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"), applied
on a basis consistent throughout the periods indicated and consistent with each
other. Netranscend Financials present fairly the financial condition, operating
results and cash flows of Netranscend as of the dates and during the periods
indicated therein.
<PAGE>
2.8 No Undisclosed Liabilities. Netranscend does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with GAAP), which individually or in the aggregate (i) has not been reflected in
the Netranscend Financials, or (ii) has not arisen in the ordinary course of
business consistent with past practices since December 31, 1998.
2.9 No Changes. Except as expressly contemplated by this Agreement, since
December 31, 1998, there has not been, occurred or arisen any of the following
(unless approved in writing by IEC):
(a) any purchase or redemption of any shares of Netranscend Capital
Stock, except in connection with repurchases upon termination of employees
pursuant to pre-existing contractual obligations;
(b) any declaration or payment of any distribution with respect to any
shares of Netranscend Capital Stock;
(c) any amendment or restatement of the charter documents, bylaws or
other organizational documents of Netranscend;
(d) any execution of any agreement with any third party in respect of,
or license, sale, mortgage, rental, lease or other disposal of Netranscend's
intellectual property;
(e) any proposal or execution of an agreement with any person or
entity, other than IEC, providing for the possible merger (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) of
Netranscend with any person or entity or the purchase or sale of any material
portion of the capital stock or assets of Netranscend or of another entity by
Netranscend;
(f) any incurrence or guarantee of any indebtedness, or any other
liabilities outside of the ordinary course of business;
(g) any termination of employees or coercion of employees to resign;
(h) any commencement or settlement of any litigation;
(i) any sale, lease or other disposal of any of its properties or
assets, except in the ordinary course of business and consistent with past
practices;
(j) any incurrence of indebtedness for borrowed money or guarantee any
such indebtedness or issuance or sale of any debt securities or guarantee of any
debt securities of others;
(k) grant of any loans to others or purchase of debt securities of
others or amendment of the terms of any outstanding loan agreement;
<PAGE>
(l) grant of any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to standard
written agreements outstanding as of the date hereof;
(m) payment, discharge or satisfaction, in an amount in excess of
$10,000 (in any one case) or $25,000 (in the aggregate), of any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice;
(n) making or changing any material election in respect of taxes,
adoption or change of any accounting method in respect of taxes, execution of
any closing agreement, settlement of any claim or assessment in respect of
taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of taxes; or
(o) execution of any strategic alliance or joint marketing arrangement
or agreement.
2.10 Tax Matters. Netranscend has filed when due all federal, state, local
and foreign tax returns required to be filed by it. Each such tax return is
true and complete in all materials respects and Netranscend has paid all taxes
due under such returns. There is no action, suit, proceeding, investigation,
audit or claim now pending against or with respect Netranscend in respect of any
tax or assessment, nor is any additional tax or assessment asserted by any
governmental authority. All taxes, interest, penalties, assessments or
deficiencies for periods prior to the Closing Date have been paid in full except
for taxes not yet due. The reserves established on the books of Netranscend for
taxes not yet due are adequate to satisfy all liabilities for taxes not yet due.
2.11 Title of Properties; Absence of Liens and Encumbrances.
(a) Netranscend does not own any real property, nor has it ever owned
any real property. Section 2.11(a) of the Disclosure Schedule sets forth a list
---------------
of all real property currently leased by Netranscend, the name of the lessor,
the date of the lease and each amendment thereto and, with respect to any
current lease, the aggregate annual rental and/or other fees payable under any
such lease. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
(b) Netranscend has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, except as reflected in the Netranscend
Financials and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not detract from the value, or
interfere with the present use, of the property subject thereto or affected
thereby.
<PAGE>
(c) Section 2.11(c) of the Disclosure Schedule lists each item of
---------------
equipment with a purchase price of more than $10,000 (the "Equipment") owned or
leased by Netranscend and such Equipment is, (i) adequate in all material
respects for the conduct of the business of Netranscend as currently conducted
and (ii) in good operating condition, regularly and properly maintained, subject
to normal wear and tear.
(d) Netranscend has sole and exclusive ownership, free and clear of
any liens, of all customer files and other customer information relating to
customers of Netranscend's current and former customers (the "Customer
Information"). No person other than Netranscend possesses any claims or rights
with respect to use of the Customer Information.
2.12 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith anywhere in the world: (i)
all United States, international and foreign patents and applications therefor
and all reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor; (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all trade
names, logos, common law trademarks and service marks; trademark and service
mark registrations and applications therefor and all goodwill associated
therewith throughout the world; and all other rights corresponding thereto
throughout the world; (vi) all mask works, mask work registrations and
applications therefor; (vii) all databases and data collections and all rights
therein throughout the world; (viii) all computer software including all source
code, object code, firmware, development tools, files, records and data, all
media on which any of the foregoing is recorded; (ix) all Web addresses, sites
and domain names; (x) any similar, corresponding or equivalent rights to any of
the foregoing and (xi) all documentation related to any of the foregoing.
"Netranscend Intellectual Property" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, Netranscend.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Netranscend Intellectual Property that is
the subject of an application, certificate, filing, registration or other
document issued by, filed with, or recorded by, any state, government or other
public legal authority.
<PAGE>
(b) Section 2.12(b) of the Disclosure Schedule lists all Registered
---------------
Intellectual Property owned by, licensed to or filed in the name of, Netranscend
(the "Netranscend Registered Intellectual Property"), and lists any proceedings
or actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of Netranscend Registered Intellectual Property.
(c) Netranscend (i) owns and has good and exclusive title to each item
of Netranscend Intellectual Property, including all Netranscend Registered
Intellectual Property listed on Section 2.12(b) of the Disclosure Schedule, free
---------------
and clear of any Liens, (ii) is the exclusive owner of all trademarks and trade
names used in connection with the operation or conduct of the business of
Netranscend, including the sale of any products or the provision of any services
by Netranscend and (iii) owns exclusively, and has good title to, all
copyrighted works that are Netranscend products or other works of authorship
that Netranscend otherwise purports to own.
(d) To the extent that any Intellectual Property has been developed or
created by a any person other than Netranscend for which Netranscend has
directly or indirectly paid, Netranscend has a written agreement with such
person with respect thereto and Netranscend thereby has obtained ownership of,
and is the exclusive owner of, all such Intellectual Property by operation of
law or by valid assignment.
(e) Netranscend has not transferred ownership of, or granted any
license of or right to use or authorized the retention of any rights to use, any
Intellectual Property that is or was Netranscend Intellectual Property, to any
other person.
(f) Other than "shrink-wrap" and similar widely available commercial
end-user licenses, the contracts, licenses and agreements listed in Section
-------
2.12(f) of the Disclosure Schedule include all contracts, licenses and
- -------
agreements, to which Netranscend is a party with respect to any Intellectual
Property. No person other than Netranscend has ownership rights to improvements
made by Netranscend in Intellectual Property which has been licensed to
Netranscend.
(g) Section 2.12(g) of the Disclosure Schedule lists all contracts,
---------------
licenses and agreements between Netranscend and any other person wherein or
whereby Netranscend has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by Netranscend or such other person of
the Intellectual Property of any person other than Netranscend.
(h) The operation of the business of Netranscend as it currently is
conducted, including but not limited to Netranscend's design, development,
manufacture, import, use and sale of the products, technology or services
(including products, technologies or services currently under development) of
Netranscend, does not infringe or misappropriate the Intellectual Property of
any other person, and Netranscend has not received notice from any person
claiming that such operation or any act, product or service (including products,
technologies or services currently under
<PAGE>
development) of Netranscend infringes or misappropriates the Intellectual
Property of any other person.
(i) Netranscend owns or has the right to all Intellectual Property
necessary to the conduct of its business as it is currently conducted including,
without limitation, the design, development, manufacture, use and sale of all
products and technology currently manufactured or sold by Netranscend or under
development by Netranscend and the performance of all services provided or
contemplated to be provided by Netranscend.
(j) To the knowledge of Netranscend, each item of Netranscend
Registered Intellectual Property is valid and subsisting. All necessary
registration, maintenance and renewal fees in connection with Registered
Intellectual Property have been paid and all necessary documents and
certificates in connection with such Netranscend Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Registered Intellectual Property. Section
-------
2.12(j) of the Disclosure Schedule lists all actions that must be taken by
- -------
Netranscend within sixty (60) days of the Closing Date, including the payment of
any registration, maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any Netranscend Intellectual Property. In each case in
which Netranscend has been assigned or purchased any Intellectual Property
rights from any other person, Netranscend has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Intellectual
Property (including the right to seek past and future damages with respect to
such Intellectual Property) to Netranscend and, to the maximum extent provided
for by, and in accordance with, applicable laws and regulations, Netranscend has
recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office, or their respective equivalents in
any relevant foreign jurisdiction, as the case may be.
(k) There are no contracts, licenses or agreements between Netranscend
and any other person with respect to Netranscend Intellectual Property under
which there is any dispute known to Netranscend regarding the scope of such
agreement, or performance under such agreement including with respect to any
payments to be made or received by Netranscend thereunder.
(l) To the knowledge of Netranscend, no person is infringing or
misappropriating any Netranscend Intellectual Property.
(m) Netranscend has taken all steps reasonably required to protect
Netranscend's rights in confidential information and trade secrets of
Netranscend or provided by any third party to Netranscend. Without limiting the
foregoing, Netranscend has, and enforces, a policy requiring each employee,
consultant and contractor to execute proprietary information and confidentiality
and assignment agreements substantially in Netranscend's standard forms, and all
current and former employees, consultants and contractors of Netranscend have
executed such an agreement.
<PAGE>
(n) No Netranscend Intellectual Property or product, technology or
service of Netranscend is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by Netranscend or may affect the validity, use or
enforceability of such Netranscend Intellectual Property.
(o) To the knowledge of Netranscend, no (i) product, technology,
service or publication of Netranscend (ii) material published or distributed by
Netranscend or (iii) conduct or statement of Netranscend constitutes obscene
material, a defamatory statement or material, false advertising or otherwise
violates any law or regulation.
2.13 Agreements, Contracts and Commitments. Netranscend is not bound by
any contract, agreement, lease or commitment other than (i) contracts for the
purchase of supplies and services that were entered into in the ordinary course
of business and that do not involve more than $50,000 and do not extend for more
than one (1) year beyond the date hereof, (ii) sales contracts entered into in
the ordinary course of business, and (iii) contracts terminable at will by
Netranscend on no more than thirty (30) days' notice without cost or liability
to Netranscend and that do not involve any employment or consulting arrangement
and are not material to the conduct of Netranscend's business. For the purpose
of this paragraph, employment and consulting contracts, and license agreements
and any other agreement relating to Netranscend's acquisition or disposition of
patent, copyright, trade secret or other proprietary rights or technology (other
than standard end-user license agreements) shall not be considered to be
contracts entered into in the ordinary course of business.
2.14 Interested Party Transactions. No officer or director of Netranscend
(nor, to the knowledge of Netranscend, any shareholder of Netranscend or any
ancestor, sibling, descendant, spouse, parent, subsidiary or other affiliate of
any officer, director or shareholder, or any trust, partnership or corporation
in which any of such persons has or has had an interest), has or has had,
directly or indirectly, (i) any interest in any entity that furnished or sold,
or furnishes or sells, services, products or technology that Netranscend
furnishes or sells, or proposes to furnish or sell, or (ii) any interest in any
entity that purchases from or sells or furnishes to Netranscend any goods or
services or (iii) a beneficial interest in any Contract; provided, however, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation and no more than 5% of the outstanding equity of any
other entity shall not be deemed an "interest in any entity" for purposes of
this Section 2.14.
2.15 Governmental Authorization. Section 2.15 of the Disclosure Schedule
------------
accurately lists each consent, license, permit, grant or other authorization
issued to Netranscend by a Governmental Entity (i) pursuant to which Netranscend
currently operates or holds any interest in any of its properties or (ii) which
is required for the operation of its business or the holding of any such
interest (herein collectively called "Netranscend Authorizations"). Netranscend
Authorizations are in full force and effect and constitute all Netranscend
Authorizations required to permit Netranscend to operate or conduct its business
or hold any interest in its properties or assets.
<PAGE>
2.16 Litigation. There is no action, suit or proceeding of any nature
pending, or to Netranscend's knowledge threatened, against Netranscend, its
properties or any of its officers or directors, nor, to the knowledge of
Netranscend, is there any reasonable basis therefor. There is no investigation
pending or, to Netranscend's knowledge threatened, against Netranscend, its
properties or any of its officers or directors (nor, to the best knowledge of
Netranscend, is there any reasonable basis therefor) by or before any
Governmental Entity. No Governmental Entity has at any time challenged or
questioned the legal right of Netranscend to conduct its operations as presently
or previously conducted.
2.17 Minute Books. The minute books of Netranscend delivered or made
available to counsel for IEC are the only minutes of Netranscend and contain a
reasonably accurate summary of all meetings of the Board of Directors (or
committees thereof) of Netranscend and its shareholders or actions by written
consent since the incorporation of Netranscend.
2.18 Environmental Matters. Netranscend is not in material violation of
any applicable statute, law or regulation relating to the environment or
occupational safety and health, and no material expenditures will be required in
order to comply with any such existing statute, law or regulation.
2.19 Brokers' and Finders' Fees. Netranscend has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.20 Employee Benefit Plans and Compensation. Netranscend has no Employee
Benefit Plan, as defined in the Employee Retirement Income Security Act of 1974.
2.21 No Interference or Conflict. To the knowledge of Netranscend, no
shareholder, officer, employee or consultant of Netranscend is obligated under
any contract or agreement or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with such person's efforts
to promote the interests of Netranscend or that would interfere with
Netranscend's business. Neither the execution nor delivery of this Agreement,
nor the carrying on of Netranscend's business as presently conducted or proposed
to be conducted nor any activity of such officers, directors, employees or
consultants in connection with the carrying on of Netranscend's business as
presently conducted or proposed to be conducted, will, to Netranscend's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, directors, employees or consultants are currently
bound.
2.22 Compliance with Laws. Netranscend has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation.
2.23 Warranties; Indemnities. Netranscend has not given any warranties or
indemnities relating to products or technology sold or services rendered by
Netranscend.
<PAGE>
2.24 Complete Copies of Materials. Netranscend has delivered or made
available true and complete copies of each document (or summaries of same) that
has been requested by IEC or its counsel.
2.25 Representations Complete. None of the representations or warranties
made by Netranscend herein (as modified by the Disclosure Schedule), nor any
statement made in any schedule or certificate furnished by Netranscend pursuant
to this Agreement, contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE III
Representations and Warranties
Of The Principal Shareholder
The Principal Shareholder represents and warrants to IEC that on the date
hereof and as of the Effective Time:
3.1 No Registration. The Principal Shareholder understands that the
Consideration Shares have not been registered under the Securities Act of 1933,
as amended (the "Act") and are being offered and sold pursuant to an exemption
from registration contained in the Act based in part upon the representations of
the Principal Shareholder below or otherwise made hereunder.
3.2 Sophistication. The Principal Shareholder has sophisticated knowledge
of business affairs to decide whether or not to make the investment contemplated
herein.
3.3 Access to Information. The Principal Shareholder has had full
opportunity to ask questions and receive answers concerning the terms and
conditions of the offering of the Consideration Shares and has had full access
to IEC's officers and such other information concerning IEC as he has requested.
3.4 Preexisting Business Relationship. The Principal Shareholder has
either: (i) a preexisting personal or business relationship with IEC or any of
its officers or directors, or (ii) by reason of the Principal Shareholder's
business or financial experience (or the business or financial experience of the
Principal Shareholder's professional advisors who are unaffiliated with and not
compensated by IEC) has the capacity to protect his own interests in connection
with the Merger and the transactions contemplated hereby.
3.5 Investment. The Principal Shareholder is acquiring the Consideration
Shares for investment in his own account, and not as a nominee or agent, and not
with a view to or for sale in connection with the distribution thereof. The
Principal Shareholder understands that he must bear the economic risk of this
investment indefinitely unless the Consideration Shares are registered
<PAGE>
pursuant to the Act, or an exemption from such registration is available, and
that IEC has no present intention of registering the Consideration Shares. The
Principal Shareholder further understands that there is no assurance that any
exemption from the Act will be available or, if available, that such exemption
will allow the Principal Shareholder to dispose of or otherwise transfer any or
all of the Consideration Shares under the circumstances in the amounts or at the
times the Principal Shareholder might propose.
3.6 Tax Advisors. The Principal Shareholder has reviewed with his own tax
advisors the federal, state and local tax consequences of this investment, where
applicable, and the transactions contemplated by this Agreement. The Principal
Shareholder is relying solely on such advisors and not on any statements or
representations of IEC or any of its agents and understands that the Principal
Shareholder (and not IEC) shall be responsible for the Principal Shareholder's
own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
3.7 Counsel. The Principal Shareholder acknowledges that he has had the
opportunity to review this Agreement, the exhibits and the schedules attached
hereto and the transactions contemplated by this Agreement with his own legal
counsel. The Principal Shareholder is relying solely on such counsel and not on
any statements or representations of IEC or any of its agents for legal advice
with respect to this investment or the transactions contemplated by this
Agreement.
3.8 Resale Under Rule 144. The Principal Shareholder acknowledges that he
is aware of Rule 144 promulgated under the Act, which permits limited public
resales of securities acquired in a nonpublic offering, subject to the
satisfaction of certain conditions. The Principal Shareholder understands that
under Rule 144, except as otherwise provided by section (k) of that Rule, the
conditions include, among other things: the availability of certain current
public information about the issuer, the resale occurring not less than one year
after the party has purchased and paid for the securities to be sold, and
limitations on the amount of securities to be sold and the manner of sale. The
Principal Shareholder acknowledges and understands that IEC may not be
satisfying the current public information requirement of Rule 144 at the time it
wishes to sell the Consideration Shares and that, in such event, he may be
precluded from selling such stock under such Rule, even if the other
requirements of such Rule have been satisfied. The Principal Shareholder
acknowledges that, in the event all of the requirements of Rule 144 are not met,
registration under the Act, compliance with the SEC's Regulation A or an
exemption from registration will be required for any disposition of the
Consideration Shares. The Principal Shareholder understands that, although Rule
144 is not exclusive, the SEC has expressed its opinion that persons proposing
to sell restricted securities received in a private offering other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales and that such persons and the brokers who participate in the
transactions do so at their own risk.
3.9 Residency. The residency of the Principal Shareholder is the State of
California.
<PAGE>
ARTICLE IV
Representations and Warranties of IEC
IEC represents and warrants to Netranscend and the Principal Shareholder,
subject to such exceptions as are specifically disclosed in the disclosure
schedule (referencing the appropriate section and paragraph numbers) supplied by
IEC to Netranscend and the Principal Shareholder and attached hereto as Exhibit
-------
E (the "IEC Disclosure Schedule") and dated the date hereof, that on the date
- -
hereof and as of the Effective Time:
4.1 Organization of IEC. Each of IEC and Subsidiary (as defined in
Section 4.3 below) is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and each has the requisite
corporate power and authority to carry on its business as presently conducted
and as presently proposed to be conducted. IEC is duly qualified to transact
business and is in good standing in the State of California and in each
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification in which the failure to be so qualified would
have a Material Adverse Effect. IEC has delivered a true and correct copy of
its Articles of Incorporation and Bylaws, each as amended to date, to
Netranscend. Section 4.1 of the Disclosure Schedule lists the directors and
-----------
officers of IEC. The operations now being conducted by IEC have not been
conducted under any other name.
4.2 IEC Capital Structure. As of Closing Date, the authorized capital
stock of the Company consists of forty million (40,000,000) shares of Common
Stock and two million (2,000,000) shares of Preferred Stock, all of which have
been designated as Series A Preferred Stock. Immediately prior to the Closing
there will be issued and outstanding 11,877,219 shares of Common Stock, and
1,174,020 shares of Series A Preferred Stock. As of the Closing Date, there
will be no outstanding rights, options, warrants, conversion rights or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock, except that (a) an aggregate of 1,174,020 shares of Common Stock
will have been reserved for issuance upon the conversion of the Series A
Preferred Stock of the Company; (b) options to purchase 5,741,050 shares of
Common Stock are outstanding; (c) an aggregate of 942,704 shares of Common Stock
will have been reserved for issuance upon conversion of an existing promissory
note, (d) an aggregate of 200,000 shares of Series A Preferred Stock will have
been reserved for issuance upon exercise of an existing warrant to purchase
Series A Preferred Stock; and (e) an aggregate of 9,000,000 shares of Common
Stock will have been reserved for issuance upon exercise of options granted, or
to be granted, to employees, directors and/or consultants of the Company. The
outstanding shares of Common Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the
registration or qualification provisions of the Act and any relevant state
securities laws or pursuant to valid exemptions therefrom.
4.3 Subsidiaries. Except for MediaPlex, Inc., a California corporation,
("Subsidiary"), IEC does not have, and has never had, any subsidiaries or
affiliated companies and does not otherwise own, and has not otherwise owned,
any shares in the capital of or any interest in, or
<PAGE>
control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity. IEC is the record and
beneficial owner of all the outstanding capital stock of Subsidiary. There are
no options, warrants, calls, rights, commitments or agreements of any character,
written or oral, to which either IEC or Subsidiary is a party or by which it is
bound obligating Subsidiary to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of
capital stock of Subsidiary or obligating Subsidiary to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to Subsidiary.
4.4 Authority. IEC has all requisite power and authority to enter into
this Agreement and any Related Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and any Related Agreements to which it is a party and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of IEC, and no
further action is required on the part of IEC to authorize the Agreement, any
Related Agreements to which it is a party and the transactions contemplated
hereby and thereby, subject only to approval of the principal terms of the
Merger by IEC's shareholders. This Agreement and the Merger have been approved
by all members of the Board of Directors of IEC. This Agreement and any Related
Agreements to which IEC is a party have been duly executed and delivered by IEC
and, assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligation of IEC,
enforceable in accordance with their respective terms, subject to the laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and to rules of law governing specific performance, injunctive relief or other
equitable remedies.
4.5 No Conflict. The execution and delivery of this Agreement and any
Related Agreements to which it is a party do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default under (with or without notice or lapse of time,
or both), or give rise to a Conflict under (i) any provision of the Articles of
Incorporation and Bylaws of IEC, (ii) any Contract to which IEC or any of its
properties or assets are subject, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to IEC or its properties or
assets.
4.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
third party, including a party to any Contract with IEC (so as not to trigger
any Conflict), is required by or with respect to IEC and no consent, waiver or
approval of any party to any Contract is required for such Contract to remain in
effect without modification in connection with the execution and delivery of
this Agreement and any Related Agreements to which IEC is a party or the
consummation of the transactions contemplated hereby and thereby, except for (i)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities laws,
and (ii) the filing of the Certificate of Merger with the Secretary of State of
the State of California, and except that the consummation of the transactions
contemplated hereby requires the approval of the shareholders of IEC.
<PAGE>
4.7 No Financial Statements. IEC has not prepared financial statements in
accordance with general accounting principles or otherwise for any previous
periods. Except as set forth in Section 4.7 of the Disclosure Schedule, neither
-----------
IEC nor Subsidiary has any material liabilities, and neither has entered into
any material agreements, contracts or instruments other than those described or
contemplated hereby.
4.8 Tax Matters. Each of IEC and Subsidiary has filed when due all
federal, state, local and foreign tax returns required to be filed by it. Each
such tax return is true and complete in all materials respects and each of IEC
and Subsidiary has paid all taxes due under such returns. There is no action,
suit, proceeding, investigation, audit or claim now pending against or with
respect IEC or Subsidiary in respect of any tax or assessment, nor is any
additional tax or assessment asserted by any governmental authority. All taxes,
interest, penalties, assessments or deficiencies for periods prior to the
Closing Date have been paid in full except for taxes not yet due. The reserves
established on the books of IEC for taxes not yet due are adequate to satisfy
all liabilities for taxes not yet due.
4.9 Title to Property; Absence of Liens and Encumbrances. Except (a) for
liens for current taxes not delinquent, (b) for liens imposed by law and
incurred in the ordinary course of business for obligations not past due to
carriers, warehousemen, laborers, materialmen and the like, (c) for liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, (d) for minor defects in title, none of which, individually or in
the aggregate, materially interferes with the use of such property, each of IEC
and Subsidiary owns its property and assets free and clear of all mortgages,
liens, claims and encumbrances. With respect to the property and assets each
leases, IEC and Subsidiary are in compliance with such leases and, to the best
of IEC's knowledge, hold a valid leasehold interest free of any liens, claims,
or encumbrances, subject to clauses (a)-(d) above.
4.10 Intellectual Property. As of the Closing Date, to IEC's knowledge
(but without having conducted any special investigation or patent search), each
of IEC and Subsidiary will have sufficient title and ownership of all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes necessary for its respective business as now
conducted without any conflict with or infringement of the rights of others.
Neither IEC nor Subsidiary has received any communications alleging that IEC or
Subsidiary has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
Neither IEC nor Subsidiary is aware that any of its employees or consultants is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court of administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of IEC or Subsidiary or that would
conflict with IEC's or Subsidiary's business as presently or as proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of IEC's or Subsidiary's business by the employees of IEC or
Subsidiary, nor the conduct of IEC's or Subsidiary's business as proposed, will,
to IEC's knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute
<PAGE>
a default under, any contract, covenant or instrument under which any of such
employees or consultants is now obligated.
4.11 Agreements, Contracts and Commitments. Neither IEC nor Subsidiary
is bound by any contract, agreement, lease or commitment other than (i)
contracts for the purchase of supplies and services that were entered into in
the ordinary course of business and that do not involve more than $50,000 and do
not extend for more than one (1) year beyond the date hereof, (ii) sales
contracts entered into in the ordinary course of business, and (iii) contracts
terminable at will by IEC or Subsidiary on no more than thirty (30) days' notice
without cost or liability to IEC or Subsidiary and that do not involve any
employment or consulting arrangement and are not material to the conduct of
IEC's or Subsidiary's business. For the purpose of this paragraph, employment
and consulting contracts, and license agreements and any other agreement
relating to IEC's or Subsidiary's acquisition or disposition of patent,
copyright, trade secret or other proprietary rights or technology (other than
standard end-user license agreements) shall not be considered to be contracts
entered into in the ordinary course of business.
4.12 Interested Party Transactions. No officer or director of IEC or
Subsidiary (nor, to the knowledge of IEC, any shareholder of IEC or Subsidiary
or any ancestor, sibling, descendant, spouse, parent, subsidiary or other
affiliate of any officer, director or shareholder, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or has
had, directly or indirectly, (i) any interest in any entity that furnished or
sold, or furnishes or sells, services, products or technology that IEC furnishes
or sells, or proposes to furnish or sell, or (ii) any interest in any entity
that purchases from or sells or furnishes to IEC any goods or services or (iii)
a beneficial interest in any Contract; provided, however, that ownership of no
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation and no more than 5% of the outstanding equity of any other entity
shall not be deemed an "interest in any entity" for purposes of this Section
4.12.
4.13 Governmental Authorization. Each consent, license, permit, grant or
other authorization issued to IEC or Subsidiary by a Governmental Entity (i)
pursuant to which IEC or Subsidiary currently operates or holds any interest in
any of its properties or (ii) which is required for the operation of its
business or the holding of any such interest (herein collectively called "IEC
Authorizations") is in full force and effect, and collectively the IEC
Authorizations constitute all IEC Authorizations required to permit IEC to
operate or conduct its business or hold any interest in its properties or
assets.
4.14 Litigation. There is no action, suit or proceeding of any nature
pending, or to IEC's knowledge threatened, against IEC or Subsidiary, its
properties or any of its officers or directors, nor, to the knowledge of IEC, is
there any reasonable basis therefor. There is no investigation pending or, to
IEC's knowledge threatened, against IEC or Subsidiary, its properties or any of
its officers or directors (nor, to the best knowledge of IEC, is there any
reasonable basis therefor) by or before any Governmental Entity. No
Governmental Entity has at any time challenged or questioned the legal right of
IEC to conduct its operations as presently or previously conducted.
<PAGE>
4.15 Minute Books. The minute books of IEC delivered or made available to
counsel for Netranscend are the only minutes of IEC and contain a reasonably
accurate summary of all meetings of the Board of Directors (or committees
thereof) of IEC and its shareholders or actions by written consent since the
incorporation of IEC.
4.16 Environmental Matters. To the best knowledge of IEC, neither IEC nor
Subsidiary is in material violation of any applicable statute, law or regulation
relating to the environment or occupational safety and health, and to the best
knowledge of IEC, no material expenditures will be required in order to comply
with any such existing statute, law or regulation.
4.17 Brokers' and Finders' Fees. IEC has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.18 Employee Benefit Plans and Compensation. Except for IEC 1999 Stock
Option Plan and the 1997 Stock Option Plan, neither IEC nor Subsidiary has any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
4.19 No Interference or Conflict. To the knowledge of IEC, no
shareholder, officer, employee or consultant of IEC is obligated under any
contract or agreement or subject to any judgment, decree or order of any court
or administrative agency, that would interfere with such person's efforts to
promote the interests of IEC or Subsidiary or that would interfere with IEC's or
Subsidiary's business. Neither the execution nor delivery of this Agreement, nor
the carrying on of IEC's or Subsidiary's business as presently conducted or
proposed to be conducted nor any activity of such officers, directors, employees
or consultants in connection with the carrying on of IEC's or Subsidiary's
business as presently conducted or proposed to be conducted, will, to IEC's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, directors, employees or consultants are currently
bound.
4.20 Compliance with Laws. Each of IEC and Subsidiary has complied with,
is not in violation of, and has not received any notices of any such violation
with respect to, any applicable federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, assets or properties the non-compliance with which
would have a material adverse effect on IEC's or Subsidiary's business and
assets.
4.21 Warranties; Indemnities. Other than in the ordinary course of
business, neither IEC nor Subsidiary has given any warranties and indemnities
relating to products or technologies sold or services rendered by them.
4.22 Complete Copies of Materials. IEC has delivered or made available
true and complete copies of each document (or summaries of same) that has been
requested by Netranscend or its counsel.
<PAGE>
4.23 Representations Complete. None of the representations or warranties
made by IEC herein (as modified by the Disclosure Schedule), nor any statement
made in any schedule or certificate furnished by IEC pursuant to this Agreement,
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE V
Conduct Prior to the Effective Time
5.1 Conduct of Business of Netranscend. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Netranscend and the Principal Shareholder agree
(except to the extent that IEC shall otherwise consent in writing), to carry on
Netranscend's business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay it debts and Taxes
when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practice and policies to preserve intact Netranscend's present business
organization, keep available the services of Netranscend's present officers and
employees and preserve Netranscend's relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired Netranscend's goodwill and ongoing
business at the Effective Time. Netranscend shall promptly notify IEC of any
event or occurrence or emergency not in the ordinary course of business of
Netranscend, and any material event involving Netranscend. Except as expressly
contemplated by this Agreement, Netranscend shall not, without the prior written
consent of IEC (which shall not be unreasonably withheld):
(a) Sell, transfer, convey or enter into any license agreement with
respect to Netranscend Intellectual Property or acquire or enter into any
license agreement with respect to the Intellectual Property of any person;
(b) Transfer or license to any person any rights to Netranscend
Intellectual Property;
(c) Enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products or technology of Netranscend;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts set
forth or described in the Disclosure Schedule;
<PAGE>
(e) Commence or settle any litigation;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of Netranscend, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock of Netranscend (or options, warrants or other rights exercisable
therefor), except that Netranscend may repurchase shares of Netranscend Capital
Stock at their original purchase price (provided that Netranscend notifies IEC
of such repurchase);
(g) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities;
(h) Cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to its business;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practices;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(l) Grant any loans to others or purchase debt securities of others
or amend the terms of any outstanding loan agreement;
(m) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to standard
written agreements outstanding on the date hereof and disclosed on the
Disclosure Schedule;
(n) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice options
granted under any option plans or authorize cash payments in exchange for any
options granted under any of such plans;
<PAGE>
(o) Adopt or amend any employee benefit plan, or enter into any
employment agreement, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees;
(p) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable;
(q) Take any action which could jeopardize the tax-free
reorganization hereunder (it being understood that each party will evaluate the
tax consequences of the Merger independently);
(r) Pay, discharge or satisfy, in an amount in excess of $5,000 (in
any one case) or $15,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Current Balance Sheet;
(s) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(t) Enter into any strategic alliance or joint marketing arrangement
or agreement;
(u) Hire or terminate any employee, or encourage any employee to
resign;
(v) Enter into any commitment or transaction not in the ordinary
course of business or any commitment or transaction of the type described in
Section 2.9 hereof; or
(w) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (v) above, or any other action that
would prevent Netranscend from performing or cause Netranscend not to perform
its covenants hereunder.
5.2 No Solicitation. Until 90 days after the date of this Agreement,
Netranscend and the Principal Shareholder will not (nor will Netranscend permit
any of Netranscend's officers, directors, agents, representatives or affiliates
to) directly or indirectly, take any of the following actions with any party
other than IEC and its designees: (a) solicit, conduct discussions with or
engage in negotiations with any person, relating to the possible acquisition of
Netranscend (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any portion of its or their capital stock or assets, or
effect any such transaction, (b) provide information with respect to Netranscend
to any person, other than IEC, relating to the possible acquisition of
Netranscend (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any portion of its or their capital stock or assets, (c)
enter into an agreement with any person, other than IEC, providing for the
acquisition of Netranscend (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any portion of its or their capital stock or
assets or (d) make or authorize any statement, recommendation or solicitation in
support of any possible acquisition of
<PAGE>
Netranscend or any of it subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
or their capital stock or assets by any person, other than by IEC. In addition
to the foregoing, if Netranscend receives prior to the Effective Time or the
termination of this Agreement any offer or proposal relating to any of the
above, Netranscend shall immediately notify IEC thereof, including information
as to the identity of the offeror or the party making any such offer or proposal
and the specific terms of such offer or proposal, as the case may be, and such
other information related thereto as IEC may reasonably request.
ARTICLE VI
Additional Agreements
6.1 Shareholder Approval. As promptly as practicable, Netranscend shall
submit this Agreement and the transactions contemplated hereby, including the
Merger, to the Principal Shareholder for approval and adoption as provided by
California Law and Netranscend's Articles of Incorporation and Bylaws.
6.2 Restrictions on Transfer
(a) Each certificate representing Consideration Shares, and any
shares issued or issuable in respect of any such shares upon any stock split,
stock dividend, recapitalization, or similar event, shall be stamped or
otherwise imprinted with legends in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. THE TRANSFER RESTRICTIONS APPLICABLE
TO THESE SHARES ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ALSO BE SUBJECT TO A
STANDSTILL AGREEMENT IN CONNECTION WITH ANY INITIAL PUBLIC STOCK
OFFERING OF THE ISSUER. COPIES OF SUCH AGREEMENT ARE ON FILE AT THE
PRINCIPAL OFFICE OF THE ISSUER AND WILL BE FURNISHED UPON REQUEST TO
THE REGISTERED HOLDER HEREOF.
(b) The certificates evidencing the Consideration Shares shall also
bear any legend required by the Commissioner of Corporations of the State of
California or such as are required pursuant to any state, local or foreign law
governing such securities.
(c) The Consideration Shares will not be registered under the Act.
<PAGE>
(d) The Principal Shareholder shall, if requested by IEC and an
underwriter of Common Stock (or other securities) of IEC in connection with
IEC's initial public stock offering, enter into an agreement not to sell or
otherwise transfer or dispose of any shares of capital stock (or other
securities) of IEC held by the Principal Shareholder during a period of time
determined by IEC and its underwriters (not to exceed 180 days) following the
effective date of the registration statement of IEC filed pursuant to the Act
relating to such public offering. Such agreement shall be in writing in a form
reasonably satisfactory to IEC and such underwriter. IEC may impose stop-
transfer instructions with respect to the Common Stock (or securities) subject
to the foregoing restriction until the end of said period.
6.3 Access to Information.
(a) Access by IEC. Netranscend shall afford IEC and its accountants,
counsel and other representatives reasonable access during normal business hours
during the period prior to the Effective Time to (a) all of Netranscend's
properties, books, contracts, commitments and records, (b) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of Netranscend as IEC may reasonably request and (c)
all key employees of Netranscend, as determined by IEC. Netranscend agrees to
provide to IEC and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request. Netranscend shall provide
IEC with copies of such information about Netranscend as IEC may reasonably
request and shall provide IEC with reasonable access to its executive officers
in this regard.
(b) Access by Netranscend. IEC shall afford Netranscend and its
accountants, counsel and other representatives reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of IEC's
properties, books, contracts, commitments and records, (b) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of IEC as Netranscend may reasonably request and (c)
all key employees of IEC, as determined by Netranscend. IEC agrees to provide
to Netranscend and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request. IEC shall provide
Netranscend with copies of such information about IEC as Netranscend may
reasonably request and shall provide Netranscend with reasonable access to its
executive officers in this regard.
(c) No Modification. No information or knowledge obtained in any
investigation pursuant to this Section 6.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
6.4 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 6.3, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, shall be treated by the party receiving it as
confidential; provided, however, that the foregoing shall not apply to
information or knowledge which (a) a party can demonstrate was already lawfully
in its possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any violation
of law, (c) became known to the public through no fault of
<PAGE>
such party, (d) is later lawfully acquired by such party from other sources, (e)
is required to be disclosed by order of court or government agency without
subpoena powers or (f) which is disclosed in the course of any litigation
between any of the parties hereto.
6.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses. Notwithstanding the
foregoing, if the Merger is consummated, IEC shall pay up to $25,000 of
Netranscend's reasonable, customary and documented Third Party Expenses at the
Closing, and if Netranscend terminates this Agreement pursuant to Section
9.1(e), IEC shall pay up to $10,000 of Netranscend's reasonable, customary and
documented Third Party Expenses within ninety (90) days of written demand
therefor.
6.6 Public Disclosure. Unless otherwise required by law, and as
necessary in connection with any IEC financing prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto unless approved by IEC and
Netranscend prior to release; provided, however, that such approval shall not be
unreasonably withheld.
6.7 Consents. Netranscend and the Principal Shareholder shall use best
efforts to obtain the consents, waivers and approvals under any of the Contracts
as may be required in connection with the Merger (all of such consents, waivers
and approvals are set forth in Disclosure Letter) so as to preserve all rights
of, and benefits to, Netranscend thereunder.
6.8 FIRPTA Compliance. On the Closing Date, Netranscend shall deliver to
IEC a properly executed statement in a form reasonably acceptable to IEC for
purposes of satisfying IEC's obligations under Treasury Regulation Section
1.1445-2(c)(3).
6.9 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings (including any filings or
registrations necessary to perfect IEC's ownership of any of Netranscend
Registered Intellectual Property after the Merger) and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement;
provided, however, that IEC shall not be required to agree to any divestiture by
IEC or Netranscend or any of IEC's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of IEC or its subsidiaries
or affiliates or of Netranscend, its affiliates, or the imposition of any
material limitation on the ability of any of them to conduct their businesses or
to own or exercise control of such assets, properties and stock.
<PAGE>
6.10 Notification of Certain Matters. Netranscend and the Principal
Shareholder shall give prompt notice to IEC, and IEC shall give prompt notice to
Netranscend, of (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of Netranscend and IEC, respectively, contained in this Agreement to be
untrue or inaccurate at or prior to the Effective Time and (ii) any failure of
Netranscend or IEC, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 6.10
shall not limit or otherwise affect any remedies available to the party
receiving such notice. No disclosure by Netranscend pursuant to this Section
6.10 shall be deemed to amend or supplement the Disclosure Schedule or prevent
or cure any misrepresentation, breach of warranty or breach of covenant.
6.11 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
6.12 Tax Free Reorganization. The parties intend to adopt this Agreement
and the Merger as a tax-free plan of reorganization under Section 368(a) of the
Code. The parties shall not take a position on any tax return inconsistent with
this Section 6.12. Neither IEC nor Netranscend shall take any action that could
reasonably be expected to cause the Merger not to be treated as a reorganization
within the meaning of Section 368 of the Code.
6.13 Employee Offers. At or prior to the Closing, IEC shall deliver
offers (the "Key Employee Offers") to the Principal Shareholder, Shuangli Cao
and Hung-Liang "Andy" Yang (collectively, the "Key Employees") for employment
and/or consulting arrangements with IEC, substantially as set forth in Exhibits
--------
F, G and H attached hereto.
- - - -
ARTICLE VII
Conditions to the Merger
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby, including without limitation the Merger hereof, shall have
been duly approved, under applicable law by holders of 100% of the shares
Netranscend Capital Stock. This Agreement and the transactions contemplated
hereby, including without limitation the Merger shall have been approved by
requisite vote under applicable law by shareholders of IEC.
<PAGE>
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(c) Claims. There shall not have occurred any suit, claim or
proceeding of any nature pending, or overtly threatened, against IEC or
Netranscend, their respective properties or any of their officers or directors,
arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement.
(d) Permits. All approvals from government authorities, including
any requisite Blue Sky approvals, which are appropriate or necessary for the
consummation of the Merger, shall have been obtained.
7.2 Additional Conditions to Obligations of Netranscend and the Principal
Shareholder. The obligations of Netranscend and the Principal Shareholder to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by Netranscend:
(a) Consideration Shares. The Principal Shareholder shall have
received from IEC a certificate representing the Consideration Shares, less the
Escrow Shares, and the Escrow Agent shall have received a certificate
representing the Escrow Shares, issued in the name of the Principal Shareholder,
pursuant to Section 1.6 and Section 1.7.
(b) Employment Offers. The Key Employees shall have received offers
of employment or consulting arrangements from IEC, substantially in the form of
Exhibits F, G and H hereto, pursuant to Section 6.14.
- ---------- - -
(c) Stock Option Agreements. The holders of Netranscend Options
shall have received stock option agreements representing options to purchase
shares of IEC Common Stock, pursuant to IEC's 1999 Stock Option Plan, pursuant
to Section 1.6.
(d) Representations, Warranties and Covenants. The representations
and warranties of IEC in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as though such representations
and warranties were made at and as of such time and IEC shall have performed and
complied in all material respects with all covenants and obligations of this
Agreement required to be performed and complied with by it as of the Effective
Time.
(e) No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect with respect to IEC since December 31, 1998.
<PAGE>
(f) Legal Opinion. Netranscend shall received a legal opinion from
Wilson Sonsini Goodrich & Rosati, Professional Corporation, legal counsel to
IEC, in substantially the form of Exhibit B hereto.
---------
(g) Certificate of IEC. Netranscend shall have been provided with a
certificate executed on behalf of IEC by the Chief Executive Officer or an
Executive Vice President of IEC to the effect that, as of the Effective Time:
(i) all representations and warranties made by IEC in this
Agreement are true and correct in all material respects as of the Effective Time
as though made on and as of such time;
(ii) all covenants and obligations of this Agreement to be
performed by IEC on or before such date have been so performed in all material
respects.
(iii) the condition set forth in Section 7.2 (e) has been
satisfied.
(h) Good Standing Certificate. Netranscend shall have been provided
with a certificate dated as of the most recent practicable date prior to the
Closing Date issued by the Secretary of State of the State of California to the
effect that IEC is qualified and in good standing.
7.3 Additional Conditions to the Obligations of IEC. The obligations of
IEC to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by IEC:
(a) Netranscend Share Certificates. IEC shall have received
certificates representing all of the issued and outstanding shares of
Netranscend Capital Stock, endorsed in blank or accompanied by stock powers or
other instruments of transfer duly executed, pursuant to Section 1.6.
(b) Netranscend Options. IEC shall have received stock option
agreements representing all of the issued and outstanding Netranscend Options,
duly canceled by Netranscend and the holder of such option.
(c) Acceptance of Key Employee Offers. The Key Employees shall have
accepted employment with IEC and executed and delivered to IEC their respective
employment offer or employment agreement, substantially in the form set forth in
Exhibits F, G and H hereto.
- ---------- - -
(d) Representations, Warranties and Covenants. The representations
and warranties of Netranscend and the Principal Shareholder in this Agreement
shall be true and correct in all material respects on and as of the Effective
Time as though such representations and warranties were made on and as of the
Effective Time and Netranscend and the Principal Shareholder shall have
performed and complied in all material respects with all covenants and
obligations of this Agreement
<PAGE>
required to be performed and complied with by them as of the Effective Time. The
representations and warranties of Netranscend and the Principal Shareholder
relating to litigation and third party claims contained in Article II hereof
shall not be materially incorrect at the Effective Time if a litigation or third
party claim arises after the date of this Agreement and a person knowledgeable
both as to the law and the facts surrounding such litigation or third party
claim reasonably determines that such litigation or third party claim arising
after the date of this Agreement is not bona fide or could not be considered
material to Netranscend.
(e) Third Party Consents. Any and all consents, waivers, and
approvals listed in the Disclosure Letter shall have been obtained.
(f) Legal Opinion. IEC shall have received a legal opinion from
Heller Ehrman White & McAuliffe, legal counsel to Netranscend, in substantially
the form of Exhibit C hereto.
---------
(g) No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect with respect to Netranscend since December 31, 1998.
(h) Shareholder Approval. Netranscend Shareholders holding 100% of
Netranscend Capital Stock shall have approved this Agreement and the Merger.
(i) Certificate of Netranscend. IEC shall have been provided with a
certificate executed on behalf of Netranscend by its Chief Executive Officer to
the effect that, as of the Effective Time:
(i) all representations and warranties made by Netranscend
in this Agreement are true and correct in all material respects as of the
Effective Time as though made on and as of such time;
(ii) all covenants and obligations of this Agreement to be
performed by Netranscend on or before such date have been so performed in all
material respects; and
(iii) the provisions set forth in Section 7.3 (e), (f), (h),
(i) and (j) have been satisfied.
(j) Certificate of the Principal Shareholder. IEC shall have been
provided with a certificate created by the Principal Shareholder to the effect
that, as of the Effective Time, all representations and warranties made by the
Principal Shareholder in this Agreement are true and correct in all material
respects as of the Effective Time as though made on and as of such time.
(k) Good Standing Certificate. IEC shall have been provided with a
certificate dated as of the most recent practicable date prior to the Closing
Date issued by the Secretary of State of the State of California to the effect
that Netranscend is qualified and in good standing.
<PAGE>
(l) Certificate of Satisfaction. IEC shall have been provided with
certificate of satisfaction prior to the Closing Date issued by the Franchise
Tax Board of the State of California to the effect that all corporate taxes
imposed by law have been paid or secured.
(m) Escrow Agreement. The Principal Shareholder shall have executed
and delivered to IEC the Escrow Agreement.
(n) Agreement of Merger. Netranscend shall have executed and
delivered to IEC the Merger Agreement.
ARTICLE VIII
Survival of Representations and Warranties; Escrow
8.1 Survival of Representations and Warranties. All of Netranscend's and
the Principal Shareholder's representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the Merger
and continue for two (2) years after the Closing Date, except for the
representations and warranties set forth in Section 2.10 hereof, which shall
survive until expiration of the statute of limitations with respect thereto.
8.2 Indemnification.
(a) Indemnification of Losses. Netranscend and the Principal
Shareholder agree to indemnify and hold IEC and its officers, directors and
affiliates (the "Indemnified Parties") harmless against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation and defense (hereinafter
individually a "Loss" and collectively "Losses") incurred by IEC, its officers,
directors, or affiliates (including the Surviving Corporation) directly or
indirectly as a result of (i) any inaccuracy or breach of a representation or
warranty of Netranscend or the Principal Shareholder contained in this
Agreement, (ii) any failure by Netranscend or the Principal Shareholder to
perform or comply with any covenant contained in this Agreement or (iii) IEC's
or the Surviving Corporation's obligations pursuant to this Agreement.
(b) Claims Against the Escrow Fund. Claims against the Escrow Fund
(as defined below) shall be the primary but not the sole remedy against the
Principal Shareholder for indemnity obligations under this Agreement. Except in
the case of fraud or willful breaches ("Fraudulent Breaches"), claims for
indemnity shall be made on or before the 30th day following the two year
anniversary of the Closing Date. Amounts of IEC Common Stock received out of
escrow will be valued as of the time that the claim is made, with such fair
market value being determined in good faith by the Board of Directors of IEC.
Except in the case of Fraudulent Breaches, claims for indemnity shall be limited
to $150,000 in the aggregate.
<PAGE>
8.3 Escrow Arrangements.
As security for the indemnity provided for in Section 8.2 hereof and by
virtue of this Agreement and the Merger Agreement, the Principal Shareholder
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by IEC after the
Effective Time with respect to the Escrow Amount) without any act of Netranscend
or the Principal Shareholder. As soon as practicable after the Effective Time,
the Escrow Amount, without any act of the Principal Shareholder, will be
deposited with the Secretary of IEC, as escrow agent (the "Escrow Agent"), such
deposit to constitute an escrow fund (the "Escrow Fund") to be governed by the
terms of the Escrow Agreement. Nothing herein shall limit the liability of IEC
or Netranscend for any breach of any representation, warranty, or covenant
contained in this Agreement if the Merger does not close. If the Merger does
not close, the Principal Shareholder shall not have any liability under this
Agreement except for breaches of covenants of such Principal Shareholder
contained in this Agreement and in any Related Agreement to which the Principal
Shareholder is a party.
8.4 Escrow Agreement. The terms and conditions of the Escrow Fund not
set forth in this Agreement shall be governed by the Escrow Agreement.
ARTICLE IX
Termination, Amendment and Waiver
9.1 Termination. Except as provided in, and subject to, Section 9.2
below, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual consent of Netranscend and IEC;
(b) by IEC or Netranscend if: (i) the Effective Time has not occurred
by May 31, 1999; provided, however, that the right to terminate this Agreement
under this Section 9.1(b)(i) shall not be available to any party whose action or
failure to act has been a principal cause of or resulted in the failure of the
Merger to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement; (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Entity that would make consummation of the Merger
illegal;
(c) by IEC if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Entity, which would: (i) prohibit IEC's ownership or
operation of any portion of the business of Netranscend or (ii) compel IEC to
dispose of or hold separate all or a portion of the business or assets of
Netranscend or IEC as a result of the Merger;
<PAGE>
(d) by IEC if it is not in material breach of its obligations under
this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Netranscend and such breach has not been cured within ten (10) calendar days
after written notice to Netranscend; provided, however, that, no cure period
shall be required for a breach which by its nature cannot be cured;
(e) by Netranscend if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of IEC
and such breach has not been cured within ten (10) calendar days after written
notice to IEC; provided, however, that, no cure period shall be required for a
breach which by its nature cannot be cured;
(f) by IEC if an event having a Material Adverse Effect on
Netranscend shall have occurred after the date of this Agreement.
(g) by Netranscend if an event having a Material Adverse Effect on
IEC shall have occurred after the date of this Agreement.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of IEC, Netranscend, or their
respective officers, directors or shareholders, provided, however, that each
party shall remain liable for any breaches of this Agreement prior to its
termination; and provided, further, that the provisions of Sections 6.4, 6.5.
6.6, Article VIII and Article IX of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.
9.3 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, IEC and
Netranscend may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
<PAGE>
ARTICLE X
General Provisions
10.1 Notices. Every notice, consent and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice), provided, however, that notices sent by mail will not be deemed
guaranteed received:
(a) if to IEC or the Escrow Agent, to:
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: Gregory R. Raifman
Telephone No.: (415) 808-1900
Facsimile No.: (415) 808-1901
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Aaron J. Alter, Esq.
Telephone No.: (650) 490-9300
Facsimile No.: (650) 493-6811
(b) if to Netranscend or the Principal Shareholder, to:
Netranscend Software Inc.
655 Bonanza Court
Sunnyvale, CA 94087
Telephone No.: (408) 517-2930
Facsimile No.: _________________
Attention: Ruiqing "Barclay" Jiang
<PAGE>
with a copy to:
Heller Ehrman White & McAuliffe
2500 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Attention: Peter N. Townshend, Esq.
Telephone No.: (650) 234-4200
Facsimile No.: (650) 234-4299
10.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement and the Exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein: (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other person any
rights or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise except as otherwise specifically provided, except that IEC may
assign its rights and delegate its obligations hereunder to its affiliates.
10.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
<PAGE>
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any federal or state court within the Northern District, State of
California, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of California for
such persons and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction, venue and such process.
10.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
<PAGE>
IN WITNESS WHEREOF, IEC, Netranscend and the Principal Shareholder have
caused this Agreement to be signed by their duly authorized respective officers,
all as of the date first written above.
INTERNET EXTRA CORPORATION
a California corporation
By:______________________________________
Gregory R. Raifman
Chairman and Chief Executive Officer
NETRANSCEND SOFTWARE, INC.
a California corporation
By:______________________________________
Ruiqing "Barclay" Jiang
PRINCIPAL SHAREHOLDER
Ruiqing "Barclay" Jiang
an individual
_________________________________________
<PAGE>
INDEX OF EXHIBITS
Exhibit Description
- ------- -----------
Exhibit A Form of California Agreement of Merger
Exhibit B Form of Legal Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation
Exhibit C Form of Legal Opinion of Heller, Ehrman, White & McAuliffe
Exhibit D Disclosure Schedule of Netranscend
Exhibit E Disclosure Schedule of IEC
Exhibit F Form of Employment Agreement - Ruiqing "Barclay" Liang
Exhibit G Form of Consulting Agreement - Shuangli Cao
Exhibit H Form of Employment Offer - Hung-Liang "Andy" Yang
Exhibit I Form of Escrow Agreement
<PAGE>
EXHIBIT A
---------
Form of Agreement of Merger
<PAGE>
AGREEMENT OF MERGER
BY AND AMONG
INTERNET EXTRA CORPORATION
AND
NETRANSCEND SOFTWARE, INC.
This Agreement of Merger (the "Agreement") is made and entered into as of
February ___, 1999, by and between Internet Extra Corporation, a California
corporation ("IEC"), and Netranscend Software, Inc., a California corporation
("Netranscend" and together with IEC, the "Constituent Corporations").
RECITALS
WHEREAS, IEC, Netranscend and Ruiqing "Barclay" Jiang, the sole shareholder
of Netranscend (the "Principal Shareholder"), have entered into that certain
Agreement and Plan of Reorganization of even date herewith (the "Reorganization
Agreement"), providing, among other things, for the execution and filing of this
Agreement of Merger and the merger of Netranscend with and into IEC upon the
terms set forth in the Reorganization Agreement and this Agreement (the
"Merger");
WHEREAS, the respective Boards of Directors of each of the Constituent
Corporations deem it advisable and in the best interests of each of such
corporations and their respective shareholders that Netranscend be merged with
and into IEC and have approved this Agreement and the Merger;
WHEREAS, the Reorganization Agreement, this Agreement and the Merger have
been approved by the shareholders of IEC and Netranscend;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, each of the Constituent Corporations hereby agrees that
Netranscend shall be merged with and into IEC in accordance with the
Reorganization Agreement and the provisions of the laws of the State of
California, upon the terms and subject to the conditions set forth as follows:
ARTICLE I
THE CONSTITUENT CORPORATIONS
1.1 IEC. IEC is a corporation duly organized and existing under the laws
---
of the State of California and, as of the date of this Agreement, has an
authorized capital of forty-two million
<PAGE>
(42,000,000) shares, forty million (40,000,000) of which are designated "Common
Stock," no par value, 12,860,539 of which are issued and outstanding, and two
million (2,000,000) of which are designated "Preferred Stock," no par value, all
of which are designated Series A Preferred Stock, 1,206,000 of which are issued
and outstanding as of the date hereof. IEC was incorporated under the laws of
the State of California on September 9, 1996.
1.2 Netranscend. Netranscend is a corporation duly organized and existing
-----------
under the laws of the State of California and has an authorized capital of ten
million (10,000,000) shares, all of which are designated "Common Stock," no par
value, three million (3,000,000) of which are issued and outstanding, all of
which are held by the Principal Shareholder, and none of which are designated
"Preferred Stock." Netranscend was incorporated under the laws of the State of
California on November 25, 1996.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the General Corporation Law of the State of California
("California Law"), Netranscend shall be merged with and into IEC, the separate
corporate existence of Netranscend shall cease and IEC shall continue as the
surviving corporation. The surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
2.2 Filing and Effectiveness. This Agreement, together with the officers'
------------------------
certificates of each of the Constituent Corporations required by California Law
(the "Officers' Certificates"), shall be filed with the Secretary of State of
the State of California at the time specified in the Reorganization Agreement.
The Merger shall become effective upon the filing of this Agreement and the
Officers' Certificates with the Secretary of State of the State of California
(the "Effective Time").
2.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in the applicable provisions of California Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of IEC and
Netranscend shall vest in the Surviving Corporation, and all debts, liabilities
and duties of IEC and Netranscend shall become the debts, liabilities and duties
of the Surviving Corporation.
2.4 Articles of Incorporation and Bylaws. At the Effective Time, the
------------------------------------
Articles of Incorporation and Bylaws of IEC in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws, respectively,
of the Surviving Corporation.
2.5 Directors and Officers. The directors of IEC immediately prior to the
----------------------
Effective Time shall be the directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation. The officers of IEC
<PAGE>
immediately prior to the Effective Time shall be the officers of Surviving
Corporation, each to hold office in accordance with the Bylaws of the Surviving
Corporation.
2.6 Effect of Merger on the Capital Stock of Netranscend.
----------------------------------------------------
(a) Certain Definitions. For all purposes of this Agreement, the
-------------------
following terms shall have the following meanings:
"Cash Consideration" shall mean cash in the amount of $430,000,
payable to the Principal Shareholder in four installments as specified in
Section 2.7(b) hereof.
"Closing Date" shall mean the date on which the closing of the
Merger occurs.
"Consideration" shall mean the Cash Consideration and the
Consideration shares.
"Consideration Shares" shall mean 1,979,000 shares of IEC Common
Stock.
"IEC Common Stock" shall mean shares of Common Stock, no par
value, of IEC.
"Netranscend Shares" shall mean shares of Netranscend Common
Stock, and shares of any other capital stock of Netranscend.
"Netranscend Common Stock" shall mean shares of common stock of
Netranscend.
"Netranscend Options" shall mean all issued and outstanding
options to purchase or otherwise acquire Netranscend Capital Stock (whether or
not vested) held by employees or directors of or consultants to Netranscend.
2.7 Effect of Merger on the Capital Stock of Netranscend. Subject to
----------------------------------------------------
the terms and conditions of this Agreement, as of the Effective Time, by virtue
of the Merger and without any action on the part of IEC, Netranscend or the
Principal Shareholder immediately prior to the Effective Time, the following
shall occur:
(a) Conversion of Netranscend Capital Stock. At and as of the
---------------------------------------
Effective Time, all Netranscend Shares shall be converted into the right to
receive, in aggregate, the Consideration. No Netranscend Capital Stock shall be
deemed to be outstanding after the Effective Time.
(b) Procedure for Payment. At the Effective Time, the Principal
---------------------
Shareholder will deliver a certificate or certificates representing all issued
and outstanding Netranscend Shares to IEC, endorsed in blank or accompanied by
stock powers or other instruments of transfer executed by such Principal
Shareholder. With respect to the Consideration Shares portion of the
Consideration, immediately after the Effective Time, IEC shall (a) deliver to
the Principal Shareholder a certificate or certificates bearing the legend set
forth in Section 2.7(d) hereof representing 1,679,000 shares of IEC Common Stock
and (b) deliver to the Secretary of IEC, as escrow agent (the "Escrow Agent") a
<PAGE>
certificate bearing the legend set forth in Section 2.7(d) hereof representing
300,000 shares of IEC Common Stock (the "Escrow Shares") to be deposited into an
escrow fund, pursuant to the terms and conditions set forth in Article VIII and
the Escrow Agreement, of even date herewith, by and between IEC and the
Principal Shareholder. With respect to the Cash Consideration portion of the
Consideration, IEC shall pay the Cash Consideration to the Principal Shareholder
in four installments, as follows: (i) $110,000 on the one-year anniversary of
the Closing Date; (ii) $110,000 on the two-year anniversary of the Closing Date;
(iii) $100,000 on the three-year anniversary of the Closing Date; and (iv)
$110,000 on the four-year anniversary of the Closing Date.
(c) Company Stock Options.
---------------------
(i) Conversion of Netranscend Options. At the Effective Time,
---------------------------------
each outstanding Netranscend Option shall be canceled by Netranscend in
connection with the Merger. IEC shall grant options to purchase IEC Common Stock
for each Netranscend Option so canceled by Netranscend under this Agreement
which shall be subject to the terms and conditions of the IEC 1999 Stock Option
Plan (the "IEC Plan"), shall have an option exercise price of $0.50 per share
and shall be fully vested and exercisable at the Effective Time. Each
Netranscend Option will be exercisable for the same number of shares of IEC
Common Stock as the number of shares of Netranscend Common Stock that were
issuable upon exercise of such Netranscend Option immediately prior to the
Effective Time.
(ii) Notice of Issuance. Promptly following the Effective Time,
------------------
IEC will issue to each holder of an outstanding Netranscend Option a stock
option agreement evidencing the foregoing conversion of such Netranscend Option
by IEC.
(d) Legends.
-------
(i) Each certificate representing Consideration Shares, and any
shares issued or issuable in respect of any such shares upon any stock split,
stock dividend, recapitalization, or similar event, shall be stamped or
otherwise imprinted with legends in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. THE
TRANSFER RESTRICTIONS APPLICABLE TO THESE SHARES ARE BINDING ON
TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ALSO BE SUBJECT TO A
STANDSTILL AGREEMENT IN CONNECTION WITH ANY INITIAL PUBLIC STOCK
OFFERING OF THE ISSUER. COPIES OF SUCH AGREEMENT ARE ON FILE AT THE
PRINCIPAL OFFICE OF THE ISSUER AND WILL BE FURNISHED UPON REQUEST TO
THE REGISTERED HOLDER HEREOF.
(ii) The certificates evidencing the Consideration Shares shall
also bear any legend required by the Commissioner of Corporations of the State
of California or such as are required pursuant to any state, local or foreign
law governing such securities.
2.8 No Further Ownership Rights in Netranscend Capital Stock. The shares
--------------------------------------------------------
of IEC Common Stock issued in accordance with the terms hereof shall be deemed
to be full satisfaction of all rights pertaining to shares of Netranscend
Capital Stock outstanding prior to the Effective Time, and there shall be no
further registration of transfers on the records of Netranscend or the Surviving
Corporation of shares of Netranscend Capital Stock that were outstanding prior
to the Effective Time.
2.9 Effect of Merger on the Capital Stock of IEC. Each share of IEC
--------------------------------------------
capital stock issued and outstanding as of the Effective Time shall remain
issued and outstanding.
2.10 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. Each party has consulted with its own tax advisers with
respect to the tax consequences of the Merger.
2.11 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Netranscend and IEC, the officers and directors of Netranscend
and IEC are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE III
MISCELLANEOUS
3.1 Termination by Mutual Agreement. Notwithstanding the approval of this
-------------------------------
Agreement by the shareholders of IEC and Netranscend, this Agreement may be
terminated at any time prior to the Effective Time by mutual agreement of the
Board of Directors of IEC and Netranscend.
3.2 Termination of Agreement and Plan of Reorganization. Notwithstanding
---------------------------------------------------
the approval of this Agreement by the shareholders of IEC and Netranscend, this
Agreement shall terminate forthwith in the event that the Reorganization
Agreement shall be terminated as therein provided.
3.3 Amendment. This Agreement may be amended by the parties hereto at any
---------
time before or after approval hereof by the shareholders of either Netranscend
or IEC, but, after any such approval, no amendment will be made which, under the
applicable provisions of California Law, requires the further approval of
shareholders without obtaining such further approval. This
<PAGE>
Agreement shall not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
3.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one agreement.
3.5 Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect by the laws of the State of
California.
<PAGE>
IN WITNESS WHEREOF, IEC and Netranscend have caused this Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
INTERNET EXTRA CORPORATION
a California corporation
By: /s/ Gregory R. Raifman
--------------------------------
Gregory R. Raifman
Chairman and Chief Executive Officer
By: /s/ Gregory R. Raifman
--------------------------------
Gregory R. Raifman
Secretary
NETRANSCEND SOFTWARE, INC.
a California corporation
By: /s/ Ruiquing "Barclay" Jiang
--------------------------------
Ruiqing "Barclay" Jiang
President
By: /s/ Peter N. Townshend
--------------------------------
Peter N. Townshend
Secretary
[SIGNATURE PAGE TO AGREEMENT OF MERGER]
<PAGE>
EXHIBIT B
---------
Form of Legal Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
<PAGE>
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI APPEARS HERE]
March 23, 1999
Netranscend Software, Inc.
655 Bonanza Court
Sunnyvale, CA 94087
Re: Agreement and Plan of Reorganization
Ladies and Gentlemen:
We have acted as counsel to Internet Extra Corporation, a California
corporation ("IEC"), in connection with the merger (the "Merger") of
Netranscend Software, Inc., a California corporation ("Netranscend"), with
and into IEC pursuant to an Agreement and Plan of Reorganization, of even
date herewith (the "Reorganization Agreement"), by and among IEC, Netranscend
and Ruiqing "Barclay" Jiang, the sole shareholder of Netranscend (the
"Principal Shareholder") and the Agreement of Merger between IEC and
Netranscend, of even date herewith, and the related officers' certificates
(collectively, the "Merger Agreement" and together with the Reorganization
Agreement, the "Agreements"). This opinion is furnished to you pursuant to
Section 7.2(f) of the Reorganization Agreement. Unless otherwise specified
herein, the capitalized terms used in this opinion have the meaning given to
them in the Reorganization Agreement.
We have acted as counsel for the IEC in connection with the
negotiation of the Agreements and the effectuation of the Merger. As such
counsel, we have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purposes of rendering this
opinion. In addition, we have examined originals or copies of documents,
corporate records and other writings which we consider relevant for the
purposes of this opinion including originals or copies of the Amended and
Restated Articles of Incorporation (the "Articles") and Bylaws of IEC and the
records of the IEC Board of Directors relating to the Merger. In addition, in
connection with the Merger, we have reviewed the Agreements. In such
examination, we have assumed the genuineness of all signatures on original
documents, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents by any party other than
the IEC where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge" or "known
to us" with reference to matters of fact means that, after an examination of
documents made available to us by IEC, and after inquiries of officers of
IEC, but without any further independent factual investigation, we find no
reason to believe that the opinions expressed herein are factually incorrect.
Further, the expression "to our knowledge" with reference to matters of fact
refers to the current actual knowledge of the attorneys of this firm who have
worked on matters for IEC solely in connection with the Reorganization
Agreement and the transactions contemplated thereby. Except to the extent
expressly set forth herein, we have not undertaken any independent
<PAGE>
Netranscend Software, Inc.
March 22, 1999
Page 2
investigation to determine the existence or absence of any fact, and no
inference as to our knowledge of the existence or absence of any fact should be
drawn from our representation of IEC or the rendering of the opinion set forth
below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate action, to
execute and deliver the Agreements, and we assume that the representations and
warranties made by you in the Reorganization Agreement and pursuant thereto are
true and correct. We are also assuming the Principal Shareholder has purchased
all outstanding shares of Netranscend capital stock for value, in good faith,
and without notice of any adverse claim within the meaning of the Uniform
Commercial Code.
In rendering this opinion we have also assumed that there are no extrinsic
agreements or understandings among you or the Principal Shareholder and IEC in
relation to the Agreements that would modify or interpret the terms of the
Agreements or the respective rights or obligations of the parties thereunder.
The opinions hereinafter expressed are subject to the following
qualifications:
a. Our opinions are qualified by the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium, or
other similar laws relating to or affecting the rights of creditors generally,
including, without limitation, laws relating to fraudulent transfers or
conveyances, preferences and equitable subordination;
b. Our opinions are qualified by the limitations imposed by
general principles of equity upon the availability of equitable remedies or the
enforcement of provisions of the Agreements; and the effect of judicial
decisions which have held that certain provisions are unenforceable when their
enforcement would violate the implied covenant of good faith and fair dealing,
or would be commercially unreasonable, or if their breach is not material;
c. A requirement that provisions of the Agreements may only be
waived in writing will not be enforced to the extent an oral agreement has been
entered into modifying provisions of the Agreements;
d. Our opinions are qualified by the effect of judicial
decisions that may permit the introduction of extrinsic evidence to modify the
terms or the interpretation of the Agreements;
e. We express no opinion as to the enforceability of provisions
of the Agreements providing for arbitration of disputes to the extent that
arbitration of a particular dispute would be against public policy;
<PAGE>
Netranscend Software, Inc.
March 22, 1999
Page 3
f. We express no opinion as to the enforceability of provisions
of the Agreements that purport to establish evidentiary standards or to make
determinations conclusive;
g. We express no opinion as to the enforceability of provisions
of the Agreements that purport to establish particular courts as the forum
for the adjudication of any controversy relating to the Agreements;
h. We express no opinion as to the enforceability of provisions
of the Agreements expressly or by implication waiving broadly or vaguely
stated rights, or waiving rights granted by law where such waivers are
against public policy;
i. We express no opinion as to the enforceability of provisions
of the Agreements providing that rights or remedies are not exclusive, that
every right or remedy is cumulative, or that the election of a particular
remedy or remedies does not preclude recourse to one or more other remedies;
j. We express no opinion as to the enforceability of any
indemnification provisions contained in the Agreements to the extent the
provisions thereof may be subject to limitations of public policy and the
effect of applicable statutes and judicial decisions;
k. Our opinions are based upon current statutes, rules,
regulations, cases and official interpretive opinions, and it covers certain
items that are not directly or definitively addressed by such authorities;
l. We express no opinion as to compliance with applicable anti-
fraud statutes, rules or regulations of applicable state and federal laws
concerning the issuance or sale of securities;
m. We express no opinion as to the enforceability of the non-
compete and non-solicit provisions of the Employment Agreements or Consulting
Agreement to the extent the provisions thereof may be subject to limitations
of public policy and the effect of applicable statutes and judicial
decisions;
n. We express no opinion as to the enforceability of the
arbitration provisions of the Agreements to the extent such provisions
purport to be binding upon the relevant parties;
o. In rendering the opinion set forth in paragraph 1 below, as
to the good standing of IEC, we have relied exclusively on certificates of
public officials;
<PAGE>
Netranscend Software, Inc.
March 22, 1999
Page 4
p. We are members of the Bar of the State of California and we
are not expressing any opinion as to any matter relating to the laws of any
jurisdiction other than the laws of the United States of America and the laws
of the State of California.
Based upon our examination of and reliance upon the foregoing and
subject to the limitations, exceptions, qualifications and assumptions set
forth herein and except as otherwise set forth in the Reorganization
Agreement or the Disclosure Schedule, we are of the opinion that as of the
date hereof:
1. IEC is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. IEC has all
requisite corporate power and authority to own and operate its
properties and to carry on its business as now being conducted.
2. The shares of IEC Common Stock to be issued pursuant to the
Merger, when issued in accordance with the terms of the
Reorganization Agreement, will be validly issued, fully paid and
nonassessable.
3. IEC has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Agreements and to
consummate the Merger and the other transactions contemplated
thereby. The execution and delivery by IEC of the Agreements, and
the performance by IEC of its obligations thereunder, have been
duly authorized by all necessary corporate action and proceedings
on the part of IEC. The Reorganization Agreement and the Merger
Agreement have been duly executed and delivered by IEC and
assuming due execution and delivery by the other parties thereto,
constitute the valid and binding obligations of IEC.
4. Neither the execution, delivery nor performance by IEC of the
Reorganization Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated thereby, conflicts
with, or will result in any Conflict with, (i) any provision of
the Articles and Bylaws of IEC, (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument,
permit, concession, franchise or license which is listed in the
IEC Disclosure Schedule attached to the Reorganization Agreement,
or (iii) to our knowledge, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to IEC or its
respective properties or assets.
5. Based in part upon the representations of the Principal
Shareholder contained in Article III of the Reorganization
Agreement, no consent, waiver, approval, order or authorization
of, or registration, declaration or filing with any Governmental
<PAGE>
Netranscend Software, Inc.
March 22, 1999
Page 5
Entity is required by or with respect to IEC in connection with
the execution and delivery of the Reorganization Agreement and
the Merger Agreement or the consummation of the transactions
contemplated thereby, other than post-sale filings required by
state securities laws. Upon the filing and acceptance of the
Merger Agreement with the Secretary of State of the State of
California, the Merger shall become legally effective in
accordance with California Law.
6. To our knowledge, there is no action, suit or proceeding of any
nature pending or threatened against IEC, its properties or its
officers or directors which is not disclosed in the Disclosure
Schedule, nor to our knowledge is there any action, suit or
proceeding of any nature pending or threatened against IEC, its
properties or any of its officers or directors which challenges
or seeks to enjoin, alter or materially delay any of the
transactions contemplated by the Agreements.
This opinion is rendered as of the date first written above solely for
your benefit in connection with the Agreements and the transactions
contemplated thereby, and may not be made available to or relied upon by any
person other than you, or for any other purpose, without our express prior
written consent. Our opinion is expressly limited to the matters set forth
above and we render no opinion, whether by implication or otherwise, as to
any other matters relating to the Agreements or the transactions contemplated
thereby. We assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and
which may alter, affect or modify the opinions expressed herein.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT C
---------
Form Of Legal Opinion Of Heller Ehrman White & McAuliffe
<PAGE>
[LETTERHEAD OF HELLER EHRMAN WHITE & McAULIFFE APPEARS HERE]
March 23, 1999
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
Ladies and Gentlemen:
We have acted as counsel to Netranscend Software, Inc., a California
corporation (the "Company"), in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated as of March 8, 1999 by and between the
Company, Internet Extra Corporation ("IEC") and Ruiqing "Barclay" Jiang (the
"Principal Shareholder"), the Agreement of Merger between the Company and IEC
dated as of March 24, 1999 and the related officers' certificates (collectively,
the "Transactional Agreements"). Capitalized terms used without definition in
this opinion have the meanings given to them in the Agreement (including the
schedules thereto) or, if the Agreement does not define them, in the Restated
Articles.
I.
In connection with this opinion, we have assumed the authenticity of all
records, documents, and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents, and instruments submitted
to us as copies. We have also assumed that there are no facts or circumstances
relating to you that might prevent you from enforcing any of the rights to which
our opinion relates (for example, lack of due incorporation, regulatory
prohibitions, or failure to qualify to do business in the State of California).
We have based our opinion upon our review of the following records, documents
and instruments:
(a) The Articles of Incorporation of the Company certified by the
California Secretary of State November 27, 1996 and the Certificate of
Amendment of the Articles of Incorporation dated December 10, 1997
certified to us by an officer of the Company as being complete and in
full force and effect as of the date of this opinion;
<PAGE>
Internet Extra Corporation
March 23, 1999
Page 2
(b) The Bylaws of the Company certified to us by an officer of the Company
as being complete and in full force and effect as of the date of this
opinion;
(c) Records certified to us by an officer of the Company as constituting
all records of proceedings and actions of the Board of Directors and
the shareholders of the Company relating (i) to the transactions
contemplated by the Transactional Agreements and (ii) to the issuance
of all of the issued and outstanding shares of the Company's capital
stock;
(d) The Agreement;
(e) The Agreement of Merger;
(f) A Certificate of Status-Domestic Corporation relating to the Company
issued by the Secretary of State of the State of California dated
March 23, 1999;
(g) A letter from the Franchise Tax Board of the State of California dated
March 23, 1999 stating that the Company is in good standing with that
agency;
(h) A Certificate of the President and the Secretary of the Company as to
the material agreements, material instruments, judgments, and decrees
to which the Company is a party or by which the Company's properties
or assets are bound and as to certain factual matters (the "Officer's
Certificate");
(i) The agreements and instruments identified in the Officer's
Certificate;
(j) The stock records of the Company evidencing the outstanding capital
stock of the Company and certified to us by an officer of the Company
as being complete and correct; and
(k) The stock certificates representing the shares being purchased by you
(the "Shares").
