<PAGE> 1
As filed with the Securities and Exchange Commission on August 6, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEBVAN GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C> <C>
CALIFORNIA* 7389 77-0446411
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1241 EAST HILLSDALE BOULEVARD, SUITE 210
FOSTER CITY, CALIFORNIA 94404
(650) 524-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LOUIS H. BORDERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WEBVAN GROUP, INC.
1241 EAST HILLSDALE BOULEVARD, SUITE 210
FOSTER CITY, CALIFORNIA 94404
(650) 524-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JEFFREY D. SAPER, ESQ. WILLIAM H. HINMAN, ESQ.
J. ROBERT SUFFOLETTA, ESQ. DANIELLE CARBONE, ESQ.
ROBERT G. DAY, ESQ. SHEARMAN & STERLING
ANIL P. PATEL, ESQ. 1550 EL CAMINO REAL, SUITE 100
WILSON SONSINI GOODRICH & ROSATI MENLO PARK, CALIFORNIA 94025
PROFESSIONAL CORPORATION (650) 330-2200
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement is declared effective.
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 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 number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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TITLE OF EACH CLASS OF AMOUNT TO BE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) REGISTRATION FEE
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Common Stock, par value $0.0001 per share $345,000,000 $95,910
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee, in accordance with Rule 457(o) promulgated under the Securities Act of
1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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* The Registrant's state of incorporation will be changed to Delaware prior to
the closing of the public offering contemplated by this Registration
Statement.
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject To Completion. Dated , 1999.
Shares
WEBVAN GROUP, INC.
Common Stock
LOGO
-------------------------
This is an initial public offering of shares of common stock of Webvan
Group, Inc. This prospectus relates to an offering of shares in the
United States. In addition, shares are being offered outside the
United States in an international offering. All of the shares of
common stock are being sold by Webvan.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . Application has been made for quotation
of the common stock on the Nasdaq National Market under the symbol "WBVN".
See "Risk Factors" beginning on page 4 to read about factors you should
consider before buying shares of the common stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Webvan........................ $ $
</TABLE>
To the extent that the U.S. underwriters sell more than shares of
common stock, the U.S. underwriters have the option to purchase up to an
additional shares from Webvan at the initial public offering
price, less the underwriting discount. The international underwriters may
similarly purchase up to an additional shares from Webvan.
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
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GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
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Prospectus dated , 1999.
<PAGE> 3
PROSPECTUS SUMMARY
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, especially "Risk Factors" beginning on page 4.
WEBVAN GROUP, INC.
Webvan is an Internet retailer providing same-day delivery of consumer
products through an innovative proprietary business design that integrates our
Webstore, distribution center and delivery system. We provide our customers with
a personalized shopping experience that we believe is superior to traditional
retailers and current online retailers. Our current product offerings are
principally focused on food, non-prescription drug products and general
merchandise.
The Webvan shopping experience provides customers with:
- the convenience of same-day direct home delivery within a
customer-selected 30-minute window;
- a broad selection of high quality fresh foods including produce, hand-cut
meats, fresh fish and live lobsters, as well as non-perishable grocery
items, chef-prepared meals, fine wines, premium quality cigars and
non-prescription drug products;
- prices that are generally at or below everyday supermarket prices;
- reliable and friendly delivery service by Webvan employees, free of
charge for orders over $50; and
- an easy to navigate Webstore offering user-friendly features including
the ability to create personalized shopping lists.
Consumers are increasingly seeking a grocery shopping solution which will
allow them to save time and effort without sacrificing the wide selection, high
quality and low cost they have come to expect from supermarkets. While a number
of retailers have attempted to address this opportunity by offering grocery
items online, we believe that their lack of a scalable distribution system and
inability to realize cost efficiencies has made it difficult for these online
grocers to deliver a high quality, low cost shopping solution in an efficient
manner.