With your consent, we have based our opinion expressed in paragraph 1 below
as to the good standing of the Company under the laws of the State of California
solely upon the documents enumerated in (f) and (g) above. In addition, we have,
with your consent, (i) based our opinion expressed in paragraph 8 below that
shares of the Company's capital stock are fully paid and nonassessable solely
upon the statement in the Officer's Certificate that the Company has received
the consideration recited in the applicable agreements and resolutions of the
Company's Board of Directors, (ii) based our opinion expressed in paragraph 8
below regarding the capitalization of the Company solely upon
<PAGE>
Internet Extra Corporation
March 23, 1999
Page 3
our review of the records identified as items (c) and (j) above, and (iii)
relied upon the Officer's Certificate with respect to factual matters relevant
to this opinion.
In connection with our opinion relating to the agreements and instruments
identified in the Officer's Certificate, we have not reviewed, and express no
opinion on, (i) financial covenants or similar provisions requiring financial
calculations or determinations to ascertain compliance, (ii) provisions relating
to the occurrence of a "material adverse event" or words of similar import, or
(iii) parol evidence bearing on interpretation or construction. Moreover, to the
extent that any of the Transactional Agreements or any of the agreements and
instruments identified in item (i) above is governed by the laws of any
jurisdiction other than the federal laws of the United States or the laws of the
State of California, our opinion relating to those agreements and instruments is
based solely upon the plain meaning of their language without regard to
interpretation or construction that might be indicated by the laws governing
those agreements or instruments.
Where our opinion relates to our "knowledge", such knowledge is based upon
our examination of the records, documents, instruments, and certificates
enumerated or described above and the actual knowledge of attorneys in this firm
who are currently involved in substantive legal representation of the Company.
With your consent, we have not examined any records of any court, administrative
tribunal or other similar entity in connection with our opinion expressed in
paragraph 7 below.
II.
We express no opinion as to any anti-fraud provisions of applicable federal
or state securities laws, any tax, anti-trust, land use, export, safety,
environmental or hazardous materials laws, rules or regulations.
This opinion is limited to the federal laws of the United States of America
and the laws of the State of California. We disclaim any opinion as to the laws
of any other jurisdiction and we further disclaim any opinion as to any statute,
rule, regulation, ordinance, order or other promulgation of any regional or
local governmental body.
III.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed below, it is our opinion
that:
<PAGE>
Internet Extra Corporation
March 23, 1999
Page 4
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of California.
2. The Company has all requisite corporate power and corporate authority
to enter into and perform the Transactional Agreements, to own its
properties, and to carry on its business as, to our knowledge, it is
now conducted and proposed to be conducted as contemplated by the
Transactional Agreements.
3. Each of the Transactional Agreements has been duly authorized by all
necessary corporate action on the part of the Company, its directors,
and shareholders and has been duly executed and delivered on behalf of
the Company.
4. Each of the Transactional Agreements is a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms, subject, as to enforcement, (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other laws of general
applicability relating to or affecting creditors' rights and (ii) to
general principles of equity, whether such enforcement is considered
in a proceeding in equity or at law.
5. No governmental consents, approvals, authorizations, registrations,
declarations, or filings are required for the execution and delivery
of the Transactional Agreements on behalf of the Company and
consummation of the Transactional Agreements by the Company except the
filing of the Merger Agreement in the Office of the Secretary of State
of the State of California.
6. The execution and delivery of the Transactional Agreements on behalf
of the Company does not (i) conflict with any provision of the Amended
and Restated Articles of Incorporation or Bylaws of the Company, (ii)
violate any law applicable to the Company, or (iii) result in a breach
or violation of, or constitute a default under, any term of any
agreements, instruments, judgments, or decrees identified in the
Officer's Certificate.
7. To our knowledge, there are no pending or threatened actions, suits,
proceedings, or governmental investigations against the Company.
8. The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock. Immediately prior to the Closing, the stock
records of the Company indicate that 3,000,000 shares of Common Stock
were issued and outstanding, all of which were held by the Principal
Shareholder. All
<PAGE>
Internet Extra Corporation
March 23, 1999
Page 5
such issued and outstanding shares of the Company's capital stock have
been duly authorized and validly issued and are fully paid and
nonassessable. To our knowledge, there are no options, warrants,
conversion privileges, preemptive rights, or other rights outstanding
granted by the Company to purchase or otherwise acquire any authorized
but unissued shares of capital stock or other securities of the
Company.
IV.
We further advise you that:
A. As noted, the enforceability of the Transactional Agreements is
subject to the effect of general principles of equity. These
principles include, without limitation, concepts of commercial
reasonableness, materiality and good faith and fair dealing. As
applied to the Transactional Agreements, these principles will require
you to act reasonably, in good faith and in a manner that is not
arbitrary or capricious in the administration and enforcement of the
Transactional Agreements and will preclude you from invoking penalties
for defaults that bear no reasonable relation to the damage suffered
or that would otherwise work a forfeiture. In addition, the
enforceability of the Transactional Agreements is subject to the
effect of Section 1670.5 of the California Civil Code, which provides
that a court may refuse to enforce, or may limit the enforcement of, a
contract or clause of a contract that the court finds as a matter of
law to have been unconscionable at the time it was made.
B. The effectiveness of indemnities, rights of contribution, exculpatory
provisions and waivers of the benefits of statutory provisions may be
limited on public policy grounds.
C. Section 1717 of the California Civil Code provides that, in any action
on a contract where the contract specifically provides that attorneys'
fees and costs incurred to enforce that contract shall be awarded
either to one of the parties or to the prevailing party, then the
party who is determined to be the party prevailing in the action,
whether that party is the party specified in the contract or not,
shall be entitled to reasonable attorneys' fees in addition to other
costs.
D. Any provisions of the Transactional Agreements requiring that waivers
must be in writing may not be binding or enforceable if a non-
executory oral agreement has been created modifying any such provision
or an
<PAGE>
Internet Extra Corporation
March 23, 1999
Page 6
implied agreement by trade practice or course of conduct has given
rise to a waiver.
This opinion is rendered to you in connection with the Agreement and is
solely for your benefit. This opinion may not be relied upon by you for any
other purpose, or relied upon by any other person, firm, corporation, or other
entity for any purpose, without our prior written consent. We disclaim any
obligation to advise you of any developments in areas covered by this opinion
that occur after the date of this opinion.
Very truly yours,
/s/ Heller Ehrman White & McAulife
<PAGE>
EXHIBIT D
---------
Disclosure Schedule of Netranscend
<PAGE>
DISCLOSURE SCHEDULES
--------------------
These Disclosure Schedules set forth exceptions to the representations and
warranties specified in Article II of the Agreement and Plan of Reorganization
by and among Internet Extra Corporation, Netranscend Software, Inc. (the
"Company") and Ruiging "Barclay" Jiang dated March ___, 1999 (the "Agreement").
Unless the context otherwise requires all capitalized terms herein have the same
meaning as defined in the Agreement. The Section numbers indicated herein have
the same meaning as defined in the Agreement. The Section numbers indicated
herein refer to Sections in the Agreement; however, the exceptions set forth
herein shall apply to any of the representations and warranties where
appropriate.
<PAGE>
Schedule 2.1
------------
Barclay Jiang is the sole director of the Company. Mr. Jiang is also the
President, Chief Executive Officer and Chief Financial Officer of the Company.
Peter Townshend is the Secretary of the Company.
<PAGE>
Schedule 2.2(b)
---------------
The Company has not adopted a Stock Option Plan. The Company has issued
three nonstatutory options as follows'
<TABLE>
<CAPTION>
Number Exercise Vesting Expiration
------ -------- ------- ----------
Name Address of Shares Price Schedule Date
- ---- ------- --------- ----- -------- ----
<S> <C> <C> <C> <C> <C>
Simon Zhao 5168 Lassen Ave., 5,000 $0.002 no vesting November 1
San Jose, CA schedule; fully- 2002
95129 vested
Hung-Liang 45548 Antelope 24,000 $0.002 vested 1/3 on August 1,
(Andy) Yang Dr., Fremont, CA 2/1/98, 8/1/98 2002
94539 and 2/1/99;
fully-vested
Shuangli Cao 6155 Regency 30,000 $0.002 vested 1/3 on August 1,
Oak, San Jose, CA 2/1/98, 8/1/98 2002
95129 and 2/1/99;
fully-vested
</TABLE>
<PAGE>
Schedule 2.7
------------
The Company's financial statements are attached.
<PAGE>
Schedule 2.11 (a)
-----------------
Real property leased: N/A
--------------------------------------------------------
Name of Lessor: N/A
--------------------------------------------------------------
Date of Lease: N/A
---------------------------------------------------------------
Date(s) of any amendments: N/A
---------------------------------------------------
Annual Rental (including any other fees payable): N/A
----------------------------
<PAGE>
Schedule 2.11 (c)
-----------------
List of Equipment with a Purchase Price Greater than $10,000: N/A
<PAGE>
Schedule 2.12(b)
----------------
List of All Registered Patents, Trademarks, Copyrights: N/A
<PAGE>
Schedule 2.12(f)
----------------
List of All Contracts, Licenses and Agreements relating to Intellectual
Property: N/A
<PAGE>
Schedule 2.12(g)
----------------
List of All Contracts, Licenses and Agreements relating to Warranties and
Indemnification: N/A
<PAGE>
Schedule 2.12(g)
----------------
List of All Actions Necessary within the next 60 days to perfect, maintain,
preserve or renew Netranscend Intellectual Property: N/A
<PAGE>
Schedule 2.15
-------------
The Company is incorporated in California and is in good standing and
qualified to do business in such state.
<PAGE>
[LETTERHEAD OF R.H. ROBINSON APPEARS HERE]
Netranscend Software, Inc
Sunnyvale, California
Gentlemen:
I have compiled the accompanying statement of assets, liabilities, and
equity-income tax basis of Netranscend Software, Inc. as of December 31, 1998,
and the related statement of revenues, expenses and retained earnings-income tax
basis for the year then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. The financial statements have been prepared on the
accounting basis used by the Company for income tax purposes, which is a
comprehensive basis of accounting other then generally accepted accounting
principles.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures
ordinarily included in financial statements prepared on the income tax basis of
accounting. If the omitted disclosures were included in the financial
statements, they might influence the user's conclusions about the Company's
assets, liabilities, equity, revenues and expenses. Accordingly, these financial
statements are not designed for those who are not informed about such matters.
R.H. Robinson, CPA
/s/ R.H. Robinson, CPA
Sunnyvale, California
March 4, 1999
<PAGE>
NETRANSCEND SOFTWARE, INC
Statement of Assets, Liabilities and Equity
(Income Tax Basis)
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
------
<S> <C> <C>
Current Assets
Cash $ 536
--------
Total current assets 536
Fixed Assets
Computer equipment $ 3,691
Less accumulated depreciation 1,940
--------
1,751
Other Assets
Organization costs $ 1,600
Less accumulated amortization 667
--------
993
--------
$ 3,220
--------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Long-term debt
Loans from stockholders 17,607
Stockholder's Equity
Common stock 1,600
Retained earnings (deficit) (15,987)
--------
(14,387)
--------
$ 3,220
========
</TABLE>
The accompanying accountant's compilation report is an integral part of these
financial statements.
<PAGE>
NETRANSCEND SOFTWARE, INC
Statement of Revenues, Expenses and Retained Earnings
(Income Tax Basis)
December 31, 1998
<TABLE>
<S> <C>
Revenues $ 0
--------
Operating Expenses:
Auto expenses 3,843
Amortization of organization costs 320
Depreciation 712
Dues and subscriptions 154
Internet charges 360
Legal and professional fees 1,133
Meals and entertainment 1,549
Miscellaneous 58
Office and computer supplies 269
Rent 354
California franchise tax 838
Telephone 318
Travel 530
--------
Total expenses 10,438
--------
Net income (loss) for the year ( 10,438)
Retained earnings (deficit) beginning of year ( 5,549)
--------
Retained earnings (deficit) end of year ($15,987)
---------
</TABLE>
The accompanying accountant's compilation report is an integral part of these
financial statements.
<PAGE>
NETRANSCEND SOFTWARE, INC
General Journal
For the Period From Jan 1, 1998 to Dec 31, 1998
Filter Criteria includes: Report order is by Date. Report is printed with
Accounts having Zero Amounts and with Truncated Transaction Descriptions and in
Detail Format.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Date Account ID Reference Trans Description Debit Amt Credit Amt
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/1/98 15100 0101 PC (12/96) incl memory & acc. 3,475.86
17900 96 & 97 depr on computer equip 1,228.00
19100 Organization costs (12.96) 1,600.00
19200 96 & 97 amort of organiz. costs 347.00
29700 96 & 97 payments by stockholder 7,450.32
39005 96 & 97 adjusted losses 5,549.46
39003 Beginning investment 1,600.00
12/30/98 76500 1201 Paid by BJ personally, airline ticket 530.00
71000 Paid by BJ personally, off suppl 60.55
64500 Paid by BJ personally, book 77.05
61000 Paid by BJ personally, parking 28.25
76000 Paid by BJ personally, cel phone 112.64
70500 Paid by BJ personally, meals 1,164.67
27900 Paid by BJ personally in 1998 1,973.16
12/30/98 61000 1202 12080 miles @ $.325 less $111 gas paid by c 3,815.00
27900 12080 miles @ $.325 less $111 gas paid by c 3,815.00
12/31/98 60500 1203 1998 amortization of org costs 320.00
19200 1998 amortization of org costs 320.00
64000 1998 depreciation 712.00
17900 1998 depreciation 712.00
----------- -----------
Total 17,445.48 17,445.48
=========== ===========
</TABLE>
<PAGE>
NETRANSCEND SOFTWARE, INC.
Balance Sheet
December 31, 1998
ASSETS
Current Assets
Cash, Wells Fargo checking $ 535.82
----------
Total Current Assets 535.82
Property and Equipment
Computer Equipment 3,691.28
Accumulated Depreciation (1,940.00)
----------
Total Property and Equipment 1,751.28
Other Assets
Organization Costs 1,600.00
Accumulated Amortization (667.00)
----------
Total Other Assets 933.00
----------
Total Assets $ 3,220.10
==========
LIABILITIES AND CAPITAL
Current Liabilities
-----------
Total Current Liabilities 0.00
Long-Term Liabilities
Loans from Stockholders $ 17,607.49
-----------
Total Long-Term Liabilities 17,607.49
-----------
Total Liabilities 17,604.49
Capital
Common Stock 1,600.00
Retained Earnings (5,549.46)
Net Income (10,437.93)
-----------
Total Capital (14,387.39)
-----------
Total Liabilities & Capital $ 3,200.10
===========
Unaudited - For Management Purposes Only
<PAGE>
NETRANSCEND SOFTWARE, INC.
Account Reconciliation
As of Mar 31, 1998
10200 - Cash, Wells Fargo checking
Bank Statement Date: March 31, 1998
Filter Criteria includes: Report is printed in Detail Format.
- --------------------------------------------------------------------------------
Beginning GL Balance 436.47
Add: Cash Receipts 2,500.00
Less: Cash Disbursements (976.08)
Add (Less) Other
--------
Ending GL Balance 1,960.39
========
Ending Bank Balance 687.72
Add back deposits in transit
Mar 21, 1998 0301 1,500.00
--------
Total deposits in transit 1,500.00
(Less) outstanding checks Mar 22, 1998 105 (227.33)
--------
Total outstanding checks (227.33)
Add (Less) Other --------
Total other
Unreconciled difference 0.00
--------
Ending GL Balance 1,960.39
========
<PAGE>
NETRANSCEND SOFTWARE, INC.
Chart of Accounts
As of Dec 31, 1998
Filter Criteria includes: ) Active Accounts. Report order is by ID. Report is
printed with Accounts having Zero Amounts and in Detail Format.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Account ID Account Description Account Type
- ----------------------------------------------------------------------------------
<S> <C> <C>
10200 Cash, Wells Fargo checking Cash
10400 Savings Account Cash
10900 Cash on Hand Cash
11000 Accounts Receivable Accounts Receivable
11500 Allowance for Doubtful Acc Accounts Receivable
12000 Inventory Inventory
14100 Employee Advances Other Current Assets
14700 Prepaid Expenses Other Current Assets
15000 Furniture and Fixtures Fixed Assets
15100 Computer Equipment Fixed Assets
15400 Leasehold Improvements Fixed Assets
17900 Accumulated Depreciation Fixed Assets
19000 Security Deposits Other Assets
19100 Organization Costs Other Assets
19200 Accumulated Amortization Other Assets
20100 Current Portion Long-term Other Current Liabilities
21200 Accounts Payable Accounts Payable
23100 Sales Tax Payable Other Current Liabilities
23200 Wages Payable Other Current Liabilities
23400 Federal Payroll Taxes Withh Other Current Liabilities
23600 State Payroll Taxes Withhel Other Current Liabilities
27000 Notes Payable, Long-term Long Term Liabilities
27900 Loans from Stockholders Long Term Liabilities
39003 Common Stock Equity-doesn't close
39004 Paid-in Capital Equity-doesn't close
39005 Retained Earnings Equity-Retained Earnings
39007 Dividends Paid Equity-gets closed
40000 Service Fees Income
40200 Sales Income Income
45500 Shipping Charges Reimburs Income
48900 Sales Returns & Allowances Income
49000 Sales Discounts Income
50000 Cost of Goods Sold #1 Cost of Sales
51100 Purchases Cost of Sales
51800 Purchase Returns & Allowa Cost of Sales
51900 Purchase Discounts Cost of Sales
57000 Direct Labor Cost of Sales
57500 Freight In Cost of Sales
58500 Inventory Adjustments Cost of Sales
60000 Advertising Expense Expenses
60500 Amortization, Organiz. Cost Expenses
61000 Auto Expenses Expenses
61500 Bad Debt Expense Expenses
62000 Bank Charges Expenses
63500 Commissions Expenses
64000 Depreciation Expense Expenses
64500 Dues and Subscriptions Expenses
65500 Freight Expense Expenses
67000 Insurance, general Expenses
67200 Insurance, Medicall Expenses
67500 Interest Expense Expenses
68000 Internet Charges Expenses
68500 Legal and Professional Fees Expenses
69000 Licenses and Permits Expenses
70500 Meals and Entertainment Expenses
70900 Miscellaneous Expenses Expenses
</TABLE>
<PAGE>
NETRANSCEND SOFTWARE, INC.
Chart of Accounts
As of Dec 31, 1998,
Filter Criteria includes: 1) Active Accounts, Report order is by ID, Report is
printed with Accounts having Zero Amounts and in Detail Format.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Account ID Account Description Account Type
- --------------------------------------------------------------------------------
<S> <C> <C>
71000 Office Supplies & Expenses Expenses
71100 Computer Supplies Expenses
73000 Pension/Profit-Sharing Plan Expenses
73500 Postage Expenses
74000 Rent Expenses
74500 Repairs and Maintenance Expenses
75000 Salaries Expenses
75500 Taxes, Payroll Expenses
75600 Taxes, Personal Property Expenses
75700 Taxes, CA Franchise Expenses
75900 Taxes, Penalties Expenses
76000 Telephone Expenses
76500 Travel, Transportation Expenses
76600 Travel, Lodging Expenses
76700 Travel, Meals Expenses
76800 Travel, Other Expenses
77000 Utilities Expenses
90000 Gain/Loss on Sale of Assets Expenses
90100 Interest Income Income
90500 Other Income Income
</TABLE>
<PAGE>
NETRANSCEND SOFTWARE, INC.
Account Reconciliation
As of Jul 31, 1998
10200 - Cash, Wells Fargo checking
Bank Statement Date: July 31, 1998
Filter Criteria includes: Report is printed in Detail Format
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Beginning GL Balance 827.08
Add: Cash Receipts
Less: Cash Disbursements (275.47)
Add (Less) Other --------
Ending GL Balance 551.61
========
Ending Bank Balance 822.08
Add back deposits in transit --------
Total deposits in transit
(less) outstanding checks
Jul 25, 1998 114 (30.00)
Jul 25, 1998 115 (201.98)
Jul 25, 1998 116 (38.49)
--------
Total outstanding checks (270.47)
Add <Less> Other
--------
Total other
Unreconciled difference 0.00
--------
Ending GL Balance 551.61
========
</TABLE>
<PAGE>
NETRANSCEND SOFTWARE, INC.
Account Reconciliation
As of Sep 30, 1998
10200 - Cash, Wells Fargo checking
Bank Statement Date: September 30, 1998
Filter Criteria includes: Report is printed in Detail Format
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Beginning GL Balance 478.24
Add: Cash Receipts
Less: Cash Disbursements (228.00)
Add (Less) Other
--------
Ending GL Balance 250.24
========
Ending Bank Balance 319.43
Add back deposits in transit
-----------
Total deposits in transit
(Less) outstanding checks
Sep 20, 1998 120 (30.00)
Sep 26, 1998 121 (39.19)
-----------
Total outstanding checks (69.19)
Add (Less) Other
Total other
Unreconciled difference 0.00
-----------
Ending GL Balance 250.24
===========
</TABLE>
<PAGE>
NETRANSCEND SOFTWARE, INC.
Account Reconciliation
As of Dec 31, 1998
10200 - Cash, Wells Fargo checking
Bank Statement Date: December 31 1998
Filter Criteria includes: Report is printed in Detail Format
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Beginning GL Balance 599.09
Add: Cash Receipts
Less: Cash Disbursements (63.27)
Add (Less) Other
-------
Ending GL Balance 535.82
=======
Ending Bank Balance 594.09
Add back deposits in transit
----------
Total deposits in transit
(Less) outstanding checks
Dec 25, 1998 130 (30.00)
Dec 25, 1998 131 (28.27)
----------
Total outstanding checks (58.27)
Add (Less) Other ----------
Total other
Unreconciled difference 0.00
------
Ending GL Balance 535.82
======
</TABLE>
<PAGE>
NETRANSCEND SOFTWARE, INC.
Income Statement
For the Twelve Months Ending December 31, 1998
<TABLE>
<CAPTION> Current Month Year to Date
<S> <C> <C> <C> <C>
Revenues ------------- --------------
Total Revenues 0.00 0.00 0.00 0.00
------------- --------------
Cost of Sales ------------- --------------
Total Cost of Sales 0.00 0.00 0.00 0.00
Gross Profit 0.00 0.00 0.00 0.00
Expenses
Amortization, Organiz. Costs $ 320.00 0.00 $ 320.00 0.00
Auto Expenses 3,843.25 0.00 3,843.25 0.00
Bank Charges 5.00 0.00 57.89 0.00
Depreciation Expense 712.00 0.00 712.00 0.00
Dues and Subscriptions 77.05 0.00 154.10 0.00
Internet Charges 30.00 0.00 360.00 0.00
Legal and Professional Fees 0.00 0.00 1,133.25 0.00
Meals and Entertainment 1,164.67 0.00 1,549.16 0.00
Office Supplies & Expenses 60.55 0.00 168.29 0.00
Computer Supplies 0.00 0.00 100.56 0.00
Rent 0.00 0.00 353.81 0.00
Taxes, CA Franchise 0.00 0.00 800.00 0.00
Taxes, Penalties 0.00 0.00 37.68 0.00
Telephone 140.91 0.00 317.94 0.00
Travel, Transportation 530.00 0.00 530.00 0.00
------------ --------------
Total Expenses 883.43 0.00 10,437.93 0.00
------------ --------------
Net Income $ (6,883.43) 0.00 $ (10,437.93) 0.00
------------ --------------
</TABLE>
For Management Purpose Only
<PAGE>
EXHIBIT E
---------
Disclosure Schedule of IEC
<PAGE>
EXHIBIT E
---------
Disclosure Schedule of IEC
March 8, 1999
Pursuant to Section IV of the Agreement and Plan of Reorganization, dated
as of March 8, 1999 (the "Agreement"), by and among Internet Extra Corporation,
a California corporation ("IEC"), Netranscend Software, Inc., a California
corporation ("Netranscend"), and Ruiqing "Barclay" Jiang, the sole shareholder
of Netranscend (the "Principal Shareholder"), IEC hereby delivers this
Disclosure Schedule (this "Schedule"). Capitalized terms used in this Schedule,
unless otherwise specified, have the same meanings given them in the Agreement.
The disclosures set forth in this Schedule are numbered to refer to the primary
section of the Agreement to which they relate. Each exception set forth herein
shall be deemed to modify each representation and warranty of IEC to which they
relate.
Section 4.1 Organization of IEC.
-------------------
The directors of IEC are Gregory R. Raifman and Jon Logan Edwards. The officers
of IEC are as follows:
Gregory R. Raifman Chairman, Chief Executive Officer and Secretary
Jon Logan Edwards President
Walter Haefeker Chief Operating Officer
Section 4.2 IEC Capital Structure.
---------------------
IEC has recently begun negotiations with several venture capital firms
relating to an investment in Series B Preferred Stock of IEC. Pursuant to such
an investment or investments, IEC expects to raise between $7 million and $11
million at a pre-money valuation of between $30 million and $35 million. There
can be no assurance that such a transaction will be consummated on favorable
terms, if at all.
Section 4.7 No Financial Statements.
-----------------------
IEC has prepared certain unaudited financial statements in the ordinary
course of business..
Section 4.10 Intellectual Property.
---------------------
On December 2, 1998, WebConnect, a Florida general partnership, and Joshua
Grantz, a former employee of WebConnect and a current employee of IEC, signed a
settlement agreement providing for the dismissal of two lawsuits relating to
claims by WebConnect of, among other things, the alleged misappropriation of
trade secrets and the alleged breach of a Non-Competition and Confidentiality
Agreement by Mr. Grantz. The settlement agreement provides for certain
restrictions upon Mr. Grantz's business activities, including restrictions on
Mr. Grantz's solicitation of WebConnect's customers and
<PAGE>
use of WebConnect's confidential information. IEC does not believe that any of
such restrictions are material to IEC or materially impair the performance of
Mr. Grantz's duties as an employee of IEC.
Section 4.11 Agreement, Contracts and Commitments.
------------------------------------
Attached as Annex 4.11 to this Schedule is a list of IEC's material
----------
contracts and commitments. See also Section 4.2 of this Schedule.
Section 4.14 Litigation.
----------
See Section 4.10 of this Schedule.
Section 4.19 No Interference or Conflict.
---------------------------
See Section 4.10 of this Schedule.
<PAGE>
Annex 4.11
----------
List of Material Contracts
1. MediaPlex Insertion Orders for Datek Online, dated December 16, 1998, in
the amount of $250,000 per month for the period beginning January 1, 1999
and ending December 31, 1999.
2. MediaPlex Insertion Orders for Creative Computers, Inc. / uBid, dated June
8, 1998, in the amount of $24,750.00 per month for the period beginning
June 15, 1998 and ending June 14, 1999.
3. MediaPlex Insertion Orders for Creative Computers, Inc. / uBid, dated June
27, 1998, in the amount of $25,000.00 per month for the period beginning
July 6, 1998 and ending July 5, 1999.
4. MediaPlex Insertion Orders for Creative Computers, Inc. / uBid, dated
December 30, 1998, in the amount of $20,000.00 per month for the period
beginning January 1, 1999 and ending March 31, 1999.
5. MediaPlex Insertion Orders for uBid Inc., dated December 30, 1998, in the
amount of $9,451.00 per month for the period beginning January 1, 1999 and
ending December 31, 1999.
6. MediaPlex Insertion Orders for uBid Inc., dated November 19, 1998, in the
amount of $58,140.00 per month for the period beginning January 1, 1999 and
ending December 31, 2000.
7. MediaPlex Insertion Orders for uBid Inc., dated December 8, 1998, in the
amount of $5,800 per month for the period beginning December 8, 1998 and
ending March 8, 1999.
8. The Office Lease Agreement, dated December 24, 1998, by and between Cypress
Building Associates, As Landlord, and MediaPlex, Inc., as Tenant for the
twelve months beginning January 1, 1999 and ending December 31, 1999.
9. The Office Lease for 131 Steuart Street, Fourth Floor, to be entered into
on or before March 1, 1999 with Prentice Properties and MediaPlex, Inc.
10. Co-Location Space Agreement for access to certain network and computer
equipment located on the 18th floor of Fairmont Plaza office building at 50
West San Fernando Street, San Jose, California, dated February 8, 1998,
with AboveNet Communications, Inc.
<PAGE>
EXHIBIT F
---------
Form of Employment Agreement - Ruiqing "Barclay" Liang
<PAGE>
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
March 24, 1999
Mr. Ruiqing "Barclay" Jiang
Netranscend Software, Inc.
655 Bonanza Court
Sunnyvale, California 94087
Dear Barclay:
I am very pleased to offer you the position of Chief Technology Officer
with Internet Extra Corporation (the "Company") commencing on the effectiveness
of the merger between Netranscend Software, Inc. ("Netranscend") and the
Company. We at the Company are delighted that you have decided to join our
enterprise and help MediaPlex become a success. I would like to take this
opportunity to set out the terms of your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered in
connection with the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of March 8, 1999, by and among the Company, Netranscend
and you, and all capitalized terms used but not defined herein shall have the
meaning ascribed to them in the Reorganization Agreement. Your employment under
this Agreement shall become effective as of the Effective Time of the Merger. In
the event that the Reorganization Agreement is terminated prior to the Effective
Time of the Merger, this Agreement shall terminate and be of no further force
and effect.
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, the Company's Chief Technology Officer, subject at all times and in
all cases and respects to the ultimate control and direction of the board of
directors of the Company. In such capacity, you shall perform all such services,
accept all such responsibilities and discharge all such duties and
responsibilities as are consistent and commensurate with your position and as
may be assigned to or required of you from time to time by the Company. You
shall perform such services, accept such responsibilities and discharge such
duties within the policies and guidelines established from time to time by the
Company, subject at all times and in all cases and respects to the ultimate
control and direction of the Company. The Company shall have the right to review
and revise your services, responsibilities and duties at any time and from time
to time during the Term (as defined below) in any and all respects, provided
--------
that any revised services, responsibilities and duties, taken as a whole,
continue to reflect your knowledge, skill and experience. Such services shall be
primarily performed in the Company's offices in Cupertino, California, although
you may be required to travel to other locations as necessary and consistent
with your position with the Company.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which consent will not be
unreasonably withheld.
<PAGE>
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
3. Compensation.
(a) Base Salary and Incentive Compensation. Your annual base salary
during the Term shall be paid at the annual rate of $150,000 for the remainder
of calendar year 1999, $168,000 for the calendar year 2000 and $180,000 for the
calendar year 2001 ("Base Salary"), payable in accordance with the Company's
standard payroll practices. Notwithstanding the foregoing, your Base Salary
shall be increased to the annual rate of $180,000 for the remainder of calendar
year 1999, $198,000 for the calendar year 2000 and $218,000 for the calendar
year 2001, upon the closing by the Company of a financing providing aggregate
gross proceeds of at least $5,000,000. Unless otherwise specified herein, the
Company shall make such deductions, withholdings and other payments from all
sums payable pursuant to this Agreement which you request or that are required
by law for taxes and other charges.
(b) Stock Options. You shall receive, as of the Effective Time, an
option (the "New Stock Option") to acquire 600,000 shares of Common Stock of the
Company (the "Option Shares"), at an exercise price equal to $0.50 per share.
The New Stock Option shall be immediately exercisable with respect to all of the
Option Shares, and the Company shall have the right to repurchase the Option
Shares at the exercise price in the event your employment is terminated. The
Company's right of repurchase shall expire with respect to one-sixth (1/6th) of
the Option Shares on the six month anniversary of the Effective Time, and with
respect to an additional 1/36th of the Option Shares on the same day of each
month during the thirty (30) months thereafter or until your employment is
earlier terminated. All other terms governing such options shall be set out in
the Company's standard option agreement and stock option plan.
(c) Benefits Plans. You will be entitled to participate in or receive
benefits under the Company's employee benefit plans and policies in effect from
time to time in which you are eligible to participate, subject to the applicable
terms and conditions of the particular benefit plan. The Company may change,
amend, modify or terminate to the extent legally allowable, any benefit plan
from time to time and without prior notice. To the extent benefits provided by
the Company are affected by seniority (i.e. length of service), you shall be
credited for time you served at Netranscend, to the fullest extent permitted by
law and consistent with the Company's current benefit plans.
(d) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its senior executive officers) in
the performance of your duties and responsibilities under this Agreement;
provided, that you shall properly account for such expenses in accordance with
- --------
Company policies and procedures. Any necessary air travel shall be coach class
domestically and business class internationally.
(e) Vacation and Holidays. You shall be entitled to four (4) weeks
paid vacation and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
(f) Bonus. You shall be eligible to participate in any management
bonus plan or similar incentive compensation program adopted by the Company on
terms comparable to other senior officers of the Company.
<PAGE>
4. Term; Termination; Severance Payments.
(a) Term. Unless otherwise terminated as hereinafter provided, the
term of your employment under this Agreement (the "Term") shall commence upon
the Effective Time as defined in the Reorganization Agreement and shall continue
until and terminate on the date that is the three year anniversary of the
Effective Time. Upon expiration of the Term, you shall be an "at will" employee
of the Company, subject to such policies, benefits and practices and procedures
that are then applicable with respect to an at will employee of the Company (the
"IEC Policies"). Notwithstanding the foregoing, the Company may terminate your
employment with the Company during the Term for Cause (as defined below).
(b) Cause. As used in this Agreement, "Cause" shall mean:
(i) Your personally engaging in or knowingly authorizing
conduct that you reasonably should know, or that you intend, to be
materially injurious to the Company or its employees;
(ii) Your (A) being convicted of a felony under the laws of the
United States or any State, (B) violating a federal or state law or
regulation applicable to the Company, (C) making any material
misrepresentation to the Company, or (D) committing a material act of
dishonesty or fraud against, or the material misappropriation of property
belonging to, the Company;
(iii) Your unreasonable failure or refusal to perform the
material duties of your position after written notice of such failure to
perform and you shall not have cured such failure by the tenth (10th)
business day after notice by the Company to you of such failure;
(iv) Your knowingly and intentionally breaching in any material
respect the terms of this Agreement or the Confidential Information and
Invention Assignment Agreement (attached hereto); provided that, except for
--------
those breaches which, by their nature, are incurable, you shall not have
cured such breach by the tenth (10th) business day after notice by the
Company to you of such breach; or
(v) Your commencement of employment with another employer.
(c) Termination and Severance Benefits.
(i) Termination for Cause or Resignation. If your employment is
terminated for Cause or if you resign your employment voluntarily, no other
compensation or payments will be provided to you for any periods following the
date when such termination of employment is effective.
(ii) Termination without Cause; Constructive Termination. If
your employment is terminated by the Company without Cause, or if you are
Constructively Terminated (as defined below), you will be entitled to receive
the severance payments provided for in Section 4(c)(iv) below (if any) upon such
termination. No other compensation or payments will be made pursuant to this
Agreement other than those to which you are entitled through your last day of
active service or under the applicable IEC Policies and benefit plans. For
purposes of this Section 4(c)(ii), the term "Constructively Terminated" shall be
deemed to mean (i) a reduction of your Base Salary, (ii) your refusal to
relocate to a facility or location which is located beyond twenty-five (25)
miles from Sunnyvale, California, or (iii) an alteration during the Term of the
services to be performed by, and the responsibilities and duties assigned to,
you under this Agreement if such services, responsibilities and duties, taken as
a whole, materially fail to reflect your knowledge, skill and experience;
provided that a change in your title will not in and of itself constitute
- --------
Constructive Termination; provided further that, your expenses-paid travel to
--------
the Company's headquarters in San Francisco, California at the Company's
<PAGE>
request will not in and of itself constitute Constructive Termination; and
provided further that, in each case, you have resigned in writing from your
- --------
position with the Company within thirty (30) calendar days of the commencement
of any Constructive Termination.
(iii) Death or Disability.
(A) Your employment shall terminate in the event of your
death.
(B) The Company may terminate your employment for
Disability by giving you 30 days' advance notice in writing. For all purposes
under this Agreement, "Disability" shall mean that you, at the time notice is
given, have been unable to substantially perform your duties under this
Agreement for a period of not less than six (6) consecutive months as the result
of your incapacity due to physical or mental illness. In the event that you
resume the performance of substantially all of your duties hereunder before the
termination of your employment under this subparagraph (B) becomes effective,
the notice of termination shall automatically be deemed to have been revoked.
(C) No compensation or benefits will be paid or provided to
you under this Agreement on account of termination for death or Disability, or
for periods following the date when such a termination of employment is
effective. Your rights under the benefit plans of the Company in the event of
your death or Disability shall be determined under the provisions of those
plans.
(iv) Severance Payments. During the Term, in the event your
employment with the Company is terminated without cause or if you are
Constructively Terminated, the Company's sole obligation to you will be to pay
you a severance payment ("Severance Payment") in the amount equal to 1/26 of
your effective Base Salary for the year in which you are so terminated for each
complete month during the Term worked by you; provided, however, the Severance
--------
Payment shall, in no case, exceed 1/2 of your Base Salary for such year.
5. Assignment
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise), or to all or substantially all of the Company's business and/or
assets, shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of such succession. For all purposes of and under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement required by this
Section 5, or which otherwise becomes bound by the terms of this Agreement by
operation of law. Any such assumption and/or succession under this Section 5
shall not be deemed to be a termination of your employment hereunder.
(b) The terms of this Agreement and all of your rights hereunder
shall inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successor, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
<PAGE>
(i) "Restricted Business" shall mean any business related to (i)
advertising, marketing, media placement or banner serving, (ii) enterprise
software applications and/or enterprise integration relating to online or
traditional (including, without limitation, television, print, direct mail,
radio or the like) advertising, marketing, media placement or banner serving or
(iii) the transacting of business, or shopping, purchasing, or subscribing to or
registering for services, products, programs or information, or downloading or
obtaining software programs or information; or participating in other similar
types of transactions, in each case which specifically arise from banners served
by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A) all of
the countries of the world or (B) if (A) is found unenforceable, the countries
in which the Company's products are available during the term of the non-compete
obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements made
by the Company with you in and pursuant to the Reorganization Agreement, (ii)
the issuance by the Company to you of the New Stock Option, (iii) the Company's
willingness to enter into the Reorganization Agreement, and (iv) the
consideration payable to you hereunder, you agree that until: (A) the three (3)
year anniversary of the Effective Time or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a Restricted Business in a
Restricted Territory. It is agreed that ownership of no more than two percent
(2%) of the outstanding voting stock of a publicly-traded or privately-held
corporation shall not constitute a violation of this section. It is further
agreed that the foregoing consideration is not intended to constitute liquidated
damages for a violation of this section.
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended to,
divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date, or induce or attempt to
induce any such employee to terminate his or her employment with the Company, or
any of its affiliates.
(d) REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 6 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH THE
TERMS AND PROVISIONS OF THIS SECTION 6 IN ANY RESPECT, AND YOU HAVE BEEN GIVEN
NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE COMPANY,
OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE
RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF. IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU
<PAGE>
HEREBY WAIVE ANY CLAIM OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF
THE TERMS AND PROVISIONS OF THIS SECTION 6 THAT THE COMPANY, OR ANY OF ITS
AFFILIATES, HAS AN ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN
ADEQUATE REMEDY FOR SUCH VIOLATION OR BREACH.
(e) Severability. The parties intend that the covenants contained in
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state and other political subdivision of each country
in the Restricted Territory. Except for geographic coverage, each separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
7. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect to the subject matter hereof and thereof, and
supersede any other written or oral negotiations, agreements, understandings,
representations or practices concerning such subject matter hereof (including
without limitation any employment agreement or offer letter extended by the
Company at any time). In the event of any conflict between the provisions
hereof and the provisions of the Confidential Information and Invention
Assignment Agreement the, provisions hereof shall control.
8. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: Gregory R. Raifman
(b) If to you: To the address for notice set forth on the
signature page hereto or to such other
address as any party hereto may hereafter
designate by notice given as herein
provided.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
Santa Clara County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
10. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
<PAGE>
11. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
12. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
13. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
14. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to either party upon any breach or default of the other
party hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
15. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Gregory R. Raifman
------------------------------------------
Gregory R. Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
_______________________________________
Ruiqing "Barclay" Jiang
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Gregory R. Raifman
------------------------------------------
Gregory R. Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
24 day of March, 1999.
/s/ Ruiqing "Barclay" Jiang
- ---------------------------------------
Ruiqing "Barclay" Jiang
Address for notices:
655 Bonanza CT.
- ---------------------------------
Sunnyvale, CA 94087
- ---------------------------------
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
__________________________________________
Gregory R. Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
24 day of March, 1999.
/s/ Ruiqing "Barclay" Jiang
- ---------------------------------------
Ruiqing "Barclay" Jiang
Address for notices:
655 Bonanza CT.
- ---------------------------------
Sunnyvale, CA 94087
- ---------------------------------
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Gregory R. Raifman
------------------------------------------
Gregory R. Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
_______________________________________
Ruiqing "Barclay" Jiang
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
EXHIBIT G
---------
Form of Consulting Agreement - Shuangli Cao
<PAGE>
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
March 24, 1999
Mr. Shuangli Cao
Netranscend Software, Inc.
655 Bonanza Court
Sunnyvale, California 94087
Dear Shuangli:
I am very pleased to offer you the position of consultant to Internet Extra
Corporation (the "Company") commencing on the effectiveness of the merger
between Netranscend Software, Inc. ("Netranscend") and the Company. We at the
Company are delighted that you have decided to join our efforts and help
MediaPlex become a success. I would like to take this opportunity to set out
the terms of our relationship more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered in
connection with the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of March 8, 1999, by and among the Company, Netranscend
and Ruiquing "Barclay" Jiang, and all capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Reorganization Agreement.
Your relationship with the Company under this Agreement shall become effective
as of the Effective Time of the Merger. In the event that the Reorganization
Agreement is terminated prior to the Effective Time of the Merger, this
Agreement shall terminate and be of no further force and effect.
2. Employment.
(a) Duties. You agree to use your best efforts to perform the services
requested by the Company, including the duties and tasks described on Exhibit A
---------
hereto. You agree to devote such time to these duties as the Company and you
reasonably agree from time to time. Your immediate supervisor is also listed on
Exhibit A.
- ---------
(b) Independent Contractor; No Agency. It is agreed that your
consulting services are made available to the Company on the basis that you will
retain your individual professional status and that your relation ship with the
Company is that of an independent consultant and not that of an employee. You
will not be eligible for any employee benefits, nor will the Company make
deductions from your fees for taxes, insurance, bonds or any other subscription
of any kind. You will use your own discretion in performing the tasks assigned,
within the scope of work specified by the Company. You are not an agent of the
Company and do not have the authority to bind the Company, nor will you hold
yourself out to third parties as having the authority to bind the Company.
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
<PAGE>
3. Compensation.
(a) Cash Compensation. As full and exclusive consideration for all
services to be rendered and performed under this Agreement, and for assigning
the rights to inventions, designs, software, patents, mask-work rights,
trademarks, and copyrights as hereinafter provided, you will be paid at the rate
specified on Exhibit A.
---------
(b) Stock Options. You shall receive, as of the Effective Time,
options (the "New Stock Options") to acquire 20,000 shares of Common Stock of
the Company, at an exercise price equal to $0.50 per share. One-fourth of such
shares shall become exercisable on the first anniversary of the Effective Time,
and an additional 1/16th of such shares become exercisable on the same day of
each third month during the three (3) years thereafter or until this Agreement
is earlier terminated. All other terms governing such options shall be set out
in the Company's standard option agreement and stock option plan.
(c) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its consultants) in the
performance of your duties and responsibilities under this Agreement; provided,
--------
that you shall properly account for such expenses in accordance with Company
policies and procedures. Any necessary air travel shall be coach class
domestically and business class internationally.
4. Term. Either you or the Company may terminate this Agreement at any
time for any reason or no reason, with or without cause. Notwithstanding the
foregoing, the provisions of Section 6 shall survive any termination of this
Agreement.
5. Assignment
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise), or to all or substantially all of the Company's business and/or
assets, shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of such succession. For all purposes of and under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement required by this
Section 5, or which otherwise becomes bound by the terms of this Agreement by
operation of law. Any such assumption and/or succession under this Section 5
shall not be deemed to be a termination of your relationship with the Company
hereunder.
(b) The terms of this Agreement and all of your rights hereunder shall
inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successor, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
(i) "Restricted Business" shall mean any business related
to (i) advertising, marketing, media placement or banner serving, (ii)
enterprise software applications and/or enterprise integration relating to
online or traditional (including, without limitation, television, print, direct
mail, radio or the like)
<PAGE>
advertising, marketing, media placement or banner serving or (iii) the
transacting of business; shopping, purchasing, or subscribing to or registering
for services, products, programs or information; downloading or obtaining
software programs or information; or participating in other similar types of
transactions which specifically arise from banners served by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A)
all of the countries of the world or (B) if (A) is found unenforceable, the
countries in which the Company's products are available during the term of the
non-compete obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements
made by the Company in and pursuant to the Reorganization Agreement, (ii) the
issuance by the Company to you of the New Stock Options, (iii) the Company's
willingness to enter into the Reorganization Agreement, and (iv) the
consideration payable to you hereunder, you agree that until: (A) the three (3)
year anniversary of the Effective Time or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a Restricted Business in a
Restricted Territory. It is agreed that ownership of no more than two percent
(2%) of the outstanding voting stock of a publicly-traded or privately-held
corporation shall not constitute a violation of this section. It is further
agreed that the foregoing consideration is not intended to constitute liquidated
damages for a violation of this section.
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended
to, divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date, or induce or attempt to
induce any such employee to terminate his or her employment with the Company, or
any of its affiliates.
(d) REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 6 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH
THE TERMS AND PROVISIONS OF THIS SECTION 6 IN ANY RESPECT, AND YOU HAVE BEEN
GIVEN NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE
COMPANY, OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER
INJUNCTIVE RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS
HEREOF. IN FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU HEREBY WAIVE
ANY CLAIM OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF THE TERMS AND
PROVISIONS OF THIS SECTION 6 THAT THE COMPANY, OR ANY OF ITS
<PAGE>
AFFILIATES, HAS AN ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN
ADEQUATE REMEDY FOR SUCH VIOLATION OR BREACH.
(e) Severability. The parties intend that the covenants contained in
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state and other political subdivision of each country
in the Restricted Territory. Except for geographic coverage, each separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
7. Compliance with Applicable Laws. You agree to comply with all
applicable laws and regulations. You shall hold harmless and indemnify the
Company for any damages resulting to the Company from a breach of this paragraph
by you.
8. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect to the subject matter hereof and thereof, and
supersede any other written or oral negotiations, agreements, understandings,
representations or practices concerning such subject matter hereof (including
without limitation any employment agreement or offer letter extended by the
Company at any time). In the event of any conflict between the provisions
hereof and the provisions of the Confidential Information and Invention
Assignment Agreement the, provisions hereof shall control.
9. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: Gregory R. Raifman
(b) If to you: To the address for notice set forth on the
signature page hereto or to such other
address as any party hereto may hereafter
designate by notice given as herein
provided.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
Santa Clara County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
11. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
<PAGE>
12. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
13. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
14. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
15. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to either party upon any breach or default of the other
party hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
16. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
__________________________________________
Greg Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
/s/ Shuangli Coa
- ---------------------------------
Shuangli Cao
Address for notices:
6155 Regency Lakes Dr
- ---------------------------------
San Jose CA 95129
- ---------------------------------
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO CONSULTING AGREEMENT]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Greg R. Raifman
-----------------------------------------------
Greg Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
- ---------------------------------
Shuangli Cao
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO CONSULTING AGREEMENT]
<PAGE>
EXHIBIT A
---------
Consulting Agreement between Internet Extra and Shuangli Cao
Duties:
Supervisor:
Compensation:
<PAGE>
EXHIBIT H
---------
Form of Employment Offer - Hung-liang "Andy" Yang
<PAGE>
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
March __, 1999
Mr. Hung-Liang Yang
Netranscend Software, Inc.
655 Bonanza Court
Sunnyvale, California 94087
Dear Hung-Liang:
I am very pleased to offer you the position of _________________ with
Internet Extra Corporation (the "Company") commencing on the effectiveness of
the merger between Netranscend Software, Inc. ("Netranscend") and the Company.
We at the Company are delighted that you have decided to join our enterprise and
help MediaPlex become a success. I would like to take this opportunity to set
out the terms of your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered in
connection with the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of March, __, 1999, by and among the Company, Netranscend
and Ruiqing "Barclay" Jiang, and all capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Reorganization Agreement.
Your employment under this Agreement shall become effective as of the Effective
Time of the Merger. In the event that the Reorganization Agreement is
terminated prior to the Effective Time of the Merger, this Agreement shall
terminate and be of no further force and effect.
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, ____________ for the Company, subject at all times and in all cases
and respects to the ultimate control and direction of the Company. In such
capacity, you shall perform all such services, accept all such responsibilities
and discharge all such duties and responsibilities as are consistent and
commensurate with your position and as may be assigned to or required of you
from time to time by the Company. You shall perform such services, accept such
responsibilities and discharge such duties within the policies and guidelines
established from time to time by the Company, subject at all times and in all
cases and respects to the ultimate control and direction of the Company. The
Company shall have the right to review and revise your services,
responsibilities and duties at any time and from time to time in any and all
respects.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which consent will not be
unreasonably withheld.
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
<PAGE>
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
March __, 1999
Mr. Hung-Liang Yang
Netranscend Software, Inc.
655 Bonanza Court
Sunnyvale, California 94087
Dear Hung-Liang:
I am very pleased to offer you the position of _________________ with
Internet Extra Corporation (the "Company") commencing on the effectiveness of
the merger between Netranscend Software, Inc. ("Netranscend") and the Company.
We at the Company are delighted that you have decided to join our enterprise and
help MediaPlex become a success. I would like to take this opportunity to set
out the terms of your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered in
connection with the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of March, __, 1999, by and among the Company, Netranscend
and Ruiqing "Barclay" Jiang, and all capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Reorganization Agreement.
Your employment under this Agreement shall become effective as of the Effective
Time of the Merger. In the event that the Reorganization Agreement is
terminated prior to the Effective Time of the Merger, this Agreement shall
terminate and be of no further force and effect.
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, ____________ for the Company, subject at all times and in all cases
and respects to the ultimate control and direction of the Company. In such
capacity, you shall perform all such services, accept all such responsibilities
and discharge all such duties and responsibilities as are consistent and
commensurate with your position and as may be assigned to or required of you
from time to time by the Company. You shall perform such services, accept such
responsibilities and discharge such duties within the policies and guidelines
established from time to time by the Company, subject at all times and in all
cases and respects to the ultimate control and direction of the Company. The
Company shall have the right to review and revise your services,
responsibilities and duties at any time and from time to time in any and all
respects.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which consent will not be
unreasonably withheld.
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
<PAGE>
3. Compensation.
(a) Base Salary and Incentive Compensation. Your base salary shall be
paid at the annual rate of $___________ ("Base Salary"), payable in accordance
with the Company's standard payroll practices. Unless otherwise specified
herein, the Company shall make such deductions, withholdings and other payments
from all sums payable pursuant to this Agreement which you request or that are
required by law for taxes and other charges.
(b) Stock Options. You shall receive, as of the Effective Time,
options (the "New Stock Options") to acquire 30,000 shares of Common Stock of
the Company, at an exercise price equal to $0.50 per share. One-fourth of such
shares shall become exercisable on the first anniversary of the Effective Time,
and an additional 1/16th of such shares become exercisable on the same day of
each third month during the three (3) years thereafter or until this Agreement
is earlier terminated. All other terms governing such options shall be set out
in the Company's standard option agreement and stock option plan.
(c) Benefits Plans. You will be entitled to participate in or receive
benefits under the Company's employee benefit plans and policies in effect from
time to time in which you are eligible to participate, subject to the applicable
terms and conditions of the particular benefit plan. The Company may change,
amend, modify or terminate to the extent legally allowable, any benefit plan
from time to time and without prior notice. To the extent benefits provided by
the Company are affected by seniority (i.e. length of service), you shall be
credited for time you served at Netranscend, to the fullest extent permitted by
law and consistent with the Company's current benefit plans.
(d) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its employees) in the performance
of your duties and responsibilities under this Agreement; provided, that you
--------
shall properly account for such expenses in accordance with Company policies and
procedures. Any necessary air travel shall be coach class domestically and
business class internationally.
(e) Vacation and Holidays. You shall be entitled to __________ weeks
paid vacation and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
4. Term. You shall be an "at-will" employee of the Company. Either you
or the Company may terminate this Agreement at any time for any reason or no
reason, with or without cause. Notwithstanding the foregoing, the provisions of
Section 6 shall survive any termination of this Agreement.
5. Assignment
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise), or to all or substantially all of the Company's business and/or
assets, shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of such succession. For all purposes of and under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement required by this
Section 5, or which otherwise becomes bound by the terms of this
<PAGE>
Agreement by operation of law. Any such assumption and/or succession under this
Section 5 shall not be deemed to be a termination of your employment hereunder.
(b) The terms of this Agreement and all of your rights hereunder shall
inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successor, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
(i) "Restricted Business" shall mean any business related
to (i) advertising, marketing, media placement or banner serving, (ii)
enterprise software applications and/or enterprise integration relating to
online or traditional (including, without limitation, television, print, direct
mail, radio or the like) advertising, marketing, media placement or banner
serving or (iii) the transacting of business; shopping, purchasing, or
subscribing to or registering for services, products, programs or information;
downloading or obtaining software programs or information; or participating in
other similar types of transactions which specifically arise from banners served
by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A)
all of the countries of the world or (B) if (A) is found unenforceable, the
countries in which the Company's products are available during the term of the
non-compete obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements
made by the Company in and pursuant to the Reorganization Agreement, (ii) the
issuance by the Company to you of the New Stock Options, (iii) the Company's
willingness to enter into the Reorganization Agreement, and (iv) the
consideration payable to you hereunder, you agree that until: (A) the three (3)
year anniversary of the Effective Time or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a Restricted Business in a
Restricted Territory. It is agreed that ownership of no more than two percent
(2%) of the outstanding voting stock of a publicly-traded or privately-held
corporation shall not constitute a violation of this section. It is further
agreed that the foregoing consideration is not intended to constitute liquidated
damages for a violation of this section.
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended
to, divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date,
<PAGE>
or induce or attempt to induce any such employee to terminate his or her
employment with the Company, or any of its affiliates.
(d) REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 6 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH
THE TERMS AND PROVISIONS OF THIS SECTION 6 IN ANY RESPECT, AND YOU HAVE BEEN
GIVEN NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE
COMPANY, OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER
INJUNCTIVE RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS
HEREOF. IN FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU HEREBY WAIVE
ANY CLAIM OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF THE TERMS AND
PROVISIONS OF THIS SECTION 6 THAT THE COMPANY, OR ANY OF ITS AFFILIATES, HAS AN
ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY
FOR SUCH VIOLATION OR BREACH.
(e) Severability. The parties intend that the covenants contained in
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state and other political subdivision of each country
in the Restricted Territory. Except for geographic coverage, each separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
7. Compliance with Applicable Laws. You agree to comply with all
applicable laws and regulations. You shall hold harmless and indemnify the
Company for any damages resulting to the Company from a breach of this paragraph
by you.
8. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect to the subject matter hereof and thereof, and
supersede any other written or oral negotiations, agreements, understandings,
representations or practices concerning such subject matter hereof (including
without limitation any employment agreement or offer letter extended by the
Company at any time). In the event of any conflict between the provisions
hereof and the provisions of the Confidential Information and Invention
Assignment Agreement the, provisions hereof shall control.
9. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: Gregory R. Raifman
<PAGE>
(b) If to you: To the address for notice set forth on the
signature page hereto or to such other address as
any party hereto may hereafter designate by notice
given as herein provided.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
Santa Clara County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
11. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
12. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
13. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
14. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
15. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to either party upon any breach or default of the other
party hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
16. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
_________________________________________
Greg Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
_______________________________________
Hung-Liang Yang
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Greg R. Raifman
-----------------------------------------
Greg Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
_______________________________________
Hung-Liang Yang
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Greg R. Raifman
-----------------------------------------
Greg Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
_______________________________________
Hung-Liang Yang
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
EXHIBIT I
---------
Form of Escrow Agreement
<PAGE>
ESCROW AGREEMENT
This ESCROW AGREEMENT (the "Agreement") is made and entered into as of
March 25, 1999 by and among (i) Internet Extra Corporation, a California
corporation ("IEC"), (ii) Ruiqing "Barclay" Jiang, both as Principal Shareholder
(the "Principal Shareholder") and as shareholder representative (the
"Shareholder Representative") for the sole shareholder of Netranscend Software,
Inc., a California corporation ("Netranscend") and (iii) Greg Raifman, the
corporate secretary of IEC, as escrow agent (the "Escrow Agent"). Capitalized
terms not defined herein shall have the meanings ascribed to them in the
Reorganization Agreement (as defined below).
Recitals
WHEREAS, IEC, Netranscend and the Principal Shareholder have entered into
an Agreement and Plan of Reorganization, of even date herewith (the
"Reorganization Agreement") whereby IEC shall acquire Netranscend through the
statutory merger of Netranscend with and into IEC (the "Merger");
WHEREAS, pursuant to the Merger, among other things, all of the issued and
outstanding shares of common stock of Netranscend shall be converted into the
right to receive cash and shares of IEC Common Stock;
WHEREAS, pursuant to the Reorganization Agreement, a portion of the shares
of IEC Common Stock otherwise payable by IEC in connection with the Merger shall
be placed in escrow and held by the Escrow Agent pursuant to the escrow terms
hereof and the release of such shares shall be contingent upon certain events
and conditions;
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
Agreement
1. Escrow Fund. At the Closing, the Principal Shareholder and IEC shall
deliver to the Escrow Agent the Escrow Shares, and such deposit with the Escrow
Agent shall constitute the Escrow Fund.
2. Escrow Period; Delivery of Balance of Escrow Fund Upon Termination of
Escrow Period. Subject to the terms hereof, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m. PST, two (2) years after the Closing Date (the "Escrow Period"); provided,
however, that the Escrow Period shall not terminate with respect to such
remaining portion of the Escrow Fund (or some portion thereof) that in the
reasonable judgement of IEC, subject to the objection of the Shareholder Agent
(as defined below) and the subsequent arbitration of the matter in the manner
provided herein, is necessary to satisfy (x) any then pending unsatisfied claims
specified in any Officer's Certificate delivered to the Escrow Agent prior to
the termination of the Escrow Period and (y) any unsatisfied claims specified in
any Officer's
<PAGE>
Certificate delivered to the Escrow Agent prior to termination of the Escrow
Period with respect to facts and circumstances existing prior to the termination
of such Escrow Period. As soon as all such claims have been resolved, the Escrow
Agent shall deliver to the Principal Shareholder the remaining portion of the
Escrow Fund not required to satisfy such claims. Notwithstanding the above, all
Escrow Shares shall be released from the Escrow Fund within five (5) years of
the Closing Date except in the event that there is a bona fide dispute over to
whom the Escrow Shares should be so released.
3. Protection of Escrow Fund. The Escrow Agent shall hold and safeguard
the Escrow Fund during the Escrow Period, shall treat such fund as a trust fund
in accordance herewith and not as the property of IEC and shall hold and dispose
of the Escrow Fund only in accordance herewith. Any shares of IEC Common Stock
or other equity securities issued or distributed by IEC (including shares issued
upon a stock split) ("New Shares") in respect of the Escrow Shares which have
not been released from the Escrow Fund shall be added to the Escrow Fund and
become a part thereof. New Shares issued in respect of Escrow Shares which have
been released from the Escrow Fund shall not be added to the Escrow Fund but
shall be distributed to record holder of such shares. Cash dividends on IEC
Common Stock shall not be added to the Escrow Fund but shall be distributed to
the Principal Shareholder. As the record holder of the Escrow Shares, the
Escrow Agent shall vote such shares in accordance with the instructions of the
Principal Shareholder and shall promptly deliver copies of all proxy
solicitation materials to the Principal Shareholder. IEC shall show the Escrow
Shares as issued and outstanding on its balance sheet.
4. Claims Upon the Escrow Fund. Upon receipt by the Escrow Agent at any
time on or before the last day of the Escrow Period of a certificate signed by
any officer of IEC (an "Officer's Certificate"): (A) stating that IEC has paid
or properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentations, breach of warranty or covenant to which such items is
related, the Escrow Agent shall, subject to the provisions of the Escrow
Instructions, deliver to IEC out of the Escrow Fund as promptly as practicable
(subject to Section 5 hereof), such number of shares of IEC Common Stock held in
the Escrow Fund with a value equal to such Losses. For the purposes of
determining the number of shares of IEC Common Stock to be delivered to IEC out
of the Escrow Fund, the shares of IEC Common Stock shall be valued at the fair
market value as determined in good faith by the IEC Board of Directors.
5. Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to the Shareholder Agent (as defined herein), and for a
period of thirty (30) days after such delivery, the Escrow Agent shall make no
delivery to IEC of any Escrow Shares unless the Escrow Agent shall have received
written authorization from the Shareholder Agent to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of shares of IEC Common Stock from the Escrow Fund, provided that no
such payment or delivery may be made if the Shareholder Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the expiration
of such thirty (30) day period.
<PAGE>
6. Resolution of Claims; Arbitration.
(i) In case the Shareholder Representative shall so object in
writing to any claim or claims made in any Officer's Certificate, the
Shareholder Representative and IEC shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholder Representative and IEC should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and distribute Escrow Shares in accordance with the terms
thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either IEC or the Shareholder Representative may demand arbitration
of the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by one
arbitrator mutually agreeable to IEC and the Shareholder Representative. In the
event that within forty-five (45) days after submission of any dispute to
arbitration, IEC and the Shareholder Representative cannot mutually agree on one
arbitrator, IEC and the Shareholder Representative shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrator or arbitrators, as the case may be, shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgement of the arbitrator or majority of the three arbitrators, as the case
may be, to discover relevant information from the opposing parties about the
subject matter of the dispute. The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the extent as a court of competent law or equity, should the
arbitrator or a majority of the three arbitrators, as the case may be, determine
that discovery was sought without substantial justification or that discovery
was refused or objected to without substantial justification. The decision of a
the arbitrator or a majority of the three arbitrators, as the case may be, as to
the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and notwithstanding
anything to the contrary herein, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. Any such arbitration shall be held in
San Francisco, California under the rules then in effect of the American
Arbitration Association. The arbitrator(s) shall determine how all expenses
relating to the arbitration shall be paid, including without limitation, the
respective expenses of each party, the fees of each arbitrator and the
administrative fee of the American Arbitration Association.
<PAGE>
7. Shareholder Representative; Power of Attorney. In the event that the
Merger is approved, effective upon such vote, the Principal Shareholder shall
act as Shareholder Representative until such time as he shall appoint another
person as agent and attorney-in-fact for the Principal Shareholder. As used
herein, the term "Shareholder Representative" shall refer to the Principal
Shareholder, and such agent and attorney-in-fact , if any is appointed. The
Shareholder Representative shall have the authority to give and receive notices
and communications, to authorize delivery to IEC of Escrow Shares from the
Escrow Fund in satisfaction of claims by IEC, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of Shareholder Representative for the accomplishment of the foregoing.
Such agency may be changed by the Principal Shareholder from time to time upon
not less than thirty (30) days prior written notice to IEC. No bond shall be
required of the Shareholder Representative, and the Shareholder Representative
shall not receive compensation for his or her services. Notices or
communications to or from the Shareholder Representative shall constitute notice
to or from the Principal Shareholder. The Shareholder Representative shall not
be liable for any act done or omitted hereunder as Shareholder Representative
while acting in good faith and in the exercise of reasonable judgment. The
Principal Shareholder shall indemnify the Shareholder Representative and hold
the Shareholder Representative harmless against any loss, liability or expense
incurred without negligence or bad faith on the part of the Shareholder
Representative and arising out of or in connection with the acceptance or
administration of the Shareholder Representative's duties hereunder, including
the reasonable fees and expenses of any legal counsel retained by the
Shareholder Representative.
8. Actions of the Shareholder Representative. A decision, act, consent
or instruction of the Shareholder Representative shall constitute a decision of
the Principal Shareholder and shall be final, binding and conclusive upon the
Principal Shareholder, and the Escrow Agent and IEC may rely upon any such
decision, act, consent or instruction of the Shareholder Representative as being
the decision, act, consent or instruction of the Principal Shareholder. The
Escrow Agent and IEC are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Shareholder Representative.
9. Third-Party Claims. In the event IEC becomes aware of a third-party
claim which IEC believes may result in a demand against the Escrow Fund, IEC
shall notify the Shareholder Representative of such claim, and the Shareholder
Representative and the Principal Shareholder (if applicable) shall be entitled,
at their expense, to participate in any defense of such claim. IEC shall have
the right in its sole discretion to settle any such claim; provided, however,
that except with the consent of the Shareholder Representative, no settlement of
any such claim with third-party claimants shall be determinative of the amount
of any claim against the Escrow Fund. In the event that the Shareholder
Representative has consented to any such settlement, the Shareholder
Representative shall have no power or authority to object to the amount of any
claim by IEC against the Escrow Fund with respect to such settlement.
<PAGE>
10. Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and in any additional written
escrow instructions which the Escrow Agent may receive after the date of this
Agreement which are signed by an officer of IEC and the Shareholder
Representative, and may rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have been
signed or presented by the proper party or parties. The Escrow Agent shall not
be liable for any act done or omitted hereunder as Escrow Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case the Escrow Agent obeys or complies with any such order, judgment or decree
of any court, the Escrow Agent shall not be liable to any of the parties hereto
or to any other person by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Reorganization Agreement, this Agreement or
any documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to the Reorganization
Agreement, this Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Escrow Instructions, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Escrow Instructions that the Escrow Agent shall in good
faith believe to be genuine, nor will the Escrow Agent be liable or responsible
for forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with the
legal counsel in connection with Escrow Agent's duties under the Escrow
Instructions and shall be fully protected in any act taken, suffered, or
permitted by him/her in good faith in accordance with the advice of counsel. The
Escrow Agent is not responsible for determining and verifying the authority of
any person acting or purporting to act on behalf of any party to the
Reorganization Agreement or this Agreement.
<PAGE>
(vi) If any controversy arises between the parties to the
Reorganization Agreement, this Agreement, or with any other party, concerning
the subject matter of the Escrow Instructions, its terms or conditions, the
Escrow Agent will not be required to determine the controversy or to take any
action regarding it. The Escrow Agent may hold all documents and shares of IEC
Common Stock and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in the Escrow Agent's
discretion, the Escrow Agent may be required, despite what may be set forth
elsewhere in the Escrow Instructions. In such event, the Escrow Agent will not
be liable for damages. Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the parties to answer and litigate any claims
and rights among themselves. The Escrow Agent is authorized to deposit with the
clerk of the court all documents and shares of IEC Common Stock held in escrow,
except all cost, expenses, charges and reasonable attorney fees incurred by the
Escrow Agent due to the interpleader action and which the parties jointly and
severally agree to pay. Upon initiating such action, the Escrow Agent shall be
fully released and discharged of and from all obligations and liability imposed
by the terms of the Escrow Instructions.
(vii) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against any
and all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, including allocated costs of in-house
counsel and disbursements that may be imposed on Escrow Agent or incurred by
Escrow Agent in connection with the performance of his/her duties under the
Escrow Instructions, including but not limited to any litigation arising from
the Escrow Instructions or involving its subject matter other than arising out
of its negligence or willful misconduct.
(viii) The Escrow Agent may resign at any time upon giving at least
fifteen (15) days written notice to IEC and the Shareholder Representative;
provided, however, that no such resignation shall become effective until the
appointment of a successor escrow agent which shall be accomplished as follows:
the parties shall use their best efforts to mutually agree on a successor escrow
agent within fifteen (15) days after receiving such notice. If the parties fail
to agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the state of California. The successor escrow agent shall execute and deliver
an instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. Upon
appointment of a successor escrow agent, the Escrow Agent shall be discharged
from any further duties and liability under the Escrow Instructions.
11. Escrow Agent Fees. All fees of the Escrow Agent for performance of
its duties hereunder shall be paid by IEC in accordance with the standard fee
schedule of the Escrow Agent. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by the Escrow Instructions. In the event
that the conditions of the Escrow Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in the Escrow Instructions
or if the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to the Escrow Fund or its subject matter, the Escrow
Agent
<PAGE>
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, including allocated costs of in-house counsel,
and expenses occasioned by such default, delay, controversy or litigation. IEC
promises to pay these sums upon demand.
12. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties entitled at the
following addresses, or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties thereto:
(i) If to IEC to:
Internet Extra Corporation
131 Stuart Street, Fourth Floor
San Francisco, California 94105
Attention: Gregory R. Raifman
Telephone No.: (415) 808-1900
Facsimile No.: (415) 808-1901
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Aaron J. Alter, Esq.
Telephone No.: (650) 490-9300
Facsimile No.: (650) 493-6811
(ii) If to the Principal Shareholder or the Shareholder
Representative, to:
Netranscend Software Inc.
655 Bonanza Court
Sunnyvale, CA 94087
Telephone No.: (408) 517-2930
Facsimile No.: _________________
Attention: Ruiqing "Barclay" Jiang
<PAGE>
with a copy to:
Heller, Ehrman, White & McAuliffe
2500 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Attention: Peter N. Townshend, Esq.
Telephone No.: (650) 234-4200
Facsimile No.: (650) 234-4299
13. Successors and Assignees. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors and
permitted assignees.
14. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
15. Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
INTERNET EXTRA CORPORATION
a California corporation
By: /s/ Gregory R. Raifman
-------------------------------------------
Gregory R. Raifman
Chairman and Chief Executive Officer
PRINCIPAL SHAREHOLDER
Ruiqing "Barclay" Jiang
an individual
______________________________________________
SHAREHOLDER REPRESENTATIVE
Ruiqing "Barclay" Jiang
an individual
______________________________________________
ESCROW AGENT
By: /s/ Gregory R. Raifman
-------------------------------------------
Gregory R. Raifman, Secretary of
Internet Extra Corporation, a California
corporation
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
INTERNET EXTRA CORPORATION
a California corporation
By: ____________________________________________
Gregory R. Raifman
Chairman and Chief Executive Officer
PRINCIPAL SHAREHOLDER
Ruiqing "Barclay" Jiang
an individual
/s/ Ruiquing "Barclay" Jiang
------------------------------------------------
SHAREHOLDER REPRESENTATIVE
Ruiqing "Barclay" Jiang
an individual
/s/ Ruiquing "Barclay" Jiang
------------------------------------------------
ESCROW AGENT
By:_____________________________________________
Gregory R. Raifman, Secretary of
Internet Extra Corporation, a California
corporation
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
INTERNET EXTRA CORPORATION
a California corporation
By: /s/ Gregory R. Raifman
-------------------------------------------
Gregory R. Raifman
Chairman and Chief Executive Officer
PRINCIPAL SHAREHOLDER
Ruiqing "Barclay" Jiang
an individual
______________________________________________
SHAREHOLDER REPRESENTATIVE
Ruiqing "Barclay" Jiang
an individual
______________________________________________
ESCROW AGENT
By: /s/ Gregory R. Raifman
-------------------------------------------
Gregory R. Raifman, Secretary of
Internet Extra Corporation, a California
corporation
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
INTERNET EXTRA CORPORATION
a California corporation
By: ____________________________________________
Gregory R. Raifman
Chairman and Chief Executive Officer
PRINCIPAL SHAREHOLDER
Ruiqing "Barclay" Jiang
an individual
/s/ Ruiquing "Barclay" Jiang
------------------------------------------------
SHAREHOLDER REPRESENTATIVE
Ruiqing "Barclay" Jiang
an individual
/s/ Ruiquing "Barclay" Jiang
------------------------------------------------
ESCROW AGENT
By:_____________________________________________
Gregory R. Raifman, Secretary of
Internet Extra Corporation, a California
corporation
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MEDIAPLEX, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Jon L. Edwards and Gregory Raifman each hereby certifies:
(1) They are the President and Secretary, respectively, of Mediaplex,
Inc., a corporation organized and existing under the General Corporation Law of
the State of Delaware (the "General Corporation Law");
(2) The Amended and Restated Certificate of Incorporation of this
corporation, originally filed on August 16, 1999, is hereby amended and restated
in its entirety to read as follows:
FIRST: The name of this corporation is Mediaplex, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, County of New
Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The Corporation is authorized to issue two classes of stock to be
designated respectively Common Stock and Preferred Stock. The
total number of shares of all classes of stock which the
Corporation has authority to issue is one hundred sixty million
(160,000,000), consisting of one hundred fifty million
(150,000,000) shares of Common Stock, $0.0001 par value (the
"Common Stock"), and ten million (10,000,000) shares of Preferred
Stock, $0.0001 par value (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized subject
to limitations prescribed by law, to fix by resolution or
resolutions the designations, powers, preferences and rights, and
the qualifications, limitations or restrictions thereof, of each
such series of Preferred Stock, including without limitation
authority to fix by resolution or resolutions, the dividend
rights, dividend rate, conversion rights, voting rights, rights
and terms of redemption (including
<PAGE>
sinking fund provisions), redemption price or prices, and
liquidation preferences of any wholly unissued series of
Preferred Stock, and the number of shares constituting any such
series and the designation thereof, or any of the foregoing.
The Board of Directors is further authorized to increase (but not
above the total number of authorized shares of the class) or
decrease (but not below the number of shares of any such series
then outstanding) the number of shares of any series, the number
of which was fixed by it, subsequent to the issue of shares of
such series then outstanding, subject to the powers, preferences
and rights, and the qualifications, limitations and restrictions
thereof stated in the resolution of the Board of Directors
originally fixing the number of shares of such series. If the
number of shares of any series is so decreased, then the shares
constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the
number of shares of such series.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The election of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
SEVENTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of
the Corporation.
EIGHTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is
expressly authorized to adopt, alter, amend or repeal the Bylaws
of the Corporation.
NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended,
no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director.
The Corporation may indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or
intestate is or was a director, officer or employee of the
Corporation or any predecessor of the Corporation or serves or
served at any other enterprise as a director, officer or employee
at the request of the Corporation or any predecessor to the
Corporation.
-2-
<PAGE>
Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Amended and Restated
Certificate of Incorporation inconsistent with this Article,
shall eliminate or reduce the effect of this Article in respect
of any matter occurring, or any cause of action, suit or claim
that, but for this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
TENTH: At the election of directors of the Corporation, each holder of
stock of any class or series shall be entitled to one vote for
each share held. No stockholder will be permitted to cumulate
votes at any election of directors.
The number of directors which constitute the whole Board of
Directors of the Corporation shall be fixed exclusively by one or
more resolution adopted from time to time by the Board of
Directors. The Board of Directors shall be divided into three
classes designated as Class I, Class II, and Class III,
respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders
following the date hereof, the term of office of the Class I
directors shall expire and Class I directors shall be elected for
a full term of three years. At the second annual meeting of
stockholders following the date hereof, the term of office of the
Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual
meeting of stockholders following the date hereof, the term of
office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At
each succeeding annual meeting of stockholders, directors shall
be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Vacancies created by newly created directorships, created in
accordance with the Bylaws of this Corporation, may be filled by
the vote of a majority, although less than a quorum, of the
directors then in office, or by a sole remaining director.
ELEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the laws of the State of Delaware) outside of the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the
Corporation.
The stockholders of the Corporation may not take any action by
written consent in lieu of a meeting, and must take any actions
at a duly called annual
-3-
<PAGE>
or special meeting of stockholders and the power of stockholders
to consent in writing without a meeting is specifically denied.
TWELFTH: Advance notice of new business and stockholder nominations for
the election of directors shall be given in the manner and to the
extent provided in the Bylaws of the Corporation.
THIRTEENTH: Notwithstanding any other provisions of this Restated Certificate
of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of the capital stock required by
law or this Restated Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds (2/3) of
the combined voting power of all of the then-outstanding shares
of the Corporation entitled to vote shall be required to alter,
amend or repeal Articles NINTH, TENTH, ELEVENTH or TWELFTH
hereof, or this Article THIRTEENTH, or any provision thereof or
hereof, unless such amendment shall be approved by a majority of
the directors of the Corporation.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
(3) This Amended and Restated Certificate of Incorporation has been duly
adopted by the Board of Directors of this Corporation in accordance with
Sections 242 and 245 of the General Corporation Law.
(4) This Amended and Restated Certificate of Incorporation has been duly
approved, in accordance with Section 242 of the General Corporation Law, by vote
of the holders of a majority of the outstanding stock entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated
Certificate of Incorporation on this ____ day of September, 1999.
________________________________________
Jon L. Edwards
President
__________________________________
Gregory R. Raifman
Secretary
-4-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
MEDIAPLEX, INC.
A Delaware Corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES................................................. 1
1.1 REGISTERED OFFICE................................................ 1
1.2 OTHER OFFICES.................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS......................................... 1
2.1 PLACE OF MEETINGS................................................ 1
2.2 ANNUAL MEETING................................................... 1
2.3 SPECIAL MEETING.................................................. 1
2.4 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..................... 2
2.5 QUORUM........................................................... 2
2.6 ADJOURNED MEETING; NOTICE........................................ 2
2.7 VOTING........................................................... 2
2.8 WAIVER OF NOTICE................................................. 3
2.9 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING....................... 3
2.10 NOTICE OF STOCKHOLDERS BUSINESS AND NOMINATION................... 4
2.11 PROXIES.......................................................... 6
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................ 6
ARTICLE III DIRECTORS....................................................... 6
3.1 POWERS........................................................... 6
3.2 NUMBER OF DIRECTORS.............................................. 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.......... 7
3.4 RESIGNATION AND VACANCIES........................................ 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE......................... 8
3.6 FIRST MEETINGS................................................... 8
3.7 REGULAR MEETINGS................................................. 9
3.8 SPECIAL MEETINGS; NOTICE......................................... 9
3.9 QUORUM........................................................... 9
3.10 WAIVER OF NOTICE................................................. 9
3.11 ADJOURNED MEETING; NOTICE........................................ 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................ 10
3.13 FEES AND COMPENSATION OF DIRECTORS............................... 10
3.14 APPROVAL OF LOANS TO OFFICERS.................................... 10
3.15 REMOVAL OF DIRECTORS............................................. 10
ARTICLE IV COMMITTEES....................................................... 11
4.1 COMMITTEES OF DIRECTORS.......................................... 11
4.2 COMMITTEE MINUTES................................................ 11
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.3 MEETINGS AND ACTION OF COMMITTEES................................ 11
ARTICLE V OFFICERS.......................................................... 12
5.1 OFFICERS......................................................... 12
5.2 ELECTION OF OFFICERS............................................. 12
5.3 SUBORDINATE OFFICERS............................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS.............................. 12
5.5 VACANCIES IN OFFICES............................................. 13
5.6 AUTHORITY AND DUTIES OF OFFICERS................................. 13
5.7 LIMITATIONS ON POWERS AND DUTIES OF OFFICERS..................... 13
ARTICLE VI INDEMNITY........................................................ 13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................ 13
6.2 INDEMNIFICATION OF OTHERS........................................ 14
6.3 INSURANCE........................................................ 14
6.4 PREPAYMENT OF EXPENSES........................................... 14
6.5 CLAIMS........................................................... 14
6.6 NON-EXCLUSIVITY OF RIGHTS........................................ 15
6.7 OTHER INDEMNIFICATION............................................ 15
6.8 AMENDMENT OR REPEAL.............................................. 15
ARTICLE VII GENERAL MATTERS................................................. 15
7.1 CHECKS........................................................... 15
7.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS................. 15
7.3 STOCK CERTIFICATES; PARTLY PAID SHARES........................... 15
7.4 SPECIAL DESIGNATION ON CERTIFICATES.............................. 16
7.5 LOST CERTIFICATES................................................ 16
7.6 CONSTRUCTION; DEFINITIONS........................................ 17
7.7 DIVIDENDS........................................................ 17
7.8 FISCAL YEAR...................................................... 17
7.9 SEAL............................................................. 17
7.10 TRANSFER OF STOCK................................................ 17
7.11 STOCK TRANSFER AGREEMENTS........................................ 18
7.12 REGISTERED STOCKHOLDERS.......................................... 18
7.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................... 18
ARTICLE VIII AMENDMENTS..................................................... 18
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
MEDIAPLEX, INC.
A Delaware Corporation
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The Board of Directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the Board of Directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
Special meetings of stockholders for any purpose or purposes may be called
at any time by the President, the Chief Executive Officer, the Chairman, Board
of Directors or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers
<PAGE>
and authority, as expressly provided in a resolution of the Board of Directors,
include the power to call such meetings, but such special meetings may not be
called by any other person or persons.
2.4 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
2.5 QUORUM
------
The holders of at least one-third of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.6 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these Amended
and Restated Bylaws otherwise require, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.7 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these Amended
and Restated Bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
-2-
<PAGE>
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the Certificate of Incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
2.8 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the Certificate of Incorporation or these
Amended and Restated Bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the Certificate of Incorporation or these
Amended and Restated Bylaws.
2.9 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the Board of Directors does not so fix a record date:
A. The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
B. The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
-3-
<PAGE>
2.10 NOTICE OF STOCKHOLDERS BUSINESS AND NOMINATION
----------------------------------------------
A. Annual Meetings of Stockholders.
-------------------------------
(i) Nominations of persons for election to the Board of
Directors of the corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the corporation's notice of meeting delivered pursuant to Section 2.4 of
these Amended and Restated Bylaws; (b) by or at the direction of the Chairman of
the Board or the Board of Directors; or (c) by any stockholder of the
corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in clauses (ii) and (iii) of this paragraph (A) of this
Bylaw and who was a stockholder of record at the time such notice is delivered
to the Secretary of the corporation.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(i) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not less than seventy days nor more than
ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the seventh day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder, including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the corporation's books, and of
such beneficial owner, (ii) the class and number of shares of the corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner and (iii) whether the stockholder or the beneficial owner
intends or is part of a group which intends to solicit proxies from other
stockholders in support of such nomination or proposal. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above.
-4-
<PAGE>
(iii) Notwithstanding anything in the second sentence of
paragraph (A)(ii) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
corporation at least eighty days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the corporation.
B. Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting pursuant to Section
2.4 of these Amended and Restated Bylaws. Nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
the corporation who is entitled to vote at the meeting, who complies with the
notice procedures set forth in this Bylaw and who is a stockholder of record at
the time such notice is delivered to the Secretary of the corporation. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as are specified in the corporation's Notice of Meeting, if the
stockholder's notice as required by paragraph (A)(ii) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the ninetieth day prior to such special meeting and not later
than the close of business on the later of the seventieth day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a new time
period for the giving of a stockholder's notice as described above.
C. General.
-------
(i) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Amended and Restated Bylaws, the chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with the
procedures set forth in this Bylaw and, if any proposed nomination or business
is not in compliance with this Bylaw, to declare that such defective proposal or
nomination shall be disregarded.
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(ii) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
2.11 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the Certificate of Incorporation or these Amended and
Restated Bylaws relating to action required to be approved by the stockholders
or by the outstanding shares, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of the Board of Directors.
3.2 NUMBER OF DIRECTORS
-------------------
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The authorized number of directors which constitute the entire Board of
Directors shall be six (6). The number of directors constituting the entire
Board of Directors may be changed by an amendment to this Bylaw duly adopted by
resolution of the Board of Directors in accordance with these Amended and
Restated Bylaws. No reduction of the authorized number of directors shall have
the effect of removing any director before that director's term of office
expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these Amended and Restated Bylaws and
unless otherwise provided in the Certificate of Incorporation, directors shall
be elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
Certificate of Incorporation or these Amended and Restated Bylaws, wherein other
qualifications for directors may be prescribed. Each director, including a
director elected to fill a vacancy, shall hold office until his successor is
elected and qualified or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the Certificate of Incorporation or these
Amended and Restated Bylaws:
A. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
B. Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
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of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Amended and Restated
Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole Board
of Directors (as constituted immediately prior to any such increase), then the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
Any and all directors may be removed without cause if the removal is
approved by the affirmative vote of a majority of the outstanding shares of the
corporation entitled to vote. Such approval shall include the affirmative vote
of a majority of the outstanding shares of each class and series entitled to
vote as a class or series on the subject matter being voted upon and shall also
include the affirmative vote of such greater proportion (including all) of the
outstanding shares of any class or series if such greater proportion is required
by the corporation's Certificate of Incorporation or by applicable laws.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The Board of Directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these
Amended and Restated Bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected Board of Directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected Board of Directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and
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place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
3.7 REGULAR MEETINGS
----------------
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
Board of Directors.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the Chairman of the Board, the Chief Executive Officer,
the President, any Vice President, the Secretary or any two (2) Directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telecopy, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to 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 or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
------
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the Certificate of Incorporation or these
Amended and Restated Bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is
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not lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the directors, or members of a
committee of directors, need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or these Amended and Restated
Bylaws.
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the Board of Directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the Certificate of Incorporation or these
Amended and Restated Bylaws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the Certificate of Incorporation or these
Amended and Restated Bylaws, the Board of Directors shall have the authority to
fix the compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the Certificate of Incorporation
or by these Amended and Restated Bylaws, any director or the entire Board of
Directors may be removed with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
-----------------------
The Board of Directors may, by resolution passed by a majority of the whole
Board of Directors, designate one or more committees, with each committee to
consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors or in the Amended and
Restated Bylaws of the corporation, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority to (i) amend the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend these Amended and Restated Bylaws of the corporation;
and, unless the Board of Directors resolution establishing the committee, these
Amended and Restated Bylaws or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law of
Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these Amended and Restated
Bylaws, Section 3.5 (place of
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meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8
(special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of
notice), Section 3.11 (adjournment and notice of adjournment), and Section 3.12
(action without a meeting), with such changes in the context of those Amended
and Restated Bylaws as are necessary to substitute the committee and its members
for the Board of Directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall 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 Amended and Restated
Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
--------
The officers of the corporation shall be a President, one or more Vice
Presidents, a Secretary, and a Treasurer. The corporation may also have, at the
discretion of the Board of Directors, a Chairman of the Board of Directors, a
Chief Executive Officer, a Chief Financial Officer, one or more Vice Presidents,
Secretaries, Treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these Amended and Restated
Bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these Amended and
Restated Bylaws, shall be chosen by the Board of Directors, subject to the
rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The Board of Directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these Amended and Restated Bylaws or as the Board
of Directors may from time to time determine.
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, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the Board of Directors or, except in the 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.
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Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the Board of Directors.
5.6 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
The officers of the corporation shall have such powers and duties in the
management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
5.7 LIMITATIONS ON POWERS AND DUTIES OF OFFICERS
--------------------------------------------
No officer shall take any action, enter into any agreement, make any
representation or, by purposeful inaction, effect any of the actions or
decisions which the Board of Directors is prohibited or restricted from enacting
pursuant to these Amended and Restated Bylaws or the Certificate of
Incorporation and their further amendments.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of
the corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
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6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of the
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware.
6.4 PREPAYMENT OF EXPENSES
----------------------
The corporation shall pay the expenses incurred in defending any proceeding
in advance of its final disposition, provided, however, that the payment of
expenses incurred by a director or officer in advance of the final disposition
of the proceeding shall be made only upon receipt of an undertaking by the
director or officer to repay all amounts advanced if it should be ultimately
determined that the director or officer is not entitled to be indemnified under
this Article or otherwise.
6.5 CLAIMS
------
If a claim for indemnification or payment of expenses under this Article is
not paid in full within sixty days after a written claim therefor has been
received by the corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled
to be paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or payment of expenses under applicable law.
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6.6 NON-EXCLUSIVITY OF RIGHTS
-------------------------
The rights conferred on any person by this Article 6 shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, these Amended and
Restated Bylaws, agreement, vote of stockholders or disinterested directors or
otherwise.
6.7 OTHER INDEMNIFICATION
---------------------
The corporation's obligation, if any, to indemnify any person who was or is
serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or non-profit entity
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or non-
profit enterprise.
6.8 AMENDMENT OR REPEAL
-------------------
Any repeal or modification of the foregoing provisions of this Article 6
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE VII
GENERAL MATTERS
7.1 CHECKS
------
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
7.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The Board of Directors, except as otherwise provided in these Amended and
Restated Bylaws, may authorize any officer or officers, or agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the corporation; such authority may be general or confined to specific
instances. Unless so authorized or ratified by the Board of Directors or within
the agency power of an officer, no officer, agent or employee shall 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 for any amount.
7.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
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The shares of the corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has 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 he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
7.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
7.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the
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place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
7.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Amended and Restated Bylaws. Without limiting
the generality of this provision, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both the
corporation and a natural person.
7.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the Certificate of Incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
7.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
7.9 SEAL
----
The seal of the corporation shall be such as from time to time may be
approved by the Board of Directors.
7.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
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7.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
7.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
7.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the Board of Directors, the president, any vice president,
the treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the Board of Directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
AMENDMENTS
The original or other Bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its Certificate of Incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
-18-
<PAGE>
EXHIBIT 4.1
THE RIGHTS TO ACQUIRE SHARES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SALE OR DISPOSITION MAYBE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
500,000 Shares of January 11, 1999
Common Stock
INTERNET EXTRA CORPORATION
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that for value received, Timothy Favia (the "Holder"), is
entitled prior to the Expiration Date (as defined below) to purchase and receive
from Internet Extra Corporation (the "Company") up to 500,000 shares of the
Company's common stock, without par value ("Common Stock"), at a purchase price
of $0.50 per share, upon and subject to the terms and conditions on the
following schedule and hereinafter set forth. This Warrant shall be exercisable
at any time prior to the Expiration Date (as defined below) for the number of
shares of Common Stock determined as follows:
(i) 250,000 shares, at any time after the opening by the Company of an office
located in either New York, New York or outside of the United States in
connection with which the Holder materially assisted and the recognition
by the Company of at least $6.0 million in revenues in fiscal year 1999
from signed orders from clients from such office or offices;
(ii) 150,000 shares, at any time after the Company enters into business
relationships (including signed agreements) with at least two (2)
advertising agencies, reasonably acceptable to the Company, and the
recognition by the Company of at least $1.0 million in revenues in fiscal
year 1999 from such relationships;
(iii) 50,000 shares, at any time after the recognition by the Company of at
least $9.0 million in revenues in fiscal year 1999 from signed orders
from clients;
(iv) 50,000 shares, at any time after the recognition by the Company of at
least $12.0 million in revenues in fiscal year 1999 from signed orders
from clients.
TERMS AND CONDITIONS OF WARRANT
1. Nontransferability of Warrant. This Warrant may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised only by the Holder or his permitted assignee. Any transfer of
this Warrant must comply with the requirements of Section 4 below, and any
purchaser or other assignee or transferee of this Warrant ("permitted assignee")
shall be required to accept this Warrant subject to all rights and obligations
of the Holder as set forth herein.
<PAGE>
2. Exercise of Warrant. This Warrant may be exercised by the Holder as
-------------------
to the whole or any lesser number of shares of Common Stock covered hereby,
subject to the terms and conditions of Section 5 below, upon surrender of this
Warrant to the Company at its principal office in San Francisco, California,
prior to the close of business on the Expiration Date, together with the Notice
of Exercise attached hereto as Exhibit A, and the Investment Representation
---------
Statement attached as Exhibit B, both duly executed by the Holder, and payment
---------
to the Company in cash or the equivalent of the price herein set forth for the
shares to be purchased. Certificates for the shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding 30 days, after
exercise of the stock purchase rights represented by this Warrant. If this
Warrant is exercised in respect of less than all of the shares of Common Stock
covered hereby, the Holder shall be entitled to receive a new warrant covering
the number of shares in respect of which this Warrant shall not have been
exercised and is still subject to exercise. Such new warrant shall be in all
other respects identical to this Warrant.
3. Covenants of the Company. The Company covenants and agrees that all
------------------------
equity securities which may be issued upon the exercise of the rights
represented by this Warrant, upon issuance and payment therefor in accordance
herewith, will be duly authorized, validly issued, fully paid and nonassessable
shares of capital stock of the Company. The Company further covenants and
agrees that, during the period within which the stock purchase rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for issuance upon the exercise of the purchase rights
evidenced by this Warrant, a number of shares of its Common Stock sufficient for
such issuance.
4. Restrictions on Transfer. Neither this Warrant nor any of the stock
------------------------
purchase rights represented hereby may be sold, assigned, transferred,
subdivided, or otherwise disposed of by the Holder, directly or indirectly
except as permitted under Section 1 above. In addition, any securities to be
issued upon exercise of this Warrant may not be sold, assigned, transferred or
otherwise disposed of unless the securities are registered under the Securities
Act of 1933 or unless the person seeking to effect such disposition shall have
requested and the Company shall have received an opinion of the Company's
counsel that the proposed disposition may be effected without registration of
such securities under the Securities Act of 1933, as amended, or any applicable
state securities laws. Unless a registration statement with respect to such
shares of Common Stock is effective at the time, any shares of Common Stock
issued upon the exercise of this Warrant shall bear the following legend:
THE RIGHTS TO ACQUIRE SHARES REPRESENTED BY THIS WARRANT HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SALE OR DISPOSITION MAYBE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
5. Adjustments. In case at any time the Company shall by stock split,
-----------
stock dividend or otherwise subdivide its outstanding shares of Common Stock
into a greater number of shares, the
<PAGE>
purchase price of Common Stock in effect hereunder immediately prior to such
subdivision shall be proportionately reduced and the number of shares
deliverable upon the exercise of this Warrant shall be proportionately
increased, and conversely, in case the outstanding shares of Common Stock shall
be combined into a smaller number of shares, the exercise price in effect
immediately prior to such combination shall be proportionately increased and the
number of shares deliverable upon the exercise of this Warrant shall be
proportionately decreased. If any capital reorganization or reclassification of
Common Stock shall be effected in such a way that holders of Common Stock (or
any other securities of the Company then issuable upon exercise of this Warrant)
shall be entitled to receive securities with respect to or in exchange for
Common Stock (or such other securities) then, as a condition of such capital
reorganization or reclassification, lawful and adequate provision shall be made
whereby the Holder shall thereafter have the right to purchase and receive upon
the basis and upon the terms and conditions specified in this Warrant and in
lieu of the shares of Common Stock (or other securities) of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such securities as may be issued with respect to or
in exchange for a number of shares of Common Stock (or such other securities)
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization or reclassification not taken
place, and in each such case appropriate provision shall be made with respect to
the rights and interests of the Holder to the end that the provisions of this
Warrant shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any securities thereafter deliverable upon the exercise hereof.
6. Notices by Company. In case at any time (i) the Company shall pay any
------------------
dividend payable in equity securities with respect to Common Stock to the
holders of outstanding Common Stock, (ii) the Company shall offer for
subscription pro rata to all holders of outstanding Common Stock any additional
shares of equity securities, (iii) there shall be any capital reorganization or
reclassification of the equity securities of the Company, or any consolidation
or merger of the Company with or sale of all or substantially all of the
Company's assets to another corporation, or (iv) there shall be a voluntary or
involuntary dissolution, liquidation or winding-up of the Company, then, in any
one or more of such cases, the Company shall give written notice by first class
mail, postage prepaid, addressed to the Holder at the address shown on the books
of the Company, of the date on which (a) the books of the Company shall close or
a record shall be taken for such dividend, distribution or subscription rights,
or (b) such reorganization, reclassification, consolidation, merger, sale of
assets, dissolution, liquidation or winding-up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale of assets, dissolution, liquidation, or winding-up,
as the case may be. The Company shall also give written notice, similarly
addressed and delivered, of the establishment of a trading market for the
Company's stock, whether within or outside the United States. Any such required
written notice shall be received by the Holder at least seven (7) days prior to
the action to be taken and not less than three (3) days prior to any record date
on which the Company's transfer books are closed with respect thereto.
7. Absence of Shareholder Rights. Until exercise of the stock purchase
-----------------------------
rights conferred by this Warrant and issuance of the equity securities issuable
upon such exercise, this Warrant does not confer upon the Holder any right
whatsoever as a shareholder of the Company.
<PAGE>
8. Expiration. This Warrant shall expire on January 10, 2002 (the
----------
"Expiration Date"). At the close of business on the Expiration Date, this
Warrant shall become void as to all securities of the Company in respect of
which the stock purchase rights hereunder have not been previously exercised,
and payment has not been made in full for the securities issuable upon such
exercise; provided that in the case of the earlier dissolution of the Company,
this Warrant shall become void on the date fixed for such dissolution.
9. Notice of Intention to Exercise or Transfer. The Holder, by
-------------------------------------------
acceptance hereof, agrees to give written notice to the Company before
exercising this Warrant or transferring any Common Stock issued upon the
exercise hereof, and each subsequent holder of any of such Common Stock which is
subject to paragraph 4 hereof shall give written notice to the Company before
retransferring any of such Common Stock unless such Common Stock has previously
been registered. Such notice shall inform the Company of the Holder's intention
to exercise this Warrant or the Holder's or such holder's intention to effect
such transfer or retransfer, as the case may be, and shall describe briefly the
date and time when this Warrant will be surrendered in such exercise and the
number of shares to be made the subject of such exercise; or, in case of a
transfer of Common Stock, the Holder's or such holder's intention as to the
disposition to be made of shares of Common Stock issued upon the exercise
hereof. Promptly after receiving such written notice of an intended transfer,
the Company shall present copies thereof to its counsel. If in the opinion of
such counsel the proposed transfer of shares may be effected without
registration or qualification (under any federal or state law) of the shares of
Common Stock issued on the exercise hereof, the Company, as promptly as
reasonably practicable, shall notify the Holder or such holder of such opinion,
whereupon the Holder or such holder shall be entitled to effect the intended
transfer of shares received upon the previous exercise of this Warrant.
10. Market Standoff Agreement. The Holder hereby agrees, if so requested
-------------------------
by the managing underwriters in a public offering by the Company of its Common
Stock, that, without the prior written consent of such managing underwriters,
the Holder will not offer, sell, contract to sell, grant any option to purchase,
make any short sale or otherwise dispose of or make a distribution of any
capital stock of the Company held by or on behalf of the Holder or beneficially
owned by the Holder in accordance with the rules and regulations of the
Securities and Exchange Commission for a period of up to 180 days after the date
of the final prospectus relating to such offering.
IN WITNESS WHEREOF, Internet Extra Corporation has caused this Warrant to
be signed by its duly authorized officer this 11 day of January, 1999.
INTERNET EXTRA CORPORATION
By : /s/ Jon Edwards
-------------------------------------
Gregory R. Raifman, Chairman and Chief
Executive Officer
Jon Edwards, President
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
To: Internet Extra Corporation
131 Steuart Street
Fourth Floor
San Francisco, CA 94105
1. The undersigned hereby elects to purchase____________________________
shares of Common Stock ("Stock") of Internet Extra Corporation (the "Company")
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price and any transfer taxes payable pursuant to the terms of the
Warrant, together with an Investment Representation Statement in form and
substance satisfactory to legal counsel to the Company.
2. The shares of Stock to be received by the undersigned upon exercise of
the Warrant are being acquired for its own account, not as a nominee or agent,
and not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Stock. The undersigned believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Stock.
3. The undersigned understands that the shares of Stock are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in transactions not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
4. The undersigned understands the instruments evidencing the Stock may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
<PAGE>
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A ONE
HUNDRED EIGHTY (180) DAY LOCK UP FOLLOWING THE CORPORATIONS INITIAL
PUBLIC OFFERING, A COPY OF WHICH LOCKUP IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION."
(c) Any legend required by applicable state law.
5. Please issue a certificate or certificates representing said shares of
Stock in the name of the undersigned:
----------------------------------
- [Name]
----------------------------------
- [Address]
----------------------------------
6. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned:
----------------------------------
- [Name]
---------------------------------
- [Address]
---------------------------------
- ---------------------- --------------------------------------------------
[Date] [Signature of Purchaser]
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : TIMOTHY FAVIA
COMPANY : INTERNET EXTRA CORPORATION
SECURITY : ________________ SHARES OF COMMON STOCK
AMOUNT : _________________
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am sufficiently aware of the Company's business affairs and financial
condition to reach an informed and knowledgeable decision to acquire the
Securities. I am purchasing these Securities for my own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available (such as Rule 144 or the resale
provisions of Rule 701 under the Securities Act). Moreover, I understand that
the Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, including, among other things: (1)
The availability of certain public information about the Company; (2) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities
<PAGE>
to be sold; and, in the case of an affiliate, or of a non-affiliate who has held
the securities less than two years, (3) the sale being made through a broker in
an unsolicited "broker's transaction" or in transactions directly with a market
maker, as said term is defined under the Securities Exchange Act of 1934 (the
"Exchange Act") and the amount of securities being sold during any three month
period not exceeding the specified limitations stated therein, if applicable.
The Purchaser further understands that the resale provisions of Rule 701 will
not apply until 90 days after the Company becomes subject to the reporting
obligations under the Exchange Act (typically upon the effective date of a
company's initial public offerings). There can be no assurances that the
requirements of Rule 144 or Rule 701 will be met, or that the Securities will
ever be saleable.
(e) I further understand that at the time I wish to sell the Securities
there may be no public market upon which to make such a sale, and that, even if
such a public market then exists, the Company may not be satisfying the current
public information requirements of Rule 144, and that, in such event, I would be
precluded from selling the Securities under Rule 144 even if the one-year
minimum holding period had been satisfied.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, or that the resale provisions of
Rule 701 are not available, registration under the Securities Act, compliance
with Regulation A, compliance with some other registration exemption or the
notification to the Company of the proposed disposition by me and the furnishing
to the Company of (i) detailed information regarding the disposition, and (ii)
and opinion of my counsel to the effect that such disposition will not require
registration (I understand such counsel's opinion shall concur with the opinion
by counsel for the Company and I shall have been informed of such compliance)
will be required and that, notwithstanding the fact that Rule 144 is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
(g) Purchaser hereby agrees that if so required by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the Securities Act of 1933, as
amended (the "1933 Act"), Purchaser shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period following
the effective date of a registration statement of the Company filed under the
1933 Act; provided, however, that such restriction shall only apply to the first
registration statement of the Company to become effective under the 1933 Act
which include securities to be sold on behalf of the Company to the public in an
underwritten public offering under the 1933 Act. The Company may impose stop-
transfer instructions with respect to securities subject to the foregoing
restrictions under the end of such 180-day period.
Dated: _________________________
PURCHASER
<PAGE>
By:______________________________________
<PAGE>
EXHIBIT 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
June 15, 1999 WARRANT 100,000 Shares
To Purchase Shares of Common Stock of
Internet Extra Corporation
THIS CERTIFIES that, for value received Retail Ventures International, Inc.
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to purchase from Internet Extra Corporation, a California corporation (the
"Company"), that number of fully paid and nonassessable shares of the Company's
Common Stock at the purchase price per share as set forth in Section 1 below
("Exercise Price"). The number of shares and Exercise Price are subject to
adjustment as provided in Section 10 hereof.
1. Number of Shares; Exercise Price; Term.
--------------------------------------
(a) Subject to adjustments as provided herein, this Warrant is
exercisable for One Hundred Thousand (100,000) shares (the "Shares") of the
Company's Common Stock at a purchase price of Fifty Cents (U.S.) ($0.50) per
share, (b) Subject to the terms and conditions set forth herein, this Warrant
shall be exercisable during the term commencing on the date hereof and ending on
the third anniversary of the date hereof and shall be void thereafter.
2. Title to Warrant. This Warrant and all rights hereunder may be
----------------
transferred, in whole or in part, by the Warrant holder to any affiliate of the
Holder at any time without the written consent of the Company, but may not be
transferred to any third party without the prior written consent of the Company,
which will not be unreasonably withheld. Transfers shall occur at the office or
agency of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed.
3. Exercise of Warrant. The purchase rights represented by this Warrant
-------------------
are exercisable by the registered holder hereof, in whole or in part, at any
time, or from time to time, during the term hereof as described in Section l
above, by the surrender of this Warrant and the Notice of Exercise in the form
annexed hereto (including its market standoff provision) duly completed and
executed on behalf of the holder hereof, at the office of the Company in San
Francisco, California (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company), upon payment in cash or
check acceptable to the Company of the purchase price of the shares thereby
purchased whereupon the holder of this Warrant
<PAGE>
shall be entitled to receive a certificate for the number of shares so purchased
and, if this Warrant is exercised in part, a new Warrant for the unexercised
portion of this Warrant. The Company agrees that, upon exercise of this Warrant
in accordance with the terms hereof, the shares so purchased shall be deemed to
be issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
Certificates for shares purchased hereunder and, on partial exercise of
this Warrant, a new Warrant for the unexercised portion of this Warrant shall be
delivered to the holder hereof as promptly as practicable after the date on
which this Warrant shall have been exercised.
The Company covenants that all shares which may be issued upon the exercise
of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein).
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which such holder would otherwise be
entitled, such holder shall be entitled, at its option, to receive either (i) a
cash payment equal to the excess of fair market value for such fractional share
above the Exercise Price for such fractional share (as mutually determined by
the Company and the holder) or (ii) a whole share if the holder tenders the
Exercise Price for one whole share.
5. Charges, Taxes and Expenses. Issuance of certificates for shares upon
---------------------------
the exercise of this Warrant shall be made without charge to the holder hereof
for any issue or transfer tax or other incidental expense in respect of the
issuance of such certificates, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the holder of
this Warrant or in such name or names as may be directed by the holder of this
Warrant (with the prior written consent of the Company, which will not be
unreasonably withheld); provided, however, that in the event certificates for
shares are to be issued in a name other than the name of the holder of this
Warrant, this Warrant when surrendered for exercise shall be accompanied by an
assignment document in form and substance satisfactory to the Company duly
executed by the holder hereof and the Notice of Exercise duly completed and
executed and stating in whose name and certificates are to be issued; and
provided further, that such assignment shall be subject to applicable laws and
regulations. Upon any transfer involved in the issuance or delivery of any
certificates for shares of the Company's securities, the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
6. No Rights as Shareholders. This Warrant does not entitle the holder
-------------------------
hereof to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof.
<PAGE>
7. Exchange and Registry of Warrant. The Company shall maintain a
--------------------------------
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
---------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Miscellaneous.
-------------
(a) Governing Law. This Warrant shall be binding upon any successors
-------------
or assigns of the Company. This Warrant shall constitute a contract under the
laws of California and for all purposes shall be construed in accordance with
and governed by the laws of said state, without giving effect to the conflict of
laws principles of such state.
(b) Restrictions. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
------------
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(c) Attorney's Fees. In any litigation, arbitration or court
---------------
proceeding between the Company and the holder relating hereto, the prevailing
party shall be entitled to reasonable attorneys' fees and expenses incurred in
enforcing this Warrant.
(d) Amendments. This Warrant may be amended and the observance of any
----------
term of this Warrant may be waived only with the written consent of the Company
and the holders hereof.
(e) Notice. Any notice required or permitted hereunder shall be
------
deemed effectively given upon personal delivery to the party to be notified,
upon confirmation of the receipt of a facsimile transmission, or upon deposit
with the United States Post Office, by certified mail, postage prepaid and
<PAGE>
addressed to the party to be notified at the address indicated below for the
Company, or at the address for a holder set forth in the registry maintained by
the Company pursuant to Section 7, such party, or at such other address as such
other party may designate by ten-day advance written notice.
IN WITNESS WHEREOF, Internet Extra Corporation has caused this Warrant to
be executed by its officer thereunto duly authorized.
Dated: June __, 1999
INTERNET EXTRA CORPORATION
By: /s/ Gregory R. Raifman
----------------------
Gregory R. Raifman
Chairman and Chief Executive Officer
Address: 131 Steuart Street
San Francisco, California 94105-1230
Telephone: (415)808-1900
Fax: (415)808-1901
Acknowledged and Agreed:
RETAIL VENTURES INTERNATIONAL, INC.
By: /s/ Oliver Kwon
---------------
Name: Oliver Kwon
Title: President
Address: 937 Crenshaw Blvd.
Los Angeles, CA 90019
Telephone: 323/937-2085
<PAGE>
NOTICE OF EXERCISE
------------------
To: Internet Extra Corporation
1. The undersigned hereby elects to purchase _______ shares of Common
Stock ("Stock") of Internet Extra Corporation (the "Company") pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price and any transfer taxes payable pursuant to the terms of the Warrant,
together with an investment Representation Statement in form and substance
satisfactory to legal counsel to the Company.
2. The shares of Stock to be received by the undersigned upon exercise of
the Warrant are being acquired for its own account, not as a nominee or agent,
and not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Stock. The undersigned believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Stock.
3. The undersigned hereby agrees that, if so requested by the Company or
any representative of the underwriters (the "Managing Underwriter") in
connection with any registration of the offering of any securities of the
Company under the Securities Act, the undersigned shall not sell or otherwise
transfer any Shares or other securities of the Company during the 180-day period
(or such other period as may be requested in writing by the Managing Underwriter
and agreed to in writing by the Company) (the "Market Standoff Period")
following the effective date of a registration statement of the Company filed
under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
4. The undersigned understands that the shares of Stock are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in transactions not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
<PAGE>
5. The undersigned understands the instruments evidencing the Stock may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
6. Please issue a certificate or certificates representing said shares of
Stock in the name of the undersigned:
________________________________
[Name]
7. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned:
________________________________
[Name]
________________________________ ________________________________
[Date] [Signature]
-6-
<PAGE>
NOTICE OF TRANSFER
------------------
(To transfer or assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby transferred and assigned to:
_________________________________________________________________
[Name of Transferee or Assignee]
_________________________________________________________________
[Address of Transferee or Assignee]
_________________________________________________________________
Dated: __________________________________________________________
Holder's Signature: _____________________________________________
Holder's Address: _______________________________________________
_________________________________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Notice of Transfer must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
-7-
<PAGE>
EXHIBIT 4.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
June 15, 1999 WARRANT 150,000 Shares
To Purchase Shares of Series B Preferred
Stock of Internet Extra Corporation
THIS CERTIFIES that, for value received Retail Ventures International, Inc.
is entitled, upon the terms and subject to the conditions hereinafter set forth,
to purchase from Internet Extra Corporation, a California corporation (the
"Company"), that number of fully paid and nonassessable shares of the Company's
Series B Preferred Stock at the purchase price per share as set forth in Section
1 below ("Exercise Price"). The number of shares and Exercise Price are subject
to adjustment as provided in Section 10 hereof.
1. Number of Shares; Exercise Price; Term.
--------------------------------------
(a) Subject to adjustments as provided herein, this Warrant is
exercisable for One Hundred Fifty Thousand (150,000) shares (the "Shares") of
the Company's Series B Preferred Stock at a purchase price of Two Dollars (U.S.)
($2.00) per share, provided, that from and after a Qualified IPO (defined in the
Company's Amended and Restated Articles of Incorporation) or other automatic
conversion pursuant to Section A.3(b) of Article IV of the Company's Amended and
Restated Articles of Incorporation, upon the exercise of all or part of this
Warrant, in lieu of the issuance of each share of Series B Preferred Stock
otherwise issuable upon such exercise, the Company shall issue a number of
shares of Common Stock equal to the Series B Conversion Price divided by the
Series B Conversion Value (as defined in the Company's Amended and Restated
Articles of Incorporation) in effect immediately prior to such Qualified IPO or
other automatic conversion with respect to the Series B Preferred Stock
(treating for purposes of this calculation the automatic conversion of the
Series B Preferred Stock into shares of Common Stock pursuant to Section A.3(b)
of Article IV of such Amended and Restated Articles of Incorporation as not
having occurred upon such Qualified IPO or other automatic conversion).
(b) Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable during the term commencing on the date hereof and
ending on the third anniversary of the date hereof and shall be void thereafter.
2. Title to Warrant. This Warrant and all rights hereunder may be
----------------
transferred, in whole or in part, by the Warrant holder to any affiliate of the
Holder at any time without the written consent of the
<PAGE>
Company, but may not be transferred to any third party without the prior written
consent of the Company, which will not be unreasonably withheld. Transfers shall
occur at the office or agency of the Company by the holder hereof in person or
by duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.
3. Exercise of Warrant. The purchase rights represented by this Warrant
-------------------
are exercisable by the registered holder hereof, in whole or in part, at any
time, or from time to time, during the term hereof as described in Section l
above, by the surrender of this Warrant and the Notice of Exercise in the form
annexed hereto (including its market standoff provision) duly completed and
executed on behalf of the holder hereof, at the office of the Company in San
Francisco, California (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company), upon payment in cash or
check acceptable to the Company of the purchase price of the shares thereby
purchased whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares so purchased and, if this Warrant is
exercised in part, a new Warrant for the unexercised portion of this Warrant.
The Company agrees that, upon exercise of this Warrant in accordance with the
terms hereof, the shares so purchased shall be deemed to be issued to such
holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been exercised.
Certificates for shares purchased hereunder and, on partial exercise of
this Warrant, a new Warrant for the unexercised portion of this Warrant shall be
delivered to the holder hereof as promptly as practicable after the date on
which this Warrant shall have been exercised.
The Company covenants that all shares which may be issued upon the exercise
of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein).
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which such holder would otherwise be
entitled, such holder shall be entitled, at its option, to receive either (i) a
cash payment equal to the excess of fair market value for such fractional share
above the Exercise Price for such fractional share (as mutually determined by
the Company and the holder) or (ii) a whole share if the holder tenders the
Exercise Price for one whole share.
5. Charges, Taxes and Expenses. Issuance of certificates for shares upon
---------------------------
the exercise of this Warrant shall be made without charge to the holder hereof
for any issue or transfer tax or other incidental expense in respect of the
issuance of such certificates, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the holder of
this Warrant or in such name or names as may be directed by the holder of this
Warrant (with the prior written consent of the Company, which will not be
unreasonably withheld); provided, however, that in the event certificates for
shares are to be issued in a name other than the name of the holder of this
Warrant, this Warrant when surrendered for exercise shall be accompanied by an
assignment document in form and substance
<PAGE>
satisfactory to the Company duly executed by the holder hereof and the Notice of
Exercise duly completed and executed and stating in whose name and certificates
are to be issued; and provided further, that such assignment shall be subject to
applicable laws and regulations. Upon any transfer involved in the issuance or
delivery of any certificates for shares of the Company's securities, the Company
may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.
6. No Rights as Shareholders. This Warrant does not entitle the holder
-------------------------
hereof to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof.
7. Exchange and Registry of Warrant. The Company shall maintain a
--------------------------------
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
---------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Miscellaneous.
-------------
(a) Governing Law. This Warrant shall be binding upon any successors
-------------
or assigns of the Company. This Warrant shall constitute a contract under the
laws of California and for all purposes shall be construed in accordance with
and governed by the laws of said state, without giving effect to the conflict of
laws principles of such state.
(b) Restrictions. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
------------
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
<PAGE>
(c) Attorney's Fees. In any litigation, arbitration or court
---------------
proceeding between the Company and the holder relating hereto, the prevailing
party shall be entitled to reasonable attorneys' fees and expenses incurred in
enforcing this Warrant.
(d) Amendments. This Warrant may be amended and the observance of any
----------
term of this Warrant may be waived only with the written consent of the Company
and the holders hereof.
(e) Notice. Any notice required or permitted hereunder shall be
------
deemed effectively given upon personal delivery to the party to be notified,
upon confirmation of the receipt of a facsimile transmission, or upon deposit
with the United States Post Office, by certified mail, postage prepaid and
addressed to the party to be notified at the address indicated below for the
Company, or at the address for a holder set forth in the registry maintained by
the Company pursuant to Section 7, such party, or at such other address as such
other party may designate by ten-day advance written notice.
IN WITNESS WHEREOF, Internet Extra Corporation has caused this Warrant to
be executed by its officer thereunto duly authorized.
Dated: June __, 1999
INTERNET EXTRA CORPORATION
By: /s/ Gregory R. Raifman
----------------------
Gregory R. Raifman
Chairman and Chief Executive Officer
Address: 131 Steuart Street
San Francisco, California 94105-1230
Telephone: (415)808-1900
Fax: (415)808-1901
Acknowledged and Agreed:
RETAIL VENTURES INTERNATIONAL, INC.
By: /s/ Oliver Kwon
---------------
Name: Oliver Kwon
Title: President
Address: 937 Crenshaw Blvd.
Los Angeles, CA 90019
Telephone: 323/937-2085
<PAGE>
NOTICE OF EXERCISE
------------------
To: Internet Extra Corporation
1. The undersigned hereby elects to purchase _______ shares of Series B
Preferred Stock ("Stock") of Internet Extra Corporation (the "Company") pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price and any transfer taxes payable pursuant to the terms of the
Warrant, together with an investment Representation Statement in form and
substance satisfactory to legal counsel to the Company.
2. The shares of Stock to be received by the undersigned upon exercise of
the Warrant are being acquired for its own account, not as a nominee or agent,
and not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Stock. The undersigned believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Stock.
3. The undersigned hereby agrees that, if so requested by the Company or
any representative of the underwriters (the "Managing Underwriter") in
connection with any registration of the offering of any securities of the
Company under the Securities Act, the undersigned shall not sell or otherwise
transfer any Shares or other securities of the Company during the 180-day period
(or such other period as may be requested in writing by the Managing Underwriter
and agreed to in writing by the Company) (the "Market Standoff Period")
following the effective date of a registration statement of the Company filed
under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
4. The undersigned understands that the shares of Stock are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in transactions not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
<PAGE>
5. The undersigned understands the instruments evidencing the Stock may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
6. Please issue a certificate or certificates representing said shares of
Stock in the name of the undersigned:
______________________________
[Name]
7. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned:
______________________________
[Name]
______________________________ ______________________________
[Date] [Signature]
-6-
<PAGE>
NOTICE OF TRANSFER
------------------
(To transfer or assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby transferred and assigned to:
_________________________________________________________________
[Name of Transferee or Assignee]
_________________________________________________________________
[Address of Transferee or Assignee]
_________________________________________________________________
Dated: __________________________________________________________
Holder's Signature: _____________________________________________
Holder's Address: _______________________________________________
_________________________________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Notice of Transfer must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
-7-
<PAGE>
EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
June 15, 1999 WARRANT 125,000 Shares
To Purchase Shares of Series B Preferred Stock of
Internet Extra Corporation
THIS CERTIFIES that, for value received Zeron Capital Ltd. is entitled,
upon the terms and subject to the conditions hereinafter set forth, to purchase
from Internet Extra Corporation, a California corporation (the "Company"), that
number of fully paid and nonassessable shares of the Company's Series B
Preferred Stock at the purchase price per share as set forth in Section 1 below
("Exercise Price"). The number of shares and Exercise Price are subject to
adjustment as provided in Section 10 hereof.
1. Number of Shares; Exercise Price; Term.
--------------------------------------
(a) Subject to adjustments as provided herein, this Warrant is
exercisable for One Hundred Twenty-Five Thousand (125,000) shares (the "Shares")
of the Company's Series B Preferred Stock at a purchase price of Two Dollars
(U.S.) ($2.00) per share, provided, that from and after a Qualified IPO (defined
in the Company's Amended and Restated Articles of Incorporation) or other
automatic conversion pursuant to Section A.3(b) of Article IV of the Company's
Amended and Restated Articles of Incorporation, upon the exercise of all or part
of this Warrant, in lieu of the issuance of each share of Series B Preferred
Stock otherwise issuable upon such exercise, the Company shall issue a number of
shares of Common Stock equal to the Series B Conversion Price divided by the
Series B Conversion Value (as defined in the Company's Amended and Restated
Articles of Incorporation) in effect immediately prior to such Qualified IPO or
other automatic conversion with respect to the Series B Preferred Stock
(treating for purposes of this calculation the automatic conversion of the
Series B Preferred Stock into shares of Common Stock pursuant to Section A.3(b)
of Article IV of such Amended and Restated Articles of Incorporation as not
having occurred upon such Qualified IPO or other automatic conversion).
(b) Subject to the terms and conditions set forth herein, this
Warrant shall be exercisable during the term commencing on the date hereof and
ending on the third anniversary of the date hereof and shall be void thereafter.
2. Title to Warrant. This Warrant and all rights hereunder may be
----------------
transferred, in whole or in part, by the Warrant holder to any affiliate of the
Holder at any time without the written consent of the Company, but may not be
transferred to any third party without the prior written consent of the Company,
which will not be unreasonably withheld. Transfers shall occur at the office or
agency of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed.
<PAGE>
3. Exercise of Warrant. The purchase rights represented by this Warrant
-------------------
are exercisable by the registered holder hereof, in whole or in part, at any
time, or from time to time, during the term hereof as described in Section l
above, by the surrender of this Warrant and the Notice of Exercise in the form
annexed hereto (including its market standoff provision) duly completed and
executed on behalf of the holder hereof, at the office of the Company in San
Francisco, California (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company), upon payment in cash or
check acceptable to the Company of the purchase price of the shares thereby
purchased whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares so purchased and, if this Warrant is
exercised in part, a new Warrant for the unexercised portion of this Warrant.
The Company agrees that, upon exercise of this Warrant in accordance with the
terms hereof, the shares so purchased shall be deemed to be issued to such
holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been exercised.
Certificates for shares purchased hereunder and, on partial exercise of
this Warrant, a new Warrant for the unexercised portion of this Warrant shall be
delivered to the holder hereof as promptly as practicable after the date on
which this Warrant shall have been exercised.
The Company covenants that all shares which may be issued upon the exercise
of rights represented by this Warrant will, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein).
4. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which such holder would otherwise
be entitled, such holder shall be entitled, at its option, to receive either (i)
a cash payment equal to the excess of fair market value for such fractional
share above the Exercise Price for such fractional share (as mutually determined
by the Company and the holder) or (ii) a whole share if the holder tenders the
Exercise Price for one whole share.
5. Charges, Taxes and Expenses. Issuance of certificates for shares upon
---------------------------
the exercise of this Warrant shall be made without charge to the holder hereof
for any issue or transfer tax or other incidental expense in respect of the
issuance of such certificates, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the holder of
this Warrant or in such name or names as may be directed by the holder of this
Warrant (with the prior written consent of the Company, which will not be
unreasonably withheld); provided, however, that in the event certificates for
shares are to be issued in a name other than the name of the holder of this
Warrant, this Warrant when surrendered for exercise shall be accompanied by an
assignment document in form and substance satisfactory to the Company duly
executed by the holder hereof and the Notice of Exercise duly completed and
executed and stating in whose name and certificates are to be issued; and
provided further, that such assignment shall be subject to applicable laws and
regulations. Upon any transfer involved in the issuance or delivery of any
certificates for shares of the Company's securities, the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
-2-
<PAGE>
6. No Rights as Shareholders. This Warrant does not entitle the holder
-------------------------
hereof to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof.
7. Exchange and Registry of Warrant. The Company shall maintain a
--------------------------------
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at the office of the Company, and the Company shall
be entitled to rely in all respects, prior to written notice to the contrary,
upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
---------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a Saturday or a Sunday or a legal holiday.
10. Miscellaneous.
-------------
(a) Governing Law. This Warrant shall be binding upon any successors
-------------
or assigns of the Company. This Warrant shall constitute a contract under the
laws of California and for all purposes shall be construed in accordance with
and governed by the laws of said state, without giving effect to the conflict of
laws principles of such state.
(b) Restrictions. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
------------
THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(c) Attorney's Fees. In any litigation, arbitration or court
---------------
proceeding between the Company and the holder relating hereto, the prevailing
party shall be entitled to reasonable attorneys' fees and expenses incurred in
enforcing this Warrant.
(d) Amendments. This Warrant may be amended and the observance of
----------
any term of this Warrant may be waived only with the written consent of the
Company and the holders hereof.
(e) Notice. Any notice required or permitted hereunder shall be
------
deemed effectively given upon personal delivery to the party to be notified,
upon confirmation of the receipt of a facsimile transmission, or upon deposit
with the United States Post Office, by certified mail, postage prepaid and
addressed to the party to be notified at the address indicated below for the
Company, or at the address
-3-
<PAGE>
for a holder set forth in the registry maintained by the Company pursuant to
Section 7, such party, or at such other address as such other party may
designate by ten-day advance written notice.
IN WITNESS WHEREOF, Internet Extra Corporation has caused this Warrant to
be executed by its officer thereunto duly authorized.
Dated: June 15, 1999
INTERNET EXTRA CORPORATION
By: /s/ Gregory R. Raifman
---------------------------------------------
Gregory R. Raifman
Chairman and Chief Executive Officer
Address: 131 Steuart Street
San Francisco, California 94105-1230
Telephone: (415)808-1900
Fax: (415)808-1901
Acknowledged and Agreed:
ZERON CAPITAL LTD.
By: /s/ Roderick M. Forrest
---------------------------------------
Name: Roderick M. Forrest
Title: Director
Address: 44 Church Street
Hamilton HM12
Bermuda
Telephone: 441-292-7078
-4-
<PAGE>
NOTICE OF EXERCISE
------------------
To: Internet Extra Corporation
1. The undersigned hereby elects to purchase _______ shares of Series B
Preferred Stock ("Stock") of Internet Extra Corporation (the "Company") pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price and any transfer taxes payable pursuant to the terms of the
Warrant, together with an investment Representation Statement in form and
substance satisfactory to legal counsel to the Company.
2. The shares of Stock to be received by the undersigned upon exercise of
the Warrant are being acquired for its own account, not as a nominee or agent,
and not with a view to resale or distribution of any part thereof, and the
undersigned has no present intention of selling, granting any participation in,
or otherwise distributing the same. The undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Stock. The undersigned believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Stock.
3. The undersigned hereby agrees that, if so requested by the Company or
any representative of the underwriters (the "Managing Underwriter") in
connection with any registration of the offering of any securities of the
Company under the Securities Act, the undersigned shall not sell or otherwise
transfer any Shares or other securities of the Company during the 180-day period
(or such other period as may be requested in writing by the Managing Underwriter
and agreed to in writing by the Company) (the "Market Standoff Period")
following the effective date of a registration statement of the Company filed
under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
4. The undersigned understands that the shares of Stock are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in transactions not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances. In this connection, the
undersigned represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
<PAGE>
5. The undersigned understands the instruments evidencing the Stock may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state law.
6. Please issue a certificate or certificates representing said shares of
Stock in the name of the undersigned:
_______________________________________
[Name]
7. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned:
_______________________________________
[Name]
______________________ __________________________________
[Date] [Signature]
<PAGE>
NOTICE OF TRANSFER
------------------
(To transfer or assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby transferred and assigned to:
_________________________________________________________________
[Name of Transferee or Assignee]
_________________________________________________________________
[Address of Transferee or Assignee]
_________________________________________________________________
Dated: __________________________________________________________
Holder's Signature: _____________________________________________
Holder's Address: _______________________________________________
_________________________________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Notice of Transfer must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
-3-
<PAGE>
EXHIBIT 10.1
MEDIAPLEX, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of this _____
day of __________, 1999, by and between Mediaplex, Inc., a Delaware corporation
(the "Company" or "Mediaplex"), and _________________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law; and
WHEREAS, in view of the considerations set forth above, the Company desires
that effective upon consummation of its merger with Internet Extra Corporation.,
a California corporation, Indemnitee shall be indemnified by the Company as set
forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding,
1
<PAGE>
had no reasonable cause to believe Indemnitee's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not act in good faith and in a
manner which Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(b) Proceedings By or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or suit if Indemnitee, acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Subsections (a) and (b) of this
Section 1 or the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by Indemnitee in connection therewith.
2. Agreement to Serve. In consideration of the protection afforded by
------------------
this Agreement, if Indemnitee is a director of the Company he agrees to serve at
least for the balance of the current term as a director and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. If Indemnitee is an officer of the Company not serving
under an employment contract, he agrees to serve in such capacity at least for
the balance of the current fiscal year of the Company and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. Following the applicable period set forth above, Indemnitee
agrees to continue to serve in such capacity at the will of the Company (or
under separate agreement, if such agreement exists) so long as he is duly
appointed or elected and qualified in accordance with the applicable provisions
of the by-laws of the Company or any subsidiary of the Company or until such
time as he tenders his resignation in writing. Nothing contained in this
Agreement is intended to create in Indemnitee any right to continued employment.
2
<PAGE>
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section l(a) or (b) hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined 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 Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) Procedure. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or By-laws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 13 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Subsection 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors or any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors or any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
3
<PAGE>
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in 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 action,
suit, proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee, 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 Claim; provided
that, (i) Indemnitee shall have the right to employ Indemnitee's counsel in any
such Claim 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 continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's counsel shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
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(a) Scope. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Certificate of Incorporation, the Company's By-laws or by statute. In the event
of any change, after the date of this Agreement, in any applicable law, statute,
or rule which expands the right of a Delaware corporation to indemnify a member
of its board of directors or an officer, such changes shall be, ipso facto,
---- -----
within the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its By-laws, any
agreement, any vote of stockholders or disinterested Directors, the General
Corporation Law of the State of Delaware, or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though he may have ceased to serve in an indemnified
capacity at the time of any action, suit or other covered proceeding.
4
<PAGE>
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken, and may be required in the future
to undertake, with the SEC to submit the question of indemnification to a court
in certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from time
----------------------------------------
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or shall
------------
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this 8. If this Agreement or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
5
<PAGE>
9. 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 Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law of otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company; or
(d) Claims under Section 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of
6
<PAGE>
an employee benefit plan, Indemnitee shall be deemed to have acted in a manner
"not opposed to the best interests of the Company" as referred to in this
Agreement.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. 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 receipt is acknowledged by the party addressee, on the
date of such receipt, or (ii) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and the Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
16. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MEDIAPLEX, INC.
a Delaware corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
AGREED TO AND ACCEPTED
INDEMNITEE:
_______________________________
(Signature)
_______________________________
(Name of Indemnitee)
_______________________________
_______________________________
(Address)
8
<PAGE>
EXHIBIT 10.2
MEDIAPLEX, INC.
AMENDED AND RESTATED 1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this Amended and Restated 1999 Stock
--------------------
Plan are:
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall be
-------------
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board in
---------
accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means MediaPlex, Inc., a Delaware corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by the
----------
Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
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<PAGE>
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(m) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for 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 Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(n) "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.
(o) "Inside Director" means a Director who is an Employee.
---------------
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
-------------------------
an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
<PAGE>
(r) "Officer" means 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.
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan .
(u) "Option Exchange Program" means a program whereby outstanding Options
-----------------------
are surrendered in exchange for Options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or Stock
--------------
Purchase Right.
(w) "Optionee" means the holder of an outstanding Option or Stock Purchase
--------
Right granted under the Plan.
(x) "Outside Director" means a Director who is not an Employee.
----------------
(y) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this Amended and Restated 1999 Stock Plan.
----
(aa) "Restricted Stock" means shares of Common Stock acquired pursuant to a
----------------
grant of Stock Purchase Rights under Section 11 of the Plan.
(bb) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
----------
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(ee) "Service Provider" means an Employee, Director or Consultant.
----------------
(ff) "Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 14 of the Plan.
(gg) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is twelve million (12,000,000) Shares, plus an annual increase to
be added on the first day of the Company's fiscal year commencing in 2000 equal
to the lesser of (i) 1,000,000 Shares, (ii) 4% of the outstanding Shares of the
Company's capital stock or (iii) such lesser amount as may be determined by the
Board of Directors. The Shares may be authorized, but unissued, or reacquired
Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be administered
------------------------------
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
--------------------
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
<PAGE>
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
<PAGE>
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 14.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock
<PAGE>
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
<PAGE>
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the
<PAGE>
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by
<PAGE>
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Formula Option Grants to Outside Directors. All grants of Options to
------------------------------------------
Outside Directors pursuant to this Section shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:
(a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.
(b) No person shall have any discretion to select which Outside
Directors shall be granted Options under this Section or to determine the number
of Shares to be covered by such Options.
(c) Each person who first becomes an Outside Director following the
effective date of this Plan, as determined in accordance with Section 7 hereof,
shall be automatically granted an Option to purchase fifty thousand (50,000)
Shares (the "First Option") on the date on which such person first becomes an
Outside Director, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy; provided, however, that an Inside
Director who ceases to be an Inside Director but who remains a Director shall
not receive a First Option.
(d) Each Outside Director shall be automatically granted an Option to
purchase ten thousand (10,000) Shares (a "Subsequent Option") on the date of the
annual meeting of the stockholders of the Company, if as of such date, he or she
shall have served on the Board for at least the preceding six (6) months.
(e) Notwithstanding the provisions of subsections (c) and (d) hereof,
any exercise of an Option granted before the Company has obtained stockholder
approval of the Plan in
<PAGE>
accordance with Section 20 hereof shall be conditioned upon obtaining such
stockholder approval of the Plan in accordance with Section 20 hereof.
(f) The terms of each Option granted pursuant to this Section shall
be as follows:
(i) the term of the Option shall be ten (10) years.
(ii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
(iii) subject to Section 14 hereof, each Option granted pursuant
to this Section shall vest and become exercisable as to 25% of the Shares
subject to the Option on the first anniversary of its date of grant, and as to
1/48th of the Shares subject to the Option each full month thereafter, provided
that the Optionee continues to serve as a Service Provider on such dates.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
-------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
<PAGE>
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
16. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
<PAGE>
17. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise
-------------------------
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
18. Inability to Obtain Authority. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. The Plan shall be subject to approval by
--------------------
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
<PAGE>
INTERNET EXTRA CORPORATION
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1999 Stock Plan
shall have the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Date of Grant:
Vesting Commencement Date:
Exercise Price per Share:
Total Number of Shares Granted:
Total Exercise Price:
Type of Option: ___Incentive Stock Option
___Nonstatutory Stock Option
Term/Expiration Date:
Vesting Schedule:
----------------
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule: 25% after one year from the vesting start date and
1/48th per month thereafter and end of each month.
<PAGE>
Termination Period:
------------------
This Option shall be exercisable for one month after Optionee ceases to be
a Service Provider. Upon Optionee's death or Disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
20. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
21. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery
------------------
of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
---------
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
22. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if
<PAGE>
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his or her Investment Representation
Statement in the form attached hereto as Exhibit B and shall read the applicable
---------
rules of the Commissioner of Corporations attached to such Investment
Representation Statement.
23. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
24. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
25. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
26. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
27. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
<PAGE>
28. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of NSO. There may be a regular federal income tax
---------------
liability upon the exercise of an NSO. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(b) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
29. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the
<PAGE>
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws but not the choice of law rules of
California.
30. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
OPTIONEE INTERNET EXTRA CORPORATION
_________________________________ _________________________________
Signature By
_________________________________ _________________________________
Print Name Title
_________________________________
_________________________________
Residence Address
<PAGE>
EXHIBIT A
---------
1999 STOCK PLAN
EXERCISE NOTICE
INTERNET EXTRA CORPORATION
Attention: President
1. Exercise of Option. Effective as of today, ___________, ____, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Swan Systems, Inc. (the
"Company") under and pursuant to the 1998 Stock Plan (the "Plan") and the Stock
Option Agreement dated ________, _________ (the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
---------------------
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the Shares at the Offered Price to the Company or its assignee(s).
<PAGE>
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
<PAGE>
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Notice or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
<PAGE>
8. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Exercise Notice to single or multiple assignees, and this Exercise Notice
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Exercise Notice
shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Exercise Notice shall be submitted by Optionee or by the Company forthwith to
the Administrator which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Administrator shall be final and binding
on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of California.
11. Entire Agreement. The Plan and Option Agreement are incorporated
----------------
herein by reference. This Exercise Notice, the Plan, the Option Agreement and
the Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE INTERNET EXTRA CORPORATION
_________________________________ _________________________________
Signature By
_________________________________ _________________________________
Print Name Title
Address: Address:
- ------- -------
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________
Date Received
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: INTERNET EXTRA CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, and any other legend required under applicable
state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701
<PAGE>
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in
an unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Optionee:
_________________________________
Date: ___________________________, ______
<PAGE>
EXHIBIT 10.3
MEDIAPLEX, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of Mediaplex, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean Mediaplex, Inc. and any Designated
-------
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
-------------
Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
<PAGE>
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after November 1 and May
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before October 31,
2001. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall the number of shares of Common Stock covered by
--------
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
-2-
<PAGE>
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provi sions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after November 1 and May 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
October 31, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
-3-
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 1,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of
-4-
<PAGE>
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
-5-
<PAGE>
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or she
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be four hundred thousand (400,000) shares, plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2000 equal to
the lesser of (i) four hundred thousand (400,000) shares, (ii) two percent (2%)
of the outstanding shares on such date or (iii) a lesser amount determined by
the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
-6-
<PAGE>
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of
-7-
<PAGE>
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount
-8-
<PAGE>
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
-9-
<PAGE>
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE>
EXHIBIT A
---------
MEDIAPLEX, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
____ Original Application Enrollment Date: ___________
____ Change in Payroll Deduction Rate
____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the MEDIAPLEX, INC.
1999 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing within 30 days after the date
---------------------------------------------------------------------------
of any disposition of my shares and I will make adequate provision for
----------------------------------------------------------------------
Federal, state or other tax withholding obligations, if any, which arise
------------------------------------------------------------------------
upon the
--------
<PAGE>
disposition of the Common Stock. The Company may, but will not be
-------------------------------
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________________
(First) (Middle) (Last)
_________________________ _____________________________________________
Relationship
_____________________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: _______________________________________
Employee's Address: _______________________________________
_______________________________________
_______________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ _____________________________________________
Signature of Employee
_____________________________________________
Spouse's Signature (If beneficiary other than
spouse)
-3-
<PAGE>
EXHIBIT B
---------
MEDIAPLEX, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the MEDIAPLEX, INC.
1999 Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
<PAGE>
Exhibit 10.4
INTERNET EXTRA CORPORATION
1997 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1997 Stock Option Plan
--------------------
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder. Stock purchase rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company, no par
------------
value per share.
(f) "Company" means Internet Extra Corporation, a California
-------
corporation
(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "Continuous Status as an Employee or Consultant" means the
----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the
1
<PAGE>
Company, its Subsidiaries or their respective successors. For purposes of this
Plan, a change in status from an Employee to a Consultant or from a Consultant
to an Employee will not constitute an interruption of Continuous Status as an
Employee or Consultant.
(i) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market including without limitation the National Market
of the National Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, its Fair Market Value shall be the closing sales price for
------
such stock (or the closing bid, if no sales were reported) as quoted on such
system or exchange, or the exchange with the greatest volume of trading in
Common Stock for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" or "ISO" means an Option intended to
---------------------- ---
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(m) "Non-statutory Stock Option" means an Option not intended to
--------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the Plan.
------
2
<PAGE>
(o) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(p) "Optionee" means an Employee or Consultant who receives an Option
--------
or a Stock Purchase Right.
(q) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1997 Stock Option Plan.
----
(s) "Reporting Person" means an officer, director, or greater than
----------------
ten percent (10%) shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(t) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 10 below.
(u) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
(w) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(x) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 10 below.
(y) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section
-------------------------
12 of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 1,438,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any Shares of Common Stock that are retained by the Company upon
exercise of an Option or Stock Purchase Right in order to satisfy the exercise
or purchase price for such Option or Stock Purchase Right or any withholding
taxes due with respect to such exercise shall be treated as not issued and
3
<PAGE>
shall continue to be available under the Plan. Shares repurchased by the Company
pursuant to any repurchase right which the Company may have exercised, shall not
be available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company
-------------------------------------------------------------
Becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
grants under the Plan may be made by different bodies with respect to directors,
non-director officers and Employees or Consultants who are not Reporting
Persons.
(ii) Administration With Respect to Reporting Persons. With
------------------------------------------------
respect to grants of Options or Stock Purchase Rights to Employees who are
Reporting Persons, such grants shall be made by (A) the Board if the Board may
make grants to Reporting Persons under the Plan in compliance with Rule 16b-3,
or (B) a committee designated by the Board to make such grants under the Plan,
which committee shall be constituted in such a manner as to permit grants under
the Plan to comply with Rule 16b-3. Once appointed, such committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the committee and thereafter directly make grants to
Reporting Persons under the Plan, all to the extent permitted by Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options or Stock Purchase Rights to
- ---------
Employees or Consultants who are not Reporting Persons, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of California corporate and securities laws, of the Code and of any
applicable Stock Exchange (the "Applicable Laws"). Once appointed, such
---------------
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint new members in substitution therefor, remove members (with
or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
4
<PAGE>
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs.
(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
holders of Options or Stock Purchase Rights.
5
<PAGE>
5. Eligibility.
-----------
(a) Recipients of Grants. Non-statutory Stock Options and Stock
--------------------
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been
granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a non-statutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as Non-
statutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to the continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated
--------------
in the Option Agreement; provided, however, that the term shall be no more than
-------- -------
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board and
set further in the applicable agreement, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
6
<PAGE>
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) Granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Non-statutory Stock Option that is:
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent of
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any other person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more then twelve (12) months after the date of
delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under applicable laws. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
7
<PAGE>
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercised at such times and under such conditions as
determined by the Administrator, and reflected in the written option agreement,
which may include vesting requirements and/or performance criteria with respect
to the Company and/or the Optionee; provided that such Option shall become
exercisable at the rate of at least twenty percent (20%) per year over five (5)
years from the date the Option is granted. In the event that any of the Shares
issued upon exercise of an Option should be subject to a right of repurchase in
the Company's favor, such repurchase right shall lapse at the rate of at least
twenty percent (20%) per year over five (5) years from the date of Option is
granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
----------------------------------------------------
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to the Option at the date of such termination, or if the Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate. No termination shall be deemed to
occur and this Section 9(b) shall not apply if (i) the Optionee is a Consultant
who becomes an Employee; or (ii) the Optionee is an Employee who becomes a
Consultant.
8
<PAGE>
(c) Disability of Optionee.
----------------------
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option within three (3) months of the date of
such termination, the Option will not qualify for ISO treatment under the Code.
To the extent that Optionee was not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option to the extent so
entitled within six (6) months from the date of termination, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
9
<PAGE>
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer, or, in the case of
a person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the price shall not be less than one hundred percent (100%) of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original purchase price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but at a minimum rate of 20% per year.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder when his or her purchase is entered upon the records of the duly
authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 12 of the Plan.
10
<PAGE>
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a fair market value
on the date of surrender equal to or less than Optionee's marginal tax rate
times the ordinary income recognized, or (d) by electing to have the Company
withhold from the Shares to be issued upon exercise of the Option, or the Shares
to be issued in connection with the Stock Purchase Right, if any, that number of
Shares having a fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
--------
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Stock Purchase Right as to which the election is made;
and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83 (b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization, Merger or Certain
-------------------------------------------------------------
Other Transactions.
- ------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
11
<PAGE>
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation of expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, re-capitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
-------- -------
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Sales of Assets. In the event of a proposed sale of all
-------------------------
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's shareholders, each outstanding Option or Stock Purchase Right
shall be assumed or an equivalent option or right shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the successor corporation does not agree to assume the Option or Stock
Purchase Right or to substitute an equivalent option or right, in which case
such Option or Stock Purchase Right shall terminate upon the consummation of the
merger of sale of assets.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
13. Non-Transferability of Options and Stock Purchase Rights.
--------------------------------------------------------
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised or purchased during the
lifetime of the Optionee or Stock Purchase Rights Holder only by the Optionee or
Stock Purchase Rights Holder.
12
<PAGE>
14. Time of Granting Options and Stock Purchase Rights. The date of
--------------------------------------------------
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option or Stock
Purchase Right is so granted within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Authority to Amend or Terminate. The Board may at any time
-------------------------------
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rules 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. No amendment or
----------------------------------
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Stock. Shares shall not be issued
---------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1993, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any Stock Exchange. As a condition to the exercise of an Option,
the Company may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by law.
17. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
13
<PAGE>
18. Agreements. Options and Stock Purchase Rights shall be evidenced
----------
by written agreements in such form as the Administrator shall approve from time
to time.
19. Shareholder Approval. Continuance of the Plan shall be subject
--------------------
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the degree and manner required under applicable state and federal
law and the rules of any Stock Exchange upon which the Common Stock is listed.
All Options and Stock Purchase Rights issued under the Plan shall become void in
the event such approval is not obtained.
20. Information and Documents to Optionees and Purchasers. The
-----------------------------------------------------
Company shall provide financial statements at least annually to each Optionee
and to each individual who acquired Shares Pursuant to the Plan, during the
period such Optionee or purchaser has one or more Options or Stock Purchase
Rights outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such Shares. The
Company shall not be required to provide such information if the issuance of
Options or Stock Purchase Rights under the Plan is limited to key employees
whose duties in connection with the Company assure their access to equivalent
information. In addition, at the time of issuance of any securities under the
Plan, the Company shall provide to the Optionee or the Purchase a copy of the
Plan and any agreement(s) pursuant to which securities under the Plan are
issued.
14
<PAGE>
INTERNET EXTRA CORPORATION
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. Internet Extra Corporation, a California corporation
---------------
(the "Company"), hereby grants to __________ ("Optionee"), an option (the
------- --------
"Option") to purchase a total number of shares of Common Stock (the "Shares")
- ------- ------
set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "Exercise Price") subject to
--------------
the terms, definitions and provisions of Internet Extra Corporation 1997 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated herein by
----
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its Term
------------------
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
-----------------
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in Section
2(a)(i).
(iii) In no event may this Option be exercised after the date of
expiration of the Term of this Option as set forth in the Notice of Stock Option
Grant.
(b) Method of Exercise. This Option shall be exercisable upon the
------------------
execution and delivery of the Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as Exhibit A (the "Exercise Agreement") or of any
--------- ------------------
other form of written notice approved for such purpose by the Company which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the provision of the
Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by the payment of the Exercise Plan.
<PAGE>
This Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
applicable law and the requirements of any stock exchange upon which the Shares
may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(i) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by Optionee for more than six (6) months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised;
(d) if there is a public market for the Shares and they are
registered under the Securities Act, delivery of a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds required to pay the exercise
price; or
(e) subject to the provisions of applicable laws, a promissory note
in the form attached to this Agreement as Exhibit B, or in any other form
---------
approved by the Company.
4. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. Termination of Relationship. In the event of termination of Optionee's
---------------------------
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
----------------
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination
<PAGE>
Date, or if Optionee does not exercise this Option within the Termination
Period, the Option shall terminate.
6. Disability of Optionee.
----------------------
(a) Notwithstanding the provisions of Section 6 above, in the event of
termination of Continuous Status as an Employee or Consultant as a result of
Optionee's total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the Termination
Date (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant and in Section 9 below), exercise this Option to the extent
that Optionee was not entitled to exercise the Option as of the Termination
Date, or if Optionee does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate.
(b) Notwithstanding the provisions of Section 6 above, in the event
of termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of any disability not constituting a total permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant and in Section
9 below), exercise this Option to the extent Optionee was entitled to exercise
it as of such Termination Date; provided, however, that if this is an Incentive
Stock Option (as defined in Section 422 of the Code) and Optionee will be
treated for federal income tax purposes as having received ordinary income at
the time of such exercise in an amount generally measured by the difference
between the Exercise Price for the Shares and the fair market value of the
Shares on the date of exercise. To the extent that Optionee was not entitled to
exercise the Option at the Termination Date, or if Optionee does not exercise
such Option to the extent so entitled within the time specified in this Section
6(b), the Optionee shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during
-----------------
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within thirty (30) days after Optionee's Termination
Date, the Option may be exercised at any time within six (6) months following
the date of death (but in not event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), by Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the Termination Date.
8. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors ands assigns of Optionee.
<PAGE>
9. Term of Option. This Option may be exercised only within the Term
--------------
set forth in the Notice of Stock Option Grant, subject to the limitations set
forth in Section 7 of the Plan.
10. Tax Consequences. Set forth below is a brief summary as of the
----------------
date of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISOR BEFORE EXERCISING THIS OPTIOIN OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as
----------------------------------
an Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) Exercise of Non-Statutory Stock Option. If this Option does not
--------------------------------------
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of a Non-Statutory Stock
---------------------
Option, if the Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares purchased
under an Incentive Stock Option are disposed of within one-year period or within
two years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the difference between the Exercise Price and the lesser of (i) the fair
market value of the Shares on the date of exercise, or (ii) the sale price of
the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option
-------------------------------------------------------------
Shares. If the Option granted to Optionee herein is an Incentive Stock Option,
- ------
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to such Incentive Stock Option on or before the later of (i) the date
two years after the Date of
<PAGE>
Grant, or (ii) the date one year after the date of exercise, Optionee shall
immediately notify the Company in writing of such disposition. Optionee
acknowledges and agrees that he or she may be subject to income tax withholding
by the Company on the compensation income recognized by Optionee from the early
disposition by payment in cash or out of the current earnings paid to Optionee.
11. Withholding Tax Obligations. Optionee understand that, upon
---------------------------
exercising a Non-Statutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six (6) months if Optionee is subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If
------------
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, Optionee may at some point be required to satisfy tax withholding
obligations with respect to the disqualifying disposition of an Incentive Stock
Option. Optionee shall satisfy his or her tax withholding obligation arising
upon the exercise of this Option by one or some combination of the following
methods: (a) by cash payment, (b) out of Optionee's current compensation, (c) if
permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
or greater than Optionee's marginal tax rate times the ordinary income
recognized, or (d) by electing to have the Company withhold from the Shares to
be issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
--------
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
-------
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
----------
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
<PAGE>
12. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
[Signature Page Follows]
<PAGE>
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
document.
INTERNET EXTRA CORPORATION
By: ______________________________
___________________________________
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he or she is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof.
Optionee has reviewed the Plan and this Option in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option and
fully understands all provisions of the Option. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: ______________________
______________________________
Name of Optionee: ______________
<PAGE>
EXHIBIT A
---------
INTERNET EXTRA CORPORATION
1997 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
This Exercise Notice and Restricted Stock Purchase Agreement
("Agreement") is made as of this ____ day of ______________, 19____, by and
- -----------
between Internet Extra Corporation, a California corporation (the "Company"),
-------
and ___________ ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
1997 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase ________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
------
the Company's 1997 Stock Option Plan (the "Plan") and the Stock Option Agreement
----
dated _______________, (the "Option Agreement"). The purchase price for the
----------------
Shares shall be $____________ per Share for a total purchase price of
$_________________. The term "Shares" refers to the purchased Shares and all
------
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares
--------------------------
under this Agreement shall occur at the principal office of the Company
simultaneously with the execution of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) subject to the provisions of applicable laws, delivery of
a promissory note in the form attached as Exhibit B to the Option Agreement (or
---------
in any form acceptable to the Company), or (e) by a combination of the
foregoing. If Purchaser delivers a promissory note as partial or full payment of
the purchase price, Purchaser will also deliver a Pledge and Security Agreement
in the form attached as Exhibit C to the Option Agreement (or in any form
---------
acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
<PAGE>
(a) Right of First Refusal. Before any Shares held by Purchaser
----------------------
(either being sometimes referred to herein as the "Holder") may be sold or
------
otherwise transferred (including transfer by gift or operation of law), the
Company or its assignee(s) shall have a right of first refusal to purchase the
Shares on the terms and conditions set forth in this Section 3(a) (the "Right of
--------
First Refusal").
- -------------
(i) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
-------------------
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "Offered Price") and upon the same
-------------
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any given time
----------------------------------
within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price")
--------------
for the Shares purchased by the Company or its assignee(s) under this Section
3(a) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made,
-------
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within thirty (30) days after receipt of the
Notice or in the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section 3(a), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice and
provided further than any such sale or other transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that the provisions of this Section 3 shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company
<PAGE>
and/or its assignees shall again be offered the Right to First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to
--------------------------------------
the contrary contained in this Section 3(a) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate Family or a trust for the benefit of the
Optionee's Immediate Family shall be exempt from the provisions of this Section
3(a). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer.
-----------------------------------------------------
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(a)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer.
(ii) Price for Involuntary Transfer. With respect to any
------------------------------
stock to be transferred pursuant to Section 3(b)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written
notice of the transfer or proposed transfer of Shares. However, if the Purchaser
does not agree with the valuation as determined by the Board of Directors of the
Company, the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and who fees shall be borne equally by the Company and the Purchaser.
(c) Assignment. The right of the Company to purchase any part of
----------
the Shares may be assigned in whole or in part to any shareholder or
shareholders of the Company or other persons or organizations; provided, however
-------- -------
that an assignee, other than a corporation that is the parent or a 100% owned
subsidiary of the Company, must pay the Company, upon assignment of such right,
cash equal to the difference between the original purchase price and fair market
value, if the original purchase price is less than the fair market value of the
Shares subject to the assignment.
(d) Restrictions Binding on Transferees. All transferees of
-----------------------------------
Shares or any interests therein will receive and hold such Shares or interest
subject to the provisions of this Agreement. Any sales or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are
satisfied.
<PAGE>
(e) Termination of Rights. The right of first refusal granted to
---------------------
the Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(b) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act. Upon
termination of the right of first refusal described in Section 3(a) above, a new
certificate or certificates representing the Shares not repurchased shall be
issued, on request, without the legend referred to in Section 6(a)(ii) herein
and delivered to Purchaser.
4. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate(s) evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and
701, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of issuance of
the securities, such issuance will be exempt from registration under the
Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
securities exempt under Rule 701 may be resold by the Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is
<PAGE>
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the Company,
and the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), if applicable.
Notwithstanding this paragraph (d), Purchaser acknowledges and agrees to the
restrictions set forth in paragraph (f) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of purchase, then the securities may be resold by the Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about the
Company; (2) the resale occurring not less than two years after the party has
purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable. PURCHASER UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY
NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED
BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she wishes
to sell the securities three may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the two-year minimum holding period has been
satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales; and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
<PAGE>
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
Delete the following bracketed language if relying upon Section 25102(o) of the
- -------------------------------------------------------------------------------
California Corporations Code:
- -----------------------------
[(iii) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.]
(b) Stop-Transfer Notices. Purchaser agrees that, in order to
---------------------
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
<PAGE>
(c) Refusal to Transfer. The Company shall not be required (i)
-------------------
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in
--------------------
any manner whatsoever the right or power of the Company, or a parent or
subsidiary of the Company, to terminate Purchaser's employment, for any reason,
with or without cause.
7. Market Stand-Off Agreement. In connection with the initial
--------------------------
public offering of the Company's securities and upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
8. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement
---------------------------------------
sets forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
<PAGE>
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage pre-paid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counter parts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this
----------------------
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE
-----------------------------------
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
(i) Arbitration. In the event of any future dispute,
-----------
controversy or claim between the parties arising from or relating to this
Agreement, its breach or any matter addressed by this Agreement, it will be
resolved through binding confidential arbitration to be conducted by the
American Arbitration Association in San Francisco, California, pursuant to its
Commercial Arbitration Rules, and judgment upon the award rendered by the
Arbitrator may be entered by any court having jurisdiction of the matter. This
paragraph shall not alter the right of either party to seek and obtain
injunctive relief from a court of law.
(j) Freely executed. In entering into this Agreement, the
---------------
parties represent and warrant that they do so freely and voluntarily, after
having had the opportunity to meet and confer with their respective attorneys
regarding the contents and legal effect of this Agreement.
<PAGE>
(k) Attorneys' Fees. Each party shall pay all costs and
---------------
expenses that it incurs with respect to the negotiation, execution, delivery,
and performance of this Agreement. If any action or proceeding (e.g., an
arbitration) at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs, and necessary disbursements in addition to any other
relief to which such party may be entitled.
(l) Venue.
-----
Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement may be brought or
otherwise commenced by any party to this Agreement in any state or federal court
located in the State of California. Each party to this Agreement:
(a) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the State of California
in connection with any such legal proceeding;
(b) agrees that each state and federal court located in the State of
California shall be deemed to be a convenient forum;
(c) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in the State of California, any claim that such party is not subject
personally to the jurisdiction of such proceeding is improper or that this
Section or the subject matter of this Section may not be enforced in or by such
court.
(m) Authority, Binding Nature of Agreement. The parties have
--------------------------------------
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
the parties of this Agreement have been duly authorized by all necessary action
on the part of each party. This Agreement constitutes the legal, valid and
binding obligation of the parties, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
[Signature Page Follows]
<PAGE>
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
INTERNET EXTRA CORPORATION
By: ____________________________
Title: _________________________
PURCHASER:
____________________
________________________________
(Signature)
________________________________
(Print Name)
Address:
______________________
______________________
I, ____________________, spouse of ____________, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall hereby by similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to
any amendment or exercise of any rights under the Agreement.
________________________________
Name:_________________
Spouse of ________________
<PAGE>
EXHIBIT 10.5
PERSIS CORPORATION
131 STEUART STREET
SAN FRANCISCO, CALIFORNIA
OFFICE LEASE
BASIC LEASE INFORMATION
Date: September 2, 1994
Landlord: Persis Corporation
Tenant: Gregory R. Raifman and Jon Logan Edwards
Exhibit A Premises: Suite 450
Section 1.5 Net Rentable Area of Premises: 2,953 Square Feet
Section 1.10 Tenant's Proportionate Share: 3.87%
Section 1.11 Term: Five (5) Years
Section 2 Scheduled Term Commencement Date:
October 1, 1994
Section 2 Term Expiration Date: September 30, 1999
Section 3.1(a) Basic Rent: ANNUAL MONTHLY
Year One: $37,620.00 $3,135.00
Year Two: $50,201.00 $4,183.42
Year Three: $51,677.50 $4,306.46
Year Four: $51,677.50 $4,306.46
Year Five: $53,154.00 $4,429.50
Section 3.2 Basic Operating Cost Base Year: 1994
Section 4 Security Deposit: $ 4,429.50
Section 23 Broker: Iliff, Thorn & Company/Marcus & Millichap
Section 25 Tenant's Address for Notices:
131 Steuart Street, Suite 410
San Francisco, CA 94105
Section 25 Landlord's Address for Notices:
131 Steuart Street
San Francisco, California 94105
<PAGE>
Exhibit(s) and Addendum:
Exhibit A - Premises/Floor Plan
Exhibit B - Work Letter Agreement
Exhibit C - Rules and Regulations
Exhibit D - Right to Expand/Right of First Refusal
Exhibit E - Expansion Space Floor Plan
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the event
of any conflict between any Basic Lease Information and the Lease, the latter
shall control.
LANDLORD: PERSIS CORPORATION
By: /s/ Paul de Ville
Paul de Ville
Its: Vice President
TENANT: GREGORY R. RAIFMAN
By: /s/ Gregory R. Raifman
TENANT: JON LOGAN EDWARDS
By: /s/ Jon Logan Edwards
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions 1
-----------
2. Term 3
----
3. Rent 3
----
4. Security Deposit 6
----------------
5. Improvement of the Premises 7
---------------------------
6. Use 7
---
7. Utilities and Services 7
----------------------
8. Repairs and Maintenance 10
-----------------------
9. Alterations 10
-----------
10. Entry by Landlord 12
-----------------
11. Insurance 12
---------
12. Indemnity 13
---------
13. Assignment and Subletting 14
---------- --- ----------
14. Damage 18
------
15. Condemnation 20
------------
16. Subordination 21
-------------
17. Default 21
-------
18. Signs 23
-----
19. Rules and Regulations 24
----- --- -----------
20. Compliance With Regulations 24
---------- ---- -----------
21. Self-Help 24
---------
22. Attorneys' Fees 25
--------- ----
23. Brokerage 25
---------
24. Quiet Enjoyment 25
----- ---------
25. Notices 25
-------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
26. Holding Over 26
------- ----
27. Transfers by Landlord 26
--------- -- --------
28. Tenant's Remedies 26
-------- --------
29. Substitution of Premises 26
------------------------
30. Miscellaneous 27
-------------
</TABLE>
Exhibit A - Premises/Floor Plan
Exhibit B - Work Letter Agreement
Exhibit C - Rules and Regulations
Exhibit D - Right to Expand/Right of First Refusal
Exhibit E - Expansion Space Floor Plan
<PAGE>
OFFICE LEASE
THIS LEASE, is executed this ________ day of September, 1994 by and between The
Persis Corporation, a Hawaii Corporation (hereinafter referred to as
"Landlord"), and Gregory R. Raifman and Jon Logan Edwards, (hereinafter referred
to as "Tenant");
WITNESSETH:
WHEREAS, Landlord is the owner of that certain real property (the "Land")
and the buildings and certain other improvements which are being or have been
constructed thereon located and addressed at 131 Steuart Street, San Francisco,
California (collectively, the "Property").
WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to lease
from Landlord, that portion of the Building specified in the Basic Lease
Information, as more particularly described on the Floor Plan(s) attached hereto
as Exhibit A (the "Premises").
NOW, THEREFORE, Landlord hereby leases the Premises to Tenant, and Tenant
hereby leases the Premises from Landlord, for the term, at the rent, and upon
and subject to the terms and conditions hereinafter set forth. Landlord reserves
to itself the use of the roof, exterior walls, Common Areas (as hereinafter
defined), and the area above and below the Premises together with the right to
install, maintain, use, repair and replace pipes, lines, ducts, pumps, conduits,
wires, transformers, glazing and structural elements now or in the future
leading through the Premises and which serve other parts of the Building.
This Lease is subject to any and all existing encumbrances, conditions,
rights, covenants, easements, restrictions and rights of way of record, and
other matters of record, if any, applicable zoning and building laws,
regulations and codes, and such matters as may be disclosed by inspection or
survey.
1. Definitions. Certain terms used herein shall have the following meanings:
-----------
1.1. "Building" shall mean the buildings located at 131 Steuart Street and 141
--------
Steuart Street, San Francisco, California.
1.2. "Building Standard Improvements" shall mean those improvements which are to
-------- -------- ------------
be installed by Landlord, if any, at its expense in the Premises or for
which a credit is to be given pursuant to the Work Letter Agreement
attached hereto as Exhibit B.
1.3. "Common Areas" shall mean the areas on individual floors devoted to
------ -----
corridors, fire vestibules, elevator foyers, lobbies, electric and
telephone closets, restrooms, mechanical rooms, janitor closets and other
similar facilities for the benefit of all tenants (or invitees) on the
particular floor and shall also mean those areas of the Building devoted to
mechanical and service rooms servicing more than one floor or the Building
as a whole.
1.4. "Holidays" shall mean New Year's Day, President's Day, Memorial Day,
--------
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
1.5. "Net Rentable Area" shall mean the area or areas of space within the
--- -------- ----
Building determined as follows: (i) Net Rentable Area on a single tenancy
floor is determined by measuring from the inside surface of the outer glass
and extensions of the plane
1
<PAGE>
thereof in non-glass areas to the inside surface of the opposite outer
glass and extensions of the plane thereof in non-glass areas and shall
include all areas within the outside walls, excluding vertical
penetrations such as building stairs, elevator shafts, flues, vents,
stacks, pipe shafts and vertical ducts; provided however, vertical
penetrations which are for the specific use of Tenant, such as special
stairs or elevators, shall be included as Net Rentable Area, and (ii) Net
Rentable Area for a partial floor shall include all space within the
demising walls (measured from the mid-point of demising walls and in the
case of exterior walls, measured as defined in (i) above, plus Tenant's
share of any Common Areas on such floors attributable to such space. No
deductions from Net Rentable Area shall be made for columns or
projections in the Building. Tenant acknowledges that it has been given
an opportunity to independently verify the amount of Net Rental Area in
the Premises calculated on the basis of the foregoing definition and
whether or not Tenant has undertaken such verification Tenant and
Landlord hereby stipulate that for all purposes hereof the amount of Net
Rentable Area in the Premises shall be the amount stated in the Basic
Lease Information.
1.6. "Rent" shall mean Basic Rent, Gross Rent and Additional Rent. "Gross
-----
Rent" shall mean Basic Rent plus Tenant's Proportionate Share of Basic
----
Operating Cost increases determined pursuant to Section 3.2. "Additional
Rent" shall mean all amounts payable to Landlord under this Lease other
than Gross Rent and Basic Rent, whether or not characterized as Rent
under this Lease including but not limited to late charges,
administrative fees and interest payable pursuant to Section 3.1(d).
1.7. "Substantial Completion" shall mean (and the Premises shall be deemed
----------- ----------
"Substantially Complete") when Landlord's architect shall have issued a
certificate of substantial completion with respect to the Premises or
that portion of the Building within which they are contained, whether or
not Substantial Completion of the Building itself shall have occurred.
Substantial Completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" or similar corrective work. Such
punchlist or corrective work shall not interfere with Tenant's occupancy
or use of the Premises.
1.8. "Tenant's Extra Improvements" shall mean those improvements which are to
-------- ----- ------------
be installed in the Premises at Tenant's expense pursuant to the Work
Letter Agreement attached hereto as Exhibit B.
1.9. "Tenant's Improvements" shall mean Building Standard Improvements and
-------- ------------
Tenant's Extra Improvements.
1.10. "Tenant's Proportionate Share" shall mean the percentage which the Net
-------- ------------- -----
Rentable Area of the Premises bears to the Net Rentable Area of the
Building; provided that if the Building is greater than 90% occupied,
Tenant's Proportionate Share shall mean the percentage which the Net
Rentable Area of the Premises bears to the occupied space in the
Building.
1.11. "Term" shall mean a period commencing with the Term Commencement Date and
----
ending on the Term Expiration Date specified on the Basic Lease
Information sheet as such Term Expiration Date may be extended. The
Scheduled Term Commencement Date specified on the Basic Lease Information
sheet represents the parties' estimate of the Term Commencement Date. The
Term Commencement Date shall be confirmed pursuant to Section 2 hereof.
2
<PAGE>
1.12. "Term Commencement Date" shall mean the date when the Term commences
---- ------------ ----
as determined pursuant to Section 2 hereof.
The terms on the Basic Lease Information sheet shall have the
definitions set forth above. The information on such sheet is
incorporated herein by this reference.
2. Term. The Term shall commence upon Substantial Completion of the Premises
----
which the parties expect to occur on the Scheduled Term Commencement Date and,
except as otherwise provided herein or in any exhibit or addendum hereto, shall
continue in full force until the Term Expiration Date. If the Premises are not
Substantially Complete by the Scheduled Term Commencement Date for any reason,
Landlord shall not be liable for any claims, damages or liabilities in
connection therewith or by reason thereof, but the Term Commencement Date shall
be the day when the Premises are Substantially Complete. If Substantial
Completion occurs prior to the Scheduled Term Commencement Date, Tenant shall
take occupancy and the Term shall commence. If Landlord is installing Tenant's
Improvements, Landlord agrees to use best efforts to provide Tenant with such
notice as circumstances reasonably allow of the date when Landlord expects to
achieve Substantial Completion, based upon the progress of the work. Should the
Term Commencement Date be a date other than the Scheduled Term Commencement
Date, either Landlord or Tenant, at the request of the other, shall execute an
amendment to the Lease specifying the Term Commencement Date. Tenant's
obligation to pay Rent shall commence upon the Term Commencement Date (except as
expressly otherwise provided herein with respect to obligations arising
earlier). If this Lease is executed by Tenant on or before September 2, 1994 and
Landlord does not deliver Premises on or before November 1, 1994, Tenant shall
have the right to terminate this Lease.
3. Rent.
----
3.1. Basic Rent.
----- ----
(a) Tenant agrees to pay to Landlord, as Basic Rent for the
Premises during the Term of this Lease, the sum set forth in
the Basic Lease Information, payable in advance in monthly
installments as set forth in the Basic Lease Information on or
before the first day of each calendar month during the Term
hereof. Said Basic Rent shall be subject to adjustment as
provided in subsection (b) of this Section 3.1, and shall be in
addition to all other amounts required to be paid by Tenant
pursuant to the provisions of this Lease.
(b) If the Term commences on a date other than the first day of a
calendar month, Basic Rent for the period from the Term
Commencement Date through the last day of the calendar month in
which the Term commences shall be prorated on the basis of a
thirty-day month, and Basic Rent for the first full or
fractional month of the Term of this Lease shall be payable on
the Term Commencement Date. In the event the Term Expiration
Date falls on a day other than the last day of the calendar
month, Basic rent for the period from the first day of the last
calendar month of the Term to the end of the Term shall be
prorated on the basis of a thirty-day month.
(c) Rent due under this Lease shall be paid, without deduction or
offset, and without prior notice or demand, to Landlord at the
address specified for notices on the Basic Lease Information
sheet, or at such other address as Landlord may from time to
time specify by written notice to Tenant. All amounts of money
(i.e., Rent) payable by Tenant to Landlord hereunder, if not
paid when due, shall bear simple interest from five days after
the due date until
3
<PAGE>
paid at the lesser of fifteen percent (15%) or the maximum rate
allowed by law. Tenant shall also pay to Landlord a fee in the
amount of ten percent (10%) of the overdue amount for the
administrative cost caused by Tenant's failure to pay the Basic
Rent or the Additional Rent payable pursuant to Section 3.2(b)
below on time if such overdue amount is not paid within five (5)
days of the date it is due.
3.2. Basic Operating Cost Adjustment.
----- --------- ---- ----------
(a) For the purposes of this Section 3.2, the following Terms are
defined as follows:
"Lease Year": Each calendar year of the Term.
----------
"Basic Operating Cost Base": The Basic Operating Cost Base Year
-------------------------
shall mean the year set forth in the Basic Lease Information.
"Basic Operating Cost": All costs and expenses of the nature
--------------------
hereinafter described, incurred in connection with ownership and
operation of the Building and such additional facilities now and
in subsequent years as may be determined by Landlord to be
necessary to the Building. All costs and expenses shall be
determined in accordance with generally accepted accounting
principles which shall be consistently applied (with accruals
appropriate to Landlord's business). Basic Operating Cost as used
herein shall mean all expenses and costs but not specific costs
which are separately billed to and paid by specific tenants) of
every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the management
and operation of the Building and supporting facilities of the
Building, including but not limited to the following:
(1) Wages, salaries and related benefits of all employees
engaged in management, operation, maintenance or security of
the Building; employer's Social Security taxes, unemployment
taxes or insurance, payroll taxes and any other taxes which
may be levied on such wages and salaries; uniforms of
Landlord's service, security and maintenance personnel; the
cost of disability and hospitalization insurance and
workers' compensation and pension or retirement and all
other benefits for such employees; and the costs of
maintaining and operating building management offices, if
any.
(2) All supplies, small tools and materials used in operation
and maintenance of the Building.
(3) Cost of all utilities and communications services, including
water and power, sewer and other waste disposal, heating,
lighting, air conditioning and ventilating for the entire
Building.
(4) Cost of all repair, maintenance, security, janitorial and
other services for the Building or for equipment therein,
including, without limitation, alarm and/or guard service,
life safety, window cleaning, scaffold maintenance, and
elevator and/or escalator maintenance, and computer
operations for the basic building systems.
4
<PAGE>
(5) Cost of all insurance applicable to the Building, including,
but not limited to, fire, earthquake, casualty, extended
coverage risk, vandalism and malicious mischief, boiler and
pressure apparatus insurance, war damage, catastrophe
excess, rent abatement or rent interruption insurance,
public liability insurance, and any other types of insurance
that a prudent owner of similar property would maintain on
the Building, all personnel engaged in its management,
maintenance and operation, and Landlord's personal property
used in connection therewith (the enumeration of such
coverages not imposing upon Landlord the duty or obligation
to maintain them), as well as casualty losses not covered by
such insurance due to the deductible provisions contained
therein.
(6) Cost of all accounting (including cost of certified public
accountants), legal or other professional fees incurred in
connection with the operation of the Building, not including
commissions or fees paid to real estate brokers or
salespersons.
(7) A reasonable fee to Landlord or its agent for general
overhead, management and other services.
(8) Cost of repairs and replacements (other than capital
improvements) and general maintenance, including, without
limitation, landscaping and all costs of periodic relamping
and reballasting of fluorescent fixtures with respect to the
Building.
(9) All maintenance costs relating to public and service areas
of the Building, including (but without limitation)
sidewalks, landscaping, service areas, mechanical rooms and
Building exteriors.
(10) All taxes (including any increase in taxes which may arise
as a result of any sale, lease or other disposition of the
Property), service payments in lieu of taxes, occupancy
fees, annual or periodic license or use fees, excises,
transit charges, housing fund assessments, assessments,
levies, fees or charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind
-------------
which are assessed, levied, charged, confirmed, or imposed
by any public authority upon the Building, its operations or
the Rent (or any portion or component thereof), except (i)
inheritance or estate taxes imposed upon or assessed against
the Building, or any part thereof or interest therein, and
(ii) taxes computed upon the basis of the net income derived
from the Building by Landlord or the owner of any interest
therein.
(11) Amortization (together with reasonable financing charges) of
capital improvements made to the Building subsequent to the
Term Commencement Date which will improve the operating
efficiency of the Building or which may be required by
governmental authorities.
(b) If the amount of the Basic Operating Cost paid or incurred by
Landlord for any calendar year during the Term of this Lease on
account of the operation or maintenance of the Building is in
excess of the Basic Operating Cost paid or incurred by Landlord
in the Basic Operating Cost Base Year, then Tenant shall pay
Tenant's Proportionate Share of such increase as Additional Rent.
During the Term, Tenant shall pay to Landlord monthly in advance
and every
5
<PAGE>
month during the Term, one-twelfth (1/12th) of the amount of such
Additional Rent as reasonably estimated by Landlord in advance,
to be due from the Tenant.
Annually, as soon as is reasonably possible after the expiration
of each calendar year, Landlord shall deliver to Tenant a
statement, which statement shall be conclusive between the
parties hereto, setting forth the Basic Operating Cost for the
preceding calendar year and the amount of the Basic Operating
Cost paid by Tenant as determined in accordance with the
provisions of this Section 3.2. If the aggregate amount of the
estimated Basic Operating Cost payments made by Tenant in any
calendar year should be less than Tenant's Proportionate Share of
the increase in Basic Operating Cost for such calendar year, then
Tenant shall pay to Landlord as Additional Rent upon demand the
amount of such deficiency. If the aggregate amount of such
estimated Basic Operating Cost payments made by Tenant in any
calendar year should be greater than Tenant's Proportionate Share
of Basic Operating Cost due for such year under this section 3.2,
then, should Tenant not be otherwise in default hereunder, the
amount of such excess will be applied by Landlord to the next
succeeding installments of such Basic Operating Cost due
hereunder; and if there is any such excess for the last year of
the Term, the amount thereof will be refunded by Landlord to
Tenant on the Term Expiration Date, provided Tenant has vacated
the Premises and is not otherwise in default under the Terms of
this Lease.
In the event the Term Commencement Date or Term Expiration Date
occurs on a day other than January 1, or ends on a day other than
December 31, Tenant's Proportionate Share of Basic Operating Cost
increases for such partial calendar year shall be appropriately
prorated so that Tenant shall pay Tenant's Proportionate Share of
Basic Operating Cost increases only for the portion of the
calendar year falling within the Term.
(c) Tenant shall have the right to review Landlord's calculations and
supporting data of the Basic Operating Cost. Tenant may have
calculations and supporting data audited at Tenant's sole
expense. In the event of a dispute regarding the Basic Operating
Cost, Landlord and Tenant shall resort to arbitration.
3.3. Costs Attributable Solely to Tenant. In addition to the payment of
----- ------------ ------ -- ------
Tenant's Proportionate Share of Basic Operating Cost, Tenant shall
also pay as Additional Rent, from time to time and when and as
incurred by Landlord, costs and/or expenses incurred by Landlord cost
which is properly attributable to the Premises as relating to
Tenant's use and occupancy of the Premises as distinguished from
Basic Operating Cost for the Building as a whole, whether such costs
and/or expenses arise as a result of Tenant's Extra Improvements,
real property or personal property taxes on Tenant's Extra
Improvements or Tenant's fixtures or personal property, use of
services in excess of those provided by Landlord hereunder,
Landlord's curing defaults pursuant to Section 21, or otherwise.
4. Security Deposit. Tenant has deposited with Landlord the sum specified in
-------- -------
the Basic Lease Information (the "Security Deposit"). The Security Deposit
shall be held by Landlord as security for the faithful performance by
Tenant of all of the provisions of this Lease to be performed or observed
by Tenant. If Tenant fails to pay the Rent or otherwise defaults with
6
<PAGE>
respect to any provision of this Lease, Landlord may use, apply or retain
all or any portion of the Security Deposit for the payment of any Rent in
default or for the payment of any other sum to which Landlord may become
obligated by reason of Tenant's default, or to compensate Landlord for any
loss or damage which Landlord may suffer thereby. If Landlord so uses or
applies all or any portion of the Security Deposit, Tenant shall within ten
(10) days after demand therefor deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to the full amount thereof and
Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep the Security Deposit separate from
its general accounts. If Tenant performs all of its obligations hereunder,
the Security Deposit, or so much thereof as has not therefore been applied
by Landlord, shall be returned without payment of interest or other
increment for its use, to Tenant or, at Landlord's option, to the last
assignee, if any, of Tenant's interest hereunder) within 30 days of the
expiration of the Term hereof, and after Tenant has vacated the Premises.
No trust relationship is created herein between Landlord and Tenant with
respect to the Security Deposit. In the event the Building is sold, credit
for the Security Deposit shall be transferred to the new owner.
5. Improvement of the Premises. As promptly as practicable after the date of
----------- -- --- --------
execution of this Lease, Landlord and Tenant shall undertake their
respective obligations to prepare the Premises for occupancy by Tenant in
accordance with the Work Letter Agreement attached hereto as Exhibit B.
6. Use. The Premises shall be used for general office purposes only. Tenant
---
shall have twenty-four (24) hour, seven (7) days a week, fifty-two(52)
weeks a year access to the Premises during the term of this Lease. Tenant
shall at its own cost and expense obtain any and all licenses and permits
necessary for any such use. Tenant agrees not to do or permit to be done in
or about the Premises or the Building, nor to bring or keep or permit to be
brought or kept in or about the Premises or the Building, anything which is
prohibited by or will in any way conflict with any law, statute or
governmental regulation, or which will in any way increase the existing
rate of, cause the cancellation of, or otherwise affect fire or any other
insurance on the Building or any of its contents. Tenant agrees not to do
or permit to be done anything in, on or about the Premises or the Building
which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or annoy them, or use or
allow the Premises to be used for residential purposes or for any improper,
unlawful or objectionable purpose. Tenant agrees not to cause, maintain or
permit any nuisance in, on or about the Premises or the Building, erect any
antennas, nor to use or permit to be used any loudspeaker or other device,
system or apparatus which can be heard outside the Premises without the
prior written consent of Landlord. Tenant agrees not to commit or suffer to
be committed any waste in or upon the Premises. Tenant shall not operate or
install any equipment within the Premises which will (i) injure, vibrate or
shake the Premises or Building, (ii) compromise the structural integrity of
the floor within the Premises or overload existing electrical systems or
other mechanical equipment servicing the Premises or Building or (iii)
impair the efficient operation of the sprinkler system (if any) or the
heating or ventilation equipment (if any) servicing the Building. The
provisions of this s Section 6 are for the benefit of Landlord only and
shall not be construed to be for the benefit of any other tenant or
occupant of the Building.
7. Utilities and Services.
--------- --- --------
(a) Landlord shall make customary arrangements with public utilities
and/or public agencies to furnish any electricity and water utilized
in operating the facilities serving the Premises.
7
<PAGE>
(b) Landlord, select to reimbursement pursuant to Section 3.2 shall
furnish Tenant during Tenant's occupancy of the Premises:
(1) Domestic and cool water at those points of supply provided for
general use of tenants in the Building; central heat and air
conditioning in season, at such times as Landlord normally
furnishes these services to other tenants in the Building and at
such temperatures and in such amounts as are reasonably
considered by Landlord to be standard or as may be limited or
controlled by applicable laws, ordinances, rules and regulations;
(2) Routine maintenance of all Common Areas and special service areas
of the Building in the manner and to the extent reasonably deemed
by Landlord to be standard; however, Landlord shall not be
obligated to paint the exterior surface of the exterior walls or
window frames nor shall Landlord be required to maintain, repair
or replace windows, doors or plate glass in the Premises;
(3) Janitorial service on a five (5) day week basis, excluding
Holidays; provided, however, that if Tenant's Extra Improvements
are not consistent in quality and quantity with Building Standard
Improvements, Tenant shall pay any extra cleaning and janitorial
cost attributable thereto;
(4) Electrical facilities comparable to those supplied in other first
class office buildings in the vicinity of the Building to provide
sufficient power for typewriters and other office machines of
similar low electrical consumption, but not including electricity
required for electronic data processing equipment (which does not
include low end desktop personal computers), special lighting in
excess of Building Standard Improvements, and any other item of
electrical equipment which (singly) consumes more than .5
kilowatts per hour at rated capacity or requires a voltage other
than one hundred twenty (120) volts single phase; and provided,
however, that if the installation of such electrical equipment
requires additional air conditioning capacity above that provided
to the Building Standard Improvements or above standard usage of
existing capacity, then the additional air conditioning
installation and/or operating costs attributable thereto shall be
paid by Tenant;
(5) Initial and subsequent lamps, bulbs, starters and ballasts used
in the Premises provided such subsequent consumption does not
exceed Building Standard usage, and
(6) Public elevator service serving the floors on which the Premises
are situated during Building hours of operation. Landlord shall
provide Tenant with an elevator key allowing full time access to
the floor upon which premises are located.
(c) Any heating, ventilation, air conditioning, electrical or elevator
service provided by Landlord to Tenant other than during normal
business days or normal business hours or on Saturdays, Sundays or
Holidays shall be furnished upon the prior written request of Tenant
and at Tenant's sole cost and expense.
(d) If Tenant shall require electric current in excess of that usually
furnished or supplied for use of the Premises as general office space,
Tenant shall first procure the consent of Landlord to the use thereof
and Landlord may cause a meter to be installed in the Premises, or
Landlord shall have the right to cause a reputable independent
electrical engineering or consulting firm to survey and determine the
value of the electric
8
<PAGE>
service furnished for such excess electric current. The cost of any
such survey or meters and of installation, maintenance and repair
thereof shall be paid for by Tenant. Tenant agrees to pay to Landlord,
promptly upon demand therefor, for all such electrical current
consumed as well as an additional use charge calculated as a
percentage of electrical current used as shown by said meters or by
said survey at the rates charged for such services to the Building by
the municipality or the local public utility, as the case may be,
furnishing the same, plus any additional expense incurred in keeping
account of the electric current so consumed.
(e) Tenant covenants and agrees that at all times its use of electric
current shall never exceed Tenant's Proportionate Share of the
capacity of existing feeders to the Building or the risers or wiring
installation. Tenant's proportionate share of the capacity of existing
feeders to the Building or the risers or wiring installation shall be
deemed to be sufficient for that capacity necessary and normally
supplied for general office use. Any riser or risers or wiring to meet
Tenant's excess electrical requirements, upon written request of
Tenant, will be installed by Landlord, at the sole cost and expense of
Tenant if, in Landlord's sole judgment, the same are necessary and
will not cause permanent damage or injury to the Building or Premises
or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alternative repairs or expense or interfere
with or disturb other tenants or occupants.
(f) To the extent that Tenant shall require special or more frequent
cleaning and janitorial service than that normally provided to tenants
in the Building generally (hereinafter referred to as "Special
Cleaning Service") Landlord shall upon reasonable advance notice by
Tenant, furnish such Special Cleaning Service and Tenant agrees to pay
Landlord, within ten (10) days of being billed therefor, Landlord's
charge for providing such additional service.
Special Cleaning Service shall include but shall not be limited to the
following:
(1) The cleaning and maintenance of Tenant's eating facilities, if
any, including the removal of refuse and garbage therefrom.
(2) The cleaning and maintenance of Tenant computer centers,
including peripheral areas, and removal of waste paper therefrom.
(3) The cleaning and maintenance of special equipment areas, kitchen
areas, private toilets and locker rooms, and large scale
duplicating rooms.
(4) The cleaning and maintenance in areas of special security such as
storage vaults.
(g) Landlord shall not be liable for damages or injuries to either person
or property, including, but not limited to those arising from an
interference with Tenant's business arising from the failure by
Landlord to furnish such services or the cessation of such services,
unless such failure is directly attributable to Landlord's gross
negligence or willful misconduct. Landlord shall not be deemed to have
evicted Tenant, nor shall there be any abatement of Rent, nor shall
Tenant be relieved from performance of any covenant on its part to be
performed hereunder, by reason of the unreasonable failure by Landlord
to furnish the above described services or the cessation of such
services due to causes or circumstances beyond the control of
Landlord. Landlord shall use reasonable diligence to make such repairs
as may be required to machinery or equipment within the Building to
provide restoration of services and, where the
9
<PAGE>
cessation or interruption of service has occurred due to circumstances
or conditions beyond the Building boundaries, to cause the same to be
restored by diligent application or request to the provider thereof.
Tenant acknowledges that one (1) year may be required after the
Building is fully occupied in order to adjust and balance the climate
control systems.
8. Repairs and Maintenance.
------- --- -----------
8.1. Landlord's Obligation to Repair. Subject to the other provisions of
---------- ---------- -- ------
this Lease imposing obligations in this respect upon Tenant and to
reimbursement pursuant to Section 3.2, Landlord shall repair, replace
and maintain the external and structural parts of the Building
including systems above the ceilings and behind the walls of the
Premises which do not comprise a part of the Premises and are not
leased to others, and janitor and equipment closets and shafts within
the Premises designated by Landlord for use by it in connection with
the operation and maintenance of the Building. Landlord shall perform
such repairs, replacements and maintenance with reasonable dispatch,
in a good and workmanlike manner: but Landlord shall not be liable
for any damages, direct, or indirect or for damages for personal
discomfort, illness or inconvenience of Tenant by reason of failure
of such equipment, facilities or systems or reasonable delays in the
performance of such repairs, replacements and maintenance, unless
caused by the deliberate act or omission, or the active negligence of
Landlord, its servants, agents, or employees. Notwithstanding the
foregoing, Landlord shall not be liable for consequential damages or
indirect damages arising by reason of failure of such equipment,
facilities or systems or delays in the performance of such repairs,
replacements and maintenance, unless such failure is directly
attributable to Landlord's gross negligence or willful misconduct.
8.2. Repairs Necessitated by Tenant's Act. Any damage to the Building
------- ------------ -- -------- ---
whatsoever, including but not limited to, windows, doors, floors,
foundation, internal structures, elevators, boilers, engines, pipes
or other apparatus used for the purpose of climate control of the
Building or operating the elevators, water pipes, drainage pipes,
electric lighting or other equipment of the Building, or roof or
outside walls of the Building, damaged or destroyed through the
negligence, willful misconduct, carelessness or misuse of Tenant, its
agents, employees or anyone permitted by it to be in the Building, or
through it in any way, the cost of the necessary repairs,
replacements or alterations shall be borne by Tenant who shall pay
the same to Landlord as Rent forthwith on demand.
8.3. Tenant's Obligation to Repair. Tenant at its cost and expense shall
-------- ---------- -- ------
repair the Premises, including without limiting the generality of the
foregoing, all interior partitions, doors, walls, windows, fixtures,
Tenant's Improvements and any alternations in the Premises and any
special mechanical and electrical equipment not a normal part of the
Premises installed by or for Tenant, reasonable wear and tear and
damage with respect to which Landlord has an obligation to repair as
provided in Sections 14.1 and 15.6 only excepted: provided that,
prior to making any repairs to the Premises that affect the base
Building structural, electrical, or mechanical systems, Tenant shall
obtain the consent of the Landlord, such consent not to be
unreasonably withheld. Landlord may enter and view the state of
repair and Tenant will repair in a good and workmanlike manner
according to notice from Landlord in writing.
9. Alterations.
-----------
10
<PAGE>
9.1. Approval of Alterations. During the Term of this Lease, Tenant shall
-------- -- -----------
not make any alterations, additions, or improvements to the Premises
without first meeting the following requirements:
(a) Prior to the commencement of any work, Tenant shall submit plans
and specifications prepared by a licensed architect and/or
structural engineer for Landlord's approval, and shall obtain
any necessary governmental permits and deliver a copy thereof to
Landlord;
(b) In the event Landlord approves such plans and specifications,
the alterations shall be made by a contractor designated by
Landlord or a contractor chosen by Tenant and approved by
Landlord;
(c) Tenant shall provide satisfactory evidence of sufficient
contractor's comprehensive general liability insurance covering
Landlord, builder's risk insurance, and workmen's compensation
insurance;
(d) Tenant shall provide a performance and payment bond satisfactory
in form and substance to Landlord;
(e) Tenant shall provide such other security as Landlord may
reasonably require to insure payment for the completion of all
work free and clear of liens; and
(f) Tenant shall give Landlord at least ten (10) business days'
notice before commencing any work so that Landlord can post and
record a notice of non-responsibility. All such alterations
shall immediately become a part of the realty and belong to
Landlord.
(g) All of Tenant's contractors, subcontractors, employees, servants
and agents must work in harmony with and shall not interfere
with any labor employed by Landlord, or Landlord's contractors
or by any other tenant or its contractors;
(h) All core drilling, concrete cutting, demolition of partitions or
removal of rubbish, shall be done between the hours of 7:00 p.m.
and 6:00 a.m. Transportation of construction materials through
Common Areas shall be done outside the Building's normal
operating hours;
(i) If any shutdown of plumbing, electrical, or air conditioning
equipment becomes necessary in connection with the making of any
alternations, Tenant shall notify Landlord and Landlord will
reasonably determine when such shutdown may be made. Any such
shutdown shall be done only if an agent or employee of Landlord
is present. Tenant will reimburse Landlord for the expense of
any such employee or agent. Tenant shall be fully responsible if
any shutdown of plumbing, electrical or air conditioning
equipment jeopardizes or invalidates any warranties covering the
Building;
(j) Any complaints by tenants of excess noise or odors are to be
remedied immediately, or alteration operations are to cease
until said noise or odors are abated;
(k) Landlord expressly reserves the right to revoke its consent upon
notice to Tenant in the event of the breach of any of the terms
or conditions hereof, in
11
<PAGE>
which case all work on the alterations shall immediately cease
to the extent directed by Landlord in such notice;
(l) Tenant shall reimburse Landlord for any and all costs or
expenses reasonably incurred by Landlord in connection with the
alterations, including without limitation architectural or
engineers' fees and attorneys' fees. Landlord agrees to limit
the cost per event to $300.00 per event, not including
attorney's fees.
(m) Tenant shall provide Landlord with a cost and expense breakdown
of the alterations.
9.2. Mechanics' Liens. Any mechanics' lien filed against the Premises or
---------- -----
the Building for work done by or materials furnished to Tenant or its
agents shall be discharged by Tenant at its expense within thirty
(30) days thereafter by the filing of the bond required by law, by
payment, by satisfaction or otherwise. Failure to so discharge any
such lien shall constitute a default hereunder.
9.3. Improvements and Alterations Landlord's Property. All Tenant's
------------ --- ----------- ---------- --------
Improvements and all alterations made thereto and installed for
Tenant shall be and remain Landlord's property, except Tenant's
furniture, furnishings and trade fixtures, and shall not be removed
without the written consent of Landlord. All goods, effects, personal
property, business and trade fixtures, machinery and equipment owned
by Tenant or installed at Tenant's expense in the Premises shall
remain the personal property of Tenant and may be removed by Tenant
at any time, and from time to time, during the Term of this Lease
provided Tenant shall, in removing any such property, repair all
damage to the Premises and the Building caused by such removal and
restore the Premises to their original condition.
10. Entry by Landlord. Landlord and Landlord's agents and representatives shall
----- -- --------
have the right to enter and inspect the Premises at any reasonable time,
for the purpose of ascertaining the condition of the Premises, of
exercising any right or performing any obligation of Landlord hereunder, or
of exhibiting the Premises to prospective tenants, purchasers, mortgagees
or insurers of Landlord's interest in the Building. In the case of
emergency Landlord shall have the right to enter the Premises at any time;
and, if Tenant is not present to permit such entry, Landlord may forcibly
enter the Premises provided Landlord has a reasonable belief that such
entry was necessary and in response to an emergency, and any such entry
shall not in 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,
actual or constructive, from the Premises or any portion thereof. No entry
by Landlord permitted hereunder shall be deemed a re-entry nor shall Tenant
be entitled to compensation or abatement of Rent for any inconveniences
nuisance or discomfort occasioned thereby.
11. Insurance
---------
11.1. Tenant's Insurance. During the term hereof, Tenant shall, at its own
-------- ---------
cost and expense, provide and keep in force the following insurance:
(a) Comprehensive public liability insurance for the mutual benefit
of Landlord and Tenant against claims for bodily injury, death
or property damage occurring in or about the Premises
(including, without limitation, bodily injury, death or property
damage resulting directly or indirectly from or in connection
with any change, alteration, improvement or repair thereof),
with a limit of not less than $1,000,000 combined single limit
bodily injury and property damage.
12
<PAGE>
Not more frequently than each three (3) years, if, in the
opinion of any mortgagee of Landlord or of the insurance broker
retained by Landlord, the amount of public liability and
property damage insurance coverage at that time is not
adequate, Tenant shall increase the insurance coverage as
required by either any mortgagee of Landlord or Landlord's
insurance broker. Said insurance shall insure performance by
Tenant of the indemnity provisions of Section 12 hereof;
(b) Worker's compensation insurance to the extent required by law;
and
11.2. Form of Insurance. The aforesaid insurance shall name Landlord as
---- -- ---------
substance and amount (where not stated above) satisfactory to
Landlord and any mortgagee of Landlord, and shall contain the
standard mortgage clause satisfactory to Landlord and any mortgagee
of Landlord. The aforesaid insurance shall not be subject to
cancellation or modification except after at least thirty (30) days'
prior written notice to Landlord and any mortgagee of Landlord.
Certified copies of the insurance policies, or at the option of
Landlord certificates of such coverage, together with satisfactory
evidence of payment of premiums thereon, shall be delivered to
Landlord at the commencement of the Term hereof; and renewals of
such policies shall be so delivered not less than thirty (30) days
prior to the end of the term of each such coverage.
11.3. Cancellation of Insurance. If any insurance policy carried by
------------ -- ----------
Landlord, shall be canceled or cancellation shall be threatened or
the coverage thereunder reduced or threatened to be reduced, in any
way by reason of the use or occupation of the Premises or any part
thereof by Tenant or by any assignee or sub-tenant of Tenant or by
anyone permitted by Tenant to be upon the Premises and, if Tenant
fails to remedy the condition giving rise to cancellation,
threatened cancellation or reduction of coverage within forty-eight
(48) hours after notice thereof, Landlord may enter upon the
Premises and attempt to remedy such condition and Tenant shall
forthwith pay the cost thereof to Landlord as Rent. Landlord shall
not be liable for any damage or injury caused to any property of
Tenant or of others located on the Premises as a result of such
entry, unless such damage or injury is directly attributable to
Landlord's gross negligence or willful conduct. In the event that
Landlord shall be unable to remedy such condition, then Landlord
shall have all of the remedies provided for in the Lease in the
event of a default by Tenant. Notwithstanding the foregoing
provisions of this Section 11.3, if Tenant fails to remedy as
aforesaid, Tenant shall be in default of its obligation hereunder
and Landlord shall have no obligation to attempt to remedy such
default.
12. Indemnity
---------
12.1. Landlord's Exculpation and Limited Liability. Landlord, its
---------- ----------- --- ------- ---------
employees, agents, contractors, and representatives shall not be
liable to Tenant or Tenant's agents, employees, contractors, or
representatives and Tenant waives all claims against Landlord for
any injury to or death of any person or for loss of use of or damage
to or destruction of property in or about the Premises or Building
by or from any cause whatsoever, including without limitation
earthquake or earth movement, gas leak, fire, oil spills or
contamination, electricity or leakage from the roof, walls, basement
or other portion of the Premises or Building, theft, act of God,
acts of the public enemy, riot, strike, insurrection, war, court
order, requisition or order of governmental body or authority,
repairs or alterations of any part of the Building or
13
<PAGE>
failure to make any such repair except to the extent attributable to
the negligent or willful acts of Landlord, its agents, contractors,
representatives or employees, but in no event shall Landlord be
liable for consequential damages, including, without limitation,
loss of profits or damages from business interruptions.
12.2. Tenant's Liability. Indemnification and Hold Harmless. Tenant
-------- --------- --------------- --- ---- --------
agrees to indemnify, defend (using counsel selected or approved by
Landlord) and hold Landlord (its agents, contractors,
representatives, employees, any lessor under any ground or
underlying lease and any mortgagee or beneficiary under any mortgage
or deed of trust encumbering the Premises) harmless against all
claims, liability, damage or loss and against all costs and
expenses, including but not limited to reasonable attorneys fees and
expenses in connection therewith, (a) arising (directly or
indirectly) out of any injury to or death of any person or damage to
or destruction of property occurring in, on or about the Premises,
from any cause whatsoever, except to the extent attributable to the
negligent or willful acts of Landlord, its agents, or employees, or
(b) occurring in, on or about any Common Areas (including without
limitation elevators, stairways, passageways or hallways) the use of
which Tenant has in common with other tenants, or elsewhere in or
about the Project other than the Premises, when such claim, injury
or damage is caused in whole or in part by the act, neglect (active
or passive), default, or omission of any duty by Tenant, its agents,
employees, invitees, assignees or sublessees or otherwise by any
conduct of any of said persons in or about the Premises or the
Project including failure of Tenant to observe or perform any of its
obligations hereunder. The provisions of this Section 12.2 shall
survive the termination of this Lease. In addition, Tenant shall
indemnify and defend Landlord (using counsel selected by Landlord)
and hold Landlord harmless of and from any and all loss, cost,
damage, injury or expense arising out of or in any way related to
claims for work or labor performed by Tenant or any agent hire or
representative of Tenant, materials or supplies furnished to or at
the request of Tenant or in connection with performance of any work
done for the account of Tenant by Tenant or any agent hire or
representative of Tenant in the Premises or the Building.
13. Assignment and Subletting.
---------- --- ----------
13.1. Prohibition Against Assignment and Sublease.
----------- ------- ---------- --- ---------
13.1.1. Except as provided in Section 13.5 below, Tenant, its legal
representatives, successors or assigns shall not, directly
or indirectly, voluntarily or by operation of law sell,
assign, encumber, pledge, mortgage or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's
leasehold estate hereunder (collectively, "Assignment"), or
permit the Premises or any part thereof to be occupied by
others or sublet the Premises or any part thereof
(collectively, "Sublease") without Landlord's prior written
consent, which consent shall not be unreasonably withheld,
delayed or conditioned, in each instance, and any attempt
to do so without such consent shall be voidable and, at
landlord's option, shall constitute a default for which
Landlord may terminate this Lease. The person or entity who
or which is the actual assignee, sublessee, transferee or
any other recipient of an Assignment or Sublease is herein
collectively referred to as "Transferee".
13.1.2. In the event Tenant violates the provisions of Section
13.1, Landlord may collect Rent from any Transferee and
apply the net amount collected to the Rent payable under
this Lease, but such collection shall not be deemed (i) a
waiver of the covenant not to allow an Assignment or
Sublease of Tenant's
14
<PAGE>
leasehold estate or the Premises or any part thereof, (ii)
an acceptance of any Transferee as Tenant, or (iii) a
release of Tenant from the further performance by Tenant of
the obligations on the part of Tenant contained herein.
13.2. Deemed Assignments.
------ -----------
13.2.1. If Tenant is a partnership or joint venture, a withdrawal
or change, voluntary, involuntary or by operation of law of
any partner or partners owning fifty percent (50%) or more
of the partnership or joint venture ("Key Partners" or "Key
Partner"), or the dissolution of the partnership or joint
venture, shall be deemed an Assignment within the meaning
of Section 13.1.
13.2.2. If Tenant or any Key Partner is a corporation, any
dissolution, merger, consolidation, or other reorganization
of Tenant or any Key Partners, or the sale or transfer of
the effective voting control of the stock of Tenant or any
Key Partners, or the sale of fifty percent (50%) or more of
the value of the assets of Tenant or any Key Partners shall
be deemed an Assignment within the meaning of Section 13.1.
The phrase "effective voting control" means the ownership
of stock possessing at least fifty percent (50%) of the
total combined voting power of all classes of Tenant's or
any Key Partner's capital stock issued, outstanding and
entitled to vote.
13.2.3. If Tenant consists of more than one person, a purported
assignment, voluntary, involuntary, or by operation of law,
from one person to another or from a majority of persons to
the others shall be deemed an Assignment within the meaning
of Section 13.1. As used in this section, Tenant shall mean
any entity that has guaranteed Tenant's obligations under
this Lease.
13.3 Tenant's Notice of Assignment or Sublease. Notwithstanding
-------- ------ -- ---------- -- --------
anything contained in Section 13.1 to the contrary, and subject to
Section 13.4, if Tenant desires at any time to effectuate an
Assignment or Sublease of Tenant's leasehold estate or the Premises
or any portion thereof, Tenant shall submit to Landlord at least
thirty (30) days prior to the proposed effective date of the
transfer ("Proposed Effective Date"), in writing:
(a) a notice of intent to effectuate an Assignment or Sublease of
the Tenant's leasehold estate or the Premises setting forth the
Proposed Effective Date, which shall be not more than sixty
(60) days nor less than thirty (30) days after the sending of
such notice ("Notice of Intent");
(b) the name of the proposed Transferee;
(c) the nature of the proposed Transferee;
(d) the terms and provisions of the proposed Assignment or
Sublease; and
(e) the proposed Transferee's most recent certified financial
statements and bank references.
Tenant shall also promptly provide Landlord with such certified or
uncertified financial information as Landlord may request concerning
the proposed Transferee.
13.4. Landlord's Option to Recapture. Landlord hereby reserves the option,
---------- ------ -- ---------
to be exercised by giving notice to Tenant within fifteen (15) days
after receipt of Tenant's Notice of Intent to recapture the Premises
described in Tenant's Notice of Intent and to
15
<PAGE>
terminate this Lease with respect to such recaptured Premises. The
effective date of such recapture and termination shall be the
Proposed Effective Date. The option to recapture reserved to Landlord
hereunder shall also arise in the event Tenant, without first
obtaining the written consent of Landlord, effectuates an Assignment
or Sublease of all or any portion of the Premises and in such event
the recapture option shall apply to the entire Premises and be
exercisable by Landlord at any time after the occurrence of the event
for which Landlord's consent was required but not obtained by Tenant.
If this Lease is terminated pursuant to Landlord's recapture option
with respect to only a portion of the Premises, the Basic Rent
required under this Lease and Tenant's Proportionate Share shall be
adjusted based on the rentable square footage retained by Tenant and
the net rentable square footage leased by Tenant hereunder
immediately prior to such recapture and cancellation, and Landlord
and Tenant shall thereupon execute an amendment of this Lease in
accordance therewith. Landlord may, without limitation and without
obtaining Tenant's consent, lease the recaptured portion of the
Premises to the proposed Transferee or any other entity or person, on
the same or different terms as were proposed by Tenant, without any
liability to Tenant.
13.5. Permitted Assignments and Subleases. Notwithstanding anything
--------- ----------- --- ---------
contained in Section 13.1 to the contrary, and subject to Sections
13.4 and 13.6 through 13.10, Tenant may effectuate an Assignment or
Sublease upon obtaining Landlord's prior written consent, which
consent will not be unreasonably withheld. The withholding of
Landlord's consent to an Assignment or Sublease shall be deemed to
have been reasonable if:
(a) the use to be made of the Premises by the proposed Transferee
(i) is not consistent with the character or nature of all other
tenancies in the Building or a use permitted under this Lease,
(ii) conflicts with any so-called "exclusive use" clause then
given in favor of another tenant of the Building, (iii) is the
same as that stated in any percentage lease to another tenant in
the Building, (iv) would create greater demands upon the
facilities, systems or services of the Building, (v) would be
prohibited by any other provision in this Lease (including but
not limited to any Rules and Regulations then in effect): or
(b) the character, business history, moral stability, reputation or
financial soundness and responsibility of the proposed
Transferee are not reasonably satisfactory to Landlord or in any
event not at least equal to those which were possessed by Tenant
as of the date of this Lease or thirty (30) days prior to the
date Landlord receives the Notice of Intent; or
(c) the proposed Transferee is a then-existing or prospective tenant
of the Building (tenants who have contacted the Building or its
agents or have been contacted by the Building or its agents
within the previous ninety (90) days); or
(d) Landlord withholds its consent pursuant to any other provision
of this Lease; or
(e) the proposed Assignment or Sublease is to be at rental rates
which are less than ninety percent (90%) of the then current
rental rates being charged by Landlord for similar space being
marketed by Landlord in the Building.
13.6. Approval/Disapproval Procedure. If Landlord disapproves the proposed
-------------------- ----------
Assignment or Sublease it shall notify Tenant in writing thereof and
shall specify the reason(s)
16
<PAGE>
therefor; provided, however, that in the event of any dispute between
Landlord and Tenant regarding the reasonableness of Landlord's
disapproval of the proposed Assignment or Sublease, Landlord shall not
be limited to the reason(s) specified in such notice in justifying its
disapproval. If Landlord approves the proposed Assignment or Sublease,
it shall notify Tenant in writing thereof and Tenant shall, prior to
the Proposed Effective Date, submit to Landlord all executed originals
of the Assignment or Sublease agreement. In the event Tenant and any
proposed Transferee do not effectuate an Assignment or Sublease prior
to the Proposed Effective Date any approval given by Landlord shall
automatically terminate. Tenant's failure to effectuate an Assignment
or Sublease prior to the Proposed Effective Date shall require Tenant
to start over the approval process set forth in this Section 13 and
Landlord shall retain all rights it has under this Section 13.
Provided such Assignment or Sublease agreement is in accordance with
the terms approved by Landlord, Landlord shall execute each
counterpart original on the signature pages thereof after the words
"The foregoing is hereby consented to" and shall retain an executed
original for its files and return the others to Tenant. No purported
Assignment or Sublease shall be deemed effective as against Landlord
and no proposed Transferee shall take occupancy unless (i) an
Assignment or Sublease Agreement is so executed by Landlord and (ii)
the proposed Transferee shall agree in writing to perform faithfully
and be bound by all of the terms, covenants and conditions, provisions
and agreements of this Lease.
13.7. Fees for Review. Tenant shall pay to Landlord when Tenant submits a
---- --- ------
Notice of Intent the amount reasonably determined by Landlord to cover
all Landlord's costs and expenses incurred in connection with
Landlord's review of the Notice of Intent, which costs and expenses
shall include, among other things, Landlord's processing fee, all
taxes or other charges imposed or to be imposed upon Landlord or the
Project as a result of such Assignment or Sublease, and all reasonable
fees of attorneys, architects, or other consultants incurred by
Landlord in connection with Landlord's review of the Notice of Intent
or in connection with Landlord's negotiation, drafting and review of
the documentation effecting such Assignment or Sublease. Landlord
shall have no obligation to consider a request for consent to a
proposed Assignment or Sublease unless and until Tenant has paid all
such costs and expenses to Landlord, and Tenant shall pay all such
costs and expenses to Landlord irrespective of whether Landlord
consents to such proposed Assignment or Sublease. Tenant shall pay to
Landlord on demand the excess, if any, of such costs and expenses
actually incurred by Landlord over the amount of such costs and
expenses actually paid by Tenant, and Landlord shall promptly refund
to Tenant the excess, if any, of such costs and expenses actually paid
by Tenant over the amount of such costs and expenses actually incurred
by Landlord. Landlord agrees to limit the cost of each event of review
to $500.00 per event, not including attorney's fees.
13.8. No Release of Tenant. No consent of Landlord to any Assignment or
-- ------- -- ------
Sublease by Tenant shall relieve Tenant of the obligations to be
performed by Tenant under this Lease, whether occurring before or
after such consent, Assignment or sublease. The consent by Landlord to
any Assignment or Sublease shall not relieve Tenant from the
obligation to obtain Landlord's express prior written consent pursuant
to this Section 13 to any other Assignment or Sublease.
13.9. Allocation of Profit From Assignment or Sublease. It is
---------- -- ------ ---- ---------- -- --------
the intent of both Landlord and Tenant that the purpose of any
Assignment or Sublease is to aid Tenant in meeting its obligations
under this Lease and not to allow Tenant to gain financially by means
of the receipt of rent from any such Assignment or Sublease. To this
end it is agreed that seventy five percent (75%) of any sums or other
economic consideration received by Tenant in rent from
17
<PAGE>
any such Assignment or Sublease, whether denominated as rent under
the Assignment or Sublease or otherwise (less (i) any rent or other
payments received which are attributable to the cost of leasehold
improvements made to the Premises or the portion thereof to be
occupied by the Transferee for the Transferee amortized over the
term of the Assignment or Sublease and paid for by Tenant and (ii)
any brokerage commission, if any, paid by Tenant amortized over the
term of the Assignment or Sublease) which exceed in the aggregate
the monthly payments of Gross Rent which Tenant is obligated to pay
Landlord under this Lease (prorated if appropriate, to reflect
obligations allocable to that portion of the Premises subject to
any such Sublease), shall be payable to Landlord as Rent under this
Lease without affecting or limiting any other obligations of Tenant
hereunder.
13.10. Assignment of Rents. Tenant immediately and irrevocably assigns to
---------- -- ------
Landlord, as security for Tenant's obligations under this Lease,
all rent from any Assignment or Sublease of or Tenant's leasehold
interest all or any part of the Premises, and Landlord, as
assignee, and as attorney-in-fact for Tenant which is coupled with
an interest for purposes thereof, or a receiver for Tenant
appointed on Landlord's application, may collect such rents and
apply the same toward Tenant's obligations under this Lease; except
that, until the occurrence of an event of default by Tenant under
this Lease, Tenant shall have the right and license to collect such
rents.
14. Damage.
------
14.1. Destruction and Repair. If the Premises shall be damaged by fire or
----------- --- -------
other casualty insured against by Landlord's fire and extended
coverage insurance policy covering the Premises and the Building,
and if Tenant shall give prompt notice to Landlord of such damage,
Landlord, at Landlord's expense, shall repair such damage and
restore the Premises to substantially the condition it was in prior
to such fire or casualty; provided, however, that (i) Landlord
shall have no obligation to repair any damage or to replace
Tenant's personal property, trade fixtures or equipment,
alterations or any other property or effects of Tenant; (ii) there
are no governmental restrictions which preclude Landlord from
repairing and restoring the Premises or the Building to
substantially the condition it was in prior to such fire or other
casualty; (iii) such fire or other casualty does not occur in the
last year of the Term; and (iv) Tenant is not in material default
under this Lease. Except as otherwise provided in this Section 14
if the Premises shall be rendered substantially untenantable by
reason of any such damage, the Rent shall abate for the period from
the date of such damage to the date when such damage to the
Premises shall have been repaired, and if only a part of the
Premises shall be rendered untenantable and the Premises are
accessible, the Gross Rent shall abate for such period in the
proportion that the area of the part of the Premises so rendered
untenantable bears to the total area of the Premises; provided,
however, if, prior to the date when all of such damage shall have
been repaired, any part of the Premises so damaged shall be
rendered tenantable or shall be used or occupied by Tenant or any
person or persons claiming through or under Tenant, then the amount
by which Gross Rent shall abate shall be equitably apportioned for
the period from the date of any such use or occupancy to the date
when all such damage shall have been repaired.
14.2. 180 Day Repair Criteria. Notwithstanding the provisions of Section
--- --- ------ ---------
14.1, if prior to or during the Term, the Premises or the Building
(whether or not the Premises has been damaged or rendered
untenantable) shall be so damaged by fire or other casualty that,
in Landlord's opinion determined in Landlord's sole and absolute
discretion, it will take longer than one hundred eighty (180) days
from the date of the casualty to repair and restore the Premises or
Building, then Landlord shall give to Tenant, within
18
<PAGE>
sixty (60) days after the casualty, notice of such opinion ("180 Day
Notice"). If such repairs and restoration cannot in Landlord's opinion
be substantially completed within one hundred eighty (180) days after
the date of the casualty, Landlord and Tenant shall both have the
right to terminate this lease by giving written notice to the other
within fifteen (15) days after the effective date of the 180 Day
Notice. In the event Landlord or Tenant delivers such a written
termination notice, this Lease and the Term shall terminate thirty
(30) days thereafter with the same effect as if the expiration of such
thirty (30) day period was the Term Expiration Date, and Gross Rent
shall be apportioned as of such date. In the event the actual time to
substantially complete the repair and restoration of the premises or
Building takes longer than one hundred eighty (180) days, Tenant shall
have no claim or remedy of any kind whatsoever against Landlord for
any damage, loss, liability or penalty it incurs, provided Landlord
diligently prosecutes the repair and restoration of the Premises to
substantial completion.
14.3 Lack of Insurance Proceeds.
---- -- --------- ---------
14.3.1. Notwithstanding anything contained in this Section 14 to the
contrary (with the exception of Section 14.3.2) in no event
shall Landlord be required to spend for any repair,
replacement or reconstruction of the Premises or Building an
amount greater than the insurance proceeds actually received
by Landlord (excluding any deductibles) as a result of the
fire or other casualty causing such loss, damage or
destruction.
14.3.2. Notwithstanding Section 14.3.1 to the contrary, but subject
to Sections 14.1 and 14.2, if the Premises or Building is
damaged and the cost to repair such damage and restore the
Premises and Building to substantially the condition they
were in (subject to any changes in the building codes) prior
to any fire or other casualty exceeds the insurance proceeds
actually received by Landlord (the "Shortage") Landlord
shall be obligated to repair such damage provided (i) such
fire or other casualty does not occur in the last year of
the Term, (ii) Tenant is not in material default hereunder,
and (iii) this Lease has not been terminated by Landlord or
Tenant pursuant to Section 14.2.
14.4. No Release of Liability. Except to the extent expressly
-- ------- -- ----------
provided otherwise in this Lease, nothing contained in this
Lease shall relieve Tenant of any liability to Landlord or to
its insurance carriers that Tenant may have under law or under
the provisions of this Lease in connection with any damage to
the Premises or the Project by fire or other casualty.
14.5. Tenant's Negligence. Notwithstanding the provisions of Section
-------- -----------
14.1, if any such damage is due to the fault or neglect of
Tenant, any person claiming through or under Tenant, or any of
their employees, suppliers, shippers, customers or invitees,
then there shall be no abatement of Gross Rent by reason of
such damage, unless Landlord is reimbursed for such abatement
of Gross Rent pursuant to any rental insurance policies that
Landlord may, in its sole discretion, elect to carry.
14.6. Express Agreement Re Damage and Destruction. The
------- --------- -- ------ --- ------------
provisions of this Lease, including this Section 14, constitute
an express agreement between Landlord and Tenant with respect
to any and all damage to, or destruction of, all or any part of
the Premises, and any statute or regulation of the State of
California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any
rights or obligations concerning
19
<PAGE>
damage or destruction in the absence of an express agreement
between the parties, and any similar statute or regulation, now
or hereafter in effect, shall have no application to this Lease
or to any damage to or destruction of all or any part of the
Premises or Building.
15. Condemnation.
-------------
15.1. Total Taking. In the event that the whole or substantially the whole
----- ------
of the Building or the Land shall be lawfully condemned or taken in
any manner for any public or quasi-public use, this Lease and the
term and estate hereby granted shall forthwith cease and terminate
as of the date of taking of possession for such use or purpose. If
any part of the Building or the Land shall be so condemned or taken
and if such condemnation or taking substantially interferes with the
Landlord's ownership or use of the Building, the Landlord at its
option, may, upon thirty (30) days' notice to the Tenant, terminate
this Lease as of the date of such taking.
15.2. Partial Taking. If more than fifty percent (50%) of the Premises
------- ------
should be condemned or taken, either party may elect at any time
within thirty (30) days of the date of such taking to cancel this
Lease upon written notice to the other, and thereupon this Lease
shall terminate upon the date specified in said notice, which date
shall be no earlier than the date of such taking. Upon any such
taking or condemnation and the continuing in force of this Lease as
to any part of the Premises, the Gross Rent shall be diminished by
an amount representing the part of the Gross Rent properly
applicable to the portion of the Premises which may be so condemned
or taken.
15.3. Termination of Lease. In the event of the termination of this Lease
----------- -- ------
pursuant to the provisions of Section 15.1. or 15.2., this Lease and
the term and estate hereby granted shall expire as of the date of
such termination in the same manner and with the same effect as if
that were the date set for the normal expiration of the Term of this
Lease, and the Gross Rent shall be apportioned as of such date. The
provisions of this Section 15.3. shall apply in the same manner to
any partial termination of this Lease pursuant to the provisions of
this Section 15.
15.4. Condemnation Award. Landlord shall be entitled to receive the entire
------------ ------
award in any condemnation proceeding without deduction therefrom for
any estate vested in Tenant by this Lease and Tenant shall receive
no part of such award or awards. Tenant hereby expressly assigns to
Landlord any and all of its right, title and interest in or to such
award or awards or any part thereof. Notwithstanding the foregoing,
in the event of any condemnation or taking pursuant to Section 15.1.
or 15.2., Tenant shall be entitled to appear, claim, prove and
receive in the condemnation proceeding such award as may be made as
represents the loss or damage to Tenant's trade fixtures and
removable personal property, removal or relocation costs, and the
unamortized balance of any of Tenant's Extra Improvements or of any
alterations installed in the Premises at Tenant's expense which
Tenant is permitted to remove upon the termination of this Lease.
Landlord shall have no claim to any award or awards directly awarded
to Tenant by the public or quasi-public agency as a result of
Tenant's claim.
15.5. Temporary Taking. If the temporary use or occupancy of all or any
--------- ------
part of the premises shall be condemned or taken for any public or
quasi-public use during the Term of this Lease, this Lease shall be
and remain unaffected by such condemnation or taking and Tenant
shall continue to pay in full all sums payable hereunder by Tenant,
but in no event shall Tenant be liable for the payment of sums
payable hereunder for any period during such temporary use or
occupancy beyond the Term
20
<PAGE>
of this Lease. In the event of any such taking, Tenant shall be
entitled to appear, claim, prove and receive the entire award for
such taking as represents compensation for use or occupancy of the
Premises during the Term of this Lease and Landlord shall be
entitled to appear, claim, prove and receive the entire award as
represents the cost of restoration of the Premises and the award
representing use or occupancy of the premises after the end of the
Term hereof.
15.6. Restoration of the Building and Premises. In the event of any
----------- -- --- -------- --- --------
condemnation or taking of less than the whole of the Building, in
which this Lease shall continue in effect, or in the event of a
condemnation or taking for a temporary use or occupancy of all or
any part of the Premises, Landlord, to the extent that the award
shall be sufficient for the purpose, shall proceed with reasonable
diligence to repair, alter and restore the remaining part of the
Building and the Premises to substantially their former condition to
the extent that the same may be feasible.
16. Subordination. This Lease and all the rights of Tenant hereunder are
-------------
subject and subordinate to any ground or underlying lease, deed of trust or
mortgage, which does now or may hereafter affect the Building and to any
and all renewal, modifications, consolidations, replacement and extensions
thereof. It is the intention of the parties that this provision be self-
operative and that no further instrument shall be required to effect such
subordination of this Lease. Tenant shall, however, upon demand at any time
or times execute, acknowledge and deliver to Landlord without expense to
Landlord, any and all instruments that may be necessary or proper to
subordinate this Lease and all rights of Tenant hereunder to said ground or
underlying lease, deed of trust or mortgage or to confirm or evidence said
subordination. In the event any proceedings are brought for the foreclosure
of any such deed of trust or mortgage Tenant covenants and agrees to attorn
to the purchaser at any summary proceedings or foreclosure sale, if
requested to do so by such purchaser, and to recognize such purchaser as
the landlord under this Lease. Tenant agrees to, at the option of any
landlord under any such ground or underlying lease, to attorn to said
landlord in the event of a termination or cancellation of such lease. Upon
the request of Landlord, or the trustee or beneficiary of such deed or
trust or mortgage, or of such purchaser, or the landlord under such ground
or underlying lease, Tenant agrees to execute and deliver within ten (10)
days of such request any instrument which, in the sole judgment of such
requesting party, may be necessary or appropriate in any such summary or
foreclosure proceeding, action or otherwise to evidence such attornment.
Tenant further waives the provisions of any statute or rule of law, now or
hereafter in effect, which may give or purport to give Tenant any right of
election to terminate or otherwise adversely affect this Lease and the
obligations of Tenant hereunder in the event any such foreclosure
proceeding is brought, prosecuted or completed.
17. Default.
-------
17.1. In the event that:
(a) Tenant shall default in the payment of Rent five (5) days after
the same shall become due, and such default shall continue for
a period of three (3) consecutive days after the date of
written notice from Landlord specifying such failure or default
(which notice shall be deemed to satisfy the requirements of
Section 1161 of the California Code of Civil Procedure); or
(b) Tenant shall abandon the Premises for a continuous period in
excess of ten (10) days (which notice shall be deemed to
satisfy the requirements of Section 1161 of the California Code
of Civil Procedure); or
21
<PAGE>
(c) Tenant shall fail to honor or default in the performance of any
obligation covenant, condition or representation required to be
performed or made by Tenant under this Lease (other than
abandonment or the payment of Rent and those described in Section
17.1(d)) and shall fail, for a period of twenty (20) days after
the date of written notice from Landlord specifying such failure
or default, to cure said default (which notice shall be deemed to
satisfy the requirements of Section 1161 of the California Code
of Civil Procedure), to cure said failure or default (unless such
default cannot be cured within said twenty (20) days and shall
cure the same with all reasonable dispatch but in no event later
than sixty (60) days after such written notice); or
(d) Tenant shall be adjudicated bankrupt, or a petition by or against
Tenant for reorganization or adjustment of its obligations under
the bankruptcy Act or any other existing or future insolvency or
bankruptcy statute shall be approved, or Tenant shall make a
general assignment of its property for the benefit of creditors,
or a receiver or trustee shall be appointed to take control of
the business or assets of Tenant;
then and in each such case Landlord may, at its option, terminate
Tenant's right to possession and thereby terminate this Lease, or
without terminating this Lease re-enter the Premises and for the
account of Tenant re-let the same or any portion or portions thereof
for all or any part of the unexpired term of this Lease upon such
terms and conditions as Landlord may elect.
17.2. In the event of any such termination of this Lease by Landlord,
Landlord shall be entitled to recover from Tenant (i) the worth at the
time of award of the unpaid Rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by
which the unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; (iii) the worth at
the time of award of the amount by which the unpaid Rent for the
balance of the term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; and (iv)
any other amount necessary to compensate Landlord for all detriment
approximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom. Efforts by Landlord to mitigate
the damages caused by Tenant's breach of this Lease shall not
constitute a waiver by Landlord of its right to recover damages
hereunder.
17.3. In the event of such re-letting without terminating this Lease,
Landlord shall be entitled to recover monthly from Tenant the
difference between the monthly installments of Gross Rent and such
other amounts as may be payable by Tenant to Landlord pursuant to the
provisions hereof over the total monthly rental received by Landlord
upon such re-letting, after first deducting therefrom all expenses
reasonably incurred by Landlord in such reletting and in repairing,
renovating, remodeling and altering the Premise for the purpose of
such re-letting.
17.4. Landlord shall not be deemed to have elected to terminate this Lease
or the liability of Tenant to pay Rent thereafter to accrue or its
liability for damages under any of the provisions hereof by any such
re-entry or by any action in unlawful detainer or otherwise to obtain
possession of the Premises, unless Landlord shall have notified Tenant
in writing that it has so elected to terminate this Lease for purposes
of this Section 17. The following shall not constitute termination of
Tenant's right to possession: (A) acts of maintenance or preservation
or efforts to re-let the Preemies;
22
<PAGE>
or (B) the appointment of a receiver upon initiative of Landlord to
protect Landlord's interest under this Lease. Nothing herein
contained shall be construed as obligating Landlord to re-let the
whole or any part of the Premises.
17.5 In the event of any entry or taking possession of the Premises,
Landlord shall have the right, but not the obligation, to remove
therefrom all or any part of the personal property located therein
and may place the same in storage at a public warehouse selected by
Landlord at the expense and risk of the owner or owners thereof The
remedies provided Landlord hereunder shall be cumulative and shall
be in addition and supplemental to all other rights or remedies
which Landlord may lawfully pursue in the event of any breach or
threatened breach by Tenant of any of the provisions of this Lease.
17.6. For purposes of computing unpaid Rent which would have accrued and
become payable under this Lease pursuant to the provisions of this
Section 17, unpaid Rent shall consist of the sum of:
(a) the total Basic Rent for the balance of the Term, plus
(b) a computation of the Basic Operating Cost increases for the
balance of the Term, the assumed Basic Operating Cost increase
for the calendar year of the default and each future calendar
year in the Term to be equal to the Basic Operating Cost
increase for the calendar year prior to the year in which
default occurs compounded at a per annum rate equal to the mean
average rate of inflation for the preceding five (5) calendar
years as determined by the revised Consumer Price Index for All
Urban Consumers, for San Francisco-Oakland-San Jose,
California, for All Items (1967=100) as published by the United
States Department of Labor, Bureau of Labor Statistics. If the
Index is either unavailable, is no longer published or if
calculated on a significantly different basis, the average rate
of inflation shall be determined by reference to the most
comprehensive official index then published which most closely
approximates the rate of inflation.
17.7. The "worth at the time of awards of the amounts referred to in (i)
and (ii) above shall be computed with interest at the lesser of
eighteen percent (18%) per annum or the maximum rate allowed by law.
The "worth at the time of award" of the amount referred to in (iii)
above shall be computed by reference to competent appraisal evidence
or the formula prescribed by and using the lowest discount rate
permitted under applicable law.
18. Signs. Tenant shall not install any sign or advertising or publicity device
-----
which is visible from outside the Premises, in any public area, on any
roof, on any window or on any outside portion of the Building. Tenant may
install an identification sign within or adjacent to the entrance of the
Premises providing such sign has the prior approval of Landlord and
conforms to the graphic standards of the Building. Landlord shall provide
on a one-time basis, one Building Standard Tenant identification sign
outside the premises and two lines on the Main Lobby Directory.
Landlord shall list Tenant's name on the directory board that Landlord
shall provide and maintain in the lobby of the Building. As space is
available other names may be listed on the directory board at Landlord's
option in relation to Tenant's Proportionate Share of the Building.