Our interactive Webstore and highly automated distribution center were
designed to provide high degrees of scalability and efficiency, enabling us to
operate with much lower overhead and reduced headcount compared to traditional
supermarkets. Our initial distribution center, which serves the San Francisco
Bay Area, was designed to process product volumes equivalent to approximately 18
supermarkets with substantially lower labor and real estate costs than these
stores would typically require.
Our proprietary distribution system and enabling software were designed to
optimize our inbound and outbound delivery operations and were created to be
readily replicated to facilitate our expansion into multiple geographic markets.
We commenced the commercial launch of our operations in the San Francisco Bay
Area in June 1999 and plan to open a second distribution center in Atlanta,
Georgia in the second quarter of 2000 and to further expand with distribution
centers in other key geographic markets. In July 1999, we entered into an
agreement with Bechtel Corporation for the construction of up to 26 additional
distribution centers on a turnkey basis over the next three years.
We believe that our innovative business design is the first solution to
adequately address the "last mile" problem of e-commerce fulfillment by
providing a highly efficient means of delivering goods directly and rapidly to
consumers. We also believe that the significant capital investment in our
business system provides us with a competitive advantage compared to traditional
supermarkets and other online grocers.
1
<PAGE> 4
THE OFFERING
Common stock offered by Webvan........ shares
Common stock to be outstanding after
this offering......................... shares
Proposed Nasdaq National Market
symbol................................ "WBVN"
Use of proceeds....................... Funding construction of and equipment
for distribution centers and for general
corporate purposes, including working
capital. See "Use of Proceeds".
The shares of common stock to be outstanding after the offering are stated
as of June 30, 1999 and include 205,760,277 shares of common stock to be issued
upon automatic conversion of all outstanding shares of our preferred stock upon
completion of this offering. The shares of common stock to be outstanding
exclude:
- 50,150,910 shares of common stock reserved for issuance under our stock
option plan, of which 40,433,688 shares at a weighted average exercise
price of $0.27 were subject to outstanding options,
- 2,397,804 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $0.91.
All of the information in this prospectus assumes that the following
transactions will be effected prior to the closing of this offering: (a) a three
for two split of our outstanding shares of common stock and preferred stock, (b)
the amendment of our articles of incorporation to increase our authorized common
stock to 800,000,000 shares, and to authorize 10,000,000 shares of undesignated
preferred stock, (c) the conversion of all outstanding shares of preferred stock
into shares of common stock and (d) no exercise of the underwriters'
overallotment option.
-------------------------
CORPORATE INFORMATION
We were incorporated in California in December 1996 and will change our
state of incorporation to Delaware prior to the date of this prospectus. Our
principal executive offices are located at 1241 East Hillsdale Boulevard, Suite
210, Foster City, California 94404, and our telephone number at that address is
(650) 524-2200. Our address on the World Wide Web is http://www.webvan.com. The
reference to our web site does not incorporate by reference the information
contained at our web site into this prospectus.
2
<PAGE> 5
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17,
1996 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -------------------------
CONSOLIDATED STATEMENTS OF 1997 1998 1998 1999
OPERATIONS DATA: -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales.............................. $ -- $ -- $ -- $ 395
Cost of goods sold..................... -- -- -- 419
----------- ----------- ----------- -----------
Gross profit......................... -- -- -- (24)
Operating expenses:
Software development................. 244 3,010 765 6,308
General and administrative........... 2,612 8,825 2,739 23,656
Amortization of deferred stock
compensation...................... -- 1,060 43 3,953
----------- ----------- ----------- -----------
Total operating expenses.......... 2,856 12,895 3,547 33,917
----------- ----------- ----------- -----------
Interest income........................ 85 923 285 1,641
Interest expense....................... 69 32 -- 1,194
----------- ----------- ----------- -----------
Net interest income.................. 16 891 285 447
----------- ----------- ----------- -----------
Net loss............................... $ (2,840) $ (12,004) $ (3,262) $ (33,494)
=========== =========== =========== ===========
Basic and diluted net loss per share... $ (0.08) $ (0.18) $ (0.05) $ (0.46)
=========== =========== =========== ===========
Shares used in calculating basic and
diluted net loss per share........... 37,406,785 67,114,048 65,075,326 73,280,388
=========== =========== =========== ===========
OTHER OPERATING DATA:
Capital expenditures................... $ 265 $ 32,669 $ 4,283 $ 25,948
Depreciation and amortization.......... 57 1,323 93 6,626
</TABLE>
The following table provides a consolidated summary of our balance sheets.