23
<PAGE>
19. Rules and Regulations. At all times during the term of this Lease, Tenant
----- --- -----------
shall comply with the Rules and Regulations for the Building which are
attached hereto as Exhibit C and incorporated herein by reference. Tenant
agrees that Landlord shall have the right to amend said Rules and
Regulations and to promulgate new Rules and Regulations applicable to all
tenants in the Building which relate to their use and occupancy thereof.
Landlord shall not be responsible to Tenant for the nonperformance by any
other tenant or occupant of any of said Rules and Regulations.
20. Compliance With Regulations
---------- ---- -----------
20.1. Compliance by Tenant. Tenant shall at its sole cost and expense
---------- -- ------
promptly comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may
hereafter be in force, with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted,
with any direction or occupancy certificate issued pursuant to any
law by any public officer or officers, as well as the provisions of
all recorded documents affecting the Premises, insofar as any
thereof relate to or affect the condition, use or occupancy of the
Premises, excluding requirements of structural changes not related
to or affected by improvements made by or for Tenant or not
necessitated by Tenant's acts. The judgment of any court of
competent jurisdiction or the admission by Tenant in any action or
proceeding against Tenant, whether Landlord be a party thereto or
not, that Tenant has violated any such law, ordinance, requirement
or order in the use of the Premises, shall be conclusive of that
fact as between Landlord and Tenant.
20.2. Right to Contest. Landlord may at its option contest the validity of
----- -- -------
any such law, ordinance, rule, order or regulation (hereinafter the
"Law") by notifying Tenant of its decision to do so within ten (10)
days after receiving the notice required by Section 20.3. hereof
from Tenant. If Landlord declines to so contest such Law, Tenant may
do so at its own expense, and non-compliance by it during such
contest shall not constitute a breach of this Lease; provided that
it shall, to the satisfaction of Landlord, indemnify and hold
Landlord harmless against the cost of compliance and against all
liability for any loss, damages, and expenses (including reasonable
attorneys' fees) which might result from or be incurred in
connection with such contest or noncompliance; except that non-
compliance shall not continue so as to subject Landlord to any fine
or penalty or to prosecution for a crime.
20.3. Notice to Landlord. If Tenant receives written notice of any
------ -- --------
violation of any law, ordinance, rule, order or regulation
applicable to the Premises, it shall give prompt notice thereof to
Landlord.
21. Self-Help.
---------
21.1. Tenant covenants and agrees that if it shall at any time fail to
make any payment or perform any act which the Tenant is obligated to
make or perform under this Lease, then Landlord may, but shall not
be obligated so to do, after any applicable grace period provided in
Section 17 has expired, and without waiving, or releasing the Tenant
from any obligations of the Tenant in this Lease contained, make any
payment or perform any act which the Tenant is obligated to perform
under this Lease, in such manner and to such extent as shall be
necessary, and in exercising any such rights, pay necessary and
incidental costs and expenses, employ counsel and incur and pay
reasonable attorneys' fees. Notwithstanding the foregoing, Landlord
may make any such payment or perform any such act before said
applicable grace period has expired if the same is necessary or
required for the preservation or protection of the Premises or the
avoidance of penalties or other charges due to delinquent payment of
taxes or
24
<PAGE>
other actions. All sums so paid by Landlord and all necessary and
incidental cost and expenses in connection with the performance of
any such act by Landlord, together with interest thereon at the
maximum rate provided by law from the date of the making of such
expenditure by Landlord, shall be deemed Rent hereunder and shall be
payable to Landlord on demand, or at the option of Landlord may be
added to any Rent then due or thereafter becoming due under this
Lease. Tenant covenants to pay any such sum or sums with interest
aforesaid and Landlord, in addition to any other right or remedy it
may have, shall have the same rights and remedies in the event of the
non-payment thereof by Tenant as in the case of default by Tenant in
the payment of Rent.
21.2 The performance of any such act by landlord shall not constitute a
waiver of Tenant's default in failing to perform the same. Unless
caused by Landlord's negligence or the negligence of Landlord's
agents, employees or contractors, Landlord shall not in any event be
liable for inconvenience, annoyance, disturbance, loss of business or
other damage of Tenant or any other occupant of the Premises or part
thereof, by reason of making repairs or the performance of any work
on the Premises or on account of bringing materials, supplies and
equipment into or through the Premises during the course thereof, and
the obligations of Tenant under this Lease shall not thereby be
affected in any manner whatsoever.
22. Attorneys' Fees. If as a result of any breach or default in the performance
---------- ----
of any of the provisions of this Lease, Landlord uses the services of an
attorney in order to secure compliance with such provisions or recover
damages therefor, or to terminate this Lease or evict Tenant, Tenant shall
reimburse Landlord upon demand for any and all attorneys' fees and expenses
so incurred by Landlord, provided that if Tenant shall be the prevailing
party in any legal action brought by Landlord against Tenant, Tenant shall
be entitled to recover the fees of its attorneys in such amount as the
court may adjudge reasonable.
23. Brokerage. Tenant covenants and represents that it has negotiated this
---------
Lease directly with the broker designated on the Basic Lease Information
sheet and has not authorized, directly or by implication, any other real
estate broker or salesman to act for it in these negotiations. Tenant
agrees to defend, indemnify and hold Landlord harmless from any and all
claims by any other real estate broker or salesman for a commission or
finder's fee as a result of Tenant's entering into this Lease.
24. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
----- ---------
Tenant's paying Rent and all other charges and observing and performing all
the terms, covenants, conditions, provisions and agreements of this Lease
on Tenant's part to be observed or performed, Tenant shall have quiet
possession of the Premises for the Term, subject, however, to the terms of
this lease and of any ground leases, underlying leases, mortgages and deeds
of trust affecting all or any portion of the Building or any of the area
used in connection with the operation of the Building.
25. Notices. Except as otherwise in this Lease provided, a bill, demand,
--------
statement, consent, notice or communication which Landlord may desire or be
required to give to Tenant shall be deemed sufficiently given or rendered
if in writing, delivered personally to Tenant or sent by certified mail
(return receipt requested) or private express mail carrier (postage and/or
handling charges fully prepaid) addressed to Tenant at the Building or the
address set forth in the Basic Lease Information. Any notice, request,
demand or communication by Tenant to Landlord must be in writing and
delivered personally to Landlord or sent by certified mail (return receipt
requested) or express private mail carrier (postage and/or handling charges
fully prepaid), addressed to Landlord, at the address set forth in the
Basic Lease Information or at such other address as Landlord shall
designate by notice given as herein provided. The
25
<PAGE>
time of the rendition of such bills or statements and of the giving of such
consents, notices, demands, requests or communications by Tenant or
Landlord shall be deemed to be the earlier of (i) the date received, (ii)
if the notice is sent by certified mail, five (5) days after the same is
mailed, or (iii) if the notice is sent by private express mail carrier, one
(1) day after the same is mailed. If Tenant is notified of the identity and
address of Landlord's mortgagee or beneficiary under a deed or trust, or
ground or underlying lessor, Tenant shall give such party notice of any
default by Landlord hereunder by certified or private express mail carrier,
and if no opportunity to cure such default is provided herein, such party
shall have a reasonable opportunity to cure such default before Tenant's
exercises any remedy available to it. Rejection or refusal to accept a
notice, request, demand, or the inability to deliver same because of a
changed address of which no notice was given shall be deemed to be a
receipt of the notice, request or demand sent.
26. Holding Over. If Tenant holds over after the Term with the express written
------- -----
consent of Landlord such tenancy shall be from month to month only and
shall not be a renewal hereof, and Tenant shall pay as Rent to Landlord for
the use and occupancy of the Premises for each month Tenant holds over an
amount agreed to be one and one-half (1.5) times the Gross Rent payable in
the last month of the Term and Tenant shall also comply with all of the
terms, covenants, conditions, provisions and agreements of this Lease for
the time during which Tenant holds over. If without the express written
consent of Landlord, Tenant shall fail to vacate the Premises after the
expiration of the Term or sooner termination of this Lease for any cause or
after Tenant's right to occupy the Premises ceases, thereafter, and
notwithstanding anything to the contrary contained elsewhere in this Lease,
Tenant shall pay as Rent to Landlord for the use and occupancy of the
Premises for each month Tenant holds over an amount agreed to be two (2)
times the Gross Rent payable in the last month of the Term, and Tenant
shall also comply with all of the terms, covenants, conditions, provisions
and agreements of this Lease for the time during which Tenant holds over.
If the Premises are not surrendered at the end of the Term or of a
permitted hold over period, Tenant shall be additionally responsible to
Landlord for all damage (including but not limited to the loss of Rent)
which Landlord shall suffer by reason thereof, and Tenant hereby
indemnifies Landlord against all claims made by any succeeding tenant
against Landlord, resulting from delay by Landlord in delivering possession
of the Premises to such succeeding Tenant. Tenant's obligation to observe
or perform all of the terms, covenants, conditions, provisions and
agreements of this Article shall survive termination of this Lease.
27. Transfers by Landlord. Landlord shall have the right to transfer and
--------- -- ---------
assign, in whole or in part, all of its rights and obligations hereunder
and in the Building, and in such event and upon its transferee's assumption
of Landlord's obligations hereunder no further liability or obligations
shall thereafter accrue against Landlord hereunder, and Landlord shall be
entirely relieved of all agreements and conditions of this Lease thereafter
to be performed by the Landlord under this lease. Tenant Agrees to attorn
any such transferee or assignee.
28. Tenant's Remedies. Tenant shall look solely to Landlord's interest in the
-------- ---------
Building, including future rents which are not subject as rental
assignments to a lender as a condition of financing, now or in the future
for the recovery of any judgment from Landlord. Landlord, or if Landlord is
a partnership, its partners whether general or limited, or if Landlord is a
corporation, its directors, officers or shareholders, shall never
personally be liable for any such judgment. Any lien obtained to enforce
any such judgment and any levy of execution thereon shall be subject and
subordinate to any lien, mortgage or deed of trust to which Section 16
applies or may apply.
29. Substitution of Premises. Landlord shall have the right upon ninety (90)
------------ -- ---------
days written notice to Tenant to substitute other premises within the
Building or the Building for the Premises, subject to the same terms and
conditions as though originally leased to Tenant at the time of
26
<PAGE>
the execution and delivery of this Lease; provided, however, that the
substituted premises shall contain as much square footage as the original
premises, plus or minus one hundred (100) square feet. In the event that
Landlord so notifies Tenant, Tenant shall notify Landlord within thirty
(30) days of Landlord's notice whether it accepts the substituted premises.
If Tenant does not accept the substituted premises, Landlord shall have the
option either to allow Tenant to remain in the Premises, this Lease
remaining in full force and effect, or to terminate this Lease. In the
event that Landlord elects to terminate this Lease, this Lease shall
terminate no sooner than sixty (60) days from Landlord's notice of
termination. In the event that Tenant elects to accept the substituted
premises, Landlord agrees to pay all reasonable moving expenses of Tenant,
including the reasonable removal and replacement of Tenant's Improvements,
incidental to such substitution of premises.
30. Miscellaneous.
--------------
30.1. Grammar. Words of any gender used in this Lease shall be held and
--------
construed to include any other gender and words in the singular
number shall be held to include the plural, unless the context
otherwise required.
30.2. Covenants Binding on Successors. The terms, provisions, covenants
--------- ------- -- -----------
and conditions contained in this Lease shall apply to, inure to the
benefit of, and be binding upon, the parties hereto and upon their
respective heirs, legal representatives, successors and permitted
assigns except as otherwise herein expressly provided.
30.3. Captions. The captions inserted in this Lease are for convenience
---------
only and in no way define, limit, or otherwise describe the scope or
intent of this Lease, or any provision hereof, nor in any way affect
the interpretation of this Lease.
30.4. Estoppel Certificates. Tenant agrees, from time to time, within
-------- -------------
twenty (20) days after request of Landlord, to deliver to Landlord,
or Landlord's designee, an estoppel certificate stating that this
Lease is unmodified and in full force and effect (or if there have
been modifications, that the Lease is in full force and effect as
modified and stating the modifications), the date to which Rent and
other charges have been paid, the unexpired term of this Lease,
whether there are any defaults or rent abatements or offsets claimed
by Tenant and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or Landlord's Mortgagee, it being
intended that any such statement delivered pursuant to this
subparagraph may be relied upon by any prospective purchaser of all
or any part of the interest of Landlord in the Premises or mortgagee
or assignee of any mortgage upon all or any part of such interest of
the Landlord, and their respective successors and assigns.
30.5. Modification. This Lease may not be altered, changed or amended
-------------
except by an instrument in writing signed by the parties hereto.
30.6. Recordation. Neither this Lease, nor any notice nor memorandum
-----------
regarding the terms hereof, shall be recorded by Tenant. Any such
unauthorized recording shall give landlord the right to declare a
breach of this Lease and pursue the remedies provided herein. Tenant
agrees to execute and acknowledge, at the request of Landlord, a
memorandum of this Lease, in recordable form.
30.7. Time of Essence. Time is of the Essence of this Lease, and all
---- -- -------
provisions herein relating thereto shall be strictly construed.
30.8. Relationship of Parties. Nothing contained herein shall be deemed or
------------ -- -------
construed by the parties hereto, nor by any third party, as creating
the relationship of principal and
27
<PAGE>
agent or of partnership, or of joint venture by the parties hereto,
it being understood and agreed that no provision contained in this
Lease nor any acts of the parties hereto shall be deemed to create
any relationship other than the relationship of landlord and
tenant.
30.9. Severability. If any term or provision of this Lease shall to any
------------
extent be held invalid or unenforceable, the remaining terms and
provisions of this Lease shall not be affected thereby, but each
term and provision of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
30.10. Law Applicable. This Lease shall be construed and enforced in
--- -----------
accordance with the laws of the State of California.
30.11. Covenants and Conditions. All of the obligations of the Tenant and
--------- --- -----------
the Landlord hereunder shall be deemed and construed to be
conditions as well as covenants as though the words specifically
expressing or importing covenants and conditions were used in each
separate instance.
30.12. Entire Agreement. This Lease contains the entire agreement between
------ ----------
the parties relating thereto. All prior negotiations or
stipulations concerning any matter which preceded or accompanied
the execution hereof are conclusively deemed to be superseded
hereby.
30.13. Authority of Tenant. Each of the persons executing this Lease on
--------- -- -------
behalf of Tenant does hereby covenant and warrant that he or she is
authorized to act for Tenant and on its behalf to enter into this
Lease, and that if Tenant is a corporation, Tenant is a corporation
duly organized and validly existing in the state of its
incorporation and qualified to do business in the State of
California.
30.14. Landlord Approval. The review, approval, inspection or examination
-------- ---------
by Landlord of any item to be reviewed, approved, inspected or
examined by Landlord under the terms of this Lease or the Exhibits
attached hereto shall not constitute the assumption of any
responsibility by Landlord for either the accuracy or sufficiency
of any such item or the quality or suitability of such items for
its intended use. Any such review, approval, inspection or
examination by Landlord is for the sole purpose of protecting
Landlord's interests in the Project and under this Lease, and no
third parties, including, without limitation Tenant or any person
or entity claiming through or under Tenant, or the contractors,
agents, employees, visitors or licensees of Tenant or any such
person or entity, shall have any rights hereunder.
30.15. Joint and Several Liability. If a partnership or more than one
----- --- ------- ----------
legal person at any time constitutes Tenant, (1) each partner and
each legal person is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants,
conditions, provisions and agreements of this Lease to be kept,
observed or performed by Tenant, and (2) the term "Tenant" as used
in this Lease shall mean and include each such partner or legal
person jointly and severally and the act of or notice from or
notice or refund to, or the signature of, any one or more of them,
with respect to this Lease, including but not limited to any
renewal, extension, expiration, termination or modification of this
Lease, shall be binding upon each and all of the persons executing
this Lease as Tenant with the same force and effect as if each and
all of them had so acted or so given or received such notice or
refund or so signed.
30.16. Security Systems. Landlord shall not be obligated to provide or
-------- -------
maintain any security patrol or security system. However, if
Landlord elects to provide such patrol or
28
<PAGE>
system, the cost thereof shall be an Operating Cost. Landlord shall
not be responsible for the quality of any such patrol or system
which may be provided hereunder or for damage or injury to Tenant,
its employees, invitees or others due to the failure, action or
inaction of such patrol or system.
30.17. Waiver of Trial By Jury. The respective parties hereto hereby
------ -- ----- -- ----
waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any
matter whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or
occupancy of the Premises, or any claim of injury or damage, or the
enforcement of any remedy under any statute, emergency or
otherwise.
30.18. Binding Effect. Submission of this Instrument for examination or
------- ------
signature by Tenant does not constitute an offer to lease, or a
reservation of or option for a lease, and it is not effective as a
lease or otherwise until execution and delivery by both Landlord
and Tenant.
30.19. Exhibits and Addenda. Any rider, addenda or exhibit attached hereto
-------- --- -------
is made a part hereof.
This space intentionally left blank.
29
<PAGE>
30.20. No Merger. The voluntary or other surrender of this Lease by
-- ------
Tenant, or a mutual cancellation thereof, shall not work a merger,
and shall, at the option of Landlord terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord,
operate as an assignment to it of any or all such assignments,
subleases or subtenancies.
IN WITNESS WHEREOF the parties hereto have executed this Lease the
date first above written.
LANDLORD:
Persis Corporation
a Hawaii Corporation
By: /s/ Paul de Ville
Paul de Ville
Its: Vice President
TENANT:
Gregory R. Raifman
By: /s/ Gregory R. Raifman
Gregory R. Raifman
TENANT:
Jon Logan Edwards
By: /s/ Jon Logan Edwards
Jon Logan Edwards
30
<PAGE>
EXHIBIT A
PREMISES
LEGAL DESCRIPTION OF THE PROPERTY - FLOOR PLAN(S)
-------------------------------------------------
[CHART OMITTED]
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
---------------------
Landlord and Tenant agree that the Premises shall be improved at Landlord's sole
expense in compliance with the original (dated 6/22/99) preliminary space plan a
copy of which is attached (Exhibit A) and the Final Working Drawings that will
be produced from the preliminary drawing and attached and made a part of this
Lease. Landlord and Tenant agree that the only changes to be made from the
preliminary drawing involves the number and placement of necessary electrical
outlets and such changes shall be a part of the Final Working Drawings.
Any and all other charges requested by Tenant and approved by Landlord shall be
at the sole expense and cost of the Tenant.
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
---------------------
1. Landlord shall have the right to control and operate the public portions of
the Building and the public facilities, as well as facilities furnished for
the common use of the tenants, in such manner as it deems best for the
benefit of the tenants generally. Rooms or other areas used in common by
tenants shall be subject to such regulations as are posted therein.
2. The sidewalks, entrances, lobby, elevators, stairways, and public corridors
shall be used only as a means of ingress and egress and shall remain
unobstructed at all times. The entrance and exit doors of all suites are to
be kept closed at all times except as required for orderly passage to and
from a suite. Loitering in any part of the Building or obstruction of any
means of ingress or egress shall not be permitted. Doors and windows shall
not be covered or obstructed except in the case of windows which may be
covered by Building Standard blinds.
3. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the Rules and Regulations of the Building or in
violation of any law, order, ordinance, or governmental regulation. No
tenant shall invite to the Premises or permit the visit of, persons in such
numbers or under such conditions as to interfere with the use and enjoyment
of the entrances, corridors, elevators and facilities of the Building by
other tenants. Tenant shall not bring into or keep within the Building any
animal or vehicle.
4. Plumbing fixtures shall not be used for any purpose other than those for
which they were constructed and no rubbish, newspapers, trash or other
substances of any kind shall be deposited therein. The use of electrical
current shall not exceed safety standards established in the applicable
building code. Walls, floors, and ceilings shall not be defaced in any way
and no tenant shall be permitted to mark, nail, screw or drill into, paint,
or in any way mar any building surface, except that pictures, certificates,
licenses and similar items normally used in Tenant's business may be
carefully attached to the walls by Tenant in a manner to be prescribed by
Landlord. Upon removal of such items by Tenant, any damage to the walls or
other surfaces shall be repaired by Tenant. Tenant shall use chair
mats/carpet protectors beneath all desks where floor surface is carpeted.
5. No awning, shade, sign, advertisement or notice shall be inscribed, painted
or affixed on or to any part of the outside or inside of the Building.
Window coverings may be installed, provided they are of such color,
material and construction and installation as may be prescribed by
Landlord. All tenant identification on public corridor doors, or walls will
be installed by Landlord for Tenant. No lettering or signs other than the
name of the Tenant will be permitted on public corridor doors, or walls,
with the size and type of the letters to be prescribed by Landlord.
6. The weight, size position and installation of all safes and other unusually
heavy objects used or placed in the Building shall be prescribed by
Landlord. All mechanical equipment and office machines which are placed in
the Building shall be installed in sittings which, in the judgment of
Landlord, shall be sufficient to prevent noise, vibration and annoyance.
The repair of any damage done to the
1
<PAGE>
Building or property therein by putting or taking out or maintaining such
safes or other unusually heavy objects shall be paid for by Tenant.
7. All freight, furniture, fixtures and other personal property shall only be
moved into, within and out of the Building at times and in the manner
designated by Landlord. In no event will Landlord be responsible for any
loss or damage to such freight, furniture, and fixtures or personal
property, from any cause.
8. The storage of goods, wares, or merchandise on the Premises will not be
permitted except in areas specifically designated by Landlord for storage.
No auction, public or private, will be permitted on the Premises.
9. All entrance doors to the Premises shall be kept locked when the Premises
are not in use. All keys to the Premises and the Building shall be obtained
from Landlord and all keys shall be returned to Landlord upon the
termination of this Lease. Tenant shall not change the locks or install
other locks on the doors.
10. Normal business hours shall be from 7:00 A.M. to 6:00 P.M. on weekdays,
excluding generally recognized holidays in San Francisco, California.
Tenant or any employee or invitee of Tenant using the Premises after
regular business hours or on non-business days shall lock any entrance
doors to the Building used by him immediately after entering or leaving the
Building Tenant, its employees and invitees and other persons entering or
leaving the Building when it is so locked, may be required to sign the
Building register when so doing, and any security personnel of Landlord may
refuse to admit Tenant or any of Tenant's employees, invitees or any other
person to the Building while it is so locked, without a pass previously
arranged or other satisfactory identification showing such person's right
to access to the Building at such time Landlord assumes no responsibility
whatsoever in connection therewith and shall not be liable for any damage
resulting from any error in regard to any such pass or identification or
from the admission of any unauthorized person to the Building.
11. Tenant shall not permit any cooking to take place in the Premises, nor
shall Tenant install therein any vending machines without Landlord's
written consent. Tenant may employ a microwave oven provided such use does
not disturb any other tenants.
12. Canvassing, soliciting or peddling in the Building is prohibited and Tenant
shall cooperate to prevent the same.
13. Tenant shall not advertise the business, profession or activities of Tenant
in any manner which violates the letter or spirit of any code of ethics
adopted by and recognized association or organization pertaining thereto or
use the name of the Building for any purpose other than that of the
business address of the Tenant.
14. Landlord reserves the right at any time to change or rescind any one or
more of these Rules or Regulations or to make such other and further
reasonable rules and regulations as in Landlord's judgment may from time to
time be necessary for the management, safety, care and cleanliness of the
Building, for the preservation of good order therein, and for the
convenience of other occupants and tenants therein. Landlord shall not be
responsible to Tenant or to any other person for the non-observance or
violation of the Rules and Regulations by any other tenant or other person.
2
<PAGE>
EXHIBIT D
RIGHT TO EXPAND
Landlord shall make available for lease to Tenant on or about March 15, 1997
approximately 1,960 square feet of additional rentable office area identified on
Exhibit E hereto, on the fourth (4th) floor being suite 420, of the Building.
Tenant may, at its option, lease this additional space upon the same terms and
conditions contained in this Lease including, without limitation, the term (as
it may be extended), provided that the term of the expansion space shall at a
minimum continue through to the termination date of the original Premises at the
annual rental rate, as determined below, per rentable square foot leased, by
giving Landlord written notice ("Notice to Expand") on or before September 15,
1996. Such notice shall include a detailed description of the tenant
improvements required by Tenant for the additional space. Rent shall commence on
the date Landlord delivers this substantially completed additional space to
Tenant free of other tenants and occupants, and with all tenant improvement work
completed in accordance with a mutually acceptable space plan which shall not
exceed Building Standard construction at Landlord's expense. Landlord represents
that this right to expand is not in conflict with and is not subordinate to any
other lease option or agreement between Landlord and any third party. The
additional space shall be subject to all City of San Francisco Building codes
and all governmental requirements in effect at the time of completion of
improvements. The additional space shall have a Base Year for operating expense
calculations of 1997. In the event Tenant is in material default of this Lease
(including delinquent rental payments) at any time during the term of this
Lease, this right shall become null and void, excepting that Tenant shall be
allowed one default during the term hereof provided such default is cured in
compliance with Section 17.1(a). The rental rate for the additional space shall
be calculated and based upon "fair market rates". After receipt of Tenant's
notice, the Landlord shall within thirty (30) days deliver to Tenant its best
estimate of the "fair market rate". Both parties shall use best efforts to agree
on the "fair market rate" and agree to the terms in writing by November 15,
1996. If Landlord fails to deliver the additional space to Tenant by June 1,
1997, as provided herein, Tenant at its option may terminate this Lease by
delivering written notice to Landlord, to be effective on July 1, 1997, provided
that (i) Tenant has properly delivered the Notice to Expand as provided herein,
(ii) Tenant is not nor has been at any time during the term of this Lease in
material default, except for that one default event provided for above, (iii)
the failure of Landlord to deliver the additional space by June 1, 1997 is not
due to the inability of the parties to agree on the "fair market rate".
Fair market rate shall be determined by recently completed lease transactions in
the Building, and comparable buildings within a four block radius of the
Building, for similar size, views and terms (including but not limited to tenant
improvements and other material terms) or by any bonafide third party written
offer acceptable to Landlord which has been received on or between the dates of
September 1, 1996 and November 15, 1996.
1
<PAGE>
EXHIBIT E
[CHART OMITTED]
<PAGE>
EXHIBIT F
WAIVER OF SUBROGATION
To the extent permitted by law, and without affecting the coverage provided by
insurance required to be maintained hereunder (Section 11), Landlord and Tenant
each waive any right to recover against the other on account of any and all
claims Landlord or Tenant may have against the other with respect to any risk
insured against by insurance actually carried, or required to be carried
hereunder, to the extent of the proceeds realized from such insurance coverage.
Each casualty insurance policy carried by Landlord or Tenant hereunder, or which
either may obtain with respect to the Premises, the Building, independent of
obligations hereunder, shall provide that the insurer waives all rights of
recovery by way of subrogation against Landlord or Tenant in connection with all
matters included within the scope of the waiver of recovery contained in this
Exhibit F.
1
<PAGE>
Exhibit G
[EXHIBIT OMITTED]
<PAGE>
PERSIS CORPORATION
131 STEUART STREET
SAN FRANCISCO, CALIFORNIA
OFFICE LEASE
BASIC LEASE INFORMATION
Date: September 2, 1994
Landlord: Persis Corporation
Tenant: Gregory R. Raifman and Jon Logan Edwards
Exhibit A Premises: Suite 450
Section 1.5 Net Rentable Area of Premises: 2,953 Square Feet
Section 1.10 Tenant's Proportionate Share: 3.87%
Section 1.11 Term: Five (5) Years
Section 2 Scheduled Term Commencement Date:
October 1, 1994
Section 2 Term Expiration Date: September 30, 1999
Section 3.1(a) Basic Rent: ANNUAL MONTHLY
<TABLE>
<S> <C> <C> <C> <C> <C>
10/1/94-9/30/95 Year One: $37,620.00 $3,135.00 10/94-10/95
10/1/95-9/30/96 Year Two: $50,201.00 $4,183.42 10/95-10/96
10/1/96-9/30/97 Year Three: $51,677.50 $4,306.46 10/96-10/97 $17.50
Year Four: $51,677.50 $4,306.46 10/97-10/98 $17.50
Year Five: $53,154.00 $4,429.50 10/98-10/99 $ 18
</TABLE>
Section 3.2 Basic Operating Cost Base Year: 1994
Section 4 Security Deposit: $4,429.50
Section 23 Broker: Iliff, Thorn & Company/Marcus &
Millichap
Section 25 Tenant's Address for Notices:
131 Steuart Street, Suite 410
San Francisco, CA 94105
Section 25 Landlord's Address for Notices:
131 Steuart Street
San Francisco, California 94105
<PAGE>
Exhibit(s) and Addendum:
Exhibit A - Premises/Floor Plan
Exhibit B - Work Letter Agreement
Exhibit C - Rules and Regulations
Exhibit D - Right to Expand/Right of First Refusal
Exhibit E - Expansion Space Floor Plan
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the event
of any conflict between any Basic Lease Information and the Lease, the latter
shall control.
LANDLORD: PERSIS CORPORATION
By: /s/ Paul de Ville
Paul de Ville
Its: Vice President
TENANT: GREGORY R. RAIFMAN
By: /s/ Gregory R. Raifman
TENANT: JON LOGAN EDWARDS
By: /s/ Jon Logan Edwards
<PAGE>
FIRST AMENDMENT TO OFFICE LEASE
-------------------------------
This First Amendment to that certain Office Lease dated September 2, 1994,
by and between Gregory R. Raifman and Jon Logan Edwards ("Tenant") and Persis
Corporation ("Landlord") is made as of February 1, 1997.
Whereas Landlord and Tenant desire to effective Exhibit D Right to Expand
of this lease; and
Whereas Landlord and Tenant desire to extend the term of this lease for an
additional three years;
Now, Therefore, Landlord and Tenant hereby agree to attached that certain
Office Lease dated September 2, 1994 as follows:
1. Effective Date: The effective date of this Amendment shall be May 1, 1997.
--------------
2. Premises: Tenant's premises shall be expanded from 2,953 rentable square
--------
feet (current premises) to 4,913 rentable square feet, as outlined in
"Exhibit A." attached hereto.
3. Term: The term shall commence on May 1, 1997 and extend for sixty-five
----
months from that date, terminating October 31, 2002.
4. Base Rent: The base rent for the Premises shall be as follows:
---------
<TABLE>
<CAPTION>
Inclusive Dates Annual Base Rent Monthly Base Rent
--------------- ---------------- -----------------
<S> <C> <C>
5/1/97 = 4/30/98 $ 98,226.96 $ 8,185.58
5/1/98 = 10/31/98 $103,139.88 $ 8,594.99
11/1/98 = 10/31/99 $108,052.92 $ 9,004.41
11/1/99 = 10/31/00 $112,967.16 $ 9,413.83
11/1/00 = 10/31/01 $117,878.88 $ 9,823.24
11/1/01 = 10/31/02 $122,791.92 $10,232.66
</TABLE>
5. Tenant's Proportionate Share of Operating Expense: Tenant's proportionate
-------------------------------------------------
share for the calculation of operating costs shall be 6.51%.
6. Tenant Improvements: Landlord will provide a tenant improvement allowance
-------------------
of $52,520. All tenant improvements will be according to a mutually
acceptable space plan and tenant work items to be attached to this
Amendment as "Exhibit B".
7. Option: Raifman and Edwards is hereby given an option subordinate to the
------
option which GCI San Francisco, formerly known as Jennings & Co., has to
lease the approximately 6,690 rentable square feet known as Suite 400
currently occupied by GCI San Francisco. Should GCI fail to exercise their
option by 12/31/97, Raifman and Edwards will then have an option
<PAGE>
to take the entire 6,690 rentable square feet; but must exercise the option
by notice in writing delivered to Landlord on or before 2/1/98. Rate and
terms in the form of a fully executed lease amendment must be agreed to no
later than 2/28/98.
All other terms and conditions of the above referenced lease shall remain
in full force and effect.
ACCEPTED AND AGREED:
Landlord Tenant
Persis Corporation Raifman & Edwards LLP
By: /s/ Paul I. deVille By: /s/ Signature Illegible
Paul I. deVille, President Date 3/28/97
Date 4-14-97 By: /s/ Signature Illegible
Date 74/8/9
<PAGE>
CONSENT TO ASSIGNMENT
Without releasing BIDCOM, INC., a California corporation ("Assignor"), from
its obligations under that certain Office Lease dated July 31, 1998 (the
"Lease"), executed by and between Assignor and the undersigned Landlord, PERSIS
CORPORATION, a Hawaii corporation ("Landlord"), Landlord hereby consents to the
assignment of the Lease by Assignor to MEDIAPLEX CORPORATION, a California
corporation ("Assignee"), on the terms and conditions set forth in the foregoing
Lease Assignment Agreement. Landlord represents and warrants to Assignee, as
follows: (i) Assignor is not in default of any of its obligations under the
Lease, and Landlord knows of no event or present condition, which, with the
passing of time or otherwise, could give rise to an event of default under the
Lease on the part of Assignor; (ii) Landlord is not in default of any of its
obligations under the Lease and Landlord knows of no event or present condition,
which, with the passing of time or otherwise, could give rise to an event of
default under the Lease on the part of Landlord; and (iii) To the best of
Landlord's knowledge, Assignor has not previously assigned any interest in the
Lease or the Premises to any party. The consent of Landlord set forth herein
shall apply to the foregoing assignment only, and shall not be construed as
consent to any further assignment or sublease of the Lease and/or the Premises.
Executed this _______ day of February, 1999, at San Francisco, California.
LANDLORD:
PERSIS CORPORATION,
a Hawaii corporation
/s/ Paul I. deVille
By: Paul I. deVille
Its: President
-4-
<PAGE>
PERSIS CORPORATION
131 STEUART STREET
SAN FRANCISCO, CALIFORNIA
OFFICE LEASE
BASIC LEASE INFORMATION
Date: July 31, 1998
Landlord: Persis Corporation
Tenant: Bidcom, Inc.
Exhibit A Premises: 131 Steuart Street, Suite 400
San Francisco, CA 94105
Section 1.5 Net Rentable Area of Premises: 6,690 square feet
Section 1.10 Tenant's Proportionate Share: 9.05%
Section 1.11 Term: 60 Months
Section 2 Scheduled Term Commencement Date: August 1, 1998
Section 2 Term Expiration Date: July 30, 2003
Section 3.1(a) Basic Rent: ANNUAL MONTHLY
Year 1: $227,460.00 $18,955.00
Year 2: $234,150.00 $19,512.50
Year 3: $240,840.00 $20,070.00
Year 4: $247,530.00 $20,627.00
Year 5: $254,220.00 $21,185.00
Section 3.2 Basic Operating Cost Base Year: 1998
Section 4 Security Deposit: $20,070.00 With a irrevocable Letter
of Credit through Silicon Valley Bank made out to
Persis Corporation and made open through August 31,
2003
Section 23 Broker: Colliers International (Landlord)
B.T. Commercial (Tenant)
Section 25 Tenant's Address for Notices:
Bidcom, Inc.
131 Steuart Street, Suite 400
San Francisco, CA 94105
Section 25 Landlord's Address for Notices:
Persis Corporation
P.O. Box 3110
Honolulu, HI 96802-3110
Attn: Paul DeVille
<PAGE>
EXHIBIT(S) AND ADDENDUM:
Exhibit A - Premises/Floor Plan(s)
Exhibit B - Work Letter Agreement - See Addendum
Exhibit C - Rules and Regulations
Exhibit D - Addendum
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the event
of any conflict between any Basic Lease Information and the Lease, the latter
shall control.
LANDLORD: PERSIS CORPORATION
By: /s/ Paul de Ville
Paul de Ville
Its: _________________________________
President
TENANT: BIDCOM, INC.
By: /s/ Signature Illegible
Its: _______________________________
President
<PAGE>
LEASE ASSIGNMENT AGREEMENT
This Lease Assignment Agreement (the "Assignment Agreement"), which is dated for
reference purposes only on February 19, 1999, is made by and between BIDCOM,
INC., a California corporation, whose address is One Market Plaza ("Assignor")
and MEDIAPLEX, a California corporation; whose address is 131 Steuart Street,
Suite 400, San Francisco, California, 94105 ("Assignee"), who agree as follows;
RECITALS
A. Assignor is a party to that certain Office Lease, dated July 31, 1998
(the "Lease"); in effect by and between Assignor and PERSIS CORPORATION, a
Hawaii corporation, whose address is P.O. Box 3110, Honolulu, Hawaii, 96802-3110
("Landlord"). A copy of the Lease is attached hereto as Exhibit "A" and
incorporated herein by reference;
B. Under the terms of the Lease, Assignor has leased from Landlord Suite
400, consisting of approximately six thousand six hundred ninety (6,690) net
rentable square feet of floor area (the "Premises"), within that certain real
property, and the improvements thereon, located in the City and County of San
Francisco, California, at 131 Steuart Street (the "Building"), as more
particularly described in the Lease;
C. Assignor desires to assign to Assignee all of Assignor's right, title,
and interest in and to the Lease and the Premises, and Assignee desires to
accept such assignment and to assume all of Assignor's duties and obligations
under the Lease, on the following terms and conditions:
AGREEMENT
1. The Effective Date. The effective date of this Assignment Agreement
------------------
(the "Effective Date") shall be the later to occur of the following dates: (i)
March 1, 1999; or (ii) the date upon which Assignor delivers actual possession
of the Premises to Assignee.
2. Assignment of Lease and Premises. Subject to the terms of this
--------------------------------
Assignment Agreement; effective on the Effective Date, Assignor hereby assigns
to Assignee all of Assignor's right, title and interest, in and to the Lease and
the Premises, including, without limitation, the following: (i) Assignor's right
to the quiet use and enjoyment of the Premises, and (ii) Assignor's right to
receive repayment of the security deposit, and Assignee accepts such assignment.
3. Assumption of Lease. In connection with the foregoing assignment,
-------------------
commencing on the Effective Date, Assignee hereby assumes and agrees to perform,
all of the duties, debts, and obligations of Assignor arising under the Lease,
including, without limitation, the following: (i) all obligations to pay rent;
and (ii) all non monetary obligations, including, without limitation, all
restrictions upon the use of the Premises. If the Effective Date should be a day
other than the
<PAGE>
first day of any calendar month, Assignee shall immediately reimburse to
Assignor, Assignee's pro rata share of the rent paid by Assignor for such month
based upon a thirty (30) day month.
4. Reimbursement of the Original Security Deposit. Upon execution of this
----------------------------------------------
Assignment Agreement, Assignee shall cause to be issued an irrevocable letter of
credit ("LC") in the name of Landlord, which shall be in the same form,
substance and amount as the LC which is presently in place on behalf of Assignor
in accordance with Section 4 of the Lease.
5. Acknowledgment of Assignment by Assignor. Assignor represents and
----------------------------------------
warrants to Assignee, that, to the best of Assignor's knowledge, without
investigation: (i) Assignor is not in default of any of its obligations under
the Lease, and Assignor knows of no event or present condition, which, with the
passing of time or otherwise, could give rise to an event of default under the
Lease on the part of Assignor; (ii) Landlord is not in default of any of its
obligations under the Lease and Assignor knows of no event or present condition,
which, with the passing of time or otherwise, could give rise to an event of
default under the Lease on the part of Landlord; and (iii) Assignor has not
previously assigned any interest in the Lease or the Premises to any party.
6. No Release of Assignor. This Assignment Agreement shall not be
----------------------
construed to release or relieve Assignor from any obligations owed to Landlord
under the terms of the Lease, as it may be amended from time to time, unless
Landlord separately agrees, in writing, to release Assignor from Assignor's
obligations under the Lease. Landlord may proceed against Assignor and/or
Assignee, or either of them, directly and independently of any action against
the other.
7. Assignor's Remedies. Assignee shall indemnify and hold Assignor free
-------------------
and harmless from any claims, judgment, injury, loss, or damage, of any nature
whatsoever, including, without limitation, attorneys' fees and costs of suit,
that may be incurred by Assignor as the result of any event of default under the
Lease or this Assignment Agreement on the part of Assignee, or its officers,
directors, shareholders, employees, contractors and agents, or their successors.
In connection with the foregoing, Assignee hereby assigns and transfers to
Assignor all of Assignee's right, title, and interest in and to the Lease and
the Premises as security for the faithful performance by Assignee of Assignee's
obligations under the Lease and this Assignment Agreement; provided however,
that until an event of default shall occur under the Lease for which Assignor
may become (or remains) liable, Assignee shall have and enjoy all rights as
tenant under the Lease. In addition to any other rights or remedies possessed by
Assignor under this Assignment Agreement, the Lease, or by law, in the event of
the breach by Assignee of any of its obligations under the Lease and/or this
Assignment Agreement, Assignor may exercise any right or remedy possessed by
Landlord under the Lease in the event of a default by tenant under the Lease,
including, without limitation, terminating Assignee's right to possession of the
Premises. This right is given as a security interest only and shall not be
construed to place Assignor into actual or constructive possession of the
Premises.
8. Security Deposit. Upon execution of this Assignment Agreement, Assignee
----------------
shall deposit with Assignor an additional security deposit in the amount of
$20,070.00 (the "Additional Security Deposit"). The Additional Security Deposit
may be applied, at Assignor's
-2-
<PAGE>
discretion, against any obligation incurred by Assignee in connection with the
Lease and/or this Assignment Agreement that is not timely paid or performed (as
the case may be), including the payment of Rent, the repair of any damage that
is Assignee's responsibility, and all other obligations of Assignee under the
Lease and this Assignment Agreement. If Assignor debits the Additional Security
Deposit, or any portion thereof, Assignor shall notify Assignee of the
occurrence and amount of the debit, and Assignee shall promptly pay to Assignor
the amount necessary to restore the Additional Security Deposit to the original
amount of the Additional Security Deposit. Failure of Assignee to pay the amount
necessary to restore the Additional Security Deposit to its original amount
within seven (7) days shall be an event of default under this Assignment
Agreement. Assignor shall have the right, but not the obligation, to accept
another form of security for Assignee's obligation under the Lease. Assignor
shall repay the Additional Security Deposit, or so much thereof as shall be
remaining, without interest, to Assignee upon the earlier to occur of the
following: (i) Landlord's full and unconditional release of Assignor from all
debts and obligations under the Lease; or (ii) the full and complete performance
of all of Assignee's obligations under the Lease and this Assignment Agreement.
9. Notices. Assignee shall forward to Assignor, immediately upon receipt
-------
thereof, copies of any and all notices received by Assignee from Landlord or
from any governmental authority relating to Assignee's use and/or occupancy of
the Premises. Assignee shall forward to Assignor immediately, upon delivery
thereof, copies of any and all notices sent by Assignee to Landlord or to any
governmental authority relating to Assignee's use and/or occupancy of the
Premises.
10. Attorneys' Fees. If any legal action, including submission to
---------------
arbitration by agreement of the parties or in compliance with statute, is
instituted by any party hereto for damages or to interpret or enforce any of the
terms or provisions of this Agreement, the prevailing party shall be entitled to
recover its reasonable attorneys' fees in addition to such other recoverable
costs and damages as may be awarded.
Executed as of the date first above written.
ASSIGNOR: ASSIGNEE
BIDCOM, INC., MEDIAPLEX, INC.
a California corporation a California corporation
/s/ Betty Yamanaka /s/ Jon E. Edwards
By: Betty Yamanaka By: Jon E. Edwards
Its: CFD Its: President
-3-
<PAGE>
June 14, 1999
Ms. Betty Yamanaka
BIDCOM, Inc.
201 Mission Street, Suite 2900
San Francisco, CA 94105
Mr. Jon Edwards
Mr. Gregory Raifman
MediaPlex, Inc.
131 Steuart Street, #400
San Francisco, CA 94105
RE: Assignment of Lease for 131 Steuart Street, Suite 400, San Francisco
Dear Betty, Jon & Gregory;
This letter will serve to memorialize the effective date of the assignment of
lease for the above referenced property. BIDCOM, Inc. vacated the premises on
May 31, 1999 and MediaPlex took possession of Suite 400 on June 1, 1999.
Please confirm your understanding and agreement of the above, by signing below
and returning an original copy back to me for my files. Fully executed copies
will be returned to both parties.
Please feel from to call me if you should have any questions.
Sincerely,
Jones Lang ?? California, Inc.
Wilma T. Vanson
Property Manager
UNDERSTOOD AND AGREED UNDERSTOOD AND AGREED
By: BIDCOM, INC. By: MediaPlex, Inc.
By: /s/ Betty Yamanaka By:______________________________
Its: CFO Its:_____________________________
By:______________________________
Its:_____________________________
<PAGE>
PERSIS CORPORATION
131 STEUART STREET.
SAN FRANCISCO, CALIFORNIA
OFFICE LEASE
BASIC LEASE INFORMATION
Date: July 31, 1998
Landlord: Persis Corporation
Tenant: Bidcom, Inc.
Exhibit A Premises: 131 Steuart Street, Suite 400
San Francisco, CA 94105
Section 1.5 Net Rentable Area of Premises: 6,690 square feet
Section 1.10 Tenant's Proportionate Share: 9.05%
Section 1.11 Term: 60 Months
Section 2 Scheduled Term Commencement Date: August 1, 1998
Section 2 Term Expiration Date: July 30, 2003
Section 3.1(a) Basic Rent: ANNUAL MONTHLY
Year 1: $227,460.00 $18,955.00
Year 2: $234,150.00 $19,512.50
Year 3: $240,840.00 $20,070.00
Year 4: $247,530.00 $20,627.00
Year 5: $254,220.00 $21,185.00
Section 3.2 Basic Operating Cost Base Year: 1998
Section 4 Security Deposit: $20,070.00 With a
irrevocable Letter of Credit through Silicon Valley
Bank made out to Persis Corporation and made open
through August 31, 2003
Section 23 Broker: Colliers International (Landlord)
B.T. Commercial (Tenant)
Section 25 Tenant's Address for Notices:
Bidcom, Inc.
131 Steuart Street, Suite 400
San Francisco, CA 94105
Section 25 Landlord's Address for Notices:
Persis Corporation
P.O. Box 3110
Honolulu, HI 96802-3110
Attn: Paul DeVille
<PAGE>
EXHIBIT(S) AND ADDENDUM:
Exhibit A - Premises/Floor Plan(s)
Exhibit B - Work Letter Agreement - See Addendum
Exhibit C - Rules and Regulations
Exhibit D - Addendum
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information. In the event
of any conflict between any Basic Lease Information and the Lease, the latter
shall control.
LANDLORD: PERSIS CORPORATION
By: /s/ Paul de Ville
Paul de Ville
Its:______________________________
President
TENANT: BIDCOM, INC.
By: /s/ Signature Illegible
Its: _____________________________
President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS 1
- -----------
TERM 3
- ----
RENT 3
- ----
SECURITY DEPOSIT 6
- ----------------
IMPROVEMENT OF THE PREMISES 7
- ---------------------------
USE 7
- ---
UTILITIES AND SERVICES 7
- --------------------
REPAIRS AND MAINTENANCE 9
- ---------------------
ALTERATIONS 10
- -----------
ENTRY BY LANDLORD 11
- -----------------
INSURANCE 12
- ---------
INDEMNITY 13
- ---------
ASSIGNMENT AND SUBLETTING 14
- -------------------------
DAMAGE 17
- ------
CONDEMNATION 19
- ------------
SUBORDINATION 20
- -------------
DEFAULT 21
- -------
SIGNS 23
- -----
RULES AND REGULATIONS 23
- ---------------------
COMPLIANCE WITH REGULATIONS 23
- ---------------------------
SELF-HELP 23
- ---------
ATTORNEYS' FEES 24
- ---------------
BROKERAGE 24
- ---------
QUIET ENJOYMENT 24
- ---------------
NOTICES 24
- -------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
HOLDING OVER 25
- ------------
TRANSFERS BY LANDLORD 25
- ---------------------
TENANT'S REMEDIES 25
- -----------------
MISCELLANEOUS 26
- -------------
</TABLE>
Exhibit A - Premises/Floor Plan(s)
Exhibit B - Work Letter Agreement - See Addendum
Exhibit C - Rules and Regulations
Exhibit D - Addendum
<PAGE>
OFFICE LEASE
THIS LEASE, is executed this 31st day of July, 1998 by and between The Persis
Corporation, a Hawaii corporation (hereinafter referred to as "Landlord"), and
Bidcom, Inc., a California corporation (hereinafter referred to as "Tenant");
WITNESSETH:
WHEREAS, Landlord is the owner of that certain real property (the "Land")
and the buildings and certain other improvements which are being or have been
constructed thereon located and addressed at 131 Steuart Street, San Francisco,
California (collectively, the "Property").
WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to lease
from Landlord, that portion of the Building specified in the Basic Lease
Information, as more particularly described on the Floor Plan(s) attached hereto
as Exhibit A (the "Premises").
NOW, THEREFORE, Landlord hereby leases the Premises to Tenant, and Tenant
hereby leases the Premises from Landlord, for the term, at the rent, and upon
and subject to the terms and conditions hereinafter set forth. Landlord reserves
to itself the use of the roof, exterior walls, Common Areas (as hereinafter
defined), and the area above and below the Premises together with the right to
install, maintain, use, repair and replace pipes, lines, ducts, pumps, conduits,
wires, transformers, glazing and structural elements now or in the future
leading through the Premises and which serve other parts of the Building.
This Lease is subject to any and all existing encumbrances, conditions,
rights, covenants, easements, restrictions and rights of way of record, and
other matters of record, if any, applicable zoning and building laws,
regulations and codes, and such matters as may be disclosed by inspection or
survey.
1. Definitions. Certain terms used herein shall have the following meanings:
-----------
1.1. "Building" shall mean the buildings located at 131 Steuart Street, San
--------
Francisco, California.
1.2. "Building Standard Improvements" shall mean those improvements which are
------------------------------
to be installed by Landlord, if any, at its expense in the Premises or for
which a credit is to be given pursuant to the Work Letter Agreement
attached hereto as Exhibit B.
1.3. "Common Areas" shall mean the areas on individual floors devoted to
------------
corridors, fire vestibules, elevator foyers, lobbies, electric and
telephone closets, restrooms, mechanical rooms, janitor closets and other
similar facilities for the benefit of all tenants (or invitees) on the
particular floor and shall also mean those areas of the Building devoted to
mechanical and service rooms servicing more than one floor or the Building
as a whole.
1.4. "Holidays" shall mean New Year's Day, President's Day, Memorial Day,
--------
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
1.5. "Net Rentable Area" shall mean the area or areas of space within the
-----------------
Building determined as follows: (i) Net Rentable Area on a single tenancy
floor is determined by measuring from the inside surface of the outer glass
and extensions of the plane thereof in non-glass areas to the inside
surface of the opposite outer glass and extensions of the plane thereof in
non-glass areas and shall include all areas within
1
<PAGE>
the outside walls, excluding vertical penetrations such as building
stairs, elevator shafts, flues, vents, stacks, pipe shafts and vertical
ducts; provided however, vertical penetrations which are for the specific
use of Tenant, such as special stairs or elevators, shall be included as
Net Rentable Area, and (ii) Net Rentable Area for a partial floor shall
include all space within the demising walls (measured from the mid-point
of demising walls and in the case of exterior walls, measured as defined
in (i) above, plus Tenant's share of any Common Areas on such floors
attributable to such space. No deductions from Net Rentable Area shall be
made for columns or projections in the Building. Tenant acknowledges that
it has been given an opportunity to independently verify the amount of Net
Rental Area in the Premises calculated on the basis of the foregoing
definition and whether or not Tenant has undertaken such verification
Tenant and Landlord hereby stipulate that for all purposes hereof the
amount of Net Rentable Area in the Premises shall be the amount stated in
the Basic Lease Information. Net rentable area equals usable area plus
twenty percent (20%) load factor.
1.6. "Rent" shall mean Basic Rent, Gross Rent and Additional Rent. "Gross Rent"
---- ----- ----
shall mean Basic Rent plus Tenant's Proportionate Share of Basic Operating
Cost increases determined pursuant to Section 3.2. "Additional Rent"
---------- ----
shall mean all amounts payable to Landlord under this Lease other than
Gross Rent and Basic Rent, whether or not characterized as Rent under this
Lease including but not limited to late charges, administrative fees and
interest payable pursuant to Section 3.1(d).
1.7. "Substantial Completion" shall mean (and the Premises shall be deemed
----------- ----------
"Substantially Complete") when architect shall have issued a certificate
of substantial completion with respect to the Premises or that portion of
the Building within which they are contained, whether or not Substantial
Completion of the Building itself shall have occurred. Substantial
Completion shall be deemed to have occurred notwithstanding a requirement
to complete "punchlist" or similar corrective work.
1.8. "Tenant's Extra Improvements" shall mean those improvements which are to
-------- ----- ------------
be installed in the Premises at Tenant's expense pursuant to the Work
Letter Agreement attached hereto as Exhibit B.
1.9. "Tenant's Improvements" shall mean Building Standard Improvements and
-------- ------------
Tenant's Extra Improvements.
1.10. "Tenant's Proportionate Share" shall mean the percentage which the Net
-------- ------------- -----
Area of the Premises bears to the Net Rentable Area of the Building;
provided that if the Building is greater than 90% occupied, Tenant's
Proportionate Share shall mean the percentage which the Net Rentable Area
of the Premises bears to the occupied space in the Building.
1.11. "Term" shall mean a period commencing with the Term Commencement Date and
----
ending on the Term Expiration Date specified on the Basic Lease
Information sheet as such Term Expiration Date may be extended. The
Scheduled Term Commencement Date specified on the Basic Lease Information
sheet represents the parties' estimate of the Term Commencement Date. The
Term Commencement Date shall be confirmed pursuant to Section 2 hereof.
1.12. "Term Commencement Date" shall mean the date when the Term commences as
---- ------------ ----
determined pursuant to Section 2 hereof.
The terms on the Basic Lease Information sheet shall have the definitions
set forth above. The information on such sheet is incorporated herein by
this reference.
2
<PAGE>
2. Term. The Term shall commence upon Substantial Completion of the Premises
----
which the parties expect to occur on the Scheduled Term Commencement Date
and, except as otherwise provided herein or in any exhibit or addendum
hereto, shall continue in full force until the Term Expiration Date. If the
Premises are not Substantially Complete by the Scheduled Term Commencement
Date for any reason, Landlord shall not be liable for any claims, damages
or liabilities in connection therewith or by reason thereof, but the Term
Commencement Date shall be the day when the Premises are Substantially
Complete. If Substantial Completion occurs prior to the Scheduled Term
Commencement Date, Tenant shall take occupancy and the Term shall commence.
If Landlord is installing Tenant's Improvements, Landlord agrees to use
best efforts to provide Tenant with such notice as circumstances reasonably
allow of the date when Landlord expects to achieve Substantial Completion,
based upon the progress of the work. Should the Term Commencement Date be a
date other than the Scheduled Term Commencement Date, either Landlord or
Tenant, at the request of the other, shall execute, an amendment to the
Lease specifying the Term Commencement Date. Tenant's obligation to pay
Rent shall commence upon the Term Commencement Date (except as expressly
otherwise provided herein with respect to obligations arising earlier).
3. Basic Rent.
----- ----
3.1. Basic Rent.
----- ----
(a) Tenant agrees to pay to Landlord, as Basic Rent for the Premises
during the Term of this Lease, the sum set forth in the Basic
Lease Information, payable in advance in monthly installments as
set forth in the Basic Lease Information on or before the first
day of each calendar month during the Term hereof. Said Basic
Rent shall be subject to adjustment as provided in subsection
(b) of this Section 3.1, and shall be in addition to all other
amounts required to be paid by Tenant pursuant to the provisions
of this Lease.
(b) If the Term commences on a date other than the first day of a
calendar month, Basic Rent for the period from the Term
Commencement Date through the last day of the calendar month in
which the Term commences shall be prorated on the basis of a
thirty-day month, and Basic Rent for the first full or
fractional month of the Term of this Lease shall be payable on
the Term Commencement Date. In the event the Term Expiration
Date falls on a day other than the last day of the calendar
month, Basic rent for the period from the first day of the last
calendar month of the Term to the end of the Term shall be
prorated on the basis of a thirty-day month.
(c) Rent due under this Lease shall be paid, without deduction or
offset, and without prior notice or demand, to Landlord at the
address specified for notices on the Basic Lease Information
sheet, or at such other address as Landlord may from time to
time specify by written notice to Tenant. All amounts of money
(i.e., Rent) payable by Tenant to Landlord hereunder, if not
paid when due, shall bear simple interest from the due date
until paid at the lesser of fifteen percent (15%) on an annual
basis or the maximum rate allowed by law. Tenant shall also pay
to Landlord a fee in the amount of five percent (5%) of the
overdue amount for the administrative cost caused by Tenant's
failure to pay the Basic Rent or the Additional Rent payable
pursuant to Section 3.2(b) below on time if such overdue amount
is not paid within five (5) days of the date it is due.
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3.2. Basic Operating Cost Adjustment.
-------------------------------
(a) For the purposes of this Section 3.2, the following Terms are defined
as follows:
"Lease Year": Each calendar year of the Term.
----------
"Basic Operating Cost Base": The Basic Operating Cost Base Year shall
-------------------------
mean the year set forth in the Basic Lease Information.
"Basic Operating Cost": All costs and expenses of the nature
--------------------
hereinafter described, incurred in connection with ownership and
operation of the Building and such additional facilities now and in
subsequent years as may be determined by Landlord to be necessary to
the Building. All costs and expenses shall be determined in accordance
with generally accepted accounting principles which shall be
consistently applied (with accruals appropriate to Landlord's
business). Basic Operating Cost as used herein shall mean all expenses
and costs but not specific costs which are separately billed to and
paid by specific tenants) of every kind and nature which Landlord
shall pay or become obligated to pay because of or in connection with
the management and operation of the Building and supporting facilities
of the Building, including but not limited to the following:
(1) Wages, salaries and related benefits of all employees engaged in
management, operation, maintenance or security of the Building;
employer's Social Security taxes, unemployment taxes or
insurance, payroll taxes and any other taxes which may be levied
on such wages and salaries; uniforms of Landlord's service,
security and maintenance personnel; the cost of disability and
hospitalization insurance and workers' compensation and pension
or retirement and all other benefits for such employees; and the
costs of maintaining and operating building management offices,
if any.
(2) All supplies, small tools and materials used in operation and
maintenance of the Building.
(3) Cost of all utilities and communications services, including
water and power, sewer and other waste disposal, heating,
lighting, air conditioning and ventilating for the entire
Building.
(4) Cost of all repair, maintenance, security, janitorial and other
services for the Building or for equipment therein, including,
without limitation, alarm and/or guard service, life safety,
window cleaning, scaffold maintenance, and elevator and/or
escalator maintenance, and computer operations for the basic
building systems.
(5) Cost of all insurance applicable to the Building, including, but
not limited to, fire, earthquake, casualty, extended coverage
risk, vandalism and malicious mischief, boiler and pressure
apparatus insurance, war damage, catastrophe excess, rent
abatement or rent interruption insurance, public liability
insurance, and any other types of insurance that a prudent owner
of similar property would maintain on the Building, all personnel
engaged in its management, maintenance and operation, and
Landlord's personal property used in connection therewith (the
enumeration of such coverages not imposing upon Landlord the duty
or obligation to maintain them), as well as casualty
4
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losses not covered by such insurance due to the deductible
provisions contained therein.
(6) Cost of all accounting (including cost of certified public
accountants), legal or other professional fees incurred in
connection with the operation of the Building.
(7) A reasonable fee to Landlord or its agent for general overhead,
management and other services. Management fees not to exceed five
percent (5%) of building's total revenue.
(8) Cost of repairs and replacements (other than capital
improvements) and general maintenance, including, without
limitation, landscaping and all costs of periodic relamping and
reballasting of fluorescent fixtures with respect to the
Building.
(9) All maintenance costs relating to public and service areas of the
Building, including (but without limitation) sidewalks,
landscaping, service areas, mechanical rooms and Building
exteriors.
(10) All taxes, service payments in lieu of taxes, occupancy fees,
annual or periodic license or use fees, excises, transit charges,
housing fund assessments, assessments, levies, fees or charges,
general and special, ordinary and extraordinary, unforeseen as
well as foreseen, of any kind which are assessed, levied,
charged, confirmed, or imposed by any public authority upon the
Building, its operations or the Rent (or any portion or component
thereof), except (i) inheritance or estate taxes imposed upon or
assessed against the Building, or any part thereof or interest
therein, and (ii) taxes computed upon the basis of the net income
derived from the Building by Landlord or the owner of any
interest therein. In no event will any increase in property tax
as a result of the sale or transfer of the building be passed-
through as an "Operating Expense".
(11) Amortization (together with reasonable financing charges) of capital
improvements made to the Building subsequent to the Term Commencement
Date which will improve the operating efficiency of the Building or
which may be required by governmental authorities.
(b) If the amount of the Basic Operating Cost paid or incurred by Landlord
for any calendar year during the Term of this Lease on account of the
operation or maintenance of the Building is in excess of the Basic
Operating Cost paid or incurred by Landlord in the Basic Operating
Cost Base Year, then Tenant shall pay Tenant's Proportionate Share of
such increase as Additional Rent. During the Term, Tenant shall pay to
Landlord monthly in advance and every month during the Term, one-
twelfth (1/12th) of the amount of such Additional Rent as reasonably
estimated by Landlord in advance, to be due from the Tenant. In no
event shall Tenant's share of Operating Cost increase more than five
percent (5%) per year. Annually, as soon as is reasonably possible
after the expiration of each calendar year, Landlord shall deliver to
Tenant a statement, which statement shall be conclusive between the
parties hereto, setting forth the Basic Operating Cost for the
preceding calendar year and the amount of the Basic Operating Cost
paid by Tenant as determined in accordance with the provisions of this
Section 3.2. If the aggregate amount of the estimated Basic
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Operating Cost payments made by Tenant in any calendar year
should be less than Tenant's Proportionate Share of the increase
in Basic Operating Cost for such calendar year, then Tenant shall
pay to Landlord as Additional Rent upon demand the amount of such
deficiency. If the aggregate amount of such estimated Basic
Operating Cost payments made by Tenant in any calendar year
should be greater than Tenant's Proportionate Share of Basic
Operating Cost due for such year under this section 3.2, then,
should Tenant not be otherwise in default hereunder, the amount
of such excess will be applied by Landlord to the next succeeding
installments of such Basic Operating Cost due hereunder; and if
there is any such excess for the last year of the Term, the
amount thereof will be refunded by Landlord to Tenant on the Term
Expiration Date, provided Tenant has vacated the Premises and is
not otherwise in default under the Terms of this Lease.
In the event the Term Commencement Date or Term Expiration Date
occurs on a day other than January 1, or ends on a day other than
December 31, Tenant's Proportionate Share of Basic Operating Cost
increases for such partial calendar year shall be appropriately
prorated so that Tenant shall pay Tenant's Proportionate Share of
Basic Operating Cost increases only for the portion of the
calendar year falling within the Term.
Note: Operating expense shall exclude costs attributable to other
building tenants, including tenant improvements, commissions,
legal and auditing fees.
3.3. Costs Attributable Solely to Tenant. In addition to the payment of
-----------------------------------
Tenant's Proportionate Share of Basic Operating Cost, Tenant shall
also pay as Additional Rent, from time to time and when and as
incurred by Landlord, costs and/or expenses incurred by Landlord cost
which is properly attributable to the Premises as relating to Tenant's
use and occupancy of the Premises as distinguished from Basic
Operating Cost for the Building as a whole, whether such costs and/or
expenses arise as a result of Tenant's Extra Improvements, real
property or personal property taxes on Tenant's Extra Improvements or
Tenant's fixtures or personal property, use of services in excess of
those provided by Landlord hereunder, Landlord's curing defaults
pursuant to Section 21, or otherwise.
3.4. Net Lease. It is the intent of the parties that this Lease be, and the
---------
same shall be, absolutely net to Landlord and that Tenant shall pay
all costs and expenses relating to the Premises and the business
conducted therein except as expressly provided in this Lease. Any
amount or obligation herein relating to the Premises which is not
expressly declared to be that of Landlord shall be deemed to be an
obligation of Tenant to be paid by Tenant and/or performed by or at
Tenant's expense.
4. Security Deposit. Tenant has deposited with Landlord the sum specified in
----------------
the Basic Lease Information (the "Security Deposit"). The Security Deposit
shall be held by Landlord as security for the faithful performance by
Tenant of all of the provisions of this Lease to be performed or observed
by Tenant. If Tenant fails to pay the Rent or otherwise defaults with
respect to any provision of this Lease, Landlord may use, apply or retain
all or any portion of the Security Deposit for the payment of any Rent in
default or for the payment of any other sum to which Landlord may become
obligated by reason of Tenant's default, or to compensate Landlord for any
loss or damage which Landlord may suffer thereby. If Landlord so uses or
applies all or any portion of the Security Deposit, Tenant shall within ten
(10) days after demand therefor deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to the full amount thereof and
Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep the Security Deposit separate from
its general accounts. If Tenant performs all of its obligations hereunder,
the Security Deposit, or so much thereof as has not theretofore been
applied by Landlord, shall be
6
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returned, without payment of interest or other increment for its use, to
Tenant or, at Landlord's option, to the last assignee, if any, of Tenant's
interest hereunder) at the expiration of the Term hereof, and after Tenant
has vacated the Premises. No trust relationship is created herein between
Landlord and Tenant with respect to the Security Deposit. In the event the
Building is sold, credit for the Security Deposit shall be transferred to
the new owner. Tenant may issue an irrevocable letter of credit in
Landlord's name for a bank approved by Landlord for the full amount of the
Security Deposit for a term that expires no earlier than August 31, 2003.
5. Improvement of the Premises. As promptly as practicable after the date of
---------------------------
execution of this Lease, Landlord and Tenant shall undertake their
respective obligations to prepare the Premises for occupancy by Tenant in
accordance with the Work Letter Agreement attached hereto as Exhibit B.
6. Use. The Premises shall be used for general office purposes only. Tenant
---
shall at its own cost and expense obtain any and all licenses and permits
necessary for any such use. Tenant agrees not to do or permit to be done in
or about the Premises or the Building, nor to bring or keep or permit to be
brought or kept in or about the Premises or the Building, anything which is
prohibited by or will in any way conflict with any law, statute or
governmental regulation, or which will in any way increase the existing
rate of, cause the cancellation of, or otherwise affect fire or any other
insurance on the Building or any of its contents. Tenant agrees not to do
or permit to be done anything in, on or about the Premises or the Building
which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or annoy them, or use or
allow the Premises to be used for residential purposes or for any improper,
immoral, unlawful or objectionable purpose. Tenant agrees not to cause,
maintain or permit any nuisance in, on or about the Premises or the
Building, erect any antennas, nor to use or permit to be used any
loudspeaker or other device, system or apparatus which can be heard outside
the Premises without the prior written consent of Landlord. Tenant agrees
not to commit or suffer to be committed any waste in or upon the Premises.
Tenant shall not operate or install any equipment within the Premises which
will (i) injure, vibrate or shake the Premises or Building, (ii) compromise
the structural integrity of the floor within the Premises or overload
existing electrical systems or other mechanical equipment servicing the
Premises or Building or (iii) impair the efficient operation of the
sprinkler system (if any) or the heating or ventilation equipment (if any)
servicing the Building. The provisions of this s Section 6 are for the
benefit of Landlord only and shall not be construed to be for the benefit
of any other tenant or occupant of the Building.
7. Utilities and Services.
----------------------
(a) Landlord shall make customary arrangements with public utilities
and/or public agencies to furnish any electricity and water utilized
in operating the facilities serving the Premises.
(b) Landlord, select to reimbursement pursuant to Section 3.2 shall
furnish Tenant during Tenant's occupancy of the Premises:
(1) Domestic and cool water at those points of supply provided for
general use of tenants in the Building; central heat and air
conditioning in season, at such times as Landlord normally
furnishes these services to other tenants in the Building and at
such temperatures and in such amounts as are considered by
Landlord to be standard or as may be limited or controlled by
applicable laws, ordinances, rules and regulations;
(2) Routine maintenance of all Common Areas and special service areas
of the Building in the manner and to the extent deemed by
Landlord to be standard, consistent with Class "A" office
buildings in San Francisco;
7
<PAGE>
(3) Janitorial service on a five (5) day week basis, excluding
Holidays; provided, however, that if Tenant's Extra Improvements
are not consistent in quality and quantity with Building Standard
Improvements, Tenant shall pay any extra cleaning and janitorial
cost attributable thereto;
(4) Electrical facilities comparable to those supplied in other first
class office buildings in the vicinity of the Building to provide
sufficient power for typewriters and other office machines of
similar low electrical consumption, special lighting in excess of
Building Standard Improvements, and any other item of electrical
equipment which (singly) consumes more than .5 kilowatts per hour
at rated capacity or requires a voltage other than one hundred
twenty (120) volts single phase; and provided, however, that if
the installation of such electrical equipment requires additional
air conditioning capacity above that provided to the Building
Standard Improvements or above standard usage of existing
capacity, then the additional air conditioning installation
and/or operating costs attributable thereto shall be paid by
Tenant;
(5) Initial lamps, bulbs, starters and ballasts used in the Premises;
and
(6) Public elevator service serving the floors on which the Premises
are situated during Building hours of operation.
(7) Tenants servers are housed in another facility, which meets
special requirements for power and HVAC. Tenant's use of the
premises to be consistent with normal office use by current
standards.
(c) Any heating, ventilation, air conditioning, electrical or elevator
service provided by Landlord to Tenant other than during normal
business days or normal business hours or on Saturdays, Sundays or
Holidays shall be furnished upon the prior written request of Tenant
and at Tenant's sole cost and expense.
(d) If Tenant shall require electric current in excess of that usually
furnished or supplied for use of the Premises as general office space,
Tenant shall first procure the consent of Landlord to the use thereof
and Landlord may cause a meter to be installed in the Premises, or
Landlord shall have the right to cause a reputable independent
electrical engineering or consulting firm to survey and determine the
value of the electric service furnished for such excess electric
current. The cost of any such survey or meters and of installation,
maintenance and repair thereof shall be paid for by Tenant. Tenant
agrees to pay to Landlord, promptly upon demand therefor, for all such
electrical current consumed as well as an additional use charge
calculated as a percentage of electrical current used as shown by said
meters or by said survey at the rates charged for such services to the
Building by the municipality or the local public utility, as the case
may be, furnishing the same, plus any additional expense incurred in
keeping account of the electric current so consumed.
(e) Tenant covenants and agrees that at all times its use of electric
current shall never exceed Tenant's Proportionate Share of the
capacity of existing feeders to the Building or the risers or wiring
installation. Any riser or risers or wiring to meet Tenant's excess
electrical requirements, upon written request of Tenant, will be
installed by Landlord, at the sole cost and expense of Tenant if, in
Landlord's sole judgment, the same are necessary and will not cause
permanent damage or injury to the Building or Premises or cause or
create a dangerous or hazardous condition or entail excessive or
unreasonable alternative repairs or expense or interfere with or
disturb other tenants or occupants.
8
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(f) To the extent that Tenant shall require special or more frequent
cleaning and janitorial service than that normally provided to tenants
in the Building generally (hereinafter referred to as "Special
Cleaning Service") Landlord shall upon reasonable advance notice by
Tenant, furnish such Special Cleaning Service and Tenant agrees to pay
Landlord, within ten (10) days of being billed therefor, Landlord's
charge for providing such additional service.
Special Cleaning Service shall include but shall not be limited to the
following:
(1) The cleaning and maintenance of Tenant's eating facilities, if
any (All refuse and garbage to be removed by janitor must be
placed in proper trash receptacles.)
(2) The cleaning and maintenance of Tenant computer centers,
including peripheral areas. (All refuse and garbage to be removed
by janitor must be placed in proper trash receptacles.)
(3) The cleaning and maintenance of special equipment areas, kitchen
areas, private toilets and locker rooms, and large scale
duplicating rooms.
(4) The cleaning and maintenance in areas of special security such as
storage vaults.
(g) Landlord shall not be liable for damages or injuries to either person
or property, including, but not limited to those arising from an
interference with Tenant's business arising from the failure by
Landlord to furnish such services or the cessation of such services.
Landlord shall not be deemed to have evicted Tenant, nor shall there
be any abatement of Rent, nor shall Tenant be relieved from
performance of any covenant on its part to be performed hereunder, by
reason of the unreasonable failure by Landlord to furnish the above
described services or the cessation of such services due to causes or
circumstances beyond the control of Landlord. Landlord shall use
reasonable diligence to make such repairs as may be required to
machinery or equipment within the Building to provide restoration of
services and, where the cessation or interruption of service has
occurred due to circumstances or conditions beyond the Building
boundaries, to cause the same to be restored by diligent application
or request to the provider thereof. Tenant acknowledges that one (1)
month may be required after the Building is fully occupied in order to
adjust and balance the climate control systems. Note: Rent to be
abated for cessation of utilities for a period in excess of five (5)
days or in excess of ten (10) business days for any calendar year.
8. Repairs and Maintenance.
-----------------------
8.1. Landlord's Obligation to Repair. Subject to the other provisions of
-------------------------------
this Lease imposing obligations in this respect upon Tenant and to
reimbursement pursuant to Section 3.2, Landlord shall repair, replace
and maintain the external and structural parts of the Building which
do not comprise a part of the Premises and are not leased to others,
and janitor and equipment closets and shafts within the Premises
designated by Landlord for use by it in connection with the operation
and maintenance of the Building. Landlord shall perform such repairs,
replacements and maintenance with reasonable dispatch, in a good and
workmanlike manner: but Landlord shall not be liable for any damages,
direct, or indirect or for damages for personal discomfort, illness or
inconvenience of Tenant by reason of failure of such equipment,
facilities or systems or reasonable delays in the performance of such
repairs, replacements and maintenance, unless caused by the deliberate
act or omission, or the active negligence of Landlord, its servants,
agents, or employees. Notwithstanding the foregoing, Landlord shall
not be liable for consequential damages or indirect damages arising by
9
<PAGE>
reason of failure of such equipment, facilities or systems or delays
in the performance of such repairs, replacements and maintenance.
Landlord to hire labor that is licensed, bonded and insured.
8.2. Repairs Necessitated by Tenant's Act. Any damage to the Building
------------------------------------
whatsoever, including but not limited to, windows, doors, floors,
foundation, internal structures, elevators, boilers, engines, pipes or
other apparatus used for the purpose of climate control of the
Building or operating the elevators, water pipes, drainage pipes,
electric lighting or other equipment of the Building, or roof or
outside walls of the Building, damaged or destroyed through the
negligence, carelessness or misuse of Tenant, its agents, employees or
anyone permitted by it to be in the Building, or through it in any
way, the cost of the necessary repairs, replacements or alterations
shall be borne by Tenant who shall pay the same to Landlord as Rent
forthwith on demand.
8.3. Tenant's Obligation to Repair. Tenant at its cost and expense shall
-----------------------------
repair the Premises, including without limiting the generality of the
foregoing, all interior partitions, doors, walls, windows, fixtures,
Tenant's Improvements and any alterations in the Premises and any
special mechanical and electrical equipment not a normal part of the
Premises installed by or for Tenant, reasonable wear and tear and
damage with respect to which Landlord has an obligation to repair as
provided in Sections 14.1 and 15.6 only excepted: provided that, prior
to making any repairs to the Premises that affect the base Building
structural, electrical, or mechanical systems, Tenant shall obtain the
consent of the Landlord, such consent not to be unreasonably withheld.
Landlord may enter and view the state of repair and Tenant will repair
in a good and workmanlike manner according to notice from Landlord in
writing.
9. Alterations.
-----------
9.1. Approval of Alterations. During the Term of this Lease, Tenant shall
-----------------------
not make any alterations, additions, or improvements to the Premises
without first meeting the following requirements:
(a) Prior to the commencement of any work, Tenant shall submit plans
and specifications prepared by a licensed architect and/or
structural engineer for Landlord's approval, and shall obtain any
necessary governmental permits and deliver a copy thereof to
Landlord;
(b) In the event Landlord approves such plans and specifications, the
alterations shall be made by a contractor designated by Landlord
or a contractor chosen by Tenant and approved by Landlord;
(c) Tenant shall provide satisfactory evidence of sufficient
contractor's comprehensive general liability insurance covering
Landlord, builder's risk insurance, and workmen's compensation
insurance;
(d) Tenant shall provide a performance and payment bond satisfactory
in form and substance to Landlord;
(e) Tenant shall provide such other security as Landlord may
reasonably require to insure payment for the completion of all
work free and clear of liens; and
(f) Tenant shall give Landlord at least ten (10) business days'
notice before commencing any work so that Landlord can post and
record a notice of non-responsibility. All such alterations shall
immediately become a part of the realty and belong to Landlord.
10
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(g) All of Tenant's contractors, subcontractors, employees, servants
and agents must work in harmony with and shall not interfere with
any labor employed by Landlord, or Landlord's contractors or by
any other tenant or its contractors;
(h) All core drilling, concrete cutting, demolition of partitions or
removal of rubbish, shall be done between the hours of 7:00 p.m.
and 6:00 a.m. Transportation of construction materials through
Common Areas shall be done outside the Building's normal
operating hours;
(i) If any shutdown of plumbing, electrical, or air conditioning
equipment becomes necessary in connection with the making of any
alterations, Tenant shall notify Landlord and Landlord will
reasonably determine when such shutdown may be made. Any such
shutdown shall be done only if an agent or employee of Landlord
is present. Tenant will reimburse Landlord for the expense of any
such employee or agent. Tenant shall be fully responsible if any
shutdown of plumbing, electrical or air conditioning equipment
jeopardizes or invalidates any warranties covering the Building;
(j) Any complaints by tenants of excess noise or odors are to be
remedied immediately, or alteration operations are to cease until
said noise or odors are abated;
(k) Landlord expressly reserves the right to revoke its consent upon
notice to Tenant in the event of the breach of any of the terms
or conditions hereof, in which case all work on the alterations
shall immediately cease to the extent directed by Landlord in
such notice;
(l) Tenant shall reimburse Landlord for any and all costs or expenses
reasonably incurred by Landlord in connection with the
alterations, including without limitation architectural or
engineers' fees and attorneys' fees; and
(m) Tenant shall provide Landlord with a cost and expense breakdown
of the alterations.
9.2. Mechanics' Liens. Any mechanics' lien filed against the Premises or
----------------
the Building for work done by or materials furnished to Tenant or its
agents shall be discharged by Tenant at its expense within twenty (20)
days thereafter by the filing of the bond required by law, by payment,
by satisfaction or otherwise. Failure to so discharge any such lien
shall constitute a default hereunder.
9.3. Improvements and Alterations Landlord's Property. All Tenant's
------------------------------------------------
Improvements and all alterations made thereto and installed for Tenant
shall be and remain Landlord's property, except Tenant's furniture,
furnishings and trade fixtures, and shall not be removed without the
written consent of Landlord. All goods, effects, personal property,
business and trade fixtures, machinery and equipment owned by Tenant
or installed at Tenant's expense in the Premises shall remain the
personal property of Tenant and may be removed by Tenant at any time,
and from time to time, during the Term of this Lease provided Tenant
shall, in removing any such property, repair all damage to the
Premises and the Building caused by such removal and restore the
Premises to their original condition.
10. Entry by Landlord: Landlord and Landlord's agents and representatives shall
-----------------
have the right to enter and inspect the Premises at any reasonable time
with twenty-four (24) hour advance notice, which may be verbal, for the
purpose of ascertaining the condition of the Premises, of exercising any
right or performing any obligation of Landlord hereunder, or of
11
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exhibiting the Premises to prospective tenants, purchasers, mortgagees or
insurers of Landlord's interest in the Building. In the case of emergency
Landlord shall have the right to enter the Premises at any time; and, if
Tenant is not present to permit such entry, Landlord may forcibly enter the
Premises and any such entry shall not in 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, actual or constructive, from the
Premises or any portion thereof. No entry by Landlord permitted hereunder
shall be deemed a re-entry nor shall Tenant be entitled to compensation or
abatement of Rent for any inconveniences nuisance or discomfort occasioned
thereby.
11. Insurance
---------
11.1. Tenant's Insurance. During the term hereof, Tenant shall, at its own
------------------
cost and expense, provide and keep in force the following insurance:
(a) Comprehensive public liability insurance for the mutual benefit
of Landlord and Tenant against claims for bodily injury, death
or property damage occurring in or about the Premises
(including, without limitation, bodily injury, death or property
damage resulting directly or indirectly from or in connection
with any change, alteration, improvement or repair thereof),
with a limit of not less than $2,000,000 combined single limit
bodily injury and property damage. Not more frequently than each
three (3) years, if, in the opinion of any mortgagee of Landlord
or of the insurance broker retained by Landlord, the amount of
public liability and property damage insurance coverage at that
time is not adequate, Tenant shall increase the insurance
coverage as required by either any mortgagee of Landlord or
Landlord's insurance broker. Said insurance shall insure
performance by Tenant of the indemnity provisions of Section 12
hereof;
(b) All Risk Replacement Cost insurance with Agreed Amount
Endorsement covering the Premises and upon property of every
description and kind owned by Tenant and for Tenant's Special
Improvements and personal property located in the Premises in an
amount equal to 100% of the full replacement value thereof,
which value shall be determined every two (2) years by an
insurance appraiser mutually satisfactory to Landlord and
Tenant;
(c) At Landlord's option, business interruption or use and occupancy
insurance with proceeds payable to Landlord and any mortgagee of
Landlord, if any, to the extent of Landlord's loss in an amount
equal to 100% of the Rent for a period of one year, but the
purchase of such insurance shall not relieve Tenant from the
primary obligation to pay Rent as required hereunder; provided,
however, that Tenant shall not be required to pay any Rent to
the extent of the proceeds of any such insurance actually
received by Landlord or Landlord's mortgagee;
(d) Worker's compensation insurance to the extent required by law;
and
(e) Such other insurance, in such amounts as may from time to time
be reasonably requested by Landlord or any mortgagee of
Landlord, against other insurable hazards which at the time are
reasonably available at reasonable cost and commonly incurred
against in the case of premises or buildings similarly situated,
with due regard to the height and the type of the Premises or
the Building, its construction, use and occupancy, including,
but not limited to, war damage and boiler insurance if there is
a boiler servicing the Premises.
11.2. Form of Insurance. The aforesaid insurance shall name Landlord and
-----------------
Tenant as co-insured and shall be with companies and in form,
substance and amount (where not
12
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stated above) satisfactory to Landlord and any mortgagee of Landlord,
and shall contain the insurer's waiver of subrogation clause against
Landlord and standard mortgage clause satisfactory to Landlord and
any mortgagee of Landlord. The aforesaid insurance shall not be
subject to cancellation or modification except after at least thirty
(30) days' prior written notice to Landlord and any mortgagee of
Landlord. Certified copies of the insurance policies, or at the
option of Landlord certificates of such coverage, together with
satisfactory evidence of payment of premiums thereon, shall be
delivered to Landlord at the commencement of the Term hereof; and
renewals of such policies shall be so delivered not less than thirty
(30) days prior to the end of the term of each such coverage.
11.3. Cancellation of Insurance. If any insurance policy carried by
-------------------------
Landlord, shall be canceled or cancellation shall be threatened or
the coverage thereunder reduced or threatened to be reduced, in any
way by reason of the use or occupation of the Premises or any part
thereof by Tenant or by any assignee or sub-tenant of Tenant or by
anyone permitted by Tenant to be upon the Premises and, if Tenant
fails to remedy the condition giving rise to cancellation, threatened
cancellation or reduction of coverage within forty-eight (48) hours
after notice thereof, Landlord may enter upon the Premises and
attempt to remedy such condition and Tenant shall forthwith pay the
cost thereof to Landlord as Rent. Landlord shall not be liable for
any damage or injury caused to any property of Tenant or of others
located on the Premises as a result of such entry. In the event that
Landlord shall be unable to remedy such condition, then Landlord
shall have all of the remedies provided for in the Lease in the event
of a default by Tenant. Notwithstanding the foregoing provisions of
this Section 11.3, if Tenant fails to remedy as aforesaid, Tenant
shall be in default of its obligation hereunder and Landlord shall
have no obligation to attempt to remedy such default.
12. Indemnity
---------
12.1. Landlord's Exculpation and Limited Liability. Landlord, its
--------------------------------------------
employees, agents, contractors, and representatives shall not be
liable to Tenant or Tenant's agents, employees, contractors, or
representatives and Tenant waives all claims against Landlord for any
injury to or death of any person or for loss of use of or damage to
or destruction of property in or about the Premises or Building by or
from any cause whatsoever, including without limitation earthquake or
earth movement, gas leak, fire, oil spills or contamination,
electricity or leakage from the roof, walls, basement or other
portion of the Premises or Building, theft, act of God, acts of the
public enemy, riot, strike, insurrection, war, court order,
requisition or order of governmental body or authority, repairs or
alterations of any part of the Building or failure to make any such
repair except to the extent attributable to the negligent or willful
acts of Landlord, its agents, contractors, representatives or
employees, but in no event shall Landlord be liable for consequential
damages, including, without limitation, loss of profits or damages
from business interruptions.
12.2. Tenant's Liability. Indemnification and Hold Harmless. Tenant agrees
-----------------------------------------------------
to indemnify, defend (using counsel selected or approved by Landlord)
and hold Landlord (its agents, contractors, representatives,
employees, any lessor under any ground or underlying lease and any
mortgagee or beneficiary under any mortgage or deed of trust
encumbering the Premises) harmless against all claims, liability,
damage or loss and against all costs and expenses, including but not
limited to reasonable attorneys fees and expenses in connection
therewith, (a) arising (directly or indirectly) out of any injury to
or death of any person or damage to or destruction of property
occurring in, on or about the Premises, from any cause whatsoever,
except to the extent attributable to the negligent or willful acts of
Landlord, its agents, or employees, or (b) occurring in, on or about
any Common Areas (including without limitation elevators, stairways,
passageways or hallways) the use of which Tenant has
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in common with other tenants, or elsewhere in or about the Project
other than the Premises, when such claim, injury or damage is caused
in whole or in part by the act, neglect (active or passive), default,
or omission of any duty by Tenant, its agents, employees, invitees,
assignees or sublessees or otherwise by any conduct of any of said
persons in or about the Premises or the Project including failure of
Tenant to observe or perform any of its obligations hereunder. The
provisions of this Section 12.2 shall survive the termination of this
Lease. In addition, Tenant shall indemnify and defend Landlord (using
counsel selected by Landlord) and hold Landlord harmless of and from
any and all loss, cost, damage, injury or expense arising out of or
in any way related to claims for work or labor performed, materials
or supplies furnished to or at the request of Tenant or in connection
with performance of any work done for the account of Tenant in the
Premises or the Building. It is understood that indemnity shall be
mutual between Landlord and Tenant.
13. Assignment and Subletting.
-------------------------
13.1. Prohibition Against Assignment and Sublease.
-------------------------------------------
13.1.1. Except as provided in Section 13.5 below, Tenant, its legal
representatives, successors or assigns shall not, directly
or indirectly, voluntarily or by operation of law sell,
assign, encumber, pledge, mortgage or otherwise transfer or
hypothecate all or any part of the Premises or Tenant's
leasehold estate hereunder (collectively, "Assignment"), or
permit the Premises or any part thereof to be occupied by
others or sublet the Premises or any part thereof
(collectively, "Sublease") without Landlord's prior written
consent, in each instance, and any attempt to do so without
such consent shall be voidable and, at landlord's option,
shall constitute a default for which Landlord may terminate
this Lease. The person or entity who or which is the actual
assignee, sublessee, transferee or any other recipient of an
Assignment or Sublease is herein collectively referred to as
"Transferee".
13.1.2. In the event Tenant violates the provisions of Section 13.1,
Landlord may collect Rent from any Transferee and apply the
net amount collected to the Rent payable under this Lease,
but such collection shall not be deemed (i) a waiver of the
covenant not to allow an Assignment or Sublease of Tenant's
leasehold estate or the Premises or any part thereof, (ii)
an acceptance of any Transferee as Tenant, or (iii) a
release of Tenant from the further performance by Tenant of
the obligations on the part of Tenant contained herein.
13.2. Deemed Assignments.
------------------
13.2.1. If Tenant is a partnership or joint venture, a withdrawal or
change, voluntary, involuntary or by operation of law of any
partner or partners owning fifty percent (50%) or more of
the partnership or joint venture ("Key Partners" or "Key
Partner"), or the dissolution of the partnership or joint
venture, shall be deemed an Assignment within the meaning of
Section 13.1.
13.2.2. If Tenant or any Key Partner is a corporation, any
dissolution, merger, consolidation, or other reorganization
of Tenant or any Key Partners, or the sale or transfer of
the effective voting control of the stock of Tenant or any
Key Partners, or the sale of fifty percent (50%) or more of
the value of the assets of Tenant or any Key Partners shall
be deemed an Assignment within the meaning of Section 13.1.
The phrase "effective voting control" means the ownership of
stock possessing at least thirty-four percent (34%) of the
total combined voting power of all classes of Tenant's or
any Key Partner's capital stock issued, outstanding and
entitled to vote.
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13.2.3. If Tenant consists of more than one person, a purported
assignment, voluntary, involuntary, or by operation of law,
from one person to another or from a majority of persons to
the others shall be deemed an Assignment within the meaning
of Section 13.1. As used in this section, Tenant shall mean
any entity that has guaranteed Tenant's obligations under
this Lease.
13.3.Tenant's Notice of Assignment or Sublease. Notwithstanding anything
-----------------------------------------
contained in Section 13.1 to the contrary, and subject to Section
13.4, if Tenant desires at any time to effectuate an Assignment or
Sublease of Tenant's leasehold estate or the Premises or any portion
thereof, Tenant shall submit to Landlord at least thirty (30) days
prior to the proposed effective date of the transfer ("Proposed
Effective Date"), in writing:
(a) a notice of intent to effectuate an Assignment or Sublease of the
Tenant's leasehold estate or the Premises setting forth the
Proposed Effective Date, which shall be not more than sixty (60)
days nor less than thirty (30) days after the sending of such
notice ("Notice of Intent");
(b) the name of the proposed Transferee;
(c) the nature of the proposed Transferee;
(d) the terms and provisions of the proposed Assignment or Sublease;
and
(e) the proposed Transferee's most recent certified financial
statements and bank references.
Tenant shall also promptly provide Landlord with such certified or
uncertified financial information as Landlord may request concerning
the proposed Transferee.
13.4. Landlord's Option to Recapture. Landlord hereby reserves the option,
------------------------------
to be exercised by giving notice to Tenant within fifteen (15) days
after receipt of Tenant's Notice of Intent to recapture the Premises
described in Tenant's Notice of Intent and to terminate this Lease
with respect to such recaptured Premises. The effective date of such
recapture and termination shall be the Proposed Effective Date. The
option to recapture reserved to Landlord hereunder shall also arise
in the event Tenant, without first obtaining the written consent of
Landlord, effectuates an Assignment or Sublease of all or any portion
of the Premises and in such event the recapture option shall apply to
the entire Premises and be exercisable by Landlord at any time after
the occurrence of the event for which Landlord's consent was required
but not obtained by Tenant. If this Lease is terminated pursuant to
Landlord's recapture option with respect to only a portion of the
Premises, the Basic Rent required under this Lease and Tenant's
Proportionate Share shall be adjusted based on the rentable square
footage retained by Tenant and the net rentable square footage leased
by Tenant hereunder immediately prior to such recapture and
cancellation, and Landlord and Tenant shall thereupon execute an
amendment of this Lease in accordance therewith. Landlord may,
without limitation and without obtaining Tenant's consent, lease the
recaptured portion of the Premises to the proposed Transferee or any
other entity or person, on the same or different terms as were
proposed by Tenant, without any liability to Tenant.
13.5. Permitted Assignments and Subleases. Notwithstanding anything
-----------------------------------
contained in Section 13.1 to the contrary, and subject to Sections
13.4 and 13.6 through 13.10, Tenant may effectuate an Assignment or
Sublease upon obtaining Landlord's prior written consent, which
consent will not be unreasonably withheld. The withholding of
Landlord's consent to an Assignment or Sublease shall be deemed to
have been reasonable if:
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(a) the use to be made of the Premises by the proposed Transferee
(i) is not consistent with the character or nature of all other
tenancies in the Building or a use permitted under this Lease,
(ii) conflicts with any so-called "exclusive use" clause then
given in favor of another tenant of the Building, (iii) is the
same as that stated in any percentage lease to another tenant in
the Building, (iv) would create greater demands upon the
facilities, systems or services of the Building, (v) would be
prohibited by any other provision in this Lease (including but
not limited to any Rules and Regulations then in effect): or
(b) the character, business history, moral stability, reputation or
financial soundness and responsibility of the proposed
Transferee are not reasonably satisfactory to Landlord or in any
event not at least equal to those which were possessed by Tenant
as of the date of this Lease or thirty (30) days prior to the
date Landlord receives the Notice of Intent; or
(c) the proposed Transferee is a then-existing or prospective tenant
of the Building; or
(d) Landlord withholds its consent pursuant to any other provision
of this Lease; or
(e) if a Sublease, the proposed Sublease is for less than the entire
Premises; or
(f) the proposed Assignment or Sublease is to be at rental rates
which are less than ninety-five percent (95%) of the then
current rental rates being charged by Landlord for space being
marketed by Landlord in the Building.
13.6. Approval/Disapproval Procedure. If Landlord disapproves the proposed
------------------------------
Assignment or Sublease it shall notify Tenant in writing thereof and
shall specify the reason(s) therefor; provided, however, that in the
event of any dispute between Landlord and Tenant regarding the
reasonableness of Landlord's disapproval of the proposed Assignment
or Sublease, Landlord shall not be limited to the reason(s) specified
in such notice in justifying its disapproval. If Landlord approves
the proposed Assignment or Sublease, it shall notify Tenant in
writing thereof and Tenant shall, prior to the Proposed Effective
Date, submit to Landlord all executed originals of the Assignment or
Sublease agreement. In the event Tenant and any proposed Transferee
do not effectuate an Assignment or Sublease prior to the Proposed
Effective Date any approval given by Landlord shall automatically
terminate. Tenant's failure to effectuate an Assignment or Sublease
prior to the Proposed Effective Date shall require Tenant to start
over the approval process set forth in this Section 13 and Landlord
shall retain all rights it has under this Section 13. Provided such
Assignment or Sublease agreement is in accordance with the terms
approved by Landlord, Landlord shall execute each counterpart
original on the signature pages thereof after the words "The
foregoing is hereby consented to" and shall retain an executed
original for its files and return the others to Tenant. No purported
Assignment or Sublease shall be deemed effective as against Landlord
and no proposed Transferee shall take occupancy unless (i) an
Assignment or Sublease Agreement is so executed by Landlord and (ii)
the proposed Transferee shall agree in writing to perform faithfully
and be bound by all of the terms, covenants and conditions,
provisions and agreements of this Lease.
13.7 Fees for Review. Tenant shall pay to Landlord when Tenant submits a
---------------
Notice of Intent the amount reasonably determined by Landlord to
cover all Landlord's costs and expenses incurred in connection with
Landlord's review of the Notice of Intent, which costs and expenses
shall include, among other things, Landlord's processing fee, all
taxes or other charges imposed or to be imposed upon Landlord or the
Project
16
<PAGE>
as a result of such Assignment or Sublease, and all reasonable fees
of attorneys, architects, or other consultants incurred by Landlord
in connection with Landlord's review of the Notice of Intent or in
connection with Landlord's negotiation, drafting and review of the
documentation effecting such Assignment or Sublease. Landlord shall
have no obligation to consider a request for consent to a proposed
Assignment or Sublease unless and until Tenant has paid all such
costs and expenses to Landlord, and Tenant shall pay all such costs
and expenses to Landlord irrespective of whether Landlord consents
to such proposed Assignment or Sublease. Tenant shall pay to
Landlord on demand the excess, if any, of such costs and expenses
actually incurred by Landlord over the amount of such costs and
expenses actually paid by Tenant, and Landlord shall promptly refund
to Tenant the excess, if any, of such costs and expenses actually
paid by Tenant over the amount of such costs and expenses actually
incurred by Landlord.
13.8 No Release of Tenant. No consent of Landlord to any Assignment or
---------------------
Sublease by Tenant shall relieve Tenant of the obligations to be
performed by Tenant under this Lease, whether occurring before or
after such consent, Assignment or sublease. The consent by Landlord
to any Assignment or Sublease shall not relieve Tenant from the
obligation to obtain Landlord's express prior written consent
pursuant to this Section 13 to any other Assignment or Sublease.
13.9 Allocation of Profit From Assignment or Sublease. It is the intent
------------------------------------------------
of both Landlord and Tenant that the purpose of any Assignment or
Sublease is to aid Tenant in meeting its obligations under this
Lease and not to allow Tenant to gain financially from any such
Assignment or Sublease. To this end it is agreed that 80% of any
sums or other economic consideration received by Tenant as a result
of any such Assignment or Sublease, whether denominated as rent
under the Assignment or Sublease or otherwise (less (i) any rent or
other payments received which are attributable to the cost of
leasehold improvements trade fixtures, and furniture/phone systems
made to the Premises or the portion thereof to be occupied by the
Transferee for the Transferee amortized over the term of the
Assignment or Sublease and paid for by Tenant and (ii) any brokerage
commission, if any, paid by Tenant amortized over the term of the
Assignment or Sublease) (iii) reasonable attorney fees which exceed
in the aggregate the monthly payments of Gross Rent which Tenant is
obligated to pay Landlord under this Lease (prorated if appropriate,
to reflect obligations allocable to that portion of the Premises
subject to any such Sublease), shall be payable to Landlord as Rent
under this Lease without affecting or limiting any other obligations
of Tenant hereunder.
13.10. Assignment of Rents. Tenant immediately and irrevocably assigns to
--------------------
Landlord, as security for Tenant's obligations under this Lease, all
rent from any Assignment or Sublease of or Tenant's leasehold
interest all or any part of the Premises, and Landlord, as assignee,
and as attorney-in-fact for Tenant which is coupled with an interest
for purposes thereof, or a receiver for Tenant appointed on
Landlord's application, may collect such rents and apply the same
toward Tenant's obligations under this Lease; except that, until the
occurrence of an event of default by Tenant under this Lease, Tenant
shall have the right and license to collect such rents.
14. Damage.
------
14.1. Destruction and Repair. If the Premises shall be damaged by fire or
----------------------
other casualty insured against by Landlord's fire and extended
coverage insurance policy covering the Premises and the Building,
and if Tenant shall give prompt notice to Landlord of such damage,
Landlord, at Landlord's expense, shall repair such damage and
restore the Premises to substantially the condition it was in prior
to such fire or casualty; provided, however, that (i) Landlord shall
have no obligation to repair any damage or to replace Tenant's
personal property, trade fixtures or equipment, alterations or any
17
<PAGE>
other property or effects of Tenant; (ii) there are no governmental
restrictions which preclude Landlord from repairing and restoring the
Premises or the Building to substantially the condition it was in
prior to such fire or other casualty; (iii) such fire or other
casualty does not occur in the last year of the Term; and (iv) Tenant
is not in default under this Lease. Except as otherwise provided in
this Section 14 if the entire Premises shall be rendered untenantable
by reason of any such damage, the Gross Rent shall abate for the
period from the date of such damage to the date when such damage to
the Premises shall have been repaired, and if only a part of the
Premises shall be rendered untenantable, the Gross Rent shall abate
for such period in the proportion that the area of the part of the
Premises so rendered untenantable bears to the total area of the
Premises; provided, however, if, prior to the date when all of such
damage shall have been repaired, any part of the Premises so damaged
shall be rendered tenantable or shall be used or occupied by Tenant
or any person or persons claiming through or under Tenant, then the
amount by which Gross Rent shall abate shall be equitably apportioned
for the period from the date of any such use or occupancy to the date
when all such damage shall have been repaired.
14.2. 180 Day Repair Criteria. Notwithstanding the provisions of Section
-----------------------
14.1, if prior to or during the Term, the Premises or the Building
(whether or not the Premises has been damaged or rendered
untenantable) shall be so damaged by fire or other casualty that, in
Landlord's opinion determined in Landlord's sole and absolute
discretion, it will take longer than one hundred eighty (180) days
from the date of the casualty to repair and restore the Premises or
Building, then Landlord shall give to Tenant, within sixty (60) days
after the casualty, notice of such opinion ("180 Day Notice"). If
such repairs and restoration cannot in Landlord's opinion be
substantially completed within one hundred eighty (180) days after
the date of the casualty, Landlord and Tenant shall both have the
right to terminate this lease by giving written notice to the other
within fifteen (15) days after the effective date of the 180 Day
Notice. In the event Landlord or Tenant delivers such a written
termination notice, this Lease and the Term shall terminate thirty
(30) days thereafter with the same effect as if the expiration of
such thirty (30) day period was the Term Expiration Date, and Gross
Rent shall be apportioned as of such date. In the event the actual
time to substantially complete the repair and restoration of the
premises or Building takes longer than one hundred eighty (180) days,
Tenant shall have no claim or remedy of any kind whatsoever against
Landlord for any damage, loss, liability or penalty it incurs,
provided Landlord diligently prosecutes the repair and restoration of
the Premises to substantial completion.
14.3 Lack of Insurance Proceeds.
---- -- --------- ---------
14.3.1. Notwithstanding anything contained in this Section 14 to the
contrary (with the exception of Section 14.3.2) in no event
shall Landlord be required to spend for any repair,
replacement or reconstruction of the Premises or Building an
amount greater than the insurance proceeds actually received
by Landlord (excluding any deductibles) as a result of the
fire or other casualty causing such loss, damage or
destruction.
14.3.2. Notwithstanding Section 14.3.1 to the contrary, but subject
to Sections 14.1 and 14.2, if the Premises or Building is
damaged and the cost to repair such damage and restore the
Premises and Building to substantially the condition they
were in (subject to any changes in the building codes) prior
to any fire or other casualty exceeds the insurance proceeds
actually received by Landlord (the "Shortage") Landlord
shall be obligated to repair such damage provided (i) such
fire or other casualty does not occur in the last year of
the Term, (ii) Tenant is not in default hereunder, (iii)
this Lease has not been terminated by Landlord or Tenant
pursuant to Section 14.2 and (iv) Tenant elects to pay
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<PAGE>
Landlord, in advance, the Shortage plus ten percent (10%).
Any amount of the Shortage which is not needed to pay repair
and restoration costs shall be returned to Tenant promptly
after such work is completed.
14.4. No Release of Liability. Except to the extent expressly provided
-----------------------
otherwise in this Lease, nothing contained in this Lease shall
relieve Tenant of any liability to Landlord or to its insurance
carriers that Tenant may have under law or under the provisions
of this Lease in connection with any damage to the Premises or
the Project by fire or other casualty.
14.5. Tenant's Negligence. Notwithstanding the provisions of Section
-------------------
14.1, if any such damage is due to the fault or neglect of
Tenant, any person claiming through or under Tenant, or any of
their employees, suppliers, shippers, customers or invitees,
then there shall be no abatement of Gross Rent by reason of such
damage, unless Landlord is reimbursed for such abatement of
Gross Rent pursuant to any rental insurance policies that
Landlord may, in its sole discretion, elect to carry.
14.6. Express Agreement Re Damage and Destruction. The provisions of
-------------------------------------------
this Lease, including this Section 14, constitute an express
agreement between Landlord and Tenant with respect to any and
all damage to, or destruction of, all or any part of the
Premises, and any statute or regulation of the State of
California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights
or obligations concerning damage or destruction in the absence
of an express agreement between the parties, and any similar
statute or regulation, now or hereafter in effect, shall have no
application to this Lease or to any damage to or destruction of
all or any part of the Premises or Building.
15. Condemnation.
-------------
15.1. Total Taking. In the event that the whole or substantially the whole
------------
of the Building or the Land shall be lawfully condemned or taken in
any manner for any public or quasi-public use, this Lease and the
term and estate hereby granted shall forthwith cease and terminate as
of the date of taking of possession for such use or purpose. If any
part of the Building or the Land shall be so condemned or taken and
if such condemnation or taking substantially interferes with the
Landlord's ownership or use of the Building, the Landlord at its
option, may, upon thirty (30) days' notice to the Tenant, terminate
this Lease as of the date of such taking.
15.2. Partial Taking. If more than fifty percent (50%) of the Premises
--------------
should be condemned or taken, either party may elect at any time
within thirty (30) days of the date of such taking to cancel this
Lease upon written notice to the other, and thereupon this Lease
shall terminate upon the date specified in said notice, which date
shall be no earlier than the date of such taking. Upon any such
taking or condemnation and the continuing in force of this Lease as
to any part of the Premises, the Gross Rent shall be diminished by an
amount representing the part of the Gross Rent properly applicable to
the portion of the Premises which may be so condemned or taken.
15.3. Termination of Lease. In the event of the termination of this Lease
--------------------
pursuant to the provisions of Section 15.1. or 15.2., this Lease and
the term and estate hereby granted shall expire as of the date of
such termination in the same manner and with the same effect as if
that were the date set for the normal expiration of the Term of this
Lease, and the Gross Rent shall be apportioned as of such date. The
provisions of this Section 15.3. shall apply in the same manner to
any partial termination of this Lease pursuant to the provisions of
this Section 15.
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15.4. Condemnation Award. Landlord shall be entitled to receive the entire
------------------
award in any condemnation proceeding without deduction therefrom for
any estate vested in Tenant by this Lease and Tenant shall receive no
part of such award or awards. Tenant hereby expressly assigns to
Landlord any and all of its right, title and interest in or to such
award or awards or any part thereof. Notwithstanding the foregoing,
in the event of any condemnation or taking pursuant to Section 15.1.
or 15.2., Tenant shall be entitled to appear, claim, prove and
receive in the condemnation proceeding such award as may be made as
represents the loss or damage to Tenant's trade fixtures, and
removable personal property, removal or relocation costs, and the
unamortized balance of any of Tenant's Extra Improvements or of any
alterations installed in the Premises at Tenant's expense which
Tenant is permitted to remove upon the termination of this Lease.
15.5. Temporary Taking. If the temporary use or occupancy of all or any
----------------
part of the premises shall be condemned or taken for any public or
quasi-public use during the Term of this Lease, this Lease shall be
and remain unaffected by such condemnation or taking and Tenant shall
receive a rental abatement on a prorated share or any portion of the
Premises condemnation or taken for any purpose during the entire
period of condemnation or taking, but in no event shall Tenant be
liable for the payment of sums payable hereunder for any period
during such temporary use or occupancy beyond the Term of this Lease.
In the event of any such taking, Tenant shall be entitled to appear,
claim, prove and receive the entire award for such taking as
represents compensation for use or occupancy of the Premises during
the Term of this Lease and Landlord shall be entitled to appear,
claim, prove and receive the entire award as represents the cost of
restoration of the Premises and the award representing use or
occupancy of the premises after the end of the Term hereof.
15.6. Restoration of the Building and Premises. In the event of any
----------------------------------------
condemnation or taking of less than the whole of the Building, in
which this Lease shall continue in effect, or in the event of a
condemnation or taking for a temporary use or occupancy of all or any
part of the Premises, Landlord, to the extent that the award shall be
sufficient for the purpose, shall proceed with reasonable diligence
to repair, alter and restore the remaining part of the Building and
the Premises to substantially their former condition to the extent
that the same may be feasible.
16. Subordination. This Lease and all the rights of Tenant hereunder are
-------------
subject and subordinate to any ground or underlying lease, deed of trust or
mortgage, which does now or may hereafter affect the Building and to any
and all renewal, modifications, consolidations, replacement and extensions
thereof. It is the intention of the parties that this provision be self-
operative and that no further instrument shall be required to effect such
subordination of this Lease. Tenant shall, however, upon demand at any time
or times execute, acknowledge and deliver to Landlord without expense to
Landlord, any and all instruments that may be necessary or proper to
subordinate this Lease and all rights of Tenant hereunder to said ground or
underlying lease, deed of trust or mortgage or to confirm or evidence said
subordination. In the event any proceedings are brought for the foreclosure
of any such deed of trust or mortgage Tenant covenants and agrees to attorn
to the purchaser at any summary proceedings or foreclosure sale, if
requested to do so by such purchaser, and to recognize such purchaser as
the landlord under this Lease. Tenant agrees to, at the option of any
landlord under any such ground or underlying lease, to attorn to said
landlord in the event of a termination or cancellation of such lease. Upon
the request of Landlord, or the trustee or beneficiary of such deed or
trust or mortgage, or of such purchaser, or the landlord under such ground
or underlying lease, Tenant agrees to execute and deliver within ten (10)
days of such request any instrument which, in the sole judgment of such
requesting party, may be necessary or appropriate in any such summary or
foreclosure proceeding, action or otherwise to evidence such attornment.
Tenant further waives the provisions of any statute or rule of law, now or
hereafter in effect, which may give or purport to give Tenant any right of
20
<PAGE>
election to terminate or otherwise adversely affect this Lease and the
obligations of Tenant hereunder in the event any such foreclosure
proceeding is brought, prosecuted or completed.
17. Default.
-------
17.1. In the event that:
(a) Tenant shall default in the payment of Rent when the same shall
become due, and such default shall continue for a period of
five consecutive days (which notice shall be deemed to satisfy
the requirements of Section 1161 of the California Code of
Civil Procedure); or
(b) Tenant shall vacate or abandon the Premises for a continuous
period in excess of ten (10) days (which notice shall be deemed
to satisfy the requirements of Section 1161 of the California
Code of Civil Procedure); or
(c) Tenant shall fail to honor or default in the performance of any
obligation covenant, condition or representation required to be
performed or made by Tenant under this Lease (other than
abandonment or the payment of Rent and those described in
Section 17.1(d)) and shall fail, for a period of twenty (20)
days after the date of written notice from Landlord specifying
such failure or default, to cure said default (which notice
shall be deemed to satisfy the requirements of Section 1161 of
the California Code of Civil Procedure), to cure said failure
or default (unless such default cannot be cured within said
twenty (20) days and shall cure the same with all reasonable
dispatch but in no event later than sixty (60) days after such
written notice); or
(d) Tenant shall be adjudicated bankrupt, or a petition by or
against Tenant for reorganization or adjustment of its
obligations under the bankruptcy Act or any other existing or
future insolvency or bankruptcy statute shall be approved, or
Tenant shall make a general assignment of its property for the
benefit of creditors, or a receiver or trustee shall be
appointed to take control of the business or assets of Tenant;
then and in each such case Landlord may, at its option, terminate
Tenant's right to possession and thereby terminate this Lease, or
without terminating this Lease re-enter the Premises and for the
account of Tenant re-let the same or any portion or portions thereof
for all or any part of the unexpired term of this Lease upon such
terms and conditions as Landlord may elect.
17.2. In the event of any such termination of this Lease by Landlord,
Landlord shall be entitled to recover from Tenant (i) the worth at
the time of award of the unpaid Rent which had been earned at the
time of termination; (ii) the worth at the time of award of the
amount by which the unpaid Rent which would have been earned after
termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided;
(iii) the worth at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's
failure to perform Tenant's obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom.
Efforts by Landlord to mitigate the damages caused by Tenant's
breach of this Lease shall not constitute a waiver by Landlord of
its right to recover damages hereunder.
21
<PAGE>
17.3. In the event of such re-letting without terminating this Lease,
Landlord shall be entitled to recover monthly from Tenant the
difference between the monthly installments of Gross Rent and such
other amounts as may be payable by Tenant to Landlord pursuant to
the provisions hereof over the total monthly rental received by
Landlord upon such re-letting, after first deducting therefrom all
expenses reasonably incurred by Landlord in such re-letting and in
repairing, renovating, remodeling and altering the Premise for the
purpose of such re-letting.
17.4. Landlord shall not be deemed to have elected to terminate this Lease
or the liability of Tenant to pay Rent thereafter to accrue or its
liability for damages under any of the provisions hereof by any such
re-entry or by any action in unlawful detainer or otherwise to
obtain possession of the Premises, unless Landlord shall have
notified Tenant in writing that it has so elected to terminate this
Lease for purposes of this Section 17, the following shall not
constitute termination of Tenant's right to possession: (A) acts of
maintenance or preservation or efforts to re-let the Preemies; or
(B) the appointment of a receiver upon initiative of Landlord to
protect Landlord's interest under this Lease. Nothing herein
contained shall be construed as obligating Landlord to re-let the
whole or any part of the Premises.
17.5. In the event of any entry or taking possession of the Premises,
Landlord shall have the right, but not the obligation, to remove
therefrom all or any part of the personal property located therein
and may place the same in storage at a public warehouse selected by
Landlord at the expense and risk of the owner or owners thereof The
remedies provided Landlord hereunder shall be cumulative and shall
be in addition and supplemental to all other rights or remedies
which Landlord may lawfully pursue in the event of any breach or
threatened breach by Tenant of any of the provisions of this Lease.
17.6. For purposes of computing unpaid Rent which would have accrued and
become payable under this Lease pursuant to the provisions of this
Section 17, unpaid Rent shall consist of the sum of:
(a) the total Basic Rent for the balance of the Term, plus
(b) a computation of the Basic Operating Cost increases for the
balance of the Term, the assumed Basic Operating Cost increase
for the calendar year of the default and each future calendar
year in the Term to be equal to the Basic Operating Cost
increase for the calendar year prior to the year in which
default occurs compounded at a per annum rate equal to the mean
average rate of inflation for the preceding five (5) calendar
years as determined by the revised Consumer Price Index for All
Urban Consumers, for San Francisco-Oakland-San Jose,
California, for All Items (1987=100) as published by the United
States Department of Labor, Bureau of Labor Statistics. If the
Index is either unavailable, is no longer published or if
calculated on a significantly different basis, the average rate
of inflation shall be determined by reference to the most
comprehensive official index then published which most closely
approximates the rate of inflation.
17.7. The "worth at the time of awards of the amounts referred to in (i)
and (ii) above shall be computed with interest at the lesser of
eighteen percent (18%) per annum or the maximum rate allowed by law.
The "worth at the time of award" of the amount referred to in (iii)
above shall be computed by reference to competent appraisal evidence
or the formula prescribed by and using the lowest discount rate
permitted under applicable law.
22
<PAGE>
18. Signs. Tenant shall not install any sign or advertising or publicity device
-----
which is visible from outside the Premises, in any public area, on any
roof, on any window or on any outside portion of the Building. Tenant may
install an identification sign within or adjacent to the entrance of the
Premises providing such sign has the prior approval of Landlord and
conforms to the graphic standards of the Building.
Landlord shall list Tenant's name on the directory board that Landlord
shall provide and maintain in the lobby of the Building. As space is
available other names may be listed on the directory board at Landlord's
option in relation to Tenant's Proportionate Share of the Building.
19. Rules and Regulations. At all times during the term of this Lease, Tenant
---------------------
shall comply with the Rules and Regulations for the Building which are
attached hereto as Exhibit C and incorporated herein by reference. Tenant
agrees that Landlord shall have the right to amend said Rules and
Regulations and to promulgate new Rules and Regulations applicable to all
tenants in the Building which relate to their use and occupancy thereof.
Landlord shall not be responsible to Tenant for the nonperformance by any
other tenant or occupant of any of said Rules and Regulations.
20. Compliance With Regulations
---------------------------
20.1. Compliance by Tenant. Tenant shall at its sole cost and expense
--------------------
promptly comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may
hereafter be in force, with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted,
with any direction or occupancy certificate issued pursuant to any
law by any public officer or officers, as well as the provisions of
all recorded documents affecting the Premises, insofar as any
thereof relate to or affect the condition, use or occupancy of the
Premises, excluding requirements of structural changes not related
to or affected by improvements made by or for Tenant or not
necessitated by Tenant's acts. The judgment of any court of
competent jurisdiction or the admission by Tenant in any action or
proceeding against Tenant, whether Landlord be a party thereto or
not, that Tenant has violated any such law, ordinance, requirement
or order in the use of the Premises, shall be conclusive of that
fact as between Landlord and Tenant.
20.2. Right to Contest. Landlord may at its option contest the validity of
----------------
any such law, ordinance, rule, order or regulation (hereinafter the
"Law"") by notifying Tenant of its decision to do so within ten (10)
days after receiving the notice required by Section 20.3. hereof
from Tenant. If Landlord declines to so contest such Law, Tenant may
do so at its own expense, and non-compliance by it during such
contest shall not constitute a breach of this Lease; provided that
it shall, to the satisfaction of Landlord, indemnify and hold
Landlord harmless against the cost of compliance and against all
liability for any loss, damages, and expenses (including reasonable
attorneys' fees) which might result from or be incurred in
connection with such contest or noncompliance; except that non-
compliance shall not continue so as to subject Landlord to any fine
or penalty or to prosecution for a crime.
20.3 Notice to Landlord. If Tenant receives written notice of any
------------------
violation of any law, ordinance, rule, order or regulation
applicable to the Premises, it shall give prompt notice thereof to
Landlord.
21. Self-Help.
---------
21.1. Tenant covenants and agrees that if it shall at any time fail to
make any payment or perform any act which the Tenant is obligated to
make or perform under this Lease, then Landlord may, but shall not
be obligated so to do, after any applicable grace
23
<PAGE>
period provided in Section 17 has expired; and without waiving, or
releasing the Tenant from any obligations of the Tenant in this
Lease contained, make any payment or perform any act which the
Tenant is obligated to perform under this Lease, in such manner and
to such extent as shall be necessary, and in exercising any such
rights, pay necessary and incidental costs and expenses, employ
counsel and incur and pay reasonable attorneys' fees.
Notwithstanding the foregoing, Landlord may make any such payment or
perform any such act before said applicable grace period has expired
if the same is necessary or required for the preservation or
protection of the Premises or the avoidance of penalties or other
charges due to delinquent payment of taxes or other actions. All
sums so paid by Landlord and all necessary and incidental cost and
expenses in connection with the performance of any such act by
Landlord, together with interest thereon at the maximum rate
provided by law from the date of the making of such expenditure by
Landlord, shall be deemed Rent hereunder and shall be payable to
Landlord on demand, or at the option of Landlord may be added to any
Rent then due or thereafter becoming due under this Lease. Tenant
covenants to pay any such sum or sums with interest aforesaid and
Landlord, in addition to any other right or remedy it may have,
shall have the same rights and remedies in the event of the non-
payment thereof by Tenant as in the case of default by Tenant in the
payment of Rent.
21.2. The performance of any such act by landlord shall not constitute a
waiver of Tenant's default in failing to perform the same. Unless
caused by Landlord's negligence or the negligence of Landlord's
agents, employees or contractors, Landlord shall not in any event be
liable for inconvenience, annoyance, disturbance, loss of business
or other damage of Tenant or any other occupant of the Premises or
part thereof, by reason of making repairs or the performance of any
work on the Premises or on account of bringing materials, supplies
and equipment into or through the Premises during the course
thereof; and the obligations of Tenant under this Lease shall not
thereby be affected in any manner whatsoever.
22. Attorneys' Fees. If as a result of any breach or default in the performance
---------------
of any of the provisions of this Lease, Landlord uses the services of an
attorney in order to secure compliance with such provisions or recover
damages therefor, or to terminate this Lease or evict Tenant, Tenant shall
reimburse Landlord upon demand for any and all attorneys' fees and expenses
so incurred by Landlord, provided that if Tenant shall be the prevailing
party in any legal action brought by Landlord against Tenant, Tenant shall
be entitled to recover the fees of its attorneys in such amount as the
court may adjudge reasonable.
23. Brokerage. Tenant covenants and represents that it has negotiated this
---------
Lease directly with the broker designated on the Basic Lease Information
sheet and has not authorized, directly or by implication, any other real
estate broker or salesman to act for it in these negotiations. Tenant
agrees to defend, indemnify and hold Landlord harmless from any and all
claims by any other real estate broker or salesman for a commission or
finder's fee as a result of Tenant's entering into this Lease.
24. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
---------------
Tenant's paying Rent and all other charges and observing and performing all
the terms, covenants, conditions, provisions and agreements of this Lease
on Tenant's part to be observed or performed, Tenant shall have quiet
possession of the Premises for the Term, subject, however, to the terms of
this lease and of any ground leases, underlying leases, mortgages and deeds
of trust affecting all or any portion of the Building or any of the area
used in connection with the operation of the Building.
25. Notices. Except as otherwise in this Lease provided, a bill, demand,
-------
statement, consent, notice or communication which Landlord may desire or be
required to give to Tenant shall be deemed sufficiently given or rendered
if in writing, delivered personally to Tenant or sent by
24
<PAGE>
certified mail (return receipt requested) or private express mail carrier
(postage and/or handling charges fully prepaid) addressed to Tenant at the
Building or the address set forth in the Basic Lease Information. Any
notice, request, demand or communication by Tenant to Landlord must be in
writing and delivered personally to Landlord or sent by certified mail
(return receipt requested) or express private mail carrier (postage and/or
handling charges fully prepaid), addressed to Landlord, at the address set
forth in the Basic Lease Information or at such other address as Landlord
shall designate by notice given as herein provided. The time of the
rendition of such bills or statements and of the giving of such consents,
notices, demands, requests or communications by Tenant or Landlord shall be
deemed to be the earlier of (i) the date received, (ii) if the notice is
sent by certified mail, three (3) days after the same is mailed, or (iii)
if the notice is sent by private express mail carrier, one (1) day after
the same is mailed. If Tenant is notified of the identity and address of
Landlord's mortgagee or beneficiary under a deed or trust, or ground or
underlying lessor, Tenant shall give such party notice of any default by
Landlord hereunder by certified or private express mail carrier, and if no
opportunity to cure such default is provided herein, such party shall have
a reasonable opportunity to cure such default before Tenant's exercises any
remedy available to it. Rejection or refusal to accept a notice, request,
demand, or the inability to deliver same because of a changed address of
which no notice was given shall be deemed to be a receipt of the notice,
request or demand sent.
26. Holding Over. If Tenant holds over after the Term with the express written
------------
consent of Landlord such tenancy shall be from month to month only and
shall not be a renewal hereof, and Tenant shall pay as Rent to Landlord for
the use and occupancy of the Premises for each month Tenant holds over an
amount agreed to be one and one-half (1.5) times the Gross Rent payable in
the last month of the Term and Tenant shall also comply with all of the
terms, covenants, conditions, provisions and agreements of this Lease for
the time during which Tenant holds over. If without the express written
consent of Landlord, Tenant shall fail to vacate the Premises after the
expiration of the Term or sooner termination of this Lease for any cause or
after Tenant's right to occupy the Premises ceases, thereafter, and
notwithstanding anything to the contrary contained elsewhere in this Lease,
Tenant shall pay as Rent to Landlord for the use and occupancy of the
Premises for each month Tenant holds over an amount agreed to be two (2)
times the Gross Rent payable in the last month of the Term, and Tenant
shall also comply with all of the terms, covenants, conditions, provisions
and agreements of this Lease for the time during which Tenant holds over.
If the Premises are not surrendered at the end of the Term or of a
permitted hold over period, Tenant shall be additionally responsible to
Landlord for all damage (including but not limited to the loss of Rent)
which Landlord shall suffer by reason thereof, and Tenant hereby
indemnifies Landlord against all claims made by any succeeding tenant
against Landlord, resulting from delay by Landlord in delivering possession
of the Premises to such succeeding Tenant. Tenant's obligation to observe
or perform all of the terms, covenants, conditions, provisions and
agreements of this Article shall survive termination of this Lease.
27. Transfers by Landlord. Landlord shall have the right to transfer and
---------------------
assign, in whole or in part, all of its rights and obligations hereunder
and in the Building, and in such event and upon its transferee's assumption
of Landlord's obligations hereunder no further liability or obligations
shall thereafter accrue against Landlord hereunder, and Landlord shall be
entirely relieved of all agreements and conditions of this Lease thereafter
to be performed by the Landlord under this lease. Tenant Agrees to attorn
any such transferee or assignee.
28. Tenant's Remedies. Tenant shall look solely to Landlord's interest in the
-----------------
Building for the recovery of any judgment from Landlord. Landlord, or if
Landlord is a partnership, its partners whether general or limited, or if
Landlord is a corporation, its directors, officers or shareholders, shall
never personally be liable for any such judgment. Any lien obtained to
enforce any such judgment and any levy of execution thereon shall be
subject and subordinate to any lien, mortgage or deed of trust to which
Section 16 applies or may apply.
25
<PAGE>
29. Miscellaneous.
-------------
29.1. Grammar. Words of any gender used in this Lease shall be held and
-------
construed to include any other gender and words in the singular
number shall be held to include the plural, unless the context
otherwise required.
29.2. Covenants Binding on Successors. The terms, provisions, covenants
-------------------------------
and conditions contained in this Lease shall apply to, inure to the
benefit of, and be binding upon, the parties hereto and upon their
respective heirs, legal representatives, successors and permitted
assigns except as otherwise herein expressly provided.
29.3. Captions. The captions inserted in this Lease are for convenience
--------
only and in no way define, limit, or otherwise describe the scope or
intent of this Lease, or any provision hereof, nor in any way affect
the interpretation of this Lease.
29.4. Estoppel Certificates. Tenant agrees, from time to time, within
---------------------
twenty (20) days after request of Landlord, to deliver to Landlord,
or Landlord's designee, an estoppel certificate stating that this
Lease is unmodified and in full force and effect (or if there have
been modifications, that the Lease is in full force and effect as
modified and stating the modifications), the date to which Rent and
other charges have been paid, the unexpired term of this Lease,
whether there are any defaults or rent abatements or offsets claimed
by Tenant and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or Landlord's Mortgagee, it being
intended that any such statement delivered pursuant to this
subparagraph may be relied upon by any prospective purchaser of all
or any part of the interest of Landlord in the Premises or mortgagee
or assignee of any mortgage upon all or any part of such interest of
the Landlord, and their respective successors and assigns.
29.5. Modification. This Lease may not be altered, changed or amended
------------
except by an instrument in writing signed by the parties hereto.
29.6. Recordation. Neither this Lease, nor any notice nor memorandum
-----------
regarding the terms hereof, shall be recorded by Tenant. Any such
unauthorized recording shall give landlord the right to declare a
breach of this Lease and pursue the remedies provided herein. Tenant
agrees to execute and acknowledge, at the request of Landlord, a
memorandum of this Lease, in recordable form.
29.7. Time of Essence. Time is of the Essence of this Lease, and all
---------------
provisions herein relating thereto shall be strictly construed.
29.8. Relationship of Parties. Nothing contained herein shall be deemed or
-----------------------
construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent or of partnership, or of
joint venture by the parties hereto, it being understood and agreed
that no provision contained in this Lease nor any acts of the
parties hereto shall be deemed to create any relationship other than
the relationship of landlord and tenant.
29.9. Severability. If any term or provision of this Lease shall to any
------------
extent be held invalid or unenforceable, the remaining terms and
provisions of this Lease shall not be affected thereby, but each
term and provision of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
29.10. Law Applicable. This Lease shall be construed and enforced in
--------------
accordance with the laws of the State of California.
26
<PAGE>
29.11. Covenants and Conditions. All of the obligations of the Tenant and
------------------------
the Landlord hereunder shall be deemed and construed to be
conditions as well as covenants as though the words specifically
expressing or importing covenants and conditions were used in each
separate instance.
29.12. Entire Agreement. This Lease contains the entire agreement between
----------------
the parties relating thereto. All prior negotiations or
stipulations concerning any matter which preceded or accompanied
the execution hereof are conclusively deemed to be superseded
hereby.
29.13. Authority of Tenant. Each of the persons executing this Lease on
-------------------
behalf of Tenant does hereby covenant and warrant that he or she is
authorized to act for Tenant and on its behalf to enter into this
Lease, and that if Tenant is a corporation, Tenant is a corporation
duly organized and validly existing in the state of its
incorporation and qualified to do business in the State of
California.
29.14. Landlord Approval. The review, approval, inspection or examination
-----------------
by Landlord of any item to be reviewed, approved, inspected or
examined by Landlord under the terms of this Lease or the Exhibits
attached hereto shall not constitute the assumption of any
responsibility by Landlord for either the accuracy or sufficiency
of any such item or the quality or suitability of such items for
its intended use. Any such review, approval, inspection or
examination by Landlord is for the sole purpose of protecting
Landlord's interests in the Project and under this Lease, and no
third parties, including, without limitation Tenant or any person
or entity claiming through or under Tenant, or the contractors,
agents, employees, visitors or licensees of Tenant or any such
person or entity, shall have any rights hereunder.
29.15. Joint and Several Liability. If a partnership or more than one
---------------------------
legal person at any time constitutes Tenant, (1) each partner and
each legal person is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants,
conditions, provisions and agreements of this Lease to be kept,
observed or performed by Tenant, and (2) the term "Tenant" as used
in this Lease shall mean and include each such partner or legal
person jointly and severally and the act of or notice from or
notice or refund to, or the signature of, any one or more of them,
with respect to this Lease, including but not limited to any
renewal, extension, expiration, termination or modification of this
Lease, shall be binding upon each and all of the persons executing
this Lease as Tenant with the same force and effect as if each and
all of them had so acted or so given or received such notice or
refund or so signed.
29.16. Security Systems. Landlord shall not be obligated to provide or
----------------
maintain any security patrol or security system. However, if
Landlord elects to provide such patrol or system, it shall be
subject to the reasonable approval of Tenant (but only as it
relates to Tenant's space), the cost thereof shall be an Operating
Cost. Landlord shall not be responsible for the quality of any such
patrol or system which may be provided hereunder or for damage or
injury to Tenant, its employees, invitees or others due to the
failure, action or inaction of such patrol or system.
29.17. Waiver of Trial By Jury. The respective parties hereto waive
-----------------------
trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other on any matter
whatsoever arising out of or in any way connected with this Lease,
the relationship of Landlord and Tenant, Tenant's use or occupancy
of the Premises, or any claim of injury or damage, or the
enforcement of any remedy under any statute, emergency or
otherwise.
29.18. Binding Effect. Submission of this Instrument for examination or
---------------
signature by Tenant does not constitute an offer to lease, or a
reservation of or option for a lease, and it is
27
<PAGE>
not effective as a lease or otherwise until execution and delivery
by both Landlord and Tenant.
29.19. Exhibits and Addenda. Any rider, addenda or exhibit attached hereto
--------------------
is made a part hereof.
THIS SPACE INTENTIONALLY LEFT BLANK.
29.20. No Merger. The voluntary or other surrender of this Lease by
---------
Tenant, or a mutual cancellation thereof, shall not work a merger,
and shall, at the option of Landlord terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord,
operate as an assignment to it of any or all such assignments,
subleases or subtenancies.
IN WITNESS WHEREOF the parties hereto have executed this Lease the date
first above written.
LANDLORD: PERSIS CORPORATION
a Hawaii corporation
By: /s/ Paul de Ville
Paul de Ville
Its:___________________________
President
TENANT: BIDCOM, INC.
a California corporation
By: /s/ Signature Illegible
Its: CEO
28
<PAGE>
Exhibit "A"
[CHART OMITTED]
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
---------------------
SEE ADDENDUM
2
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
---------------------
1. Landlord shall have the right to control and operate the public portions of
the Building and the public facilities, as well as facilities furnished for
the common use of the tenants; in such manner as it deems best for the
benefit of the tenants generally. Rooms or other areas used in common by
tenants shall be subject to such regulations as are posted therein.
2. The sidewalks, entrances, lobby, elevators, stairways, and public corridors
shall be used only as a means of ingress and egress and shall remain
unobstructed at all times. The entrance and exit doors of all suites are to
be kept closed at all times except as required for orderly passage to and
from a suite. Loitering in any part of the Building or obstruction of any
means of ingress or egress shall not be permitted. Doors and windows shall
not be covered or obstructed.
3. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the Rules and Regulations of the Building or in
violation of any law, order, ordinance, or governmental regulation. No
tenant shall invite to the Premises or permit the visit of, persons in such
numbers or under such conditions as to interfere with the use and enjoyment
of the entrances, corridors, elevators and facilities of the Building by
other tenants. Tenant shall not bring into or keep within the Building any
animal or vehicle.
4. Plumbing fixtures shall not be used for any purpose other than those for
which they were constructed and no rubbish, newspapers, trash or other
substances of any kind shall be deposited therein. The use of electrical
current shall not exceed safety standards established in the applicable
building code. Walls, floors, and ceilings shall not be defaced in any way
and no tenant shall be permitted to mark, nail, screw or drill into, paint,
or in any way mar any building surface, except that pictures, certificates,
licenses and similar items normally used in Tenant's business may be
carefully attached to the walls by Tenant in a manner to be prescribed by
Landlord. Upon removal of such items by Tenant, any damage to the walls or
other surfaces shall be repaired by Tenant. Tenant shall use chair
mats/carpet protectors beneath all desks where floor surface is carpeted.
5. No awning, shade, sign, advertisement or notice shall be inscribed, painted
or affixed on or to any part of the outside or inside of the Building.
Window coverings may be installed, provided they are of such color,
material and construction and installation as may be prescribed by
Landlord. All tenant identification on public corridor doors, or walls will
be installed by Landlord for Tenant. No lettering or signs other than the
name of the Tenant will be permitted on public corridor doors, or walls,
with the size and type of the letters to be prescribed by Landlord.
1
<PAGE>
6. The weight, size position and installation of all safes and other unusually
heavy objects used or placed in the Building shall be prescribed by
Landlord. All mechanical equipment and office machines which are placed in
the Building shall be installed in sittings which, in the judgment of
Landlord, shall be sufficient to prevent noise, vibration and annoyance.
The repair of any damage done to the Building or property therein by
putting or taking out or maintaining such safes or other unusually heavy
objects shall be paid for by Tenant.
7. All freight, furniture, fixtures and other personal property shall only be
moved into, within and out of the Building at times and in the manner
designated by Landlord, In no event will Landlord be responsible for any
loss or damage to such freight, furniture, and fixtures or personal
property, from any cause.
8. The storage of goods, wares, or merchandise on the Premises will not be
permitted except in areas specifically designated by Landlord for storage.
No auction, public or private, will be permitted on the Premises.
9. All entrance doors to the Premises shall be kept locked when the Premises
are not in use. All keys to the Premises and the Building shall be obtained
from Landlord and all keys shall be returned to Landlord upon the
termination of this Lease. Tenant shall not change the locks or install
other locks on the doors.
10. Normal business hours shall be from 7:00 A.M. to 6:00 P.M. on weekdays,
excluding generally recognized holidays in San Francisco, California.
Tenant or any employee or invitee of Tenant using the Premises after
regular business hours or on non-business days shall lock any entrance
doors to the Building used by him immediately after entering or leaving the
Building Tenant, its employees and invitees and other persons entering or
leaving the Building when it is so locked, may be required to sign the
Building register when so doing, and any security personnel of Landlord may
refuse to admit Tenant or any of Tenant's employees, invitees or any other
person to the Building while it is so locked, without a pass may be
required to sign the Building register when so doing, and any security
personnel of Landlord may refuse to admit Tenant or any of Tenant's
employees, invitees or any other person to the Building while it is so
locked, without a pass previously arranged or other satisfactory
identification showing such person's right to access to the Building at
such time Landlord assumes no responsibility whatsoever in connection
therewith and shall not be liable for any damage resulting from any error
in regard to any such pass or identification or from the admission of any
unauthorized person to the Building.
11. Tenant shall not permit any cooking to take place in the Premises, nor
shall Tenant install therein any vending machines without Landlord's
written consent.
12. Canvassing, soliciting or peddling in the Building is prohibited and Tenant
shall cooperate to prevent the same.
13. Tenant shall not advertise the business, profession or activities of Tenant
in any manner which violates the letter or spirit of any code of ethics
adopted by and recognized association or organization pertaining thereto or
use the name of the Building for any purpose other than that of the
business address of the Tenant.
14. Landlord reserves the right at any time to change or rescind any one or
more of these Rules or Regulations or to make such other and further
reasonable rules and regulations as in Landlord's judgment may from time to
time be necessary for the management, safety, care and cleanliness of the
Building, for the preservation of good order therein, and for the
convenience of other occupants and tenants therein. Landlord shall not be
responsible to Tenant or to any other person for the non-observance or
violation of the Rules and Regulations by any other tenant or other person.
2
<PAGE>
EXHIBIT D
ADDENDUM
--------
This Addendem by and between Persis Corporation as Landlord and Bidcom, Inc., as
Tenant (Lease dated July 4, 1998) shall incorporate the following additional
terms and conditions:
1. OPTION TO EXTEND: If Tenant is not in default on their lease, Tenant shall
----------------
have an option to renew their lease at the then Fair Market Value for an
additional five (5) years. Intent to extend must be made in writing one
hundred eighty (180) days prior to the end of basic term. Within 15 days of
receipt of written notice from Tenant, Landlord will give Tenant written
notice of Fair Market Value Rental, which shall be based upon comparable
space in this and nearby buildings. Tenant shall have 15 days from receipt
of Landlord's Fair Market Value Rental Notice, to accept or reject. If a
lease is not executed by both parties within 60 days of Tenant's first
written notice, this option shall be null and void. Fair Market Value rent
shall be mutually agreed upon between Landlord and Tenant.
If Tenant has been in default of lease three or more times during the
initial lease term, this option shall be null and void.
2. TENANT IMPROVEMENTS:
--------------------
Landlord, at its sole cost and expense, to provide the following improvements to
the Premises, subject to a total contribution not to exceed $7.00 per RSF of
total project:
1) New paint throughout the Premises, with accent color in the reception area.
2) Installation of new 32 ounce carpet over a new pad, with new vinyl base.
Also, vinyl flooring to be replaced in existing areas, with a pattern of
two colors.
3) Electrical upgrades per Tenant's requirements.
4) One-half the cost of reinstalling cabinets and phone board in the kitchen
and work room.
5) Limited demolition work, to include removal and disposal of the following:
Kitchenette (including the capping of plumbing) and phone closet and its
supporting wall (to be replaced with glass, at Tenant's expense), removal
of the sheet rock housing for the portion of the suspension brace that
extends beyond the
<PAGE>
work room, and removal of the interior wall of the work room. Removal of
the existing carpet, bad, base, and vinyl flooring (unless new vinyl
flooring can be installed over existing floor).
6) Installation of telecommunications cabling per Tenant's requirements (to be
capped at $1.00 per RSF).
7) Contractor's cost of construction, including general conditions, overhead
and profit.
3. ELEVATOR CAB: Upon completion of the ground floor improvements, elevator
------------
cab carpet will be replaced.
<PAGE>
Exhibit 10.6
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUBLEASE
(SHORT-FORM TO BE USED WITH POST 1995 AIR LEASES)
1. PARTIES. This Sublease, dated, for reference purposes only, July 9,
1999, is made by and between Telocity, Inc. ("SUBLESSOR") and Mediaplex, Inc.
("SUBLESSEE").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property, including all
improvements therein, and commonly known by the street address of 992 South De
Anza Blvd. located in the County of Santa Clara, State of CA and generally
described as (describe briefly the nature of the property) That 2-story, free-
standing building situated on a parcel of land identified as Assessor's Parcel
No. 372-26-20, and also known as 992 South De Anza Boulevard. ("PREMISES").
3. TERM.
3.1 TERM. The term of this Sublease shall be for approximately 37 1/2
months commencing on August 15, 1999 and ending on October 30, 2002 unless
sooner terminated pursuant to any provision hereof.
3.2 DELAY IN COMMENCEMENT. Sublessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises by the
commencement date. If, despite said efforts, Sublessor is unable to deliver
possession as agreed, the rights and obligations of Sublessor and Sublessee
shall be as set forth in Paragraph 3.3 of the Master Lease (as modified by
Paragraph 7.3 of this Sublease).
4. RENT.
4.1 BASE RENT. Sublessee shall pay to Sublessor as Base Rent for the
Premises equal monthly payments of $27,371.61 in advance, on the first day of
each month of the term hereof. Sublessee shall pay Sublessor upon the execution
hereof $27,371.61 as Base Rent for the first full month's rent. The prorated 1st
month of rent of $13,685.81 shall be paid during the due date of the 2nd month's
rent Base Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the monthly installment.
4.2 RENT DEFINED. All monetary obligations of Sublessee to Sublessor
under the terms of this Sublease (except for the Security Deposit) are deemed to
be rent ("RENT"). Rent shall be payable in lawful money of the United States to
Sublessor at the address stated herein or to such other persons or at such other
places as Sublessor may designate in writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon
execution hereof $28,693.91 as security for Sublessee's faithful performance of
Sublessee's obligations hereunder. The rights and obligations of Sublessor and
Sublessee as to said Security Deposit shall be as set forth in Paragraph 5 of
the Master Lease (as modified by Paragraph 7.3 of this Sublease).
6. USE.
6.1 AGREED USE. The Premises shall be used and occupied only for
general office, Internet related research development and for no other purpose.
6.2 COMPLIANCE. Sublessor warrants that the Improvements on the
Premises comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances ("APPLICABLE
REQUIREMENTS") in effect on the commencement date. Said warranty does not apply
to the use to which Sublessee will put the Premises or to any alterations or
utility installations made or to be made by Sublessee. NOTE: Sublessee is
responsible for determining whether or not the zoning is appropriate for its
Intended use, and acknowledges that past uses of the Premises may no longer be
allowed. If the Premises do not comply with said warranty, or in the event that
the Applicable Requirements are hereafter changed, the rights and obligations of
Sublessor and Sublessee shall be as provided in Paragraph 2.3 of the Master
Lease (as modified by Paragraph 7.3 of this Sublease).
6.3 ACCEPTANCE OF PREMISES AND LESSEE. Sublessee acknowledges that:
(a) it has been advised by Brokers to satisfy itself with
respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects,
and compliance with Applicable Requirements), and their suitability for
Sublessee's intended use,
<PAGE>
(b) Sublessee has made such investigation as it deems necessary
with reference to such matters and assumes all responsibility therefor as the
same relate to its occupancy of the Premises, and
(c) neither Sublessor, Sublessor's agents, nor any Broker has
made any oral or written representations or warranties with respect to said
matters other than as set forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representations, promises or warranties
concerning Sublessee's ability to honor the Sublease or suitability to occupy
the Premises, and
(b) It is Sublessor's sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.
7. MASTER LEASE
7.1 Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "MASTER LEASE", a copy of which is attached hereto marked
Exhibit 1, wherein Lee Li Ching Koo as suceeded by Ben Rizzi is the lessor,
hereinafter the "MASTER LESSOR"
7.2 This Sublease is and shall be at all times subject and
subordinate to the Master Lease.
7.3 The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and conditions of
the Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this Sublease
document shall control over the Master Lease. Therefore, for the purposes of
this Sublease, wherever in the Master Lease the word "Lessor" is used it shall
be deemed to mean the Sublessor herein and wherever in the Master Lease the word
"Lessee" is used it shall be deemed to mean the Sublessee herein.
7.4 During the term of this Sublease and for all periods subsequent
for obligations which have arisen prior to the termination of this Sublease,
Sublessee does hereby expressly assume and agree to perform and comply with, for
the benefit of Sublessor and Master Lessor, each and every obligation of
Sublessor under the Master Lease except for the following paragraphs which are
excluded therefrom: Sections 1.1, 1.3, 1.5, 1.6, 1.7, 1.8, 1.10, 1.11, 50, 52,
55, 56, 57, and Exhibit C
7.5 The obligations that Sublessee has assumed under paragraph 7.4
hereof are hereinafter referred to as the "SUBLESSEE'S ASSUMED OBLIGATIONS". The
obligations that Sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "SUBLESSOR'S REMAINING OBLIGATIONS".
7.6 Sublessee shall hold Sublessor free and harmless from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys' fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed Obligations.
7.7 Sublessor agrees to maintain the Master Lease during the entire
term of this Sublease, subject, however, to any earlier termination of the
Master Lease without the fault of the Sublessor, and to comply with or perform
Sublessor's Remaining Obligations and to hold Sublessee free and harmless from
all liability, judgments, costs, damages, claims or demands arising out of
Sublessor's failure to comply with or perform Sublessor's Remaining Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is in
full force and effect and that no default exists on the part of any Party to the
Master
Page 1 of 4
<PAGE>
Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1 Sublessor hereby assigns and transfers to Master Lessor the
Sublessor's interest in this Sublease, subject however to the provisions of
Paragraph 8.2 hereof.
8.2 Master Lessor, by executing this document, agrees that until a
Default shall occur in the performance of Sublessor's Obligations under the
Master Lease, that Sublessor may receive, collect and enjoy the Rent accruing
under this Sublease. However, if Sublessor shall Default in the performance of
its obligations to Master Lessor then Master Lessor may, at its option, receive
and collect, directly from Sublessee, all Rent owing and to be owed under this
Sublease. Master Lessor shall not, by reason of this assignment of the Sublease
nor by reason of the collection of the Rent from the Sublessee, be deemed liable
to Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs Sublessee
upon receipt of any written notice from the Master Lessor stating that a Default
exists in the performance of Sublessor's obligations under the Master Lease, to
pay to Master Lessor the Rent due and to become due under the Sublease.
Sublessor agrees that Sublessee shall have the right to rely upon any such
statement and request from Master Lessor, and that Sublessee shall pay such Rent
to Master Lessor without any obligation or right to inquire as to whether such
Default exists and notwithstanding any notice from or claim from Sublessor to
the contrary and Sublessor shall have no right or claim against Sublessee for
any such Rent so paid by Sublessee.
8.4 No changes or modifications shall be made to this Sublease
without the consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1 In the event that the Master Lease requires that Sublessor obtain
the consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within ten days of the date hereof, Master Lessor
signs this Sublease thereby giving its consent to this Subletting.
9.2 In the event that the obligations of the Sublessor under the
Master Lease have been guaranteed by third parties then neither this Sublease,
nor the Master Lessor's consent, shall be effective unless, within 10 days of
the date hereof, said guarantors sign this Sublease thereby giving their consent
to this Sublease.
9.3 In the event that Master Lessor does give such consent then:
(a) Such consent shall not release Sublessor of its obligations
or alter the primary liability of Sublessor to pay the Rent and perform and
comply with all of the obligations of Sublessor to be performed under the Master
Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee or
anyone else liable under the Master Lease shall not be deemed a waiver by Master
Lessor of any provisions of the Master Lease.
(c) The consent to this Sublease shall not constitute a consent
to any subsequent subletting or assignment.
(d) In the event of any Default of Sublessor under the Master
Lease, Master Lessor may proceed directly against Sublessor, any guarantors or
anyone else liable under the Master Lease or this Sublease without first
exhausting Master Lessor's remedies against any other person or entity liable
thereon to Master Lessor.
(e) Master Lessor may consent to subsequent sublettings and
assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor or any one else liable under
the Master Lease and without obtaining their consent and such action shall not
relieve such persons from liability.
(f) In the event that Sublessor shall Default in its obligations
under the Master Lease, then Master Lessor, at its option and without being
obligated to do so, may require Sublessee to attorn to Master Lessor in which
event Master Lessor shall undertake the obligations of Sublessor under this
Sublease from the time of the exercise of said option to termination of this
Sublease but Master Lessor shall not be liable for any prepaid Rent nor any
Security Deposit paid by Sublessee, nor shall Master Lessor be liable
<PAGE>
for any other Defaults of the Sublessor under the Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of
Sublessor at the end of this document shall constitute their consent to the
terms of this Sublease.
9.5 Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no Default presently exists under the Master Lease of obligations to
be performed by Sublessor and that the Master Lease is in full force and effect.
9.6 In the event that Sublessor Defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to deliver
to Sublessee a copy of any such notice of default. Sublessee shall have the
right to cure any Default of Sublessor described in any notice of default within
ten days after service of such notice of default on Sublessee. If such Default
is cured by Sublessee then Sublessee shall have the right of reimbursement and
offset from and against Sublessor.
10. BROKERS FEE.
10.1 Upon execution hereof by all parties, Sublessor shall pay to CPS
a licensed real estate broker, ("BROKER"), a fee as set forth in a separate
agreement between Sublessor and Broker,
10.2 Sublessor agrees that if Sublessee exercises any option or right
of first refusal as granted by Sublessor herein, or any option or right
substantially similar thereto, either to extend the term of this Sublease, to
renew this Sublease, to purchase the Premises, or to lease or purchase adjacent
property which Sublessor may own or in which Sublessor has an interest, then
Sublessor shall pay to Broker a fee in accordance with the schedule of Broker in
effect at the time of the execution of this Sublease. Notwithstanding the
foregoing, Sublessor's obligation under this Paragraph 10.2 is limited to a
transaction in which Sublessor is acting as a Sublessor, lessor or seller.
10.3 Master Lessor agrees that if Sublessee shall exercise any option
or right of first refusal granted to Sublessee by Master Lessor in connection
with this Sublease, or any option or right substantially similar thereto, either
to extend or renew the Master Lease, to purchase the Premises or any part
thereof, or to lease or purchase adjacent property which Master Lessor may own
or in which Master Lessor has an interest, or if Broker is the procuring cause
of any other lease or sale entered into between Sublessee and Master Lessor
pertaining to the Premises, any part thereof, or any adjacent property which
Master Lessor owns or in which it has an interest, then as to any of said
transactions, Master Lessor shall pay to Broker a fee, in cash, in accordance
with the schedule of Broker in effect at the time of the execution of this
Sublease.
10.4 Any fee due from Sublessor or Master Lessor hereunder shall be
due and payable upon the exercise of any option to extend or renew, upon the
execution of any new lease, or, in the event of a purchase, at the close of
escrow.
10.5 Any transferee of Sublessor's interest in this Sublease, or of
Master Lessor's interest in the Master Lease, by accepting an assignment
thereof, shall be deemed to have assumed the respective obligations of Sublessor
or Master Lessor under this Paragraph 10. Broker shall be deemed to be a third-
party beneficiary of this paragraph 10.
11. ATTORNEY'S FEES. If any party or the Broker named herein brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in any such action, on trial and appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
Court.
12. ADDITIONAL PROVISIONS. [If there are no additional provisions, draw a
line from this point to the next printed word after the space left here. If
there are additional provisions place the same here.]