The Pro Forma column reflects the closing of the sale of an aggregate of
21,670,605 shares of our Series D preferred stock in July and August 1999 for
approximately $275.0 million and the conversion of all outstanding shares of
preferred stock into common stock immediately prior to the closing of this
offering. The Pro Forma As Adjusted column also reflects the issuance of the
shares of common stock pursuant to this offering.
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, ----------------------------------
---------------- PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents...................... $2,935 $13,839 $ 21,836 $296,736
Working capital........................... 7,693 10,923 31,773 306,673
Total assets.............................. 8,279 60,009 112,429 387,329
Long-term liabilities..................... 17 14,337 14,216 14,216
Total shareholders' equity................ 7,972 33,612 79,626 354,526
</TABLE>
3
<PAGE> 6
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before purchasing the common stock. The risks and uncertainties described below
are not the only ones facing our company. Additional risks and uncertainties
that we are unaware of or that we currently believe are not material also may
become important factors that may adversely affect our company in the future.
WE ARE AN EARLY-STAGE COMPANY AND WE EXPECT TO ENCOUNTER RISKS AND DIFFICULTIES
FREQUENTLY FACED BY EARLY-STAGE COMPANIES IN NEW AND RAPIDLY EVOLVING MARKETS.
We were incorporated in December 1996. From 1997 through May 1999, we were
focused on developing our Webstore and constructing and equipping our first
distribution center serving the San Francisco Bay Area. We did not begin
commercial operations until June 1999. Our limited operating history makes an
evaluation of our business and prospects very difficult. You must consider our
business and prospects in light of the risks and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets, such as e-commerce. These risks
and difficulties include, but are not limited to:
- an unproven business system;
- lack of sufficient customers, revenue or cash flow;
- difficulties in managing rapid growth;
- high capital expenditures; and
- lack of widespread acceptance of the Internet as a means of purchasing
groceries and other consumer products.
We cannot be certain that our business strategy will be successful or that
we will successfully address these risks. Our failure to address any of the
risks described above could have a material adverse effect on our business,
financial condition and results of operations.
WE HAVE DEVELOPED A NEW BUSINESS SYSTEM WHICH REMAINS SUBJECT TO A NUMBER OF
OPERATIONAL RISKS.
We have designed a new business system which integrates our Webstore,
highly automated distribution center and complex order fulfillment and delivery
operations. We have only been delivering products to customers commercially
since we launched our Webstore on June 2, 1999 and the daily volume of orders
that we have had to fulfill to date has been significantly below our designed
capacity and the levels that are necessary for us to achieve profitability. We
have voluntarily limited the number of customer orders accepted in any given
delivery window in an effort to ensure our ability to successfully execute those
orders. As a result, the success of our system in a high order volume
environment has yet to be proven. We cannot assure you that our business system
will be able to accommodate a significant increase in the number of customers
and orders. If we are unable to effectively accommodate substantial increases in
customer orders, we may lose existing customers or fail to add new customers.
Our innovative business design relies on the complex integration of
numerous software and hardware subsystems that utilize advanced algorithms to
manage the entire process from the receipt and processing of goods at our
distribution center to the picking, packing and delivery of these goods to
customers in a 30-minute delivery window. We have, from time to time,
experienced operational "bugs" which have resulted in order errors and delays in
deliveries. We expect bugs to occur from time to time and we cannot assure you
that our operations will not be adversely affected. The efficient and timely
execution of our business system is critical to consumer acceptance of our
service. If we are unable to meet customer demand or service expectations as a
result of operational issues, our ability to develop customer relationships that
result in repeat orders will be adversely affected.
4
<PAGE> 7
OUR SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY EXECUTE OUR EXPANSION PLANS.
A critical part of our business strategy is to expand our business by
opening additional distribution centers in new and existing markets to achieve
economies of scale and leverage our significant capital investment in our
proprietary business system. One of the key elements of our expansion strategy
is our proprietary business system and enabling software, which we created to be
readily replicated to facilitate our expansion into additional geographic
markets on a timely and cost-effective basis. Nonetheless, our business system
is extremely complex and we currently have only one distribution center. As a
result, we have not demonstrated whether our proprietary business system is in
fact readily and cost-effectively replicable. If this key element of our
expansion strategy fails, our business, financial condition and results of
operations could be materially adversely affected.
In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. We expect that our next 26 distribution centers following our Atlanta,
Georgia distribution center will be constructed by Bechtel pursuant to this
agreement. The success of our expansion program is highly dependent on the
success of our relationship with Bechtel and Bechtel's ability to perform its
obligations under the contract. We have no prior working relationship with
Bechtel and we cannot assure you that we will not encounter unexpected delays or
design problems in connection with the build-out of our distribution centers. If
our relationship with Bechtel fails for any reason, we would be forced to engage
another contractor, which would likely result in a significant delay in our
expansion plans.
In addition, our ability to expand successfully will depend upon a number
of factors, some of which are beyond our control. These factors include:
- the availability of appropriate and affordable sites that can accommodate
our distribution centers;
- our ability to successfully and cost-effectively hire and train qualified
employees to operate new distribution centers;
- our ability to develop relationships with local and regional
distributors, vendors and other product providers;
- acceptance of our product and service offerings;
- competition;
- our ability to integrate the operations of new distribution centers into
our existing operations;
- our ability to coordinate and manage distribution operations in multiple,
geographically distant locations; and
- our ability to establish and maintain adequate management and information
systems and financial controls.
We have no experience operating in any other regions, managing multiple
distribution centers or addressing the factors described above. Our failure to
successfully address these factors could have a material adverse effect on our
business, financial condition and results of operations.
WE ANTICIPATE FUTURE LOSSES AND NEGATIVE CASH FLOW.
We have experienced significant net losses and negative cash flow since our
inception. As of June 30, 1999, we had an accumulated deficit of $48.3 million.
We incurred net losses of $12.0 million for the fiscal year ended December 31,
1998 and $33.5 million for the six months ended
5
<PAGE> 8
June 30, 1999. We will continue to incur significant capital and operating
expenses over the next several years in connection with our planned expansion,
including:
- the continued expansion and development of operations at our existing
distribution center;
- the construction and operation of new distribution centers in additional
geographic markets;
- increases in personnel at our current and future distribution centers;
- brand development, marketing and other promotional activities;
- the continued development of our computer network, Webstore, warehouse
management and order fulfillment systems and delivery infrastructure; and
- the development of relationships with strategic business partners.
As a result, we expect to continue to have operating losses and negative cash
flow on a quarterly and annual basis for the foreseeable future. To achieve
profitability, we must accomplish the following objectives:
- substantially increase our number of customers and the number of orders
placed by our customers;
- generate a sufficient average order size;
- realize repeat orders from a significant number of customers;
- achieve favorable gross margins; and
- build additional distribution centers in new markets.
We cannot assure you that we will be able to achieve these objectives. If
we do achieve profitability, we cannot be certain that we would be able to
sustain or increase profitability on a quarterly or annual basis in the future.
If we cannot achieve or sustain profitability, we may not be able to meet our
working capital requirements, which would have a material adverse effect on our
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
WE FACE INTENSE COMPETITION FROM TRADITIONAL AND ONLINE RETAILERS OF GROCERY
PRODUCTS.
The grocery retailing market is extremely competitive. Local, regional, and
national food chains, independent food stores and markets, as well as online
grocery retailers comprise our principal competition, although we also face
substantial competition from convenience stores, liquor retailers, membership
warehouse clubs, specialty retailers, supercenters, and drugstore chains. Many
of our existing and potential competitors, particularly traditional grocers and
retailers, are larger and have substantially greater resources than we do. We
expect this competition will intensify as more traditional and online grocery
retailers offer competitive services.
Our initial distribution center in Oakland, California operates in the San
Francisco Bay Area market. In this market, we compete primarily with traditional
grocery retailers and with online grocers NetGrocer and Peapod. The number and
nature of competitors and the amount of competition we will experience will vary
by market area. In other markets, we expect to compete with these and other
online grocers. The principal competitive factors that affect our business are
location, breadth of product selection, quality, service, price and consumer
loyalty to traditional and online grocery retailers. If we fail to effectively
compete in any one of these areas, we may lose existing and potential customers
which would have a material adverse effect on our business, financial condition
and results of operations.
We also compete to retain customers once they have registered for Webvan's
services. Generally, online subscriber attrition rates, or the rates at which
subscribers cancel an online service, are high.
6
<PAGE> 9
High rates of customer attrition could have a material adverse effect on our
business, financial condition and results of operations.
WE RELY ON INCREASING CONSUMER ACCEPTANCE OF INTERNET GROCERY SHOPPING.
We rely solely on product orders received through our Webstore for sales.
The market for e-commerce is new and rapidly evolving, and it is uncertain
whether e-commerce will achieve and sustain high levels of demand and market
acceptance, particularly with respect to the grocery industry. Our success will
depend to a substantial extent on the willingness of consumers to increase their
use of online services as a method to buy groceries and other products and
services. Our success will also depend upon our vendors' acceptance of our
online service as a significant means to market and sell their products.
Moreover, our growth will depend on the extent to which an increasing number of
consumers own or have access to personal computers or other systems that can
access the Internet. If e-commerce in the grocery industry does not achieve high
levels of demand and market acceptance, our business will be materially
adversely affected.
WE NEED TO BUILD STRONG BRAND IDENTITY AND CUSTOMER LOYALTY TO BE SUCCESSFUL.
Since we only recently launched the Webvan brand, we currently do not have
strong brand identity or brand loyalty. We believe that establishing and
maintaining brand identity and brand loyalty is critical to attracting consumers
and vendors. Furthermore, we believe that the importance of brand loyalty will
increase with the proliferation of Internet retailers. In order to attract and
retain consumers and vendors, and respond to competitive pressures, we intend to
increase spending substantially to create and maintain brand loyalty among these
groups. We plan to accomplish this goal by expanding our current radio and
newspaper advertising campaigns and by conducting online and television
advertising campaigns. We believe that advertising rates, and the cost of our
advertising campaigns in particular, could increase substantially in the future.
If our branding efforts are not successful, our business, results of operations
and financial condition will be materially and adversely affected.
Promotion and enhancement of the Webvan brand will also depend on our
success in consistently providing a high-quality consumer experience for
purchasing groceries and other products. If consumers, other Internet users and
vendors do not perceive our service offerings to be of high quality, or if we
introduce new services that are not favorably received by these groups, the
value of the Webvan brand could be harmed. Any brand impairment or dilution
could decrease the attractiveness of Webvan to one or more of these groups,
which could materially and adversely affect our business, results of operations
and financial condition.
IF WE ARE UNABLE TO OBTAIN SUFFICIENT QUANTITIES OF PRODUCTS FROM OUR KEY
VENDORS, OUR NET SALES WOULD BE ADVERSELY AFFECTED.
We expect to derive a significant percentage of our net sales from
high-volume items, well-known brand name products and fresh foods. We source
products from a network of manufacturers, wholesalers and distributors. We
currently rely on national and regional distributors for a substantial portion
of our items. We also utilize premium specialty suppliers or local sources for
gourmet foods, farm fresh produce, fresh fish and meats. From time to time, we
may experience difficulty in obtaining sufficient product allocations from a key
vendor. In addition, our key vendors may establish their own online retailing
efforts, which may impact our ability to get sufficient product allocations from
these vendors. Many of our key vendors also supply products to the retail
grocery industry and our online competitors. If we are unable to obtain
sufficient quantities of products from our key vendors to meet customer demand,
our net sales and results of operations would be materially adversely affected.
7
<PAGE> 10
WE CURRENTLY OPERATE ONLY ONE DISTRIBUTION CENTER WHICH IS LOCATED IN THE SAN
FRANCISCO BAY AREA.
We currently operate only one distribution center, which is located in
Oakland, California and serves the San Francisco Bay Area. We do not expect to
begin operating a second distribution center until the second quarter of 2000.
Therefore, our business and operations would be materially adversely affected if
any of the following events affected our current distribution center or the San
Francisco Bay Area:
- prolonged power or equipment failures;
- disruptions in our web site, computer network, software and our order
fulfillment and delivery systems;
- disruptions in the transportation infrastructure including bridges,
tunnels and roads;
- refrigeration failures; or
- fires, floods, earthquakes or other disasters.
Since the San Francisco Bay Area is located in an earthquake-sensitive
area, we are particularly susceptible to the risk of damage to, or total
destruction of, our distribution center and the surrounding transportation
infrastructure caused by earthquakes. Although we maintain property damage and
business interruption insurance, the amount of this insurance may not be
sufficient to cover the total amount of any losses caused by any of those
events. In addition, this insurance would not cover any losses due to
interruptions in our business due to damage to or destruction of our
distribution center caused by earthquakes or major transportation infrastructure
disruptions or other events that do not occur on our premises.
WE MAY NEED SUBSTANTIAL ADDITIONAL CAPITAL TO FUND OUR PLANNED EXPANSION, AND WE
CANNOT BE SURE THAT ADDITIONAL FINANCING WILL BE AVAILABLE.
We require substantial amounts of working capital to fund our business. In
addition, the opening of new distribution centers and the continued development
of our order fulfillment and delivery systems requires significant amounts of
capital. Since our inception, we have experienced negative cash flow from
operations and expect to experience significant negative cash flow from
operations for the foreseeable future. In the past, we have funded our operating
losses and capital expenditures through proceeds from equity offerings, debt
financing and equipment leases. In addition to the proceeds from this offering,
we expect to require substantial additional capital to fund our expansion
program and operating expenses. We currently anticipate that the net proceeds of
this offering, together with our available funds, will be sufficient to meet our
anticipated needs for working capital and capital expenditures through the next
12 months. In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. Although the Company has no specific capital commitment under this
agreement, our expenditures under the contract are estimated to be approximately
$1.0 billion. Our future capital needs will be highly dependent on the number of
additional distribution centers we open, the timing of openings and the success
of our facilities once they are launched. Therefore, we may need to raise
additional capital to fund our planned expansion. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all. If we are unable to obtain sufficient additional capital when needed,
we could be forced to alter our business strategy, delay or abandon some of our
expansion plans or sell assets. Any of these events would have a material
adverse effect on our business, financial condition and results of operation. In
addition, if we raise additional funds through the issuance of equity,
equity-linked or debt securities, such securities may have rights, preferences
or privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution.
8
<PAGE> 11
OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT.
As a result of our limited operating history, it is difficult to accurately
forecast our revenue and we have no meaningful historical financial data upon
which to base planned operating expenses. We base our current and future expense
levels on our operating plans and estimates of future revenue, and our expenses
are dependent in large part upon our facilities and product costs. Sales and
operating results are difficult to forecast because they generally depend on the
growth of our customer base and the volume of the orders we receive, as well as
the mix of products sold. As a result, we may be unable to make accurate
financial forecasts and adjust our spending in a timely manner to compensate for
any unexpected revenue shortfall. This inability could cause our net losses in a
given quarter to be greater than expected and could have a material adverse
effect on our business, financial condition and results of operations.
OUR QUARTERLY OPERATING RESULTS ARE EXPECTED TO BE VOLATILE AND DIFFICULT TO
PREDICT.
Our quarterly operating results are expected to fluctuate significantly in
the future due to a variety of factors, some of which are outside of our
control. Some of the factors that may cause our operating results to fluctuate
include the following:
- the timing of our expansion plans as we construct and begin to operate
new distribution centers in additional geographic markets;
- changes in pricing policies or our product and service offerings;
- increases in personnel, marketing and other operating expenses to support
our anticipated growth;
- the mix of groceries and other products sold by us;
- our inability to obtain new customers or retain existing customers at
reasonable cost;
- our inability to manage our distribution and delivery operations to
handle significant increases in the number of customers and orders;
- our inability to adequately maintain, upgrade and develop our Webstore,
our computer network or the systems that we use to process customer
orders and payments;
- seasonal purchasing patterns of our customers;
- competitive factors; and
- technical difficulties, system or web site downtime or Internet
brownouts.
Due to these factors, we expect our operating results to be volatile and
difficult to predict. As a result, quarter-to-quarter comparisons of our
operating results may not be good indicators of our future performance. In
addition, it is possible that in any future quarter our operating results could
be below the expectations of securities analysts and investors. In that event,
the price of our common stock could decline, perhaps substantially.
IF WE EXPERIENCE PROBLEMS IN OUR DELIVERY OPERATIONS, OUR BUSINESS COULD BE
SERIOUSLY HARMED.
We use our own couriers to deliver products from our distribution center to
our local stations, and from the local stations to our customers. We are
therefore subject to the risks associated with our ability to provide delivery
services to meet our shipping needs, including potential labor activism or
employee strikes, inclement weather, disruptions in the transportation
infrastructure, including bridges, roads and traffic congestion. In addition,
our failure to deliver products to our customers in a timely and accurate manner
or to meet our targeted delivery times would harm our reputation and brand,
which would have a material adverse effect on our business, financial condition
and results of operations.
9
<PAGE> 12
OUR NET SALES WOULD BE HARMED IF OUR ONLINE SECURITY MEASURES FAIL.
Our relationships with our customers may be adversely affected if the
security measures that we use to protect their personal information, such as
credit card numbers, are ineffective. If, as a result, we lose many customers,
our net sales and results of operations would be harmed. We rely on security and
authentication technology to perform real-time credit card authorization and
verification with our bank. We cannot predict whether events or developments
will result in a compromise or breach of the technology we use to protect a
customer's personal information.
Furthermore, our computer servers may be vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions. We may need to expend
significant additional capital and other resources to protect against a security
breach or to alleviate problems caused by any breaches. We cannot assure you
that we can prevent all security breaches, and any failure to do so could have a
material adverse effect on our business, financial condition and results of
operations.
THE LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL, OR OUR FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE
WOULD SERIOUSLY HARM OUR BUSINESS.
The loss of the services of one or more of our key personnel could
seriously harm our business. We depend on the continued services and performance
of our senior management and other key personnel, particularly Louis H. Borders,
our founder, President and Chief Executive Officer. Our future success also
depends upon the continued service of our other executive officers and other key
software development, merchandising, marketing and support personnel. None of
our officers or key employees are bound by an employment agreement and our
relationships with these officers and key employees are at will. We currently
hold a "key person" life insurance policy in the amount of $2.0 million for Mr.
Borders, which expires in January 2000. However, this policy would not be
sufficient to compensate for the loss of the services of Mr. Borders.
Additionally, there are low levels of unemployment in the San Francisco Bay Area
and in many of the regions in which we plan to operate. These low levels of
unemployment have led to pressure on wage rates, which can make it more
difficult and costly for us to attract and retain qualified employees. The loss
of key personnel, or the failure to attract additional personnel, could have a
material adverse effect on our business, financial condition and results of
operations.
WE MAY NEED TO CHANGE THE MANNER IN WHICH WE CONDUCT OUR BUSINESS IF GOVERNMENT
REGULATION OF THE INTERNET INCREASES.
The adoption or modification of laws or regulations relating to the
Internet could adversely affect the manner in which we currently conduct our
business. In addition, the growth and development of the market for online
commerce may lead to more stringent consumer protection laws which may impose
additional burdens on us. Laws and regulations directly applicable to
communications or commerce over the Internet are becoming more prevalent. The
United States government recently enacted Internet laws regarding privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel and taxation
apply to the Internet. If we are required to comply with new regulations or new
interpretations of existing regulations, this compliance could have a material
adverse effect on our business, financial condition and results of operations.
WE ARE AFFECTED BY REGULATIONS APPLICABLE TO THE SALE OF FOOD, ALCOHOL AND
TOBACCO PRODUCTS.
It is uncertain whether the handling of certain food items in our
distribution facility, such as meat and fish, will subject us to regulation by
the United States Department of Agriculture, or USDA. Although we have designed
our food handling operations to comply with USDA regulations, we cannot
10
<PAGE> 13
assure you that the USDA will not require changes to our food handling
operations. We are subject to state and local regulations applicable to food,
alcohol and tobacco products. We will be required to obtain state licenses and
permits for the sale of alcohol and tobacco products in each location in which
we seek to open a distribution center. We cannot assure you that we will be able
to obtain any required permits or licenses in a timely manner, or at all. In
addition, the United States Congress is considering enacting legislation which
would restrict the interstate sale of alcoholic beverages over the Internet. We
will also be required to comply with local health regulations concerning the
preparation and packaging of our prepared meals and other food items. Any
applicable federal, state or local regulations or required permits or licenses
may cause us to incur substantial compliance costs or delay the availability of
certain items at one or more of our distribution centers. In addition, any
inquiry or investigation from a food regulatory authority could have a negative
impact on our reputation. Any of these events could have a material adverse
effect on our business, financial condition and results of operations.
IN THE FUTURE WE MAY FACE POTENTIAL PRODUCT LIABILITY CLAIMS.
We cannot assure you that the products that we deliver will be free from
contaminants. Grocery and other related products occasionally contain
contaminants due to inherent defects in the products or improper storage or
handling. If any of the products that we sell cause harm to any of our
customers, we could be subject to product liability lawsuits. If we are found
liable under a product liability claim, or even if we are required to defend
ourselves against such a claim, our reputation could suffer and customers may
substantially reduce their orders or stop ordering from us. Any of these events
could have a material adverse effect on our business, financial condition and
results of operations.
OUR NET SALES WOULD BE HARMED IF WE EXPERIENCE SIGNIFICANT CREDIT CARD FRAUD.
A failure to adequately control fraudulent credit card transactions would
harm our net sales and results of operations because we do not carry insurance
against this risk. We utilize technology to help us detect the fraudulent use of
credit card information. Nonetheless, we may suffer losses as a result of orders
placed with fraudulent credit card data even though the associated financial
institution approved payment of the orders. Under current credit card practices,
we are liable for fraudulent credit card transactions because we do not obtain a
cardholder's signature. Because we have had an extremely short operating
history, we cannot predict our future levels of bad debt expense.
IF THE PROTECTION OF OUR TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE, OUR
BUSINESS MAY BE SERIOUSLY HARMED.
We regard patent rights, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as important to our success. We rely
on patent, trademark and copyright law, trade secret protection and
confidentiality or license agreements with our employees, customers, partners
and others to protect our proprietary rights; however, the steps we take to
protect our proprietary rights may be inadequate. We currently have no patents.
We have filed, and from time to time expect to file, patent applications
directed to aspects of our proprietary technology. We cannot assure you that any
of these applications will be approved, that any issued patents will protect