12.1 In addition to the cash deposit as described in Paragraph 5, Lessee
shall provide the amount of $82,114.83 in the form of a Letter of Credit. Lessee
shall deliver to Lessor a clean, irrevocable, non-documentary and unconditional
Letter of Credit issued by and drawn upon any commercial bank, trust company,
national banking association or savings and loan association having offices for
banking purposes in the State of California (the "Issuing Bank") and which (or
the parent company of which) shall have outstanding unsecured, uninsured and
unguaranteed indebtedness, or shall have issued a letter of credit or other
credit facility that constitutes the primary security for any outstanding
indebtedness (which is otherwise uninsured and unguaranteed), that is then
rated, without regard to qualification of such rating by symbols such as "+" or
"-" or numerical notation, "As" or better by Moody's Investors Service and "AA"
or better by Standard & Poor's Corporation, and has combined capital, surplus
and undivided profits of not less than
<PAGE>
$500,000,000.00, which Letter of Credit shall have a term of not less than one
year, be in form and content satisfactory to Lessor, be for the account of
Lessor, be in the amount of the Additional
Page 2 of 4
<PAGE>
Security Deposit then required to be deposited hereunder, and be fully
transferable by Lessor to successor owners of the Building without the payment
of any fees or charges. It being agreed that if any such fees or charges shall
be so imposed, then such fees or charges, shall be paid by Lessee. The Letter of
Credit shall provide that it shall be deemed automatically renewed, without
amendment, for consecutive periods of one year each thereafter during the term
of this Lease, unless the Issuing Bank sends notice (the "Non-Renewal Notice")
to Lessor by certified mail, return receipt requested, not less than thirty (30)
days next preceding the then expiration date of the Letter of Credit that it
elects not to have such Letter of Credit renewed. Additionally, the Letter of
Credit shall provide that Lessor shall have the right, exercisable within twenty
(20) days of its receipt of the Non-Renewal Notice, by sight draft on the
Issuing Bank, to receive the monies represented by the existing Letter of Credit
and to hold such proceeds as a cash security pending the replacement of such
Letter of Credit. If an Event of Default shall have occurred and be continuing
with respect to any provision of this Lease, including but not limited to the
provisions relating to the payment of Fixed Rent and Additional Rent, Lessor may
apply or retain the whole or any part of the cash security so deposited or may
notify the Issuing Bank and thereupon receive all the monies represented by the
Letter of Credit and use, apply, or retain the whole or any part of such
proceeds. Any portion of the cash proceeds of the Letter of Credit not so used
or applied by Lessor in satisfaction of the obligations of Lessee as to which
such Event of Default shall have occurred shall be deposited by Lessor and
retained in an interest-bearing account. If Lessor applies or retains any part
of the cash security or proceeds of the Letter of Credit, as the case may be,
Lessee shall, within five (5) days after written demand therefor, deposit with
Lessor the amount so applied or retained so that Lessor shall have the full
Additional Security Deposit required on hand at all times during the Term. If
Lessee shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the Letter of Credit shall be returned
to Lessee after the Expiration Date and after delivery of possession of the
Premises to Lessor. In the event of a sale of Lessor's Interest in the Premises,
within thirty (30) days of notice of such sale or leasing, Lessee, at Lessee's
sole cost and expense, shall arrange for the transfer of the Letter of Credit to
the new Lessor, as designated by Lessor, or have the Letter of Credit reissued
in the name of the new Lessor and Lessor shall thereupon be released by Lessee
from all liability for the return of the Letter of Credit: provided, however,
that if the Letter of Credit is reissued. Lessor shall return the original
Letter of Credit Issued in Lessor's name to Lessee. The amount of the Additional
Security Deposit and the Letter of Credit shall be reduced each August by
$27,371.61, so that the amount shall be reduced to $27,371.61 after two years.
However, If Lessee is in default of the Lease anytime during the course of
twelve (12) months preceding the date of reduction, Lessor has the right to
delay the reduction for another twelve (12) month period.
12.2 Rent Schedule: Sublessee shall pay to Sublessor as Base Rent according
to the following schedule:
Months Base Rent
------ ---------
01-12 $ 27,371.61
----- -----------
12 - 24 $ 28,032.76
------- -----------
25 - end of Sublease $ 28,693.91
-------------------- -----------
12.3 Tenant Improvements: Sublandlord, at its sole cost and expense, shall
professionally clean the carpets, touch-up paint any walls showing wear marks
and otherwise deliver the premises in a cleared-out and cleaned-up environment.
Sublandlord shall keep intact any wiring (power, phone and data) and related
termination connectors and/or receptacles. Sublandlord will also warrant that
the building's mechanical systems are in good working condition as of the
Commencement Date and shall give Subtenant ten (10) days to notify Sublandlord
of any problems of such systems. Nothwithstanding the preceeding provisions, the
building is being offered and taken in its as-is condition.
Page 3 of 4
<PAGE>
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
- ---------
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
SUBLEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
- -------
CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH THE
LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
Executed at: San Jose, CA Telocity, Inc.
/s/ Signature Illegible
on: July 20, 1999 By
Address: 992 S. DeAnza By Controller
San Jose, CA 95129 "Sublessor" (Corporate Seal)
Executed at: San Francisco, CA Mediaplex, Inc.
/s/ Gregory R. Raifman
on: July 20, 1999 By
Address: 131 Steuart Street, 4th Fl. By Chairman & CEO
SF CA 94105 "Sublessee" (Corporate Seal)
Executed at: San Jose, CA ________________________________
/s/ Signature Illegible
on: July 21, 1999 By
Address: 14561 WEETH DR By______________________________
SAN JOSE, CA 95124 "Master Lessor" (Corporate Seal)
NOTE: These forms are often modified to meet changing requirements of law and
needs of the Industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
St., Suite 600, Los Angeles, CA 90017. (213) 687-8777.
Page 4 of 4
<PAGE>
EXHIBIT "A"
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only
September 18, 1997, is made by and between LEE LI CHUN KOO ("Lessor") and
MACHONE COMMUNICATIONS, INC., a California Corporation ("Lessee"), (collectively
the "Parties," or individually a "Party").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 992 South De Anza Boulevard, San Jose located in the County of Santa
Clara, State of California, and generally described as (describe briefly the
nature of the property and, if applicable, the "Project", if the property is
located within a Project) a free standing office building measuring
approximately 13,223 square feet and all associated parking as set forth on
Exhibit "B". ("Premises"). (See also Paragraph 2)
1.3 TERM: Five (5) years and 0 months ("Original Term") commencing
November 1, 1997 ("Commencement Date") and ending October 30, 2002 ("Expiration
Date"). (See also Paragraph 3)
1.4 EARLY POSSESSION: Upon lease execution ("Early Possession Date"). (See
also Paragraphs 3.2 and 3.3)
1.5 BASE RENT: $ 21,156.80 per month ("Base Rent"), payable on the first
(1st) day of each month commencing November 1997 (See also Paragraph 4) [X] If
this box is checked, there are provisions in this Lease for the Base Rent to be
adjusted. See Addendum - Paragraph 50
1.6 BASE RENT PAID UPON EXECUTION: $ 21,156.80 as Base Rent for the period
November 1997.
1.7 SECURITY DEPOSIT: $ 21,156.80 ("Security Deposit"). (See also
Paragraph 5)
1.8 AGREED USE: R&D, sales, marketing, clerical, administrative and other
legal related uses. (See also Paragraph 6)
1.9 INSURING PARTY. Lessor is the "Insuring Party" unless otherwise stated
herein. (See also Paragraph 8)
1.10 REAL ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction (check
applicable boxes):
[X] BT Commercial - Guterman/Turkus represents Lessor exclusively ("Lessor's
Broker");
[X] CPS - Kristen Felder represents Lessee exclusively ("Lessee's Broker"); or
[_] ___________________________________________ represents both Lessor and
Lessee ("Dual Agency").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Broker the fee agreed to in their separate
written agreement (or if there is no such agreement, the sum of _______% of the
total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by Peter Olson __________________________________________________
("Guarantor"). (See also Paragraph 37)
1.12 ADDENDS AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 58 and Exhibits "A" Floor Plan, "B" Parking,
"C" Initial Alterations and Utility Installations all of which constitute a part
of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of size set forth in this Lease, or that may have been
used in calculating rental, is an
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approximation which the Parties agree is reasonable and the rental based thereon
is not subject to revision whether or not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee broom clean and
free of debris on the Commencement Date ("Start Date"), and, so long as the
required service contracts described in Paragraph 7.1(b) below are obtained by
Lessee within thirty (30) days following the Start Date, warrants that the
existing electrical, plumbing, landscape irrigation, fire sprinkler, lighting,
heating, ventilating and air conditioning systems ("HVAC"), In the Premises,
other than those constructed by Lessee, shall be in good operating condition on
said date and that the structural elements of the roof, bearing walls and
foundation of any buildings on the Premises (the "Building") shall be free of
material defects. If a non-compliance with said warranty exists as of the Start
Date, Lessor shall, as Lessor's sole obligation with respect to such matter,
except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense. If, after the Start Date,
Lessee does not give Lessor written notice of any non-compliance with this
warranty within; (i) one year as to the surface of the roof and the structural
portions of the roof, foundations and bearing walls, (ii) six (6) months as to
the HVAC systems, (iii) thirty (30) days as to the remaining systems and other
elements of the Building, correction of such non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE. Lessor warrants that the improvements on the Premises
comply with all applicable laws, covenants or restrictions of record, building
codes, regulations and ordinances ("Applicable Requirements") in effect on the
Start Date. Said warranty does not apply to the use to which Lessee will put the
Premises or to any Alterations or Utility Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a non-
compliance with this warranty within six (6) months following the Start Date,
correction of that non-compliance shall be the obligation of Lessee at Lessee's
sole cost and expense. If the Applicable Requirements are hereafter changed (as
opposed to being in existence at the Start Date, which is addressed in Paragraph
6.2(a) below) so as to require during the term of this Lease the construction of
an addition to or an alteration of the Building, the remediation of any
Hazardous Substance, or the reinforcement or other physical modification of the
Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of
such work as follows:
PAGE 1
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(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent. If Lessee elects termination, Lessee shall immediately cause
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (Such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
such costs pursuant to the provisions of Paragraph 7.1(c); provided, however,
that if such Capital Expenditure is required during the last two years of this
Lease or if Lessor reasonably determines that it is not economically feasible to
pay its share thereof, Lessor shall have the option to terminate this Lease upon
ninety (90) days prior written notice to Lessee unless Lessee notifies Lessor,
in writing, within ten (10) days after receipt of Lessor's termination notice
that Lessee will pay for such Capital Expenditure. If Lessor does not elect to
terminate, and fails to tender its share of any such Capital Expenditure, Lessee
may advance such funds and deduct same, with interest, from Rent until Lessor's
share of such costs have been fully paid. If Lessee is unable to finance
Lessor's share, or if the balance of the Rent due and payable for the remainder
of this Lease is not sufficient to fully reimburse Lessee on an offset basis.
Lessee shall have the right to terminate this Lease upon thirty (30) days
written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
2.4 ACKNOWLEDGEMENTS. Other than as provided in Paragraph 2.2 Lessee
acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy
itself with respect to the conditions of the Premises (including but not limited
to the electrical, HVAC and fire sprinkler systems, security, environmental
aspects, and compliance with Applicable Requirements), and their suitability for
Lessee's intended use. (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises, and (c) neither Lessor,
Lessor's agents, nor any Broker has made any oral or written representations or
warranties with respect to said matters other than as set forth in this Lease.
In addition, Lessor acknowledges that: (a) Broker has made no representations,
promises or warranties concerning Lessee's ability to honor the Lease or
suitability to occupy the Premises, and (b) it is Lessor's sole responsibility
to investigate the financial capability and/or suitability of all proposed
tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. TERM.
3.1. TERM. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Real Property Taxes and
insurance premiums and to maintain the Premises) shall, however, be in effect
during such period. Any such early possession shall not affect the Expiration
Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this
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Lease. Lessee shall not, however, be obligated to pay Rent or perform its other
obligations until it receives possession of the Premises. If possession is not
delivered within sixty (60) days after the Commencement Date, Lessee may, at its
option, by notice in writing within ten (10) days after the end of such sixty
(60) day period, cancel this Lease, in which event the Parties shall be
discharged from all obligations hereunder. If such written notice is not
received by Lessor within said ten (10) day period. Lessee's right to cancel
shall terminate. Except as otherwise provided, if possession is not tendered to
Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid,
any period of rent abatement that Lessee would otherwise have enjoyed shall run
from the date of delivery of possession and continue for a period equal to what
Lessee would otherwise have enjoyed under the terms hereof, but minus any days
of delay caused by the acts or omissions of Lessee. If possession of the
Premises is not delivered within four (4) months after the Commencement Date,
this Lease shall terminate unless other agreements are reached between Lessor
and Lessee, in writing.
3.4 LEASEE COMPLIANCE. Lessor shall not be required to tender possession
of the premises to Lessee complies with its obligation to provide evidence of
insurance (Paragraph 8.5). Pending delivery of such evidence. Lessee shall be
required to perform all of its obligations under this Lease from and after the
Start Date, including the payment of Rent, notwithstanding Lessor's election to
withhold possession pending receipt of such evidence of insurance. Further, if
Lessee is required to perform any other conditions prior to or concurrent with
the Start Date, the Start Date shall occur but Lessor may elect to withhold
possession until such conditions are satisfied.
4. RENT.
4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit. Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease. Lessee shall, upon written request from Lessor,
deposit additional moneys with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within fourteen (14) days after the expiration or termination
of this Lease, if Lessor elects to apply the Security Deposit only to unpaid
Rent, and otherwise within thirty (30) days after the Premises have been vacated
pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.
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6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to neighboring properties. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, or waste whose
presence, use, manufacture, disposal, transportation, or release, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from adjacent properties). Lessee's obligations shall
include, but not be limited to, the effects of any contamination or injury to
person,
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property or the environment created or suffered by Lessee, and the cost of
investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease. NO TERMINATION,
CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY LESSOR AND LESSEE SHALL
RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE WITH RESPECT TO HAZARDOUS
SUBSTANCES, UNLESS SPECIFICALLY SO AGREED BY LESSOR IN WRITING AT THE TIME OF
SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
"Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such payment, Lessee shall cooperate fully
in any such activities at the request of Lessor, including allowing Lessor and
Lessor's agents to have reasonable access to the Premises at reasonable times in
order to carry out Lessor's investigative and remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination
notice, Lessee may, within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined in
Paragraph 30 below) and consultants shall have the right to enter into Premises
at any time, in the case of an emergency, and otherwise at reasonable times, for
the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any such inspections shall be
paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination.
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7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation); Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations, and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises), including, but
not limited to, all equipment or facilities, such as plumbing, heating,
ventilating, air-conditioning, electrical, lighting facilities, boilers,
pressure vessels, fire protection system, fixtures, walls (interior and
exterior), ceilings, roof membrane, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include commercially reasonable restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in the condition as delivered consistent with the
exterior appearance of other similar facilities of comparable age and size in
the vicinity including, when necessary, the exterior repainting of the Building.
This paragraph is subject to the modifications in Paragraph 51 of the Addendum.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure
vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke
detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, (vi) driveways and parking lots, (vii) clarifiers (viii) basic utility
feed to the perimeter of the Building, and (ix) any other equipment, if
reasonably required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as set
forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such Basic Elements, then such Basic Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the number of months of the useful life
of such replacement as such useful life is specified pursuant to Federal income
tax regulations or guidelines for depreciation thereof (including interest on
the unamortized balance as is then commercially reasonable in the judgment of
Lessor's accountants), with Lessee reserving the right to prepay its obligation
at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation),
it is intended by the Parties hereto that Lessor have no obligation, in any
manner whatsoever, to repair and maintain the Premises, or the equipment
therein, all of which obligations are intended to be that of the Lessee. It is
the intention of the Parties that the terms of this Lease govern the respective
obligations of the Parties as to maintenance and repair of the Premises, and
they expressly waive the benefit of any statute now or hereafter in effect to
the extent it is inconsistent with the terms of this Lease. This paragraph is
subject to the modifications in Paragraph 51 of the Addendum.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility Installations"
refers to all floor and window coverings, air lines, power panels, electrical
distribution, security and fire protection systems, communication systems,
lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises.
The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can
be removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations
<PAGE>
and/or Utility Installations" are defined as Alterations and/or Utility
Installations made by Lessee that are not yet owned by Lessor pursuant to
Paragraph 7.4(a). Lessee shall not make any Alterations or Utility Installations
to the Premises without Lessor's prior written consent. Lessee may, however,
make non-structural Utility Installations to the interior of the Premises
(excluding the roof) without such consent but upon notice to Lessor, as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
this Lease as extended does not exceed $50,000 in the aggregate or $10,000 in
any one year.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's; (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility. It Lessee shall contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof. If Lessor shall require, Lessee shall furnish a surety bond in an
amount equal to one and one-half times the amount of such contested lien, claim
or demand, indemnifying Lessor against liability for the same. If Lessor elects
to participate in any such action, Lessee shall pay Lessor's attorneys' fees and
costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility installations.
Unless otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor not
earlier than ninety (90) and not later than thirty (30) days prior to the end of
the term of this Lease, Lessor may require that any or all Lessee Owned
Alterations or Utility installations be removed by the expiration or termination
of this Lease. Lessor may require the removal at any time of all or any part of
any Lessee Owned Alterations or Utility installations made without the required
consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. "Ordinary
wear and tear" shall not include any damage or deterioration that would have
been prevented by good maintenance practice. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
Owned Alterations and/or Utility installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee, and the
removal, replacement, or remediation of any soil, material or groundwater
contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and
shall be removed by Lessee. The failure by Lessee to timely vacate the Premises
pursuant to this Paragraph 7.4(c) without the express written consent of Lessor
shall constitute a holdover under the provisions of Paragraph 26 below.
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8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per
occurrence. Premiums for policy periods commencing prior to or extending beyond
the Lease term shall be prorated to correspond to the Lease term. Payment shall
be made by Lessee to Lessor within ten (10) days following receipt of an
invoice.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a). In addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force a policy or policies in the name of Lessor, with loss payable to
Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lenders, but in no event more than the commercially reasonable
and available insurable value thereof. If Lessor is the Insuring Party, however,
Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's
personal property shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy
or policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an insured Loss.
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger building,
or of a group of buildings owned by Lessor which are adjacent to the Premises,
the Lessee shall pay for any increase in the premiums for the property insurance
of such building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
<PAGE>
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property. Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"Insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful misconduct,
Lessee shall Indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents. Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, liens, judgments,
penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. If any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
<PAGE>
9.1 Definitions.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in six (6) months or less from
the date of the damage or destruction.
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Lessor shall notify Lessee in writing within thirty (30) days from the date of
the damage or destruction as to whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be repaired in six (6) months or less
from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (30) days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that is
not an insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate sixty (60) days
following such
<PAGE>
Destruction. If the damage or destruction was caused by the gross negligence or
willful misconduct of Lessee, Lessor shall have the right to recover Lessor's
damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months
of this Lease there is damage for which the cost to repair exceeds one (1)
month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within ninety (90) days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or restoration,
give written notice to Lessor and to any Lenders of which Lessee has actual
notice, of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such notice
and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within said thirty (30) days, this
Lease shall continue in full force and effect. "Commence" shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease pursuant
to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor, Lessor shall, in addition, return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "Real
Property Taxes" shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated
PAGE 6
<PAGE>
with reference to the Building address and where the proceeds so generated are
to be applied by the city, county or other local taxing authority of a
jurisdiction within which the Premises are located. The term "Real Property
Taxes" shall also include any tax, fee, levy, assessment or charge, or any
increase therein, imposed by reason of events occurring during the term of this
Lease, including but not limited to, a change in the ownership of the Premises.
10.2
(a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. Subject to Paragraph
10.2(b), all such payments shall be made at least ten (10) days prior to any
delinquency date. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes shall cover any
period of time prior to or after the expiration or termination of this Lease.
Lessee's share of such taxes shall be prorated to cover only that portion of the
tax bill applicable to the period that this Lease is in effect, and Lessor shall
reimburse Lessee for any overpayment. If Lessee shall fail to pay any required
Real Property Taxes, Lessor shall have the right to pay the same, and Lessee
shall reimburse Lessor therefor upon demand.
(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on any
Rent payment, Lessor may, at Lessor's option, estimate the current Real Property
Taxes, and require that such taxes be paid in advance to Lessor by Lessee,
either: (i) in a lump sum amount equal to the installment due, at least twenty
(20) days prior to the applicable delinquency date, or (ii) monthly in advance
with the payment of the Base Rent. If Lessor elects to require payment monthly
in advance, the monthly payment shall be an amount equal to the amount of the
estimated installment of taxes divided by the number of months remaining before
the month in which said installment becomes delinquent. When the actual amount
of the applicable tax bill is known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the
applicable taxes. If the amount collected by Lessor is insufficient to pay such
Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations. All moneys paid to
Lessor under this Paragraph may be intermingled with other moneys of Lessor and
shall not bear interest. In the event of a Breach by Lessee in the performance
of its obligations under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may at the option of Lessor, be treated
as an additional Security Deposit.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee. Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "assign or assignment") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an assignment
requiring consent. The transfer, on a cumulative basis, of twenty-five percent
(25%) or more of the voting control of Lessee shall constitute a change in
control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or
<PAGE>
Lessee's assets occurs, which result or will results in a reduction of the Net
Worth of Lessee by an amount greater than twenty-five percent (25%) of such Net
Worth as it was represented at the time of the execution of this Lease or at the
time of the most recent assignment to which Lessor has consented, or as it
exists immediately prior to said transaction or transactions constituting such
reduction, whichever was or is greater, shall be considered an assignment of
this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall
mean the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles.
(d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to
treat such unapproved assignment or subletting as a noncurable Breach, Lessor
may either: (i) terminate this Lease, or (ii) upon thirty (30) days written
notice, increase the monthly Base Rent to one hundred ten percent (110%) of the
Base Rent than in effect. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief,
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) after the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $1,000 or
ten percent (10%) of the current monthly Base Rent applicable to the portion of
the Premises which is the subject of the proposed assignment or sublease,
whichever is greater, as consideration for Lessor's considering and processing
said request. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein: Subject to Paragraph
58 of the Addendum, regarding "Bonus Rent"
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublessee, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur
<PAGE>
in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor
shall not, by reason of the foregoing or any assignment of such sublease, nor by
reason of the collection of Rent, be deemed liable to the sublessee for any
failure of Lessee to perform and comply with any of Lessee's obligations to such
sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice
PAGE 7
<PAGE>
from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in this Lease. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "Default" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or rules under
this Lease. A "Breach" is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a third
party, when due, to provide reasonable evidence of Insurance or surety bond, or
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of three (3) business days
following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Statement, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements),
or (viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is dismissed
within sixty (60) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
subparagraph (e) is contrary to any applicable law, such provision shall be of
no force or affect, and not affect the validity of the remaining provisions.
<PAGE>
(f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory basis, unless
within sixty (60) days following written notice of any such event, Lessee
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative duties or
obligations or cure any default within the time provided in the Lease, then
within ten (10) days after written notice (or in case of an emergency, without
notice), Lessor may, at its option, perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn. Lessor, at its option,
may require all future payments to be made by Lessee to be by cashier's check.
In the event of a Breach, Lessor may, with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer. Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's Interests, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability
PAGE 8
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under any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "INDUCEMENT PROVISIONS,"
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, If any Rent
shall not be received by Lessor within ten (10) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to ten percent (10%) of each such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within thirty (30) days following the date on which it was due for non-
scheduled payment, shall bear interest from the date when due, as to scheduled
payments, or the thirty-first (31st) day after it was due as to non-scheduled
payments. The interest ("INTEREST") charged shall be equal to the prime rate
reported in the Wall Street Journal as published closest prior to the date when
due plus four percent (4%), but shall not exceed the maximum rate allowed by
law. Interest is payable in addition to the potential late charge provided for
in Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "CONDEMNATION"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title of possession, whichever
first occurs. If more than ten percent (10%) of any building portion of the
premises, or more than twenty-five percent (25%) of the land area portion of the
premises not occupied by any building, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10)
<PAGE>
days after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in proportion to the reduction in utility of the Premises caused by such
Condemnation. Condemnation awards and/or payments shall be the property of
Lessor, whether such award shall be made as compensation for diminution in value
of the leasehold, the value of the part taken, or for severance damages;
provided, however, that Lessee shall be entitled to any compensation for
Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures,
without regard to whether or not this Lease is terminated pursuant to the
provisions of this Paragraph. All Alterations and Utility Installations made to
the Premises by Lessee, for purposes of Condemnation only, shall be considered
the property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor. In the event that this Lease is not
terminated by reason of the Condemnation, Lessor shall repair any damage to the
Premises caused by such Condemnation.
15. BROKERS' FEE.
15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) If Lessee exercises any Option, (b) If Lessee
acquires any rights to the Premises or other premises owned by Lessor and
located within the same Project, if any, within which the Premises is located,
(c) If Lessee remains in possession of the Premises, with the consent of Lessor,
after the expiration of this Lease, or (d) If Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then, Lessor shall pay
Brokers a fee in accordance with the schedule of said Brokers in effect at the
time of the execution of this Lease.
15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
Interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.
16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "Responding Party") shall within ten (10) days
after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party, (ii) there are no uncured defaults in the Requesting Party's performance,
and (iii) If Lessor is the Requesting Party, not more than one month's rent has
been paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
PAGE 9
<PAGE>
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined, Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
22. NO PRIOR OR OTHER AGREEMENTS: BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by courier) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall
<PAGE>
be deemed given forty-eight (48) hours after the same is addressed as required
herein and mailed with postage prepaid. Notices delivered by United States
Express Mail or overnight courier that guarantee next day delivery shall be
deemed given twenty-four (24) hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt, provided
a copy is also delivered via delivery or mail. If notice is received on a
Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.
24. WAIVERS. No waiver by either party of the Default or Breach of any term,
covenant or condition hereof shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach of the same
or of any other term, covenant or condition hereof. Lessor's consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or
be construed as the basis of an estoppel to enforce the provision or provisions
of this Lease requiring such consent. The acceptance of Rent by Lessor shall not
be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lessor's Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new
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owner shall not: (i) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (ii) be
subject to any offsets or defenses which Lessee might have against any prior
lessor, or (iii) be bound by prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the Non-
Disturbance Agreement within said sixty (60) days, then Lessee may, at Lessee's
option, directly contact Lessor's lender and attempt to negotiate for the
execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term,
"PREVAILING PARTY" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be, whether
by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be computed
in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys' fees reasonably incurred. In addition, the parties
shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "FOR SALE" signs and
Lessor may during the last six (6) months of the term hereof place on the
Premises any ordinary "FOR LEASE" signs. Lessee may at any time place on or
about the Premises any ordinary "FOR SUBLEASE" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not place any
sign upon the Premises without Lessor's prior written consent. All signs must
comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including
<PAGE>
but not limited to architects', attorneys', engineers' and other consultants'
fees) incurred in the consideration of, or response to, a request by Lessee for
any Lessor consent, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee upon receipt of an invoice and supporting documentation therefor.
Lessor's consent to any act, assignment or subletting shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent. The failure to specify herein any particular condition to
Lessor's consent shall not preclude the imposition by Lessor at the time of
consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within ten (10) business days following such request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any Guarantor
falls or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) a Tenancy Statement, or (d)
written confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.
39. OPTIONS.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given three (3) or more notices of separate Default, whether or not the
Defaults are cured, during the twelve (12) month period immediately preceeding
the exercise of the Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of thirty (30) days after such Rent becomes due (without
any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee
three (3) or more notices of separate Default during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease.
40. Multiple Buildings. If the Premises are a part of a group of buildings
controlled by
<PAGE>
Lessor, Leases agrees that it will observe all reasonable rules and regulations
which Lessor may make from time to time for the management, safety, and care of
said properties, including
PAGE 11
<PAGE>
the care and cleanliness of the grounds and including the parking, loading and
unloading of vehicles, and that Lessee will pay its fair share of common
expenses incurred in connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time; to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each party
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder. Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease [X] is [ ] is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED. THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
- ---------
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE ON THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES, SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO; THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION
<PAGE>
OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR
LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
- -------
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<CAPTION>
<S> <C>
Executed at:______________________________ Executed at:______________________________
on:_______________________________________ on:_______________________________________
By LESSOR: LEE LI CHUN KOO By LESSEE: MACHONE COMMUNICATIONS, INC.,
__________________________________________ a California Corporation.
__________________________________________ __________________________________________
/s/ Signature Illegible /s/ Signature Illegible
By:_______________________________________ By:_______________________________________
Name Printed:_____________________________ Name Printed:_____________________________
Title:____________________________________ Title:____________________________________
Address:__________________________________ Address:__________________________________
__________________________________________ __________________________________________
Telephone:( )__________________________ Telephone:( )__________________________
Facsimile:( )__________________________ Facsimile:( )__________________________
Federal ID No.____________________________ Federal ID No.____________________________
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So.
Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777.
Fax No. (213) 687-8616
PAGE 12
<PAGE>
THIS LEASE ADDENDUM IS MADE PURSUANT TO AND IN CONNECTION WITH THAT CERTAIN
LEASE AGREEMENT ("LEASE") DATED SEPTEMBER 18, 1997 BY AND BETWEEN LEE LI CHUN
KOO ("LESSOR") AND MACHONE COMMUNICATIONS ("LESSEE') FOR THE PREMISES COMMONLY
KNOWN AS 992 SOUTH DE ANZA BOULEVARD, SAN JOSE, CALIFORNIA.
PAGE 1 OF 1
If there are inconsistencies between the body of the Lease and this
Addendum, this Addendum will prevail.
50) MONTHLY BASE RENT:
-----------------
The monthly base rent shall be as follows:
<TABLE>
<CAPTION>
Term Rent/SF Rent/Month
---- ------- ----------
<S> <C> <C>
November 1, 1997 - October 30, 1998 $1.60 NNN $21,156.80
November 1, 1998 - October 30, 1999 $1.65 NNN $21,817.95
November 1, 1999 - October 30, 2000 $1.70 NNN $22,479.10
November 1, 2000 - October 30, 2001 $1.75 NNN $23,140.25
November 1, 2001 - October 30, 2002 $1.80 NNN $23,801.40
</TABLE>
51) PAYMENT OBLIGATIONS OF TENANT AND LANDLORD:
------------------------------------------
Notwithstanding anything in the Lease to the contrary, maintenance of the
building foundations, roof structure and exterior walls, except for damage
caused by Tenant, shall be the responsibility of Landlord. All other costs
associated with Landlord's ownership of the property, including but not
limited to, taxes, insurance repairs, maintenance (including roof repairs
and HVAC maintenance), property management, janitorial and utilities, shall
be the responsibility of Tenant. Tenant will be responsible for exterior
painting only after Landlord has repainted the building.
52) TENANT IMPROVEMENTS, CONDITION AT COMMENCEMENT, AND ENVIRONMENTAL
-----------------------------------------------------------------
LIABILITY:
---------
Lessee agrees to take possession of the Premises in its present "AS IS"
condition, (including ceiling tiles and lighting systems) except as
provided in Paragraph 2.2. Lessor shall not be required to make any
improvements to the existing space. Lessee acknowledges that Except as
provided in paragraph 2.2 Lessor, including Lessor's Agent, has made no
representations or warranty regarding the condition of the Premises or the
Building, and that in entering into this lease Lessee is not relying on any
statements by Lessor or by Agent. Except as provided in paragraph 2.2
Lessor does represent that, to the best of its current actual knowledge, it
is not aware of any current environmental hazards or deficiencies in the
building operating systems. In consideration of Lessee paying for all
Tenant Improvements and accepting the Premises as indicated above, Lessee
shall receive a rent credit of up to $35,000.00. However the amount of the
rent credit shall be limited to the amount of money spent by Lessee for
Tenant Improvements, and Lessee shall provide an accounting of the Tenant
Improvement expenses to Lessor in order to receive the credit. The credit
shall be applied to offset the rental obligations due as follows:
November 1997 $12,000.00 Credit
December 1997 $12,000.00 Credit
January 1998 $11,000.00 Credit
----------
$35,000.00 Total Credit
53) SIGNAGE:
-------
Building signage will be allowed subject to approval of Landlord, which
shall not be unreasonably withheld, and approval of the City of San Jose.
54) CAPITAL IMPROVEMENT:
-------------------
Any capital improvements required during the term of the lease or any
extensions thereof that are considered common area maintenance expenses
shall be paid for by
<PAGE>
Landlord. The cost shall be amortized into the common area maintenance
expense in accordance with GAAP standards or the useful life, whichever is
greater.
<PAGE>
THIS LEASE ADDENDUM IS MADE PURSUANT TO AND IN CONNECTION WITH THAT CERTAIN
LEASE AGREEMENT ("LEASE") DATED SEPTEMBER 18, 1997 BY AND BETWEEN LEE LI CHUN
KOO ("LESSOR") AND MACHONE COMMUNICATIONS ("LESSEE") FOR THE PREMISES COMMONLY
KNOWN AS 992 SOUTH DE ANZA BOULEVARD, SAN JOSE, CALIFORNIA.
PAGE 2 OF 2
55) OPTION TO EXTEND:
----------------
Lessor grants Lessee an Option to Extend the term of this Lease for an
additional period of five (5) years, provided that Lessee is not then in
default in any of the terms, conditions and covenants herein contained at
the time of the exercise of said option. Such extension shall be upon all
the terms, conditions, and covenants as contained in said Lease except rent
which shall be set at the then current market rent. To exercise the option,
Lessee must deliver written notice to Lessor at least six (6) months prior
to the expiration of the initial term. Said notice shall be by physical
delivery or U.S. Mail.
Lessor and Lessee shall in good faith make all possible efforts to reach an
agreement as to the current market rent for the first year of the option
term and yearly increased thereto. If Lessor and Lessee are unable to agree
upon the Option Rent within sixty (60) days from the written exercise of
the option, then each party shall select a commercial real estate broker to
determine the fair market rent based on similar property in the immediate
area.
Within thirty (30) days of his or her appointment, each broker shall
simultaneously deliver his or her opinion to Lessor and Lessee. If the
higher recommendation is no more than ten percent (10%) in excess of the
lower appraisal, the mean of the two shall be the fair rental value. If the
higher recommendation is more than ten percent (10%) in excess of the lower
recommendation the two brokers together shall appoint a third broker within
fifteen (15) days thereafter who shall determine which fair market rental
value between the two most nearly approximates his or her opinion of the
fair rental value. The recommendation shall be binding on the Lessor and
Lessee and shall set the base rent for the first twelve (12) months of the
option period.
In no event shall the rental paid for the first twelve (12) months of the
option period be less than the rental paid for the last twelve (12) months
of the initial term ($1.80 per square foot).
56) TENANT'S COVENANTS:
------------------
Tenant represents that it shall, in a timely manner, use due diligence to
obtain Corporate and any other necessary approvals so that a lease may be
executed by Tenant no later than September 30, 1997.
57) INITIAL OCCUPANCY:
-----------------
MachOne and H3D Entertainment, Inc. (another Peter Olson backed company)
will initially jointly occupy the Premises. However, MachOne shall be the
responsible party under this Lease.
58) BONUS RENT:
----------
Regarding Paragraph 12.3, in the event that the rent payable per square
foot per month for any portion of the property subleased is in excess of
the rent per square foot indicated in Paragraph 50 above, the excess rent
("Bonus Rent") shall be split 50/50 between Lessor and Lessee. Lessee shall
pay all expenses associated with any proposed Sublease, including but not
limited to, Tenant Improvements and Commissions. Lessee shall not receive
any credit for said expenses, nor will said expenses have any effect on the
"Bonus Rent" sharing indicated above.
READ AND APPROVED:
LANDLORD: TENANT:
LEE LI CHUN KOO MACHONE COMMUNICATIONS, INC.
A CALIFORNIA CORPORATION
By:______________________________ By:______________________________
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
<PAGE>
/s/ Signature Illegible /s/ Signature Illegible
By:____________________________ By:_________________________________
Title:_________________________ Title:______________________________
Date:__________________________ Date:_______________________________
<PAGE>
ARBITRATION OF DISPUTES: Any dispute or claim, either in law or in equity,
- ------------------------
arising out of this contract or any resulting transaction shall be decided by
neutral binding arbitration in accordance with the rules of the American
Arbitration Association, and not by court action except as provided by
California law for judicial review of arbitration proceedings. Judgement upon
the award rendered in such arbitration proceedings may be entered in any court
having jurisdiction thereof. In the arbitration proceeding, the parties shall
have the right to discovery in accordance with California Code of Civil
Procedure Section 1283.05. Notwithstanding the foregoing, the following matters
are excluded from arbitration hereunder: (i) a judicial or non-judicial
foreclosure other action or proceeding to enforce a deed of trust, mortgage or
real property sales contract as defined in California Civil Code Section 2985;
(ii) an unlawful detainer action (iii) the filing or enforcement of a mechanics
lien; (iv) any matter which is within the jurisdiction of a probate court; or
(v) an action for bodily injury or wrongful death, or for latent or patent
defects to which California Code of Civil Procedure Section 337.1 or Section
337.15 applies. The filing of a judicial action to enable the recording of a
notice of pending action, or to request an order of attachment, receivership,
preliminary injunction or other provisional remedy, shall not constitute a
waiver of the right to arbitrate under this provision.
Any dispute or claim by or against any broker or associate licensee
participating in this transaction shall be submitted to arbitration pursuant to
the above only if the broker and/or associate licensee making the claim or
against whom the claim is made, shall have agreed so to submit such matter to
arbitration.
NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED IN CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALLING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATE AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OR CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISIONS IS VOLUNTARY.
BY INTIALING BELOW, WE ACKNOWLEDGE THAT WE HAVE READ AND UNDERSTAND THE
FOREGOING, AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
LESSOR'S Initials LESSEE'S Initials
<PAGE>
EXHIBIT B2
[DIAGRAM OMITTED]
<PAGE>
EXHIBIT A
[DIAGRAM OMITTED]
<PAGE>
EXHIBIT B1
[DIAGRAM OMITTED]
<PAGE>
This Lease Addendum is made pursuant to and in connection with that certain
Sublease Agreement, dated July 9, 1999, by and between Ben Rizzi ("Master
Lessor"), Telocity ("Sublessor") and Mediaplex ("Seblessee") for the Premises
commonly known as 992 South De Anza Blvd, San Jose, California.
ARBITRATION OF DISPUTES: ANY DISPUTE OR CLAIM, EITHER IN LAW OR IN EQUITY,
- ------------------------
ARISING OUT OF THIS CONTRACT OR ANY RESULTING TRANSACTION SHALL BE DECIDED BY
NEUTRAL BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION, AND NOT BY COURT ACTION EXCEPT AS PROVIDED BY
CALIFORNIA LAW FOR JUDICIAL REVIEW OF ARBITRATION PROCEEDINGS. JUDGEMENT UPON
THE AWARD RENDERED IN SUCH ARBITRATION PROCEEDINGS MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION THEREOF. IN THE ARBITRATION PROCEEDING, THE PARTIES SHALL
HAVE THE RIGHT TO DISCOVERY IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL
PROCEDURE SECTION 1283.05. NOTWITHSTANDING THE FOREGOING, THE FOLLOWING MATTERS
ARE EXCLUDED FROM ARBITRATION HEREUNDER: (I) A JUDICIAL OR NON-JUDICIAL
FORECLOSURE OTHER MOTION OR PROCEEDING TO ENFORCE A DEED OF TRUST, MORTGAGE OR
REAL PROPERTY SALES CONTRACT AS DEFINED IN CALIFORNIA CIVIL CODE SECTION 2985;
(II) AN UNLAWFUL DETAINER ACTION (III) THE FILING OR ENFORCEMENT OF A MECHANICS
LIEN; (IV) ANY MATTER WHICH IS WITHIN THE JURISDICTION OF A PROBATE COURT; OR
(V) AN ACTION FOR BODILY INJURY OR WRONGFUL DEATH, OR FOR PATENT OR PATENT
DEFECTS TO WHICH CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 337.1 OR SECTION
337.15 APPLIES. THE FILING OF A JUDICIAL ACTION TO ENABLE THE RECORDING OF A
NOTICE OF PENDING ACTION, OR TO REQUEST AN ORDER OF ATTACHMENT, RECEIVERSHIP,
PRELIMINARY INJUNCTION OR OTHER PROVISIONAL REMEDY, SHALL NOT CONSTITUTE A
WAIVER OF THE RIGHT TO ARBITRATE UNDER THIS PROVISION.
ANY DISPUTE OR CLAIM BY OR AGAINST ANY BROKER OR LICENSEE PARTICIPATING IN THIS
TRANSACTION SHALL BE SUBMITTED TO ARBITRATION PURSUANT TO THE ABOVE ONLY IF THE
BROKER AND/OR LICENSEE MAKING THE CLAIM OR AGAINST WHOM THE CLAIM IS MADE, SHALL
HAVE AGREED SO TO SUBMIT SUCH MATTER TO ARBITRATION.
NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED IN CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALLING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATE AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OR CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISIONS IS VOLUNTARY.
BY INTIALING BELOW, WE ACKNOWLEDGE THAT WE HAVE READ AND UNDERSTAND THE
FOREGOING, AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
Sub LESSOR'S INITIALS Sub LESSEE'S INITIALS
<PAGE>
EXHIBIT 10.7
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
February 19, 1999
Mr. Gregory R. Raifman
360 Mountain Avenue
Piedmont, California 94611
Dear Gregory:
I am very pleased to offer you the position of Chairman & Chief Executive
Officer with Internet Extra Corporation (the "Company") commencing as of the
date hereof. We at the Company are delighted that you have decided to join our
enterprise and help MediaPlex become a success. I would like to take this
opportunity to set out the terms of your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered into
effective as of the date hereof (the "Effective Date").
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, the Company's Chairman & Chief Executive Officer, subject at all times
and in all cases and respects to the ultimate control and direction of the board
of directors of the Company. In such capacity, you shall perform all such
services, accept all such responsibilities and discharge all such duties and
responsibilities as are consistent and commensurate with your position and as
may be assigned to or required of you from time to time by the Company. You
shall perform such services, accept such responsibilities and discharge such
duties within the policies and guidelines established from time to time by the
Company, subject at all times and in all cases and respects to the ultimate
control and direction of the Company. The Company shall have the right to review
and revise your services, responsibilities and duties at any time and from time
to time during the Term (as defined below) in any and all respects, provided
--------
that any revised services, responsibilities and duties, taken as a whole,
continue to reflect your knowledge, skill and experience. Such services shall be
primarily performed in the Company's offices in San Francisco, California,
although you may be required to travel to other locations as necessary and
consistent with your position with the Company.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which
<PAGE>
consent will not be unreasonably withheld. Notwithstanding the foregoing
provision of this Section, any work that you perform for the companies listed on
Schedule A attached hereto (the "Exempted Companies") or any such Exempted
Company's subsidiaries or affiliates pursuant to any agreement with any Exempted
Company or any of Exempted Company's subsidiaries or affiliates, oral or
written, which is fully disclosed to the Company's Board of Directors, shall not
be deemed a conflict of interest, impropriety or breach of corporate duty with
the Company and any work that you perform for any Exempted Company or any of
Exempted Company's subsidiaries or affiliates from time to time, pursuant to any
agreement, oral or written, which is fully disclosed to the Company's Board of
Directors, whether as employee, officer, director or consultant to any Exempted
Company or any of Exempted Company's subsidiaries or affiliates shall not be
deemed a conflict of interest, impropriety or breach of corporate duty with the
Company.
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
3. Compensation.
(a) Base Salary and Incentive Compensation. Your annual base salary
during the Term shall be paid at the annual rate of $250,000 for the remainder
of calendar year 1999, $275,000 for the calendar year 2000 and $300,000 for the
calendar year 2001 ("Base Salary"), payable in accordance with the Company's
standard payroll practices. Unless otherwise specified herein, the Company shall
make such deductions, withholdings and other payments from all sums payable
pursuant to this Agreement which you request or that are required by law for
taxes and other charges.
(b) Stock Options. You shall receive, as of the Effective Date, an
option (the "New Stock Option") to acquire 1,750,000 shares of Common Stock of
the Company (the "Option Shares"), at an exercise price equal to $0.50 per
share. The New Stock Option shall be immediately exercisable with respect to all
of the Option Shares, and the Company shall have the right to repurchase the
Option Shares at the exercise price in the event your employment is terminated.
The Company's right of repurchase shall expire with respect to one-sixth (1/6th)
of the Option Shares on the six month anniversary of the Vesting Commencement
Date (as set forth in your stock option agreement), and with respect to an
additional 1/36th of the Option Shares on the same day of each month during the
thirty (30) months thereafter or until your employment is earlier terminated.
All other terms governing such options shall be set out in the Company's
standard option agreement and stock option plan.
(c) Benefits Plans. You will be entitled to participate in or receive
benefits under the Company's employee benefit plans and policies in effect from
time to time in which you are eligible to participate, subject to the applicable
terms and conditions of the particular benefit plan. The Company may change,
amend, modify or terminate to the extent legally allowable, any benefit plan
from time to time and without prior notice. To the extent benefits provided by
the Company are affected by seniority (i.e., length of service), you shall be
credited for time you served at the
-2-
<PAGE>
Company, to the fullest extent permitted by law and consistent with the
Company's current benefit plans.
(d) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its senior executive officers) in
the performance of your duties and responsibilities under this Agreement,
provided, that you shall properly account for such expenses in accordance with
- --------
Company policies and procedures. Any necessary air travel shall be coach class
domestically and business class internationally.
(e) Vacation and Holidays. You shall be entitled to four (4) weeks
paid vacation and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
(f) Bonus. You shall be eligible to participate in any management
bonus plan or similar incentive compensation program adopted by the Company on
terms comparable to other senior officers of the Company.
(g) Other Benefits. During the Term the Company shall pay you the
following: (i) a monthly automobile allowance of Five Hundred Dollars ($500.00)
and (ii) free parking at corporate premises for Raifman, or if no such premises
shall exist, then a monthly parking allowance up to a maximum of Two Hundred
Dollars ($200.00).
4. Term; Termination; Severance Payments.
(a) Term. Unless otherwise terminated as hereinafter provided, the
term of your employment under this Agreement (the "Term") shall commence upon
the Effective Date and shall continue until and terminate on the date that is
the three year anniversary of the Effective Date. Upon expiration of the Term,
you shall be an "at-will" employee of the Company, subject to such policies,
benefits and practices and procedures that are then applicable with respect to
an at-will employee of the Company (the "IEC Policies"). Notwithstanding the
foregoing, the Company may terminate your employment with the Company during the
Term for Cause (as defined below).
(b) Cause. As used in this Agreement, "Cause" shall mean (i)
-----
conviction of a felony or a crime involving moral turpitude causing material
harm to the standing and reputation of the Company or (ii) any habitual neglect
or willful misconduct in the performance of Purchaser's duties to the Company
where such habitual negligence or willful misconduct has resulted in substantial
and material damage to the Company or its subsidiaries, in each as determined in
good faith by the Board of Directors of the Company.
(c) Termination and Severance Benefits.
(i) Termination for Cause or Resignation. If your employment is
terminated for Cause or if you resign your employment voluntarily, no other
compensation or
-3-
<PAGE>
payments will be provided to you for any periods following the date when such
termination of employment is effective.
(ii) Termination without Cause; Constructive Termination. If
your employment is terminated by the Company without Cause, or if you are
Constructively Terminated (as defined below), you will be entitled to receive
the severance payments provided for in Section 4(c)(iv) below (if any) upon such
termination. No other compensation or payments will be made pursuant to this
Agreement other than those to which you are entitled through your last day of
active service or under the applicable IEC Policies and benefit plans. For
purposes of this Section 4(c)(ii), the term "Constructively Terminated" shall
mean your voluntary termination, upon 30 days prior written notice to the
Company, following: (A) a material reduction or change in job duties,
responsibilities and requirements inconsistent with your position with the
Company and prior duties, responsibilities and requirements (B) any reductions
of your base compensation; or (C) your refusal to relocate to facility or
location more than 25 miles from the Company's current location.
(iii) Death or Disability.
(A) Your employment shall terminate in the event of your
death.
(B) The Company may terminate your employment for
Disability by giving you 30 days' advance notice in writing. For all purposes
under this Agreement, "Disability" shall mean that you, at the time notice is
given, have been unable to substantially perform your duties under this
Agreement for a period of not less than six (6) consecutive months as the result
of your incapacity due to physical or mental illness. In the event that you
resume the performance of substantially all of your duties hereunder before the
termination of your employment under this subparagraph (B) becomes effective,
the notice of termination shall automatically be deemed to have been revoked.
(C) No compensation or benefits will be paid or provided to
you under this Agreement on account of termination for death or Disability, or
for periods following the date when such a termination of employment is
effective. Your rights under the benefit plans of the Company in the event of
your death or Disability shall be determined under the provisions of those
plans.
(iv) Severance Payments. During the Term, in the event your
employment with the Company is terminated without cause or if you are
Constructively Terminated, the Company's sole obligation to you will be to (a)
pay you a lump sum severance payment ("Severance Payment") in the amount equal
to (I) 2/26 of your effective Base Salary for the year in which you are so
terminated for each complete month worked by you commencing April 1, 1998;
provided, however, the Severance Payment shall, in no case, exceed one year of
- -------- -------
your Base Salary for such year; and (II) any benefits set forth in Section 3(b)
through (g) of this Agreement owing to you prior to the Termination Date and (c)
permit you to participate under the Company's Benefits Plans for up to one year
following your termination with the Company.
-4-
<PAGE>
5. Assignment.
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise), or to all or substantially all of the Company's business and/or
assets, shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of such succession. For all purposes of and under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement required by this
Section 5, or which otherwise becomes bound by the terms of this Agreement by
operation of law. Any such assumption and/or succession under this Section 5
shall not be deemed to be a termination of your employment hereunder.
(b) The terms of this Agreement and all of your rights hereunder
shall inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successor, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
(i) "Restricted Business" shall mean any business related to (i)
advertising, marketing, media placement or banner serving, (ii) enterprise
software applications and/or enterprise integration relating to online or
traditional (including, without limitation, television, print, direct mail,
radio or the like) advertising, marketing, media placement or banner serving or
(iii) the transacting of business, or shopping, purchasing, or subscribing to or
registering for services, products, programs or information, or downloading or
obtaining software programs or information; or participating in other similar
types of transactions, in each case which specifically arise from banners served
by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A) all of
the countries of the world or (B) if (A) is found unenforceable, the countries
in which the Company's products are available during the term of the non-compete
obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements made
by the Company with you in and pursuant to the Reorganization Agreement, (ii)
the issuance by the Company to you of the New Stock Option and (iii) the
consideration payable to you hereunder, you agree that until: (A) the one (1)
year anniversary of the Effective Date or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm,
-5-
<PAGE>
corporation or business that engages in a Restricted Business in a Restricted
Territory. It is agreed that ownership of no more than five percent (5%) of the
outstanding voting stock of a publicly-traded or privately-held corporation
shall not constitute a violation of this section. It is further agreed that the
foregoing consideration is not intended to constitute liquidated damages for a
violation of this section.
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended to,
divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date, or induce or attempt to
induce any such employee to terminate his or her employment with the Company, or
any of its affiliates.
7. REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 7 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH THE
TERMS AND PROVISIONS OF THIS SECTION 7 IN ANY RESPECT, AND YOU HAVE BEEN GIVEN
NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE COMPANY,
OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE
RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF. IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU HEREBY WAIVE ANY CLAIM
OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF THE TERMS AND
PROVISIONS OF THIS SECTION 7 THAT THE COMPANY, OR ANY OF ITS AFFILIATES, HAS AN
ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY
FOR SUCH VIOLATION OR BREACH.
8. Severability. The parties intend that the covenants contained in the
preceding paragraphs shall be construed as a series of separate covenants, one
for each county, city, state and other political subdivision of each country in
the Restricted Territory. Except for geographic coverage, each separate covenant
shall be deemed identical in terms to the covenant contained in the preceding
paragraphs. If, in any judicial proceeding, a court shall refuse to enforce any
of the separate covenants (or any part thereof) deemed included in said
paragraphs, then such
-6-
<PAGE>
unenforceable covenant (or such part) shall be deemed eliminated from this
Agreement for the purpose of those proceedings to the extent necessary to permit
the remaining separate covenants (or portions thereof) to be enforced by such
court. It is the intent of the parties that the covenants set forth herein be
enforced to the maximum degree permitted by applicable law.
9. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect to the subject matter hereof and thereof, and
supersede any other written or oral negotiations, agreements, understandings,
representations or practices concerning such subject matter hereof (including
without limitation any employment agreement or offer letter extended by the
Company at any time). In the event of any conflict between the provisions hereof
and the provisions of the Confidential Information and Invention Assignment
Agreement, the provisions hereof shall control.
10. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: General Counsel
(b) If to you: To the address for notice set forth on the
signature page hereto or to such other
address as any party hereto may hereafter
designate by notice given as herein provided.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
San Francisco County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
12. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
-7-
<PAGE>
13. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
15. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
16. Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to either party upon any breach or default of the other party
hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
17. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
-8-
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Jon Logan Edwards
-----------------------------
Jon Logan Edwards
President, Founder & Director
ACCEPTED AND AGREED TO THIS
_____ DAY OF FEBRUARY, 1999.
/s/ Gregory R. Raifman
----------------------------
Gregory R. Raifman
Address for notices:
360 Mountain Avenue
Piedmont, California 94611
Phone: (510) 923-0666
Fax: (510) 923-0667
Enclosures: Duplicate Original Letter
Option Agreement
Confidential Information and Invention Assignment Agreement
-9-
<PAGE>
SCHEDULE A
Schedule of Exempted Companies
------------------------------
1. Raifman & Edwards LLP
2. PointBreak Ventures, LLC (including, without limitation, the existing
portfolio companies of PointBreak Ventures, LLC)
<PAGE>
INTERNET EXTRA CORPORATION
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Internet Extra Corporation, its
subsidiaries, affiliates, successors or assigns (collectively, the "Company"),
and in consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company. I agree to the following:
1. Confidential Information.
------------------------
(a) Company Information. I agree at all times during the term of my
-------------------
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer, vendor and contractor lists and
customers (including, but not limited to, customers of the Company on whom I
called or with whom I became acquainted during the term of my employment),
markets, software, developments, inventions, processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing,
finances or other business information disclosed to me by the Company either
directly or indirectly in writing, orally or by drawings or observation of parts
or equipment. I further understand that Confidential Information does not
include any of the foregoing items which has become publicly known and made
generally available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
---------------------------
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring into the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
<PAGE>
2. Inventions.
----------
(a) Inventions Retained and Licensed. I have attached hereto, as
--------------------------------
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a Company product, process or machine a Prior Invention owned by me or in
which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make full
------------------------
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to any and all inventions, original works
of authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of the Company (collectively referred to as "Inventions"), except as
provided in Section 2(f) below. I further acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of and during the period of my employment with the Company and which are
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to
----------------------------------------
the United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate
----------------------
and current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
----------------------------------
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my
<PAGE>
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of my mental or physical incapacity
or for any other reason to secure my signature to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering Inventions or original works of authorship assigned to the Company as
above, then I hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact, to act for and
in my behalf and stead to execute and file any such applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by me.
(f) Exception to Assignments. I understand that the provisions of
------------------------
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet the criteria in
California Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
3. Conflicting Employment. I agree that, during the term of my
----------------------
employment with the Company, I will not engage in any other employment,
occupation, consulting other business activity directly related to the business
in which the Company and/or its customers are now involved or becomes involved
during the term of my employment, nor will I engage in any other activities that
conflict with my obligations to the Company.
4. At Will Employment. I understand that my employment with the Company
------------------
is "at will" and is for no specified term. As a result, I understand that the
Company can terminate my employment at any time and that, similarly, I am free
to terminate my employment with the Company at any time.
5. Returning Company Documents. I agree that, at the time of leaving the
---------------------------
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree
to sign and deliver the "Termination Certification" attached hereto as Exhibit
C.
6. Notification to New Employer. In the event that I leave the employ of
----------------------------
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve (12)
-------------------------
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to
<PAGE>
solicit, induce, recruit, encourage or take away employees of the Company,
either for myself or for any other person or entity.
8. Conflict of Interest Guidelines. I agree to diligently adhere to the
-------------------------------
Conflict of Interest Guidelines attached as Exhibit D hereto.
9. Representations. I agree to execute any proper oath or verify any
---------------
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary 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 oral or written agreement in
conflict herewith.
10. Arbitration and Equitable Relief.
--------------------------------
(a) Arbitration. Except as provided in Section 10(b) below, I agree
-----------
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 1, 2, 3, and 5 herein. Accordingly, I agree that
if I breach any of such Sections, the Company will have available, in addition
to any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining, such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
------------------
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
-----------------------------------------------
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification for
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged.
<PAGE>
Any subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) 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.
INTERNET EXTRA CORPORATION
By: ______________________________
Name
Title
AGREED TO AND ACCEPTED:
Signature
Date:
Witness
<PAGE>
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number or Brief
Title Date Description
----- ---- -----------
______ No inventions or improvements
______ Additional Sheets Attached
Signature of Employee:
Print Name of Employee:
Date:_______________________
<PAGE>
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, 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 employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE>
EXHIBIT C
---------
INTERNET EXTRA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Internet Extra Corporation, its subsidiaries, affiliates,
successors or assigns (collectively, the "Company").
I further certify that I have complied with all the terms of the Company's
Employment, Confidential Information and Invention Assignment Agreement signed
by me, including the reporting of any inventions and original works of
authorship (as defined therein), conceived or made by me (solely or jointly with
others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not directly or indirectly solicit,
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce, recruit,
encourage or take away any employees of the Company, either for myself or for
any other person or entity.
Date:
_____________________________________
(Employee's Signature)
_____________________________________
(Type/Print Employee's Name)
<PAGE>
EXHIBIT D
---------
INTERNET EXTRA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of Internet Extra Corporation, its subsidiaries,
affiliates, successors or assigns (collectively, the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the
President and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.
3. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
4. Initiating or approving any form of personal or social harassment of
employees.
5. Investing or holding outside directorships in suppliers, customers or
competing companies, including financial speculation, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
6. Borrowing from or lending to employees, customers or suppliers.
7. Acquiring a real estate interest adverse to the Company.
8. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
9. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
10. Making any unlawful agreements with distributors with respect to
prices.
<PAGE>
11. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
12. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
<PAGE>
EXHIBIT 10.8
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
February 19, 1999
Mr. Jon Logan Edwards
1602 Rancho View Road
Lafayette, California 94549
Dear Jon:
I am very pleased to offer you the position of President of Internet Extra
Corporation (the "Company") commencing as of the date hereof. We at the Company
are delighted that you have decided to join our enterprise and help MediaPlex
become a success. I would like to take this opportunity to set out the terms of
your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered into
effective as of the date hereof (the "Effective Date").
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, the Company's Chairman & Chief Executive Officer, subject at all times
and in all cases and respects to the ultimate control and direction of the board
of directors of the Company. In such capacity, you shall perform all such
services, accept all such responsibilities and discharge all such duties and
responsibilities as are consistent and commensurate with your position and as
may be assigned to or required of you from time to time by the Company. You
shall perform such services, accept such responsibilities and discharge such
duties within the policies and guidelines established from time to time by the
Company, subject at all times and in all cases and respects to the ultimate
control and direction of the Company. The Company shall have the right to review
and revise your services, responsibilities and duties at any time and from time
to time during the Term (as defined below) in any and all respects, provided
--------
that any revised services, responsibilities and duties, taken as a whole,
continue to reflect your knowledge, skill and experience. Such services shall be
primarily performed in the Company's offices in San Francisco, California,
although you may be required to travel to other locations as necessary and
consistent with your position with the Company.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which
<PAGE>
consent will not be unreasonably withheld. Notwithstanding the foregoing
provision of this Section, any work that you perform for the companies listed on
Schedule A attached hereto (the "Exempted Companies") or any such Exempted
Company's subsidiaries or affiliates pursuant to any agreement with any Exempted
Company or any of Exempted Company's subsidiaries or affiliates, oral or
written, which is fully disclosed to the Company's Board of Directors, shall not
be deemed a conflict of interest, impropriety or breach of corporate duty with
the Company and any work that you perform for any Exempted Company or any of
Exempted Company's subsidiaries or affiliates from time to time, pursuant to any
agreement, oral or written, which is fully disclosed to the Company's Board of
Directors, whether as employee, officer, director or consultant to any Exempted
Company or any of Exempted Company's subsidiaries or affiliates shall not be
deemed a conflict of interest, impropriety or breach of corporate duty with the
Company.
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
3. Compensation.
(a) Base Salary and Incentive Compensation. Your annual base salary
during the Term shall be paid at the annual rate of $250,000 for the remainder
of calendar year 1999, $275,000 for the calendar year 2000 and $300,000 for the
calendar year 2001 ("Base Salary"), payable in accordance with the Company's
standard payroll practices. Unless otherwise specified herein, the Company shall
make such deductions, withholdings and other payments from all sums payable
pursuant to this Agreement which you request or that are required by law for
taxes and other charges.
(b) Stock Options. You shall receive, as of the Effective Date, an
option (the "New Stock Option") to acquire 1,500,000 shares of Common Stock of
the Company (the "Option Shares"), at an exercise price equal to $0.50 per
share. The New Stock Option shall be immediately exercisable with respect to all
of the Option Shares, and the Company shall have the right to repurchase the
Option Shares at the exercise price in the event your employment is terminated.
The Company's right of repurchase shall expire with respect to one-sixth (1/6th)
of the Option Shares on the six month anniversary of the Vesting Commencement
Date (as set forth in your stock option agreement), and with respect to an
additional 1/36th of the Option Shares on the same day of each month during the
thirty (30) months thereafter or until your employment is earlier terminated.
All other terms governing such options shall be set out in the Company's
standard option agreement and stock option plan.
(c) Benefits Plans. You will be entitled to participate in or receive
benefits under the Company's employee benefit plans and policies in effect from
time to time in which you are eligible to participate, subject to the applicable
terms and conditions of the particular benefit plan. The Company may change,
amend, modify or terminate to the extent legally allowable, any benefit plan
from time to time and without prior notice. To the extent benefits provided by
the Company are affected by seniority (i.e., length of service), you shall be
credited for time you served at the Company, to the fullest extent permitted by
law and consistent with the Company's current benefit plans.
-2-
<PAGE>
(d) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its senior executive officers) in
the performance of your duties and responsibilities under this Agreement;
provided, that you shall properly account for such expenses in accordance with
- --------
Company policies and procedures. Any necessary air travel shall be coach class
domestically and business class internationally .
(e) Vacation and Holidays. You shall be entitled to four (4) weeks
paid vacation and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
(f) Bonus. You shall be eligible to participate in any management
bonus plan or similar incentive compensation program adopted by the Company on
terms comparable to other senior officers of the Company.
(g) Other Benefits. During the Term the Company shall pay you the
following: (i) a monthly automobile allowance of Five Hundred Fifty Dollars
($550.00) and (ii) free parking at corporate premises for Raifman, or if no such
premises shall exist, then a monthly parking allowance up to a maximum of Two
Hundred Dollars ($200.00).
4. Term; Termination; Severance Payments.
(a) Term. Unless otherwise terminated as hereinafter provided, the
term of your employment under this Agreement (the "Term") shall commence upon
the Effective Date and shall continue until and terminate on the date that is
the three year anniversary of the Effective Date. Upon expiration of the Term,
you shall be an "at-will" employee of the Company, subject to such policies,
benefits and practices and procedures that are then applicable with respect to
an at-will employee of the Company (the "IEC Policies"). Notwithstanding the
foregoing, the Company may terminate your employment with the Company during the
Term for Cause (as defined below).
(b) Cause. As used in this Agreement, "Cause" shall mean (i)
-----
conviction of a felony or a crime involving moral turpitude causing material
harm to the standing and reputation of the Company or (ii) any habitual neglect
or willful misconduct in the performance of Purchaser's duties to the Company
where such habitual negligence or willful misconduct has resulted in substantial
and material damage to the Company or its subsidiaries, in each as determined in
good faith by the Board of Directors of the Company.
(c) Termination and Severance Benefits.
(i) Termination for Cause or Resignation. If your employment is
terminated for Cause or if you resign your employment voluntarily, no other
compensation or payments will be provided to you for any periods following the
date when such termination of employment is effective.
(ii) Termination without Cause; Constructive Termination. If your
employment is terminated by the Company without Cause, or if you are
Constructively Terminated
-3-
<PAGE>
(as defined below), you will be entitled to receive the severance payments
provided for in Section 4(c)(iv) below (if any) upon such termination. No other
compensation or payments will be made pursuant to this Agreement other than
those to which you are entitled through your last day of active service or under
the applicable IEC Policies and benefit plans. For purposes of this Section
4(c)(ii), the term "Constructively Terminated" shall mean your voluntary
termination, upon 30 days prior written notice to the Company, following: (A) a
material reduction or change in job duties, responsibilities and requirements
inconsistent with your position with the Company and prior duties,
responsibilities and requirements; (B) any reductions of your base compensation;
or (C) your refusal to relocate to facility or location more than 25 miles from
the Company's current location.
(iii) Death or Disability.
(A) Your employment shall terminate in the event of your
death.
(B) The Company may terminate your employment for
Disability by giving you 30 days' advance notice in writing. For all purposes
under this Agreement, "Disability" shall mean that you, at the time notice is
given, have been unable to substantially perform your duties under this
Agreement for a period of not less than six (6) consecutive months as the result
of your incapacity due to physical or mental illness. In the event that you
resume the performance of substantially all of your duties hereunder before the
termination of your employment under this subparagraph (B) becomes effective,
the notice of termination shall automatically be deemed to have been revoked.
(C) No compensation or benefits will be paid or provided
to you under this Agreement on account of termination for death or Disability,
or for periods following the date when such a termination of employment is
effective. Your rights under the benefit plans of the Company in the event of
your death or Disability shall be determined under the provisions of those
plans.
(iv) Severance Payments. During the Term, in the event your
employment with the Company is terminated without cause or if you are
Constructively Terminated, the Company's sole obligation to you will be to (a)
pay you a lump sum severance payment ("Severance Payment") in the amount equal
to (I) 2/26 of your effective Base Salary for the year in which you are so
terminated for each complete month worked by you commencing April 1, 1998;
provided, however, the Severance Payment shall, in no case, exceed one year of
- -------- -------
your Base Salary for such year; and (II) any benefits set forth in Section 3(b)
through (g) of this Agreement owing to you prior to the Termination Date and (b)
permit you to participate under the Company's Benefits Plans for up to one year
following your termination with the Company.
5. Assignment.
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation,
-4-
<PAGE>
liquidation or otherwise), or to all or substantially all of the Company's
business and/or assets, shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of such succession. For all purposes of and under
this Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
required by this Section 5, or which otherwise becomes bound by the terms of
this Agreement by operation of law. Any such assumption and/or succession under
this Section 5 shall not be deemed to be a termination of your employment
hereunder.
(b) The terms of this Agreement and all of your rights hereunder
shall inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
(i) "Restricted Business" shall mean any business related to (i)
advertising, marketing, media placement or banner serving, (ii) enterprise
software applications and/or enterprise integration relating to online or
traditional (including, without limitation, television, print, direct mail,
radio or the like) advertising, marketing, media placement or banner serving or
(iii) the transacting of business, or shopping, purchasing, or subscribing to or
registering for services, products, programs or information, or downloading or
obtaining software programs or information; or participating in other similar
types of transactions, in each case which specifically arise from banners served
by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A) all of
the countries of the world or (B) if (A) is found unenforceable, the countries
in which the Company's products are available during the term of the non-compete
obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements made
by the Company with you in and pursuant to the Reorganization Agreement, (ii)
the issuance by the Company to you of the New Stock Option and (iii) the
consideration payable to you hereunder, you agree that until: (A) the one (1)
year anniversary of the Effective Date or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a Restricted Business in a
Restricted Territory. It is agreed that ownership of no more than five percent
(5%) of the outstanding voting stock of a publicly-traded or privately-held
corporation shall not constitute a violation of this section. It is further
agreed that the foregoing consideration is not intended to constitute liquidated
damages for a violation of this section.
-5-
<PAGE>
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended to,
divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date, or induce or attempt to
induce any such employee to terminate his or her employment with the Company, or
any of its affiliates.
7. REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 7 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH THE
TERMS AND PROVISIONS OF THIS SECTION 7 IN ANY RESPECT, AND YOU HAVE BEEN GIVEN
NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE COMPANY,
OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE
RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF. IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU HEREBY WAIVE ANY CLAIM
OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF THE TERMS AND
PROVISIONS OF THIS SECTION 7 THAT THE COMPANY, OR ANY OF ITS AFFILIATES, HAS AN
ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY
FOR SUCH VIOLATION OR BREACH.
8. Severability. The parties intend that the covenants contained in the
preceding paragraphs shall be construed as a series of separate covenants, one
for each county, city, state and other political subdivision of each country in
the Restricted Territory. Except for geographic coverage, each separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such
-6-
<PAGE>
unenforceable covenant (or such part) shall be deemed eliminated from this
Agreement for the purpose of those proceedings to the extent necessary to permit
the remaining separate covenants (or portions thereof) to be enforced by such
court. It is the intent of the parties that the covenants set forth herein be
enforced to the maximum degree permitted by applicable law.
9. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect to the subject matter hereof and thereof, and
supersede any other written or oral negotiations, agreements, understandings,
representations or practices concerning such subject matter hereof (including
without limitation any employment agreement or offer letter extended by the
Company at any time). In the event of any conflict between the provisions hereof
and the provisions of the Confidential Information and Invention Assignment
Agreement, the provisions hereof shall control.
10. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: General Counsel
(b) If to you: To the address for notice set forth
on the signature page hereto or to
such other address as any party
hereto may hereafter designate
by notice given as herein
provided.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
San Francisco County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
12. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
-7-
<PAGE>
13. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
15. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
16. Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to either party upon any breach or default of the other party
hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
17. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
-8-
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Gregory R. Raifman
------------------------------------
Gregory R. Raifman
Chairman & Chief Executive Officer
ACCEPTED AND AGREED TO THIS
_____ DAY OF FEBRUARY, 1999.
/s/ Jon Logan Edwards
-------------------------
Address for notices:
1602 Rancho View Road
Lafayette, CA 94549
Phone: (925) 945-8028
Enclosures: Duplicate Original Letter
Option Agreement
Confidential Information and Invention Assignment Agreement
-9-
<PAGE>
SCHEDULE A
Schedule of Exempted Companies
------------------------------
1. Raifman & Edwards LLP
2. PointBreak Ventures, LLC (including, without limitation, the existing
portfolio companies of PointBreak Ventures, LLC)
<PAGE>
INTERNET EXTRA CORPORATION
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Internet Extra Corporation, its
subsidiaries, affiliates, successors or assigns (collectively, the "Company"),
and in consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company. I agree to the following:
1. Confidential Information.
------------------------
(a) Company Information. I agree at all times during the term of my
-------------------
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer, vendor and contractor lists and
customers (including, but not limited to, customers of the Company on whom I
called or with whom I became acquainted during the term of my employment),
markets, software, developments, inventions, processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing,
finances or other business information disclosed to me by the Company either
directly or indirectly in writing, orally or by drawings or observation of parts
or equipment. I further understand that Confidential Information does not
include any of the foregoing items which has become publicly known and made
generally available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
---------------------------
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring into the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
<PAGE>
2. Inventions.
----------
(a) Inventions Retained and Licensed. I have attached hereto, as
--------------------------------
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a Company product, process or machine a Prior Invention owned by me or in
which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make full
------------------------
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to any and all inventions, original works
of authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of the Company (collectively referred to as "Inventions"), except as
provided in Section 2(f) below. I further acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of and during the period of my employment with the Company and which are
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to
----------------------------------------
the United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
----------------------------------
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my
<PAGE>
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of my mental or physical incapacity
or for any other reason to secure my signature to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering Inventions or original works of authorship assigned to the Company as
above, then I hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact, to act for and
in my behalf and stead to execute and file any such applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by me.
(f) Exception to Assignments. I understand that the provisions of
------------------------
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet the criteria in
California Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
3. Conflicting Employment. I agree that, during the term of my employment
----------------------
with the Company, I will not engage in any other employment, occupation,
consulting other business activity directly related to the business in which the
Company and/or its customers are now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
4. At Will Employment. I understand that my employment with the Company
------------------
is "at will" and is for no specified term. As a result, I understand that the
Company can terminate my employment at any time and that, similarly, I am free
to terminate my employment with the Company at any time.
5. Returning Company Documents. I agree that, at the time of leaving the
---------------------------
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I
agree to sign and deliver the "Termination Certification" attached hereto as
Exhibit C.
6. Notification to New Employer. In the event that I leave the employ of
----------------------------
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve (12)
-------------------------
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to
<PAGE>
solicit, induce, recruit, encourage or take away employees of the Company,
either for myself or for any other person or entity.
8. Conflict of Interest Guidelines. I agree to diligently adhere to the
-------------------------------
Conflict of Interest Guidelines attached as Exhibit D hereto.
9. Representations. I agree to execute any proper oath or verify any
---------------
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary 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 oral or written agreement in
conflict herewith.
10. Arbitration and Equitable Relief.
--------------------------------
(a) Arbitration. Except as provided in Section 10(b) below, I agree
-----------
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 1, 2, 3, and 5 herein. Accordingly, I agree that
if I breach any of such Sections, the Company will have available, in addition
to any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief, and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
------------------
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
-----------------------------------------------
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification for
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged.
<PAGE>
Any subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) 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.
INTERNET EXTRA CORPORATION
By:________________________________
Name
Title
AGREED TO AND ACCEPTED:
Signature
Date:
Witness
<PAGE>
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number or
Title Date Brief Description
----- ---- -----------------
______ No inventions or improvements
______ Additional Sheets Attached
Signature of Employee:
Print Name of Employee:
Date:_________________________
<PAGE>
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, 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 employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE>
EXHIBIT C
---------
INTERNET EXTRA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Internet Extra Corporation, its subsidiaries, affiliates,
successors or assigns (collectively, the "Company").
I further certify that I have complied with all the terms of the Company's
Employment, Confidential Information and Invention Assignment Agreement signed
by me, including the reporting of any inventions and original works of
authorship (as defined therein), conceived or made by me (solely or jointly with
others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not directly or indirectly solicit,
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce, recruit,
encourage or take away any employees of the Company, either for myself or for
any other person or entity.
Date:
______________________________________
(Employee's Signature)
______________________________________
(Type/Print Employee's Name)
<PAGE>
EXHIBIT D
---------
INTERNET EXTRA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of Internet Extra Corporation, its subsidiaries,
affiliates, successors or assigns (collectively, the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the
President and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.
3. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
4. Initiating or approving any form of personal or social harassment of
employees.
5. Investing or holding outside directorships in suppliers, customers or
competing companies, including financial speculation, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
6. Borrowing from or lending to employees, customers or suppliers.
7. Acquiring a real estate interest adverse to the Company.
8. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
9. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
10. Making any unlawful agreements with distributors with respect to
prices.
<PAGE>
11. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
12. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
<PAGE>
Exhibit 10.9
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
February 19, 1999
Mr. Walter Haefeker
164 Pepper Avenue
Burlingame, California 94010
Dear Walter:
I am very pleased to offer you the position of Chief Operating Officer with
Internet Extra Corporation (the "Company") commencing on the date hereof. We at
the Company are delighted that you have decided to join our enterprise and help
MediaPlex become a success. I would like to take this opportunity to set out
the terms of your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered into
effective as of the date hereof (the "Effective Date").
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, the Company's Chief Operating Officer, subject at all times and in all
cases and respects to the ultimate control and direction of the board of
directors of the Company. In such capacity, you shall perform all such services,
accept all such responsibilities and discharge all such duties and
responsibilities as are consistent and commensurate with your position and as
may be assigned to or required of you from time to time by the Company. You
shall perform such services, accept such responsibilities and discharge such
duties within the policies and guidelines established from time to time by the
Company, subject at all times and in all cases and respects to the ultimate
control and direction of the Company. The Company shall have the right to review
and revise your services, responsibilities and duties at any time and from time
to time during the Term (as defined below) in any and all respects, provided
--------
that any revised services, responsibilities and duties, taken as a whole,
continue to reflect your knowledge, skill and experience. Such services shall be
primarily performed in the Company's offices in San Francisco, California,
although you may be required to travel to other locations as necessary and
consistent with your position with the Company.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which consent will not be
unreasonably withheld. Notwithstanding the foregoing provision of this Section,
<PAGE>
any work that you perform for the companies listed on Schedule A attached hereto
(the "Exempted Companies") or any such Exempted Company's subsidiaries or
affiliates pursuant to any agreement with any Exempted Company or any of
Exempted Company's subsidiaries or affiliates, oral or written, which is fully
disclosed to the Company's Board of Directors, shall not be deemed a conflict of
interest, impropriety or breach of corporate duty with the Company and any work
that you perform for any Exempted Company or any of Exempted Company's
subsidiaries or affiliates from time to time, pursuant to any agreement, oral or
written, which is fully disclosed to the Company's Board of Directors, whether
as employee, officer, director or consultant to any Exempted Company or any of
Exempted Company's subsidiaries or affiliates shall not be deemed a conflict of
interest, impropriety or breach of corporate duty with the Company.
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
3. Compensation.
(a) Base Salary and Incentive Compensation. Your annual base salary
during the Term shall be paid at the annual rate of $175,000 for the remainder
of calendar year 1999, $200,000 for the calendar year 2000 and $225,000 for the
calendar year 2001 ("Base Salary"), payable in accordance with the Company's
standard payroll practices. Unless otherwise specified herein, the Company shall
make such deductions, withholdings and other payments from all sums payable
pursuant to this Agreement which you request or that are required by law for
taxes and other charges.
(b) Stock Options. You shall receive, as of the Effective Date, an
option (the "New Stock Option") to acquire 1,250,000 shares of Common Stock of
the Company (the "Option Shares"), at an exercise price equal to $0.50 per
share. The New Stock Option shall be immediately exercisable with respect to all
of the Option Shares, and the Company shall have the right to repurchase the
Option Shares at the exercise price in the event your employment is terminated.
The Company's right of repurchase shall expire with respect to one-sixth (1/6th)
of the Option Shares on the six month anniversary of the Vesting Commencement
Date (as set forth in your stock option agreement), and with respect to an
additional 1/36th of the Option Shares on the same day of each month during the
thirty (30) months thereafter or until your employment is earlier terminated.
All other terms governing such options shall be set out in the Company's
standard option agreement and stock option plan.
(c) Benefits Plans. You will be entitled to participate in or receive
benefits under the Company's employee benefit plans and policies in effect from
time to time in which you are eligible to participate, subject to the applicable
terms and conditions of the particular benefit plan. The Company may change,
amend, modify or terminate to the extent legally allowable, any benefit plan
from time to time and without prior notice. To the extent benefits provided by
the Company are affected by seniority (i.e., length of service), you shall be
credited for time you served at the Company, to the fullest extent permitted by
law and consistent with the Company's current benefit plans.
-2-
<PAGE>
(d) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its senior executive officers) in
the performance of your duties and responsibilities under this Agreement;
provided, that you shall properly account for such expenses in accordance
- --------
with Company policies and procedures. Any necessary air travel shall be coach
class domestically and business class internationally.
(e) Vacation and Holidays. You shall be entitled to four (4) weeks
paid vacation and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
(f) Bonus. You shall be eligible to participate in any management
bonus plan or similar incentive compensation program adopted by the Company on
terms comparable to other senior officers of the Company.
(g) Other Benefits. During the Term the Company shall pay you the
following: (i) a monthly automobile allowance of Five Hundred Dollars ($500.00)
and (ii) free parking at corporate premises for Raifman, or if no such premises
shall exist, then a monthly parking allowance up to a maximum of Two Hundred
Dollars ($200.00).
4. Term; Termination; Severance Payments.
(a) Term. Unless otherwise terminated as hereinafter provided, the
term of your employment under this Agreement (the "Term") shall commence upon
the Effective Date and shall continue until and terminate on the date that is
the three year anniversary of the Effective Date. Upon expiration of the Term,
you shall be an "at-will" employee of the Company, subject to such policies,
benefits and practices and procedures that are then applicable with respect to
an at-will employee of the Company (the "IEC Policies"). Notwithstanding the
foregoing, the Company may terminate your employment with the Company during the
Term for Cause (as defined below).
(b) Cause. As used in this Agreement, "Cause" shall mean (i)
-----
conviction of a felony or a crime involving moral turpitude causing material
harm to the standing and reputation of the Company or (ii) any habitual neglect
or willful misconduct in the performance of Purchaser's duties to the Company
where such habitual negligence or willful misconduct has resulted in substantial
and material damage to the Company or its subsidiaries, in each as determined in
good faith by the Board of Directors of the Company.
(c) Termination and Severance Benefits.
(i) Termination for Cause or Resignation. If your employment is
terminated for Cause or if you resign your employment voluntarily, no other
compensation or payments will be provided to you for any periods following the
date when such termination of employment is effective.
(ii) Termination without Cause; Constructive Termination. If your
employment is terminated by the Company without Cause, or if you are
Constructively Terminated
-3-
<PAGE>
(as defined below), you will be entitled to receive the severance payments
provided for in Section 4(c)(iv) below (if any) upon such termination. No other
compensation or payments will be made pursuant to this Agreement other than
those to which you are entitled through your last day of active service or under
the applicable IEC Policies and benefit plans. For purposes of this Section
4(c)(ii), the term "Constructively Terminated" shall mean your voluntary
termination, upon 30 days prior written notice to the Company, following: (A) a
material reduction or change in job duties, responsibilities and requirements
inconsistent with your position with the Company and prior duties,
responsibilities and requirements; (B) any reductions of your base compensation;
or (C) your refusal to relocate to facility or location more than 25 miles from
the Company's current location.
(iii) Death or Disability.
(A) Your employment shall terminate in the event of your
death.
(B) The Company may terminate your employment for
Disability by giving you 30 days' advance notice in writing. For all purposes
under this Agreement, "Disability" shall mean that you, at the time notice is
given, have been unable to substantially perform your duties under this
Agreement for a period of not less than six (6) consecutive months as the result
of your incapacity due to physical or mental illness. In the event that you
resume the performance of substantially all of your duties hereunder before the
termination of your employment under this subparagraph (B) becomes effective,
the notice of termination shall automatically be deemed to have been revoked.
(C) No compensation or benefits will be paid or provided
to you under this Agreement on account of termination for death or Disability,
or for periods following the date when such a termination of employment is
effective. Your rights under the benefit plans of the Company in the event of
your death or Disability shall be determined under the provisions of those
plans.
(iv) Severance Payments. During the Term, in the event your
employment with the Company is terminated without cause or if you are
Constructively Terminated, the Company's sole obligation to you will be to (a)
pay you a lump sum severance payment ("Severance Payment") in the amount equal
to (I) 2/26 of your effective Base Salary for the year in which you are so
terminated for each complete month worked by you commencing September 1, 1999;
provided, however, the Severance Payment shall, in no case, exceed one year of
- -------- -------
your Base Salary for such year; and (II) any benefits set forth in Section 3(b)
through (g) of this Agreement owing to you prior to the Termination Date and (b)
permit you to participate under the Company's Benefits Plans for up to one year
following your termination with the Company.
5. Assignment.
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation,
-4-
<PAGE>
liquidation or otherwise), or to all or substantially all of the Company's
business and/or assets, shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of such succession. For all purposes of and under
this Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
required by this Section 5, or which otherwise becomes bound by the terms of
this Agreement by operation of law. Any such assumption and/or succession under
this Section 5 shall not be deemed to be a termination of your employment
hereunder.
(b) The terms of this Agreement and all of your rights hereunder
shall inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successor, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
(i) "Restricted Business" shall mean any business related to (i)
advertising, marketing, media placement or banner serving, (ii) enterprise
software applications and/or enterprise integration relating to online or
traditional (including, without limitation, television, print, direct mail,
radio or the like) advertising, marketing, media placement or banner serving or
(iii) the transacting of business, or shopping, purchasing, or subscribing to or
registering for services, products, programs or information, or downloading or
obtaining software programs or information; or participating in other similar
types of transactions, in each case which specifically arise from banners served
by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A) all of
the countries of the world or (B) if (A) is found unenforceable, the countries
in which the Company's products are available during the term of the non-compete
obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements made
by the Company with you in and pursuant to the Reorganization Agreement, (ii)
the issuance by the Company to you of the New Stock Option and (iii) the
consideration payable to you hereunder, you agree that until: (A) the one (1)
year anniversary of the Effective Date or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a Restricted Business in a
Restricted Territory. It is agreed that ownership of no more than five percent
(5%) of the outstanding voting stock of a publicly-traded or privately-held
corporation shall not constitute a violation of this section. It is further
agreed that the foregoing consideration is not intended to constitute liquidated
damages for a violation of this section.
-5-
<PAGE>
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended to,
divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date, or induce or attempt to
induce any such employee to terminate his or her employment with the Company, or
any of its affiliates.
7. REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 7 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH THE
TERMS AND PROVISIONS OF THIS SECTION 7 IN ANY RESPECT, AND YOU HAVE BEEN GIVEN
NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE COMPANY,
OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE
RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS HEREOF. IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU HEREBY WAIVE ANY CLAIM
OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF THE TERMS AND
PROVISIONS OF THIS SECTION 7 THAT THE COMPANY, OR ANY OF ITS AFFILIATES, HAS AN
ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN ADEQUATE REMEDY
FOR SUCH VIOLATION OR BREACH.
8. Severability. The parties intend that the covenants contained in the
preceding paragraphs shall be construed as a series of separate covenants, one
for each county, city, state and other political subdivision of each country in
the Restricted Territory. Except for geographic coverage, each separate covenant
shall be deemed identical in terms to the covenant contained in the preceding
paragraphs. If, in any judicial proceeding, a court shall refuse to enforce any
of the separate covenants (or any part thereof) deemed included in said
paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
9. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect
-6-
<PAGE>
to the subject matter hereof and thereof, and supersede any other written or
oral negotiations, agreements, understandings, representations or practices
concerning such subject matter hereof (including without limitation any
employment agreement or offer letter extended by the Company at any time). In
the event of any conflict between the provisions hereof and the provisions of
the Confidential Information and Invention Assignment Agreement, the provisions
hereof shall control.
10. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: General Counsel
(b) If to you: To the address for notice set forth on the
signature page hereto or to such other
address as any party hereto may hereafter
designate by notice given as herein provided.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
San Francisco County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
12. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
13. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
14. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
-7-
<PAGE>
15. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
16. Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to either party upon any breach or default of the other party
hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
17. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
-8-
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Gregory R. Raifman
-----------------------------------
Gregory R. Raifman
Chairman & Chief Executive Officer
ACCEPTED AND AGREED TO THIS
_____ DAY OF FEBRUARY, 1999.
/s/ Walter Haefeker
---------------------------
Walter Haefeker
Address for notices:
164 Pepper Avenue
Burlingame, California 94010
Phone: (650) 347-6725
Fax: (650) 680-2329
Enclosures: Duplicate Original Letter
Option Agreement
Confidential Information and Invention Assignment Agreement
-9-
<PAGE>
SCHEDULE A
Schedule of Exempted Companies
------------------------------
1. PointBreak Ventures, LLC (including, without limitation, the existing
portfolio companies of PointBreak Ventures, LLC)
<PAGE>
INTERNET EXTRA CORPORATION
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Internet Extra Corporation, its
subsidiaries, affiliates, successors or assigns (collectively, the "Company"),
and in consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company. I agree to the following:
1. Confidential Information.
------------------------
(a) Company Information. I agree at all times during the term of my
-------------------
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer, vendor and contractor lists and
customers (including, but not limited to, customers of the Company on whom I
called or with whom I became acquainted during the term of my employment),
markets, software, developments, inventions, processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing,
finances or other business information disclosed to me by the Company either
directly or indirectly in writing, orally or by drawings or observation of parts
or equipment. I further understand that Confidential Information does not
include any of the foregoing items which has become publicly known and made
generally available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
---------------------------
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring into the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
<PAGE>
2. Inventions.
----------
(a) Inventions Retained and Licensed. I have attached hereto, as
--------------------------------
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a Company product, process or machine a Prior Invention owned by me or in
which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make full
------------------------
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to any and all inventions, original works
of authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of the Company (collectively referred to as "Inventions"), except as
provided in Section 2(f) below. I further acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of and during the period of my employment with the Company and which are
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to
----------------------------------------
the United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate
----------------------
and current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
----------------------------------
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my
<PAGE>
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of my mental or physical incapacity
or for any other reason to secure my signature to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering Inventions or original works of authorship assigned to the Company as
above, then I hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact, to act for and
in my behalf and stead to execute and file any such applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by me.
(f) Exception to Assignments. I understand that the provisions of
------------------------
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet the criteria in
California Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
3. Conflicting Employment. I agree that, during the term of my
----------------------
employment with the Company, I will not engage in any other employment,
occupation, consulting other business activity directly related to the business
in which the Company and/or its customers are now involved or becomes involved
during the term of my employment, nor will I engage in any other activities that
conflict with my obligations to the Company.
4. At Will Employment. I understand that my employment with the Company
------------------
is "at will" and is for no specified term. As a result, I understand that the
Company can terminate my employment at any time and that, similarly, I am free
to terminate my employment with the Company at any time.
5. Returning Company Documents. I agree that, at the time of leaving the
---------------------------
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree
to sign and deliver the "Termination Certification" attached hereto as Exhibit
C.
6. Notification to New Employer. In the event that I leave the employ of
----------------------------
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve (12)
-------------------------
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to
<PAGE>
solicit, induce, recruit, encourage or take away employees of the Company,
either for myself or for any other person or entity.
8. Conflict of Interest Guidelines. I agree to diligently adhere to the
-------------------------------
Conflict of Interest Guidelines attached as Exhibit D hereto.
9. Representations. I agree to execute any proper oath or verify any
---------------
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary 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 oral or written agreement in
conflict herewith.
10. Arbitration and Equitable Relief.
--------------------------------
(a) Arbitration. Except as provided in Section 10(b) below, I agree
-----------
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 1, 2, 3, and 5 herein. Accordingly, I agree that
if I breach any of such Sections, the Company will have available, in addition
to any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief, and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
------------------
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
-----------------------------------------------
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification for
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged.
<PAGE>
Any subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) 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.
INTERNET EXTRA CORPORATION
By: __________________________
Name
Title
AGREED TO AND ACCEPTED:
Signature
Date:
Witness
<PAGE>
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number or
Title Date Brief Description
----- ---- -----------------
______ No inventions or improvements
______ Additional Sheets Attached
Signature of Employee:
Print Name of Employee:
Date: ___________________________________
<PAGE>
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, 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 employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE>
EXHIBIT C
---------
INTERNET EXTRA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Internet Extra Corporation, its subsidiaries, affiliates,
successors or assigns (collectively, the "Company").
I further certify that I have complied with all the terms of the Company's
Employment, Confidential Information and Invention Assignment Agreement signed
by me, including the reporting of any inventions and original works of
authorship (as defined therein), conceived or made by me (solely or jointly with
others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not directly or indirectly solicit,
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce, recruit,
encourage or take away any employees of the Company, either for myself or for
any other person or entity.
Date:
_________________________________
(Employee's Signature)
_________________________________
(Type/Print Employee's Name)
<PAGE>
EXHIBIT D
---------
INTERNET EXTRA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of Internet Extra Corporation, its subsidiaries,
affiliates, successors or assigns (collectively, the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the
President and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.
3. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
4. Initiating or approving any form of personal or social harassment of
employees.
5. Investing or holding outside directorships in suppliers, customers or
competing companies, including financial speculation, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
6. Borrowing from or lending to employees, customers or suppliers.
7. Acquiring a real estate interest adverse to the Company.
8. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
9. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
10. Making any unlawful agreements with distributors with respect to
prices.
<PAGE>
11. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
12. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
<PAGE>
EXHIBIT 10.10
Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, California 94105
March 24, 1999
Mr. Ruiqing "Barclay" Jiang
Netranscend Software, Inc.
655 Bonanza Court
Sunnyvale, California 94087
Dear Barclay:
I am very pleased to offer you the position of Chief Technology Officer
with Internet Extra Corporation (the "Company") commencing on the effectiveness
of the merger between Netranscend Software, Inc. ("Netranscend") and the
Company. We at the Company are delighted that you have decided to join our
enterprise and help MediaPlex become a success. I would like to take this
opportunity to set out the terms of your employment more fully:
1. Effectiveness. This agreement (this "Agreement") is being entered in
connection with the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of March 8, 1999, by and among the Company, Netranscend
and you, and all capitalized terms used but not defined herein shall have the
meaning ascribed to them in the Reorganization Agreement. Your employment under
this Agreement shall become effective as of the Effective Time of the Merger. In
the event that the Reorganization Agreement is terminated prior to the Effective
Time of the Merger, this Agreement shall terminate and be of no further force
and effect.
2. Employment.
(a) Duties. The Company shall employ you, and you shall initially
serve as, the Company's Chief Technology Officer, subject at all times and in
all cases and respects to the ultimate control and direction of the board of
directors of the Company. In such capacity, you shall perform all such services,
accept all such responsibilities and discharge all such duties and
responsibilities as are consistent and commensurate with your position and as
may be assigned to or required of you from time to time by the Company. You
shall perform such services, accept such responsibilities and discharge such
duties within the policies and guidelines established from time to time by the
Company, subject at all times and in all cases and respects to the ultimate
control and direction of the Company. The Company shall have the right to review
and revise your services, responsibilities and duties at any time and from time
to time during the Term (as defined below) in any and all respects, provided
--------
that any revised services, responsibilities and duties, taken as a whole,
continue to reflect your knowledge, skill and experience. Such services shall be
primarily performed in the Company's offices in Cupertino, California, although
you may be required to travel to other locations as necessary and consistent
with your position with the Company.
(b) Exclusive Employment. At all times during the Term, you shall
devote all of your business time, attention and energies to the performance,
fulfillment and satisfaction of your duties and responsibilities to the Company
under this Agreement, and shall not undertake or be engaged in any other
activities, whether or not pursued for gain, profit or other pecuniary
advantage, which could impair your ability to perform, fulfill and satisfy your
duties and responsibilities to the Company under this Agreement, in any case
without the prior written consent of the Company which consent will not be
unreasonably withheld.
<PAGE>
(c) Affirmation of Fiduciary Responsibilities. At all times during
the Term, you shall perform, satisfy, fulfill and carry out your duties and
responsibilities to the Company under this Agreement with fidelity and loyalty,
in a diligent manner, to the best of your ability, experience and talent, and in
a manner consistent with your fiduciary responsibilities to the Company.
3. Compensation.
(a) Base Salary and Incentive Compensation. Your annual base salary
during the Term shall be paid at the annual rate of $150,000 for the remainder
of calendar year 1999, $168,000 for the calendar year 2000 and $180,000 for the
calendar year 2001 ("Base Salary"), payable in accordance with the Company's
standard payroll practices. Notwithstanding the foregoing, your Base Salary
shall be increased to the annual rate of $180,000 for the remainder of calendar
year 1999, $198,000 for the calendar year 2000 and $218,000 for the calendar
year 2001, upon the closing by the Company of a financing providing aggregate
gross proceeds of at least $5,000,000. Unless otherwise specified herein, the
Company shall make such deductions, withholdings and other payments from all
sums payable pursuant to this Agreement which you request or that are required
by law for taxes and other charges.
(b) Stock Options. You shall receive, as of the Effective Time, an
option (the "New Stock Option") to acquire 600,000 shares of Common Stock of the
Company (the "Option Shares"), at an exercise price equal to $0.50 per share.
The New Stock Option shall be immediately exercisable with respect to all of the
Option Shares, and the Company shall have the right to repurchase the Option
Shares at the exercise price in the event your employment is terminated. The
Company's right of repurchase shall expire with respect to one-sixth (1/6th) of
the Option Shares on the six month anniversary of the Effective Time, and with
respect to an additional 1/36th of the Option Shares on the same day of each
month during the thirty (30) months thereafter or until your employment is
earlier terminated. All other terms governing such options shall be set out in
the Company's standard option agreement and stock option plan.
(c) Benefits Plans. You will be entitled to participate in or receive
benefits under the Company's employee benefit plans and policies in effect from
time to time in which you are eligible to participate, subject to the applicable
terms and conditions of the particular benefit plan. The Company may change,
amend, modify or terminate to the extent legally allowable, any benefit plan
from time to time and without prior notice. To the extent benefits provided by
the Company are affected by seniority (i.e. length of service), you shall be
credited for time you served at Netranscend, to the fullest extent permitted by
law and consistent with the Company's current benefit plans.
(d) Expenses. You shall be entitled to prompt reimbursement by the
Company for all reasonable ordinary and necessary travel, entertainment, and
other expenses incurred by you during the Term (in accordance with the policies
and procedures established by the Company for its senior executive officers) in
the performance of your duties and responsibilities under this Agreement;
provided, that you shall properly account for such expenses in accordance with
- --------
Company policies and procedures. Any necessary air travel shall be coach class
domestically and business class internationally.
(e) Vacation and Holidays. You shall be entitled to four (4) weeks
paid vacation and Company holidays in accordance with the Company's policies in
effect from time to time for its senior executive officers.
(f) Bonus. You shall be eligible to participate in any management
bonus plan or similar incentive compensation program adopted by the Company on
terms comparable to other senior officers of the Company.
-2-
<PAGE>
4. Term; Termination; Severance Payments.
(a) Term. Unless otherwise terminated as hereinafter provided, the
term of your employment under this Agreement (the "Term") shall commence upon
the Effective Time as defined in the Reorganization Agreement and shall continue
until and terminate on the date that is the three year anniversary of the
Effective Time. Upon expiration of the Term, you shall be an "at will" employee
of the Company, subject to such policies, benefits and practices and procedures
that are then applicable with respect to an at will employee of the Company (the
"IEC Policies"). Notwithstanding the foregoing, the Company may terminate your
employment with the Company during the Term for Cause (as defined below).
(b) Cause. As used in this Agreement, "Cause" shall mean:
(i) Your personally engaging in or knowingly authorizing
conduct that you reasonably should know, or that you intend, to be
materially injurious to the Company or its employees;
(ii) Your (A) being convicted of a felony under the laws of the
United States or any State, (B) violating a federal or state law or
regulation applicable to the Company, (C) making any material
misrepresentation to the Company, or (D) committing a material act of
dishonesty or fraud against, or the material misappropriation of property
belonging to, the Company;
(iii) Your unreasonable failure or refusal to perform the
material duties of your position after written notice of such failure to
perform and you shall not have cured such failure by the tenth (10th)
business day after notice by the Company to you of such failure;
(iv) Your knowingly and intentionally breaching in any material
respect the terms of this Agreement or the Confidential Information and
Invention Assignment Agreement (attached hereto); provided that, except for
--------
those breaches which, by their nature, are incurable, you shall not have
cured such breach by the tenth (10th) business day after notice by the
Company to you of such breach; or
(v) Your commencement of employment with another employer.
(c) Termination and Severance Benefits.
(i) Termination for Cause or Resignation. If your employment
is terminated for Cause or if you resign your employment voluntarily, no other
compensation or payments will be provided to you for any periods following the
date when such termination of employment is effective.
(ii) Termination without Cause; Constructive Termination. If
your employment is terminated by the Company without Cause, or if you are
Constructively Terminated (as defined below), you will be entitled to receive
the severance payments provided for in Section 4(c)(iv) below (if any) upon such
termination. No other compensation or payments will be made pursuant to this
Agreement other than those to which you are entitled through your last day of
active service or under the applicable IEC Policies and benefit plans. For
purposes of this Section 4(c)(ii), the term "Constructively Terminated" shall be
deemed to mean (i) a reduction of your Base Salary, (ii) your refusal to
relocate to a facility or location which is located beyond twenty-five (25)
miles from Sunnyvale, California, or (iii) an alteration during the Term of the
services to be performed by, and the responsibilities and duties assigned to,
you under this Agreement if such services, responsibilities and duties, taken as
a whole, materially fail to reflect your knowledge, skill and experience;
provided that a change in your title will not in and of itself constitute
- ---------
Constructive Termination; provided further that, your expenses-paid travel to
--------
the Company's headquarters in San Francisco, California at the Company's
-3-
<PAGE>
request will not in and of itself constitute Constructive Termination; and
provided further that, in each case, you have resigned in writing from your
- --------
position with the Company within thirty (30) calendar days of the commencement
of any Constructive Termination.
(iii) Death or Disability.
(A) Your employment shall terminate in the event of your
death.
(B) The Company may terminate your employment for
Disability by giving you 30 days' advance notice in writing. For all purposes
under this Agreement, "Disability" shall mean that you, at the time notice is
given, have been unable to substantially perform your duties under this
Agreement for a period of not less than six (6) consecutive months as the result
of your incapacity due to physical or mental illness. In the event that you
resume the performance of substantially all of your duties hereunder before the
termination of your employment under this subparagraph (B) becomes effective,
the notice of termination shall automatically be deemed to have been revoked.
(C) No compensation or benefits will be paid or provided
to you under this Agreement on account of termination for death or Disability,
or for periods following the date when such a termination of employment is
effective. Your rights under the benefit plans of the Company in the event of
your death or Disability shall be determined under the provisions of those
plans.
(iv) Severance Payments. During the Term, in the event your
employment with the Company is terminated without cause or if you are
Constructively Terminated, the Company's sole obligation to you will be to pay
you a severance payment ("Severance Payment") in the amount equal to 1/26 of
your effective Base Salary for the year in which you are so terminated for each
complete month during the Term worked by you; provided, however, the Severance
--------
Payment shall, in no case, exceed 1/2 of your Base Salary for such year.
5. Assignment
(a) Successors and Assigns. Any of the Company's affiliates may
assume the liabilities and obligations, and succeed to the rights and interests,
of the Company under this Agreement at any time and without limitation. In
addition to the foregoing, any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise), or to all or substantially all of the Company's business and/or
assets, shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of such succession. For all purposes of and under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which executes and delivers the assumption agreement required by this
Section 5, or which otherwise becomes bound by the terms of this Agreement by
operation of law. Any such assumption and/or succession under this Section 5
shall not be deemed to be a termination of your employment hereunder.
(b) The terms of this Agreement and all of your rights hereunder
shall inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successor, heirs, distributees,
devisees or legatees.
6. Covenant Not to Compete.
(a) Definitions. As used in this Agreement, the terms:
-4-
<PAGE>
(i) "Restricted Business" shall mean any business related to
(i) advertising, marketing, media placement or banner serving, (ii) enterprise
software applications and/or enterprise integration relating to online or
traditional (including, without limitation, television, print, direct mail,
radio or the like) advertising, marketing, media placement or banner serving or
(iii) the transacting of business, or shopping, purchasing, or subscribing to or
registering for services, products, programs or information, or downloading or
obtaining software programs or information; or participating in other similar
types of transactions, in each case which specifically arise from banners served
by the Company.
(ii) "Restricted Territory" shall mean the larger of: (A) all
of the countries of the world or (B) if (A) is found unenforceable, the
countries in which the Company's products are available during the term of the
non-compete obligations specified in this Section 6.
(b) Non-Compete. In consideration of: (i) the several agreements
made by the Company with you in and pursuant to the Reorganization Agreement,
(ii) the issuance by the Company to you of the New Stock Option, (iii) the
Company's willingness to enter into the Reorganization Agreement, and (iv) the
consideration payable to you hereunder, you agree that until: (A) the three (3)
year anniversary of the Effective Time or (B) in the event that the period set
forth in clause (A) is determined to be unenforceable by a court of competent
jurisdiction, the maximum period allowable, you will not, directly or
indirectly, engage in (whether as an officer, employee, consultant, director,
proprietor, partner, consultant or otherwise), or have any ownership interest
in, or participate in the financing, operation, management or control of, any
person, firm, corporation or business that engages in a Restricted Business in a
Restricted Territory. It is agreed that ownership of no more than two percent
(2%) of the outstanding voting stock of a publicly-traded or privately-held
corporation shall not constitute a violation of this section. It is further
agreed that the foregoing consideration is not intended to constitute liquidated
damages for a violation of this section.
(c) Non-Solicit. You agree that until the expiration of the non-
compete obligations specified above in subsection (b), you shall not:
(i) take any action to, or do anything reasonably intended to,
divert business from the Company, or any of its affiliates, or influence or
attempt to influence any retailer, dealer, vendor, supplier, customer or
potential customer of the Company, or any of its affiliates, in each case as
existing on the date of your termination (the "Termination Date"), to cease
doing business with the Company, or any of its affiliates, as the case may be,
or to alter its business relationship with the Company, or any of its
affiliates, in each case as existing on the Termination Date; or
(ii) recruit, attempt to hire, solicit, or assist others in
recruiting or hiring, any person who is an employee of the Company, or any of
its affiliates, in each case as of the Termination Date, or induce or attempt to
induce any such employee to terminate his or her employment with the Company, or
any of its affiliates.
(d) REMEDIES. YOU HEREBY RECOGNIZE AND ACKNOWLEDGE THAT A MATERIAL
VIOLATION OF THE TERMS AND PROVISIONS OF THIS SECTION 6 WOULD CAUSE IRREPARABLE
INJURY TO THE COMPANY, OR ONE OR MORE OF ITS AFFILIATES, AS THE CASE MAY BE, FOR
WHICH THE COMPANY, OR ANY OF ITS AFFILIATES, WOULD HAVE NO ADEQUATE REMEDY AT
LAW. ACCORDINGLY, IN THE EVENT THAT YOU SHALL FAIL TO MATERIALLY COMPLY WITH
THE TERMS AND PROVISIONS OF THIS SECTION 6 IN ANY RESPECT, AND YOU HAVE BEEN
GIVEN NOTICE OF SUCH VIOLATION AND AN OPPORTUNITY TO CURE SUCH VIOLATION, THE
COMPANY, OR ANY OF ITS AFFILIATES, SHALL BE ENTITLED TO PRELIMINARY AND OTHER
INJUNCTIVE RELIEF AND TO SPECIFIC PERFORMANCE OF THE TERMS AND PROVISIONS
HEREOF. IN FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, YOU
-5-
<PAGE>
HEREBY WAIVE ANY CLAIM OR DEFENSE RELATING TO ANY VIOLATION OR BREACH BY YOU OF
THE TERMS AND PROVISIONS OF THIS SECTION 6 THAT THE COMPANY, OR ANY OF ITS
AFFILIATES, HAS AN ADEQUATE REMEDY AT LAW OR THAT MONEY DAMAGES WOULD PROVIDE AN
ADEQUATE REMEDY FOR SUCH VIOLATION OR BREACH.
(e) Severability. The parties intend that the covenants contained in
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state and other political subdivision of each country
in the Restricted Territory. Except for geographic coverage, each separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent of the parties that the
covenants set forth herein be enforced to the maximum degree permitted by
applicable law.
7. Entire Agreement. This Agreement and the Confidential Information and
Invention Assignment Agreement set forth the entire agreement and understanding
of the parties with respect to the subject matter hereof and thereof, and
supersede any other written or oral negotiations, agreements, understandings,
representations or practices concerning such subject matter hereof (including
without limitation any employment agreement or offer letter extended by the
Company at any time). In the event of any conflict between the provisions hereof
and the provisions of the Confidential Information and Invention Assignment
Agreement the, provisions hereof shall control.
8. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given on
the date of delivery if delivered, or five days after mailing, if mailed first-
class mail, postage prepaid, return receipt requested, or delivered to a
nationwide overnight delivery service charges prepaid, return receipt requested,
to the following addresses:
(a) If to the Company: Internet Extra Corporation
131 Steuart Street, Fourth Floor
San Francisco, CA 94105
Attention: Gregory R. Raifman
(b) If to you: To the address for notice set forth on the
signature page hereto or to such other
address as any party hereto may hereafter
designate by notice given as herein provided.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California without giving effect to principles
regarding conflict of laws. Any action or proceeding brought by any party
against another arising out of or related to this Agreement shall be brought in
a state or federal court of competent subject matter jurisdiction located within
Santa Clara County in the State of California, and each of the parties to this
Agreement consents to the personal jurisdiction of those courts.
10. Arbitration. In the event of any dispute or claim relating to or
arising out of our employment relationship, you and the Company agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information.
-6-
<PAGE>
11. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by the Company and you nor
shall any covenant or provision of this Agreement be waived except by an
instrument in writing signed by the party against whom enforcement of such
waiver is sought.
12. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
13. Effect of Headings. The section headings herein are for convenience
only and shall not effect the construction or interpretation of the Agreement.
14. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to either party upon any breach or default of the other
party hereto shall impair any such right, power or remedy of such non-defaulting
party, nor shall it be construed to be a waiver of any such breach or default or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of a breach or default be deemed to be a waiver
of any other breach or default.
15. Rules of Construction. You and the Company each acknowledge that they
have been represented by, or had an opportunity to consult with, competent
counsel during the negotiation and execution of this Agreement and therefore,
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in any agreement will be construed against the party
drafting such agreement.
[The remainder of this page is intentionally left blank.]
<PAGE>
To indicate your acceptance of the terms of this Agreement, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements, whether written or oral.
We look forward to working with you at Internet Extra Corporation.
Sincerely,
Internet Extra Corporation
/s/ Gregory R. Raifman
---------------------------------------
Gregory R. Raifman
Chief Executive Officer
ACCEPTED AND AGREED TO this
____ day of March, 1999.
/s/ Ruiqing "Barclay" Jiang
- ----------------------------
Ruiqing "Barclay" Jiang
Address for notices:
_________________________________
_________________________________
_________________________________
Enclosures: Duplicate Original Letter
Confidential Information and Invention Assignment Agreement
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE>
INTERNET EXTRA CORPORATION
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Internet Extra Corporation, its
subsidiaries, affiliates, successors or assigns (collectively, the "Company"),
and in consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company. I agree to the following:
1. Confidential Information.
------------------------
(a) Company Information. I agree at all times during the term of my
-------------------
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer, vendor and contractor lists and
customers (including, but not limited to, customers of the Company on whom I
called or with whom I became acquainted during the term of my employment),
markets, software, developments, inventions, processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing,
finances or other business information disclosed to me by the Company either
directly or indirectly in writing, orally or by drawings or observation of parts
or equipment. I further understand that Confidential Information does not
include any of the foregoing items which has become publicly known and made
generally available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
---------------------------
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring into the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
<PAGE>
2. Inventions.
----------
(a) Inventions Retained and Licensed. I have attached hereto, as
--------------------------------
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a Company product, process or machine a Prior Invention owned by me or in
which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make full
------------------------
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to any and all inventions, original works
of authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of the Company (collectively referred to as "Inventions"), except as
provided in Section 2(f) below. I further acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of and during the period of my employment with the Company and which are
protectable by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to
----------------------------------------
the United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
----------------------------------
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my
<PAGE>
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of my mental or physical incapacity
or for any other reason to secure my signature to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering Inventions or original works of authorship assigned to the Company as
above, then I hereby irrevocably designate and appoint the Company and its duly
authorized officers and agents as my agent and attorney in fact, to act for and
in my behalf and stead to execute and file any such applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by me.
(f) Exception to Assignments. I understand that the provisions of
------------------------
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet the criteria in
California Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
3. Conflicting Employment. I agree that, during the term of my employment
----------------------
with the Company, I will not engage in any other employment, occupation,
consulting other business activity directly related to the business in which the
Company and/or its customers are now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
4. At Will Employment. I understand that my employment with the Company
------------------
is "at will" and is for no specified term. As a result, I understand that the
Company can terminate my employment at any time and that, similarly, I am free
to terminate my employment with the Company at any time.
5. Returning Company Documents. I agree that, at the time of leaving the
---------------------------
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I
agree to sign and deliver the "Termination Certification" attached hereto as
Exhibit C.
6. Notification to New Employer. In the event that I leave the employ of
----------------------------
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve (12)
-------------------------
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to
<PAGE>
solicit, induce, recruit, encourage or take away employees of the Company,
either for myself or for any other person or entity.
8. Conflict of Interest Guidelines. I agree to diligently adhere to the
-------------------------------
Conflict of Interest Guidelines attached as Exhibit D hereto.
9. Representations. I agree to execute any proper oath or verify any
---------------
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary 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 oral or written agreement in
conflict herewith.
10. Arbitration and Equitable Relief.
--------------------------------
(a) Arbitration. Except as provided in Section 10(b) below, I agree
-----------
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 1, 2, 3, and 5 herein. Accordingly, I agree that
if I breach any of such Sections, the Company will have available, in addition
to any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief, and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
------------------
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
-----------------------------------------------
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification for
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged.
<PAGE>
Any subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) 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.
INTERNET EXTRA CORPORATION
By:________________________________
Name
Title
AGREED TO AND ACCEPTED:
Signature
Date:
Witness
<PAGE>
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number or
Title Date Brief Description
----- ---- -----------------
______ No inventions or improvements
______ Additional Sheets Attached
Signature of Employee:
Print Name of Employee:
Date:_________________________
<PAGE>
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, 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 employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE>
EXHIBIT C
---------
INTERNET EXTRA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Internet Extra Corporation, its subsidiaries, affiliates,
successors or assigns (collectively, the "Company").
I further certify that I have complied with all the terms of the Company's
Employment, Confidential Information and Invention Assignment Agreement signed
by me, including the reporting of any inventions and original works of
authorship (as defined therein), conceived or made by me (solely or jointly with
others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not directly or indirectly solicit,
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce, recruit,
encourage or take away any employees of the Company, either for myself or for
any other person or entity.
Date:
______________________________________
(Employee's Signature)
______________________________________
(Type/Print Employee's Name)
<PAGE>
EXHIBIT D
---------
INTERNET EXTRA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of Internet Extra Corporation, its subsidiaries,
affiliates, successors or assigns (collectively, the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the
President and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.
3. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
4. Initiating or approving any form of personal or social harassment of
employees.
5. Investing or holding outside directorships in suppliers, customers or
competing companies, including financial speculation, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
6. Borrowing from or lending to employees, customers or suppliers.
7. Acquiring a real estate interest adverse to the Company.
8. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
9. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
10. Making any unlawful agreements with distributors with respect to
prices.
<PAGE>
11. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
12. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
<PAGE>
EXHIBIT 10.11
August 6, 1999
VIA OVERNIGHT MAIL
- ------------------
Ms. Sandra L. Abbott
131 Sherland Avenue
Mountain View, CA 94043
Re: Terms of Employment Offer with MediaPlex, Inc.
----------------------------------------------
Dear Sandra:
MediaPlex, Inc., (the "Company"), a wholly owned subsidiary of Internet
Extra Corporation ("IEC"), is pleased to offer you the position described below.
This letter sets forth the terms and conditions of your employment with the
Company.
I. Description of Employment Position and Responsibilities. You will
-------------------------------------------------------
serve in the position of Senior Vice President and Chief Financial Officer. By
executing this agreement, you agree to assume and discharge such duties and
responsibilities as are commensurate with this position and such other duties
and responsibilities that are assigned to you from time to time by the Company's
Board of Directors, Chief Executive Officer, or your then supervisor. During
the term of your employment, you shall devote your full time, skill and
attention to your duties and responsibilities and shall perform them faithfully,
diligently and competently. In addition, you shall comply with and be bound by
the operating policies, procedures and practices of the Company in effect from
time to time during your employment.
II. Employment Considerations.
-------------------------
2.1 At-Will Employment. You acknowledge that your employment with
------------------
the Company is for an unspecified duration that constitutes at-will employment,
and that either you or the Company can terminate this relationship at any time,
with or without cause and without notice.
2.2 Employment Eligibility. Your employment is contingent on your
----------------------
submission to the Company of satisfactory original documentation to verify your
identity and eligibility for employment in the United States.
III. Compensation.
------------
3.1 Base Salary. In consideration of your services, effective August
-----------
23, 1999, you will be paid an annual base salary of $170,000.00 (One Hundred and
Seventy Thousand Dollars and no Cents), payable no less frequently than on a
monthly basis in accordance with the Company's standard payroll practices. Your
base salary, in conjunction with your performance evaluation, is normally
renewed annually by the appropriate management of the Company.
<PAGE>
Ms. Sandra L. Abbott
August 6, 1999
Page 2 of 5
3.2 Incentive Compensation. In addition to your base salary, you may
----------------------
be entitled to participate in such incentive compensation plan that may be
adopted by the Company in its sole discretion. You understand that the adoption
of any such plan, the eligibility and measurement criteria and all other terms
shall be at the sole discretion of the Company. Currently, it is anticipated
that you will be eligible to receive a bonus of up to 15% (Fifteen Percent) of
your Base Salary upon the achievement of certain milestones to be established by
the Company's Board of Directors or Chief Executive Officer within thirty (30)
days of your date of commencement with the Company.
3.3 Termination. If your employment is terminated by the Company for
-----------
any reason, with or without cause, or if you resign your employment voluntarily,
no compensation or other payments will be paid or provided to you for periods
following the date when such a termination of employment is effective, provided
that any rights you may have under the benefit plans of the Company shall be
determined under the provisions of those plans. If your employment terminates
as a result of your death or disability, no compensation or payments will be
made to you other than those to which you may otherwise be entitled under the
benefit plans of the Company.
IV. Additional Benefits.
-------------------
4.1 Health Insurance/Vacation/Benefit Plans. You will be entitled to
---------------------------------------
receive the standard employee benefits made available by the Company to its
employees to the full extent of your eligibility therefor. You shall be
entitled to two (2) weeks of paid vacation per year; the terms and conditions of
your vacation benefits shall be in accordance with the Company's vacation policy
in effect at that time. During your employment, you shall be permitted, to the
extent eligible, to participate in any group medical, dental, life insurance and
disability insurance plans, or similar benefit plan of the Company that is
available to employees generally. Participation in any such plan shall be
consistent with your rate of compensation to the extent that compensation is a
determinative factor with respect to coverage under any such plan.
4.2 Reimbursed Expenses. The Company shall reimburse you for all
-------------------
reasonable expenses actually incurred or paid by you in the performance of your
services on behalf of the Company, upon prior authorization and approval in
accordance with the Company's expense reimbursement policy as from time to time
in effect.
4.3 Stock Options. Pursuant to Board approval, and under the terms
-------------
and conditions of the Company's Stock Option Plan and Stock Option Agreement,
including the stock vesting provisions contained therein, you will be granted an
option to purchase 350,000 (Three Hundred Fifty Thousand) shares of common stock
of the Company. The Company Stock Option Plan, including the Stock Option
Agreement, will be sent to you separately.
<PAGE>
Ms. Sandra L. Abbott
August 6, 1999
Page 3 of 5
V. Intellectual Property Rights/Confidential Information.
-----------------------------------------------------
5.1 Valuable Trade Secrets. You agree that the Company is the owner
----------------------
of valuable trade secrets, client, vendor, customer and contractor lists and
other confidential and proprietary information. As such, you agree that your
employment is contingent upon your execution of, and delivery to, the Company of
a Confidential Information and Invention Assignment Agreement ("Intellectual
Property Agreement") in the standard form utilized by the Company.
5.2 Additional Confidential Information. You agree to maintain the
-----------------------------------
confidentiality of all elements of this Agreement, agreeing to an absolute
prohibition on any disclosure or use of such information in any fashion, with
the exception of discussions with your supervisor or myself, and Messrs. Jon
Edwards, Walter Haefeker, and Tim Favia and Ms. Joy Fauvre. As you are well
aware the maintenance of confidentiality of this kind of information is critical
to our organization.
5.3 Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in this Section as well as Sections 1, 2, 3, and 5 of the
Intellectual Property Agreement. Accordingly, I agree that if I breach any of
such Sections, the Company will have available, in addition to any other right
or remedy available, the right to obtain an injunction from a court of competent
jurisdiction restraining such breach or threatened breach and to specific
performance of any such provision of this Agreement. I further agree that no
bond or other security shall be required in obtaining, such equitable relief and
I hereby consent to the issuance of such injunction and to the ordering of
specific performance.
VI. Non-Competition/Conflicting Employment. You agree that, during the
--------------------------------------
term of your employment with the Company, you will not engage in any other
employment, occupation, consulting or other business activity directly related
to the business in which the Company and/or its customers are now involved or
become involved during the term of your employment, nor will you engage in any
other activities that conflict with your obligations to the Company.
VII. Arbitration. Except as otherwise provided in the Intellectual
-----------
Property Agreement described above, it is agreed that any dispute or controversy
arising out of or relating to any interpretation, construction, performance or
breach of this Agreement, shall be exclusively settled by arbitration to be held
in San Francisco County, California, in accordance with the rules then in effect
of the American Arbitration Association. The arbitrator may grant injunctions
or other relief in such dispute or controversy. The decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.
Judgement may be entered on the arbitrator's decision in any court having
jurisdiction. Each party shall pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
<PAGE>
Ms. Sandra L. Abbott
August 6, 1999
Page 4 of 5
VIII. General Provisions.
------------------
8.1 Governing Law. This offer letter will be governed by the laws of
-------------
the State of California, applicable to agreements made and to be performed
entirely within such state.
8.2 Entire Agreement. This offer letter sets forth the entire
----------------
agreement and understanding between the Company and you relating to your
employment and supersedes all prior verbal discussion and written agreements
between us. Any subsequent change or changes in your duties, salary or other
compensation will not affect the validity or scope of this agreement. Any
change to the at-will term of this agreement must be executed in writing and
signed by you and the President of the Company.
8.3 Successors/Assigns. This agreement will be binding upon your
------------------
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company and its respective successors and assigns.
<PAGE>
Ms. Sandra L. Abbott
August 6, 1999
Page 5 of 5
Please acknowledge and confirm your acceptance of this letter by signing
and returning the enclosed copy of this offer letter, and the Confidential
Information and Invention Assignment Agreement as soon as possible. If you have
any questions about this offer letter, please call me directly.
MEDIAPLEX, INC.
By: /s/ Gregory R. Raifman
--------------------------
Gregory R. Raifman
Chief Executive Officer
ACCEPTANCE:
I accept the terms of my employment with MediaPlex, Inc. as set forth
herein. I understand that this offer letter does not constitute a contract of
employment for any specified period of time, and that my employment relationship
may be terminated by either party, with or without cause and with or without
notice.
Ms. Sandra L. Abbott
/s/ Sandra L. Abbott
- ---------------------------
___________________________
Date
<PAGE>
INTERNET EXTRA CORPORATION
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1999 Stock Plan
shall have the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Ms. Sandra L. Abbott
131 Sherland Avenue
Mountain View, CA 94043
The undersigned Optionee ("Optionee") has been granted an Option to
purchase Common Stock of the Company, subject to the terms and conditions of the
Plan and this Option Agreement, as follows:
<TABLE>
<S> <C>
Grant Number ___________________________________________
Date of Grant August 23, 1999
-------------------------------------------
Vesting Commencement Date August 23, 1999 or earlier upon date employment
-----------------------------------------------
Exercise Price per Share $3.25
-------------------------------------------
Total Number of Shares Granted 350,000
-------------------------------------------
Total Exercise Price $ 1,137,500
-------------------------------------------
Type of Option: X Incentive Stock Option
----------
__________ Nonstatutory Stock Option
Term/Expiration Date: August 23, 2009
------------------------------------------
Vesting Schedule:
----------------
</TABLE>
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
Twenty-five percent (25%) of the Shares subject to the Option shall vest on
the one (1) year anniversary of the Vesting Commencement Date and 1/48 of the
total number of Shares subject to the Option shall vest on the last day of each
month thereafter.
<PAGE>
Change of Control: Subject to Section 11 of Part II herein, in the event
-----------------
that both of the following occur: (i) a Change of Control (as defined herein)
and (ii) Optionee is terminated from the Company without Cause (as defined
herein), or Optionee's position in the Company is reduced below that of Chief
Financial Officer, either of which is without her approval, then Options held by
Optionee set out herein, in addition to any Options already vested, shall, as of
the date of Optionee's termination from the Company, be released from any and
all vesting restrictions established by the Company.
A Change of Control is defined to occur when an entity not currently owning
more than fifty percent (50%) of the Company's securities directly or indirectly
becomes the "beneficial owner" of (i) securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company's then
outstanding securities, except that, in the event that one or more underwriters
of a public offering of the Company's stock retain such percentage prior to a
distribution of such stock, such ownership shall not be deemed a Change of
Control or (ii) acquires within a twelve (12) consecutive month period during
the term of this Agreement more than one-third in value of the gross assets of
the Company or (iii) a merger or reorganization of the Company with another
corporation, unless any of the holders of shares of voting stock of the Company
immediately prior to such merger or reorganization will beneficially own,
immediately after consummation thereof, more than fifty percent (50%) of the
voting stock of the Company or the surviving corporation in such merger or
reorganization, will own more than fifty percent (50%) of the voting stock of
the Company or the surviving corporation in such merger or reorganization.
"Cause" shall mean (i) willful breach or neglect by Optionee to
substantially perform his duties under his Employment Offer, dated August 6,
1999 ("Employment Agreement"); (ii) a violation of any significant written
policy or procedure of the Company or such willful misconduct for which the
Company could incur civil liability to any other employee or third party, or be
assessed a fine or penalty by a government agency; (iii) an arrest, indictment
or commission of a misdemeanor involving moral turpitude or of a felony; or (iv)
a material misrepresentation, in the application for employment with the
Company, or in any resume or other information (oral or written) furnished in
connection therewith, of qualifications, employment history, academic
performance or achievements or other information relevant to the ability to
perform the duties for which Optionee was hired. An act, or failure to act, by
Optionee without good faith shall be considered "willful."
Termination Period:
------------------
This Option shall be exercisable for one month after Optionee ceases to be
a Service Provider. Upon Optionee's death or Disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the
-2-
<PAGE>
number of Shares set forth in the Notice of Grant, at the exercise price per
Share set forth in the Notice of Grant (the "Exercise Price"), and subject to
the terms and conditions of the Plan, which is incorporated herein by reference.
Subject to Section 14(c) of the Plan, in the event of a conflict between the
terms and conditions of the Plan and this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code. Nevertheless, to the extent that it exceeds the
$100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery
------------------
of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
---------
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit B
---------
and shall read the applicable rules of the Commissioner of Corporations attached
to such Investment Representation Statement.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
-3-
<PAGE>
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, and may
not be exercised if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
Applicable Law.
7. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of NSO. There may be a regular federal income tax
---------------
liability upon the exercise of an NSO. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
-4-
<PAGE>
(b) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and at least two years after the Date of Grant, any gain
realized on disposition of the Shares will also be treated as long-term capital
gain for federal income tax purposes. If Shares purchased under an ISO are
disposed of within one year after exercise or two years after the Date of Grant,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between the
Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the
date of exercise, or (2) the sale price of the Shares. Any additional gain will
be taxed as capital gain, short-term or long-term depending on the period that
the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
-5-
<PAGE>
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE INTERNET EXTRA CORPORATION
_______________________ _______________________
Signature By
_______________________ _______________________
Print Name Title
_______________________
_______________________
Residence Address
-6-
<PAGE>
EXHIBIT 10.13
INTERNET EXTRA CORPORATION
INVESTORS' RIGHTS AGREEMENT
This Investors' Rights Agreement (the "Agreement") is made as of this 30th
day of July, 1999 by and among Internet Extra Corporation, a California
corporation (the "Company"), and the undersigned holders of the Company's
securities (the "Investors").
RECITALS
A. Each of the Investors is a party to the Series C Preferred Stock
Purchase Agreement dated on even date herewith (the "Series C Agreement"),
pursuant to which such Investors are purchasing shares of Series C Preferred
Stock of the Company (the "Series C Preferred").
B. In connection with the purchase and sale of the Series C Preferred,
the Company desires to provide for certain rights of the Investors with respect
to information about the Company and registration of the Common Stock issued
upon conversion of the Series C Preferred according to the terms of this
Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Investors and the Company as follows:
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
successor agency.
"Holder" shall mean any holder of outstanding Registrable Securities
which have not been sold to the public, but only if such holder is an Investor
or transferee or assignee of the registration rights as permitted by Section 15
hereof.
"Registrable Securities" shall mean (i) any shares of the Company's
Common Stock issued or issuable upon the conversion of the Series C Preferred;
and (ii) any Common Stock of the Company issued or issuable with respect of any
stock described in clause (i) above; provided, however, that any shares
described in clause (i) or (ii) above which have been resold to the public shall
cease to be Registrable Securities upon such resale.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE>
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 5, 6 and 9 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof (or any similar
legend).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and expenses of counsel for any selling Holders.
2. Restrictions on Transferability. The Restricted Securities shall not
-------------------------------
be transferable except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder of Restricted Securities will cause any proposed
transferee of the Restricted Securities held by such Holder to agree to take and
hold such Restricted Securities subject to the provisions and upon the
conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Series C
------------------
Preferred, (ii) shares of the Company's Common Stock issued upon conversion of
the Series C Preferred, and (iii) any other securities issued in respect of the
Series C Preferred and Common Stock issued upon conversion of the Series C
Preferred shall (unless otherwise permitted by the provisions of Section 4 below
or upon the sale of such shares pursuant to an effective registration statement)
be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
4. Notice of Proposed Transfers. The Holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and shall, if the Company so
-2-
<PAGE>
requests, be accompanied (except in transactions in compliance with Rule 144) by
either (i) an unqualified written opinion of legal counsel who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "No Action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder to the
Company; provided, however, that no opinion or No Action letter need be obtained
with respect to a transfer to (A) a partner, active or retired, of a Holder of
Restricted Securities, (B) the estate of any such partner, (C) an "affiliate" of
a Holder of Restricted Securities as that term is defined in Rule 405
promulgated by the Commission under the Securities Act, (D) to any officer,
director or principal shareholder or member thereof, where such Holder is a
corporation or a limited liability company or (E) the spouse, children,
grandchildren or spouse of such children or grandchildren of any Holder or to
trusts for the benefit of any Holder or such persons, if the transferee agrees
to be subject to the terms hereof. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear the appropriate restrictive
legend set forth in Section 3 above, except that such certificate shall not bear
such restrictive legend if in the opinion of counsel for the Company or in the
written opinion of counsel retained by a Holder at such Holder's expense and
reasonably satisfactory to the Company such legend is not required in order to
establish compliance with any provisions of the Securities Act.
5. Requested Registration.
----------------------
(a) Request for Registration. If at any time after the effective date
------------------------
of the first registration statement filed by the Company covering the
underwritten offering of any of its securities to the general public, the
Company shall receive from any Holder or group of Holders holding at least 25%
of the Registrable Securities a written request that the Company effect any
registration, qualification or compliance with respect to at least 25% of the
Registrable Securities, or such lesser number of shares of Registrable
Securities provided that the aggregate proceeds of such offering (after
deduction for Selling Expenses) exceed $5,500,000, the Company will:
(x) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(y) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 20 days after receipt of such written notice from the
Company;
-3-
<PAGE>
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 5:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(B) After the Company has effected two such registrations pursuant to
this Section 5(a), such registrations have been declared or ordered effective
and the securities offered pursuant to such registration have been sold; or
(C) Within six months following the effective date of any other
registration statement previously filed by the Company.
Subject to the foregoing clauses (A), (B) and (C), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
any Holder or Holders. If, however, the Company shall furnish to the Holder or
Holders requesting a registration statement pursuant to this Section 5 a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Holder or Holders requesting such registration; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.
(b) Underwriting. If the Holders intend to distribute the Registrable
------------
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to Section 5(a) and
the Company shall include such information in the written notice referred to in
Section 5(a)(x). The right of any Holder to registration pursuant to Section 5
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Holders
requesting registration pursuant to Section 5(a)) to the extent provided herein.
A Holder may elect to include in such underwriting all or part of the
Registrable Securities held by such Holder.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Holders requesting registration. Notwithstanding any
other provision of this Section 5, if the managing underwriter advises the
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then, subject to the provisions of Section 5(a), the
Company shall so advise all Holders and the number of shares of Registrable
Securities and other securities that may be included in the registration and
underwriting shall be allocated among all Holders requesting inclusion in the
registration in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities and other securities requested
-4-
<PAGE>
by such Holders at the time of filing to be included the registration statement;
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting. No Registrable Securities and
other securities excluded from the underwriting by reason of the managing
underwriter's marketing limitation shall be included in such registration. If
less that 75% of Registrable Securities requested to be included in a
registration by all Holders requesting registration are included in such
registration, then each Holder requesting registration shall be entitled to an
additional demand registration right pursuant to the terms of Section 5(a).
If any Holder of Registrable Securities and other securities disapproves of
the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the other Holders.
The Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such Registrable Securities a greater number of Registrable Securities held by
other Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 5(b). If the
registration does not become effective due to the withdrawal of Registrable
Securities, then either (1) the Holders requesting registration shall reimburse
the Company for expenses incurred in complying with the request or (2) the
aborted registration shall be treated as effected for purposes of Section
5(a)(B); provided that, in the event that such withdrawal is based upon material
adverse information relating to the Company that is different from the
information known or available (upon request from the Company or otherwise) to
the Holders requesting registration at the time of their request for
registration under Section 5, such registration shall not be treated as a
counted registration for purposes of Section 5(a)(B) hereof, even though the
Holders do not bear the Registration Expenses for such aborted registration.
6. Company Registration.
--------------------
(a) Notice of Registration. If the Company shall determine to
----------------------
register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, including the Company's initial public offering but excluding any
registration relating solely to (a) employee benefit plans or shares issued
pursuant thereto, (b) a Rule 145 transaction, or (c) an exchange transaction
involving Rule 144A securities, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 15 days after receipt of such written notice from the
Company, by any Holder or Holders, provided that the Company may limit on a pro
rata basis based on the number of shares proposed to be registered by each
Holder, to the extent so advised by the underwriters, the amount of Registrable
Securities to be included in the registration by the Holders, or may exclude, to
the extent so advised by the underwriters, such Registrable Securities entirely
from such
-5-
<PAGE>
registration; and provided, further, that if Registrable Securities are excluded
entirely from the registration, no securities other than the securities being
registered by the Company may be included in the registration.
(b) In all registered public offerings, whether underwritten or not,
the amount of Registrable Securities of Holders which are included in such
registration, in accordance with the limitations set forth in Section 6(a)(ii)
above, shall be allocated to the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities which would be
held by each of such Holders requesting registration assuming conversion by such
Holders of all outstanding shares of Series C Preferred requested to be included
by them as of the date of the notice given pursuant to this Section 6.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with up to two registrations pursuant to Section 5(a) and any
registration pursuant to Section 6 shall be borne by the Company. Registration
Expenses incurred in connection with any registration pursuant to Section 9
shall be borne by the Company and the Holders of the Registrable Securities
being so registered pro rata. All Selling Expenses relating to securities
registered by the Holders shall be borne by the Holders of such securities pro
rata on the basis of the number of shares so registered.
8. Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for
a period of 120 days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that such 120-day period shall be extended for
a period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed; and
(d) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
9. Registration on Form S-3. In addition to the rights set forth in
-------------------------
Section 5 and Section 6, if a Holder or Holders holding at least 25% of the
Registrable Securities requests that the Company file a registration statement
on Form S-3 (or any successor thereto) for a public offering of shares of
Registrable Securities the anticipated aggregate price to the public of which
would exceed $1,000,000,
-6-
<PAGE>
and the Company is a registrant entitled to use Form S-3 to register securities
for such an offering, the Company shall use good faith efforts to cause such
shares to be registered for the offering on such form (or any successor
thereto). A Holder or group of Holders is entitled to an unlimited number of
Form S-3 registrations; provided, however, that the Company shall be required to
file no more than one (1) such registration statement during any 12-month
period; provided further, that if the Company shall furnish to the Holder or
Holders requesting a registration statement pursuant to this Section 9 a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Holder or Holders requesting such registration; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.
10. Termination and Modification of Registration Rights.
---------------------------------------------------
(a) The registration rights granted pursuant to this Agreement shall
terminate (i) as to all Holders on the fifth anniversary of the closing of the
Company's initial public offering and (ii) as to any Holder, at such time after
the Company's initial public offering as the Holder would be able to sell all of
the Registrable Securities held by such Holder under Rule 144 promulgated under
the Securities Act in any three month period.
(b) The Company shall not, without the prior written consent of the
Holders of not less than a majority of the Registrable Securities then held by
Holders, enter into any agreement with any holder or prospective holder of any
securities of the Company that are or were New Securities, as defined below,
which would allow such holder or prospective holder to include such securities
in any registration filed under Sections 5, 6 or 9 hereof other than rights
subordinate to the rights of the Holders hereunder.
11. Lockup Agreement. Each Holder of Registrable Securities and each
----------------
transferee pursuant to Section 15 hereof agrees, in connection with registration
of Registrable Securities or other securities of the Company, upon request of
the Company (if the Company shall be registering shares for its own account) and
the underwriters managing any underwritten offering of the Company's securities
(a) not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company (if the Company shall be registering shares for its own account) and
such underwriters, for such period of time (not to exceed 180 days in the case
of the Company's initial registered public offering or 90 days in the case of
any other such registered offering by the Company) from the effective date of
such registration as the Company and the underwriters may specify and (b) to
enter into a separate written agreement with such underwriters to that effect;
provided, that such obligations shall not apply to any registration of shares of
capital stock for any employee benefit plan on Form S-1 or Form S-8 or any
successor form or to any registration relating to a Commission Rule 145
transaction on Form S-4 or any successor form. Each Holder agrees that the
Company may instruct its transfer agent to place stop transfer notations in its
records to enforce the provisions of this Section 11. Notwithstanding anything
herein to the contrary, the foregoing shall not restrict Goldman, Sachs & Co.
and its affiliates from
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<PAGE>
engaging in any brokerage, investment advisory, financial advisory, anti-raid
advisory, merger advisory, financing, asset management, trading, market making,
arbitrage an other similar activities conducted in the ordinary course of its or
its affiliates' business, so long as such activities are not conducted in
respect of the securities of the Company purchased pursuant to the Series C
Agreement.
12. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners and such Holder's legal
counsel and independent accountants, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action; provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or 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, and will reimburse the Company, such Holders, such directors,
officers, legal counsel, independent accountants, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with
-8-
<PAGE>
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders hereunder shall be limited to an amount equal to the gross proceeds
before expenses and commissions to each such Holder of Registrable Securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 12
(each an "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided, further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Agreement, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is impaired as a result of such failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the written consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 12 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations.
Notwithstanding the provisions of this Section 12, an Indemnifying Party that is
a selling Holder of Registrable Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Indemnifying Party exceeds the amount of any damages that such Indemnifying
Party has otherwise been required to pay by reason of such untrue or alleged
untrue statement of omission or alleged omission. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. No person adjudged 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 adjudged guilty of
such fraudulent misrepresentation.
-9-
<PAGE>
13. Information by Holder. The Holder or Holders of Registrable
----------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement.
14. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its all reasonable commercial efforts to then file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements);
(c) Furnish to Holders of Registrable Securities forthwith upon
request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), and of the Securities Act and
the Securities Exchange Act of 1934 (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Holder of Registrable Securities may reasonably request in availing itself of
any rule or regulation of the Commission allowing such Holder to sell any such
securities without registration.
15. Transfer of Registration Rights. The right to cause the Company to
-------------------------------
register securities granted the Investors shall be transferable to (A) a
transferee or assignee who acquires at least 500,000 shares of Series C
Preferred (or Common Stock issuable upon conversion of the Series C Preferred)
(adjusted for stock splits, reverse stock splits or similar events after the
date hereof); provided, that the Company is given written notice of such
assignment prior to such assignment, or (B) the transferee of all of an
Investor's shares of Series C Preferred Stock (or Common Stock issued upon
conversion of the Series C Preferred), if an Investor holds less than 500,000
shares of Series C Preferred (or Common Stock issued on conversion of the Series
C Preferred) (adjusted for stock splits, reverse stock splits or similar events)
provided, that the Company is given written notice of such assignment prior to
such assignment.
16. Company Covenants. The Company hereby covenants and agrees as
-----------------
follows:
-10-
<PAGE>
16.1 Annual and Quarterly Financial Information. The Company will
------------------------------------------
furnish the following reports to each Investor for so long as such Investor is a
holder of any shares of Series C Preferred (or Common Stock issued upon
conversion of the Series C Preferred):
(a) As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
national standing selected by the Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within 45 days thereafter, an unaudited consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and unaudited consolidated statements of income and unaudited
consolidated statements of cash flows of the Company and its subsidiaries for
such period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the corresponding periods of
the previous fiscal year, all in reasonable detail and signed, subject to
changes resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company.
16.2 Assignment of Rights to Financial Information. The rights to
---------------------------------------------
receive information pursuant to Section 16.1 shall be transferable to any
transferee of shares of Series C Preferred (or Common Stock issued upon
conversion thereof) acquiring at least 100,000 shares (adjusted for stock
splits, reverse stock splits or similar events after the date hereof); provided,
however, that (i) the Company must receive written notice prior to the time of
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such information rights are
being assigned, and (ii) the transferee or assignee of such rights must not be a
person reasonably deemed by the Board of Directors of the Company (in a writing
delivered to the transferor) to be a competitor of the Company.
16.3 Termination of Covenants. Notwithstanding anything to the
------------------------
contrary set forth herein, the covenants set forth in this Section 16 (except
for those set forth in Section 16.3 which shall survive) shall terminate and be
of no further force or effect after the date upon which the first registration
statement filed by the Company under the Securities Act in connection with an
underwritten public offering of its securities first becomes effective.
17. Option to Purchase New Securities. The Company hereby grants to each
---------------------------------
Investor (an "Eligible Purchaser") an option to purchase, pro rata, all (or any
part) of "New Securities" (as defined in this Section 17) that the Company may,
from time to time propose to sell and issue. Such pro rata share, for purposes
of this option, is the ratio of (X) the number of shares of Common Stock then
owned by such Series C Purchaser or issuable upon the conversion of the Series C
Preferred then owned by such Series C Purchaser (including shares issuable upon
exercise of options or warrants held by such Series C
-11-
<PAGE>
Purchaser), to (Y) the total number of shares of Common Stock then outstanding,
after giving effect to the conversion of all outstanding convertible securities
(including the Preferred Stock) and the exercise of all outstanding options.
This option shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock and Preferred Stock
of the Company whether or not authorized on the date hereof, and rights,
options, or warrants to purchase Common Stock or Preferred Stock and securities
of any type whatsoever that are, or may become, convertible into Common Stock or
Preferred Stock; provided, however, that "New Securities" does not include the
following:
(i) shares of Common Stock, or options to purchase shares of
Common Stock, issued or granted from and after the date hereof to officers,
directors, employees and consultants of the corporation pursuant to employee
incentive plans, or other stock compensation arrangements, the principal purpose
of which is not to raise equity funding, and which (x) have been approved by the
Board of Directors of the corporation and which are not in excess of an
aggregate of 1,000,000 shares or (y) have been approved by the Board of
Directors of the corporation including the vote of the director elected by the
holders of Series C Preferred;
(ii) shares of Series C Preferred being issued or which may
become issuable pursuant to the Series C Agreement;
(iii) shares of Common Stock issuable upon conversion of the
Series C Preferred;
(iv) securities of the Company offered to the public pursuant
to a registration statement filed under the Securities Act subsequent to a
Series C Qualified IPO, as defined in the Company's Articles of Incorporation;
(v) securities of the Company issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets, or other reorganization whereby the Company
owns more than fifty percent (50%) of the voting power of such other
corporation;
(vi) securities of the Company issued to vendors or customers
or in connection with equipment lease financing transactions or bank financing
transactions the principal purpose of which is not to raise equity funding;
(vii) securities of the Company issued to corporate partners,
in connection with other strategic alliances or any other transaction if the
Board of Directors unanimously determines that any such transaction is not
principally for the purpose of raising equity funding; or
(viii) shares of Common Stock or Preferred Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
Company.
-12-
<PAGE>
(b) In the event that Company proposes to undertake an issuance of
New Securities, it shall give each Eligible Purchaser written notice of its
intention, describing the type of New Securities, the price to be paid by the
purchaser or purchasers thereof, the valuation of the Company upon which such
price was computed, the identity of the proposed purchasers of such New
Securities, and the general terms upon which the Company proposes to issue the
same. Each Eligible Purchaser shall have ten (10) business days after receipt of
such notice to agree to purchase its pro rata share of such New Securities at
the price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
If any Eligible Purchaser fails to agree to purchase its full pro rata share
within such ten (10) business day period, the Company will give the Eligible
Purchasers who did so agree (the "Electing Purchasers") notice of the number of
shares which were not subscribed for. Such notice may be by telephone if
followed by written confirmation within two days. The Electing Purchasers shall
have ten (10) business days from the date of such notice to agree to purchase
pro rata all of the New Securities not purchased by such non-purchasing Eligible
Purchasers.
(c) In the event that Eligible Purchasers fail to exercise in full
the option within the period specified above, the Company shall have seventy-
five (75) days thereafter to sell (or enter into an agreement pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
forty-five (45) days from the date of said agreement) the New Securities
respecting which the rights of the Eligible Purchasers were not exercised at the
same price, the same valuation, to no purchasers other than those specified in
the Company's notice, and upon the same terms (except for immaterial changes
unrelated to the price, the valuation or the identity of the purchasers) as
specified in the Company's notice. In the event the Company has not sold the New
Securities within such seventy-five (75) day period (or sold and issued New
Securities in accordance with the foregoing within forty-five (45) days from the
date of such agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such New Securities to the Eligible
Purchasers in the manner provided above.
(d) The option granted under this Section 17 shall expire upon the
earlier of (i) five years from the date hereof, or (ii) the closing of a Series
C Qualified IPO, as defined in the Company's Articles of Incorporation.
(e) This option is nonassignable except to any transferee to whom
registration rights may be transferred pursuant to Section 15 of this Agreement.
18. Confidentiality. For a period of three years from the date hereof,
---------------
each Investor shall not disclose to any third party or to the public in general
the terms and conditions of the Series C Preferred Stock Purchase Agreement and
each of the documents entered into in connection therewith, including their
existence, except (a) to the extent the discloser concludes in good faith and
upon advice of counsel that such disclosure is required by applicable law,
regulation or regulatory authority, (b) to the discloser's directors,
shareholders, auditors, accountants, lenders, bankers, underwriters, attorney
and bona fide prospective equity investors and (c) to any potential permitted
transferees in respect of transfers to be made pursuant to Sections 4 or 15 of
this Agreement; provided, that any such potential permitted transferees agree in
writing to be bound by the confidentiality provisions hereof. In the event of
any disclosure authorized by the preceding sentence, the disclosing party shall
use reasonable efforts to obtain confidential treatment of the information and
materials so disclosed.
-13-
<PAGE>
19. Additional Parties. The parties hereto agree that additional holders
------------------
of securities of the Company may, with the consent only of the Company, be added
as parties to this Agreement with respect to any or all securities of the
Company held by them, and shall thereupon be deemed for all purposes "Investors"
hereunder. Any such additional party shall execute a counterpart of this
Agreement, and upon execution by such additional party and by the Company, shall
be considered an Investor for purposes of this Agreement. Upon such execution,
all shares of Common Stock of the Company issuable upon conversion of any
securities held by such additional party shall be deemed for all purposes
"Registrable Securities" hereunder. Notwithstanding the foregoing, from and
after the date of this Agreement, the Company shall not without the prior
written consent of each Investor, enter into any other agreement with any holder
or prospective holder of any securities of the Company providing for the grant
to such holder of rights superior to or on parity with those granted herein.
20. Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California, without giving effect to the conflicts of
laws principals thereof.
21. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors (including,
without limitation, any successors by reason of a reincorporation of the
Company), assigns, heirs, executors and administrators of the parties hereto.
22. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to a Investor, to such Investor address
set forth on the signature page to this Agreement or at such other address as
such Investor shall have furnished to the Company in writing, (b) if to any
other holder of any Registrable Securities, to such address as such holder shall
have furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Registrable Securities who has so furnished an address to the Company, or (c) if
to the Company, to its address set forth on the signature page of this Agreement
to the attention of the Corporate Secretary, or at such other address as the
Company shall have furnished to the Holders.
23. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together constitute one instrument.
24. Amendment. Any provision of this Agreement may be amended, waived or
---------
modified upon the written consent of the (i) Company, and (ii) holders of a
majority of the Registrable Securities; provided, that any such amendment,
waiver or modification applies by its terms to each holder. Any Investor may
waive any of his or its rights or the Company's obligations hereunder without
obtaining the consent of any other person.
-14-
<PAGE>
25. Delay or Omissions. No delay or omission to exercise any right, power
------------------
or remedy accruing to any Purchaser, upon any breach or default of the Company
under this Agreement, shall impair any such right, power or remedy of such
holder nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
26. Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
27. Agreement to Vote for Series C Director. Each Investor hereby agrees
---------------------------------------
to vote its shares of Series C Preferred in favor of the person nominated by
Pequot Private Equity Fund, L.P. to be the member of the Company's Board of
Directors elected by the holders of Series C Preferred pursuant to Section
IV.A.(5) of the Company's Articles of Incorporation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY: INVESTORS
INTERNET EXTRA CORPORATION
BROOKSIDE CAPITAL PARTNERS FUND, L.P.
By: /s/ Gregory R. Raifman
----------------------------------
Gregory R. Raifman, Chief Executive
Officer By: /s/ D. J. Ferrante
---------------------------------
Print Name: D. J. Ferrante
-------------------------
R&E HOLDINGS LLC Title: Managing Director
------------------------------
PEQUOT PRIVATE EQUITY FUND, L.P.
By: /s/ Gregory R. Raifman
----------------------------------
Print Name: Gregory R. Raifman By: /s/ David J. Malat
-------------------------- ---------------------------------
Title: Managing Partner Print Name: David J. Malat
------------------------------- -------------------------
Title: CFO
------------------------------
/s/ Arron J. Alter PEQUOT OFFSHORE PRIVATE EQUITY FUND,
- --------------------------------------
Aaron J. Alter INC.
By: /s/ David J. Malat
---------------------------------
Print Name: David J. Malat
-------------------------
/s/ David J. Segre Title: CFO
- -------------------------------------- ------------------------------
David J. Segre
-15-
<PAGE>
CELERITY PARTNERS
/s/ Kenneth M. Siegel By: /s/ David Benham
- -------------------------------------- ---------------------------------
Kenneth M. Siegel Print Name: David Benham
-------------------------
Title: ______________________________
THE GOLDMAN SACHS GROUP, INC.
/s/ Stephen Berke
- -------------------------------------- By: /s/ Joseph Gleberman
Stephen Berke ---------------------------------
Print Name: Joseph Gleberman
-------------------------
Title: Vice President
------------------------------
/s/ Tamara Mattison
- --------------------------------------
Tamara Mattison STONE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp., its
general partner
By: /s/ Joseph Gleberman
---------------------------------
/s/ Peter F. Stewart Print Name: Joseph Gleberman
- -------------------------------------- -------------------------
Peter F. Stewart Title: Vice President
------------------------------
/s/ Linda Cuny
- --------------------------------------
Linda Cuny
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
[FIRST AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT]
<PAGE>
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 July 30, 1999, except for Note 10, which is as of September 1,
1999, relating to the financial statements of Mediaplex, Inc., which appears in
such Registration Statement. We also consent to the references to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
September 2, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated July 23, 19999, relating to the financial statements and financial
statement schedule of Netranscent Software, Inc., which appear in such
Registration Statement. We also consent to the reference to us under the
headings "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
September 2, 1999
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 DEC-31-1998
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<INCOME-PRETAX> (5,186,121) (2,019,212)
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<INCOME-CONTINUING> (5,186,121) (2,019,212)
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<NET-INCOME> 5,186,121 (2,019,212)
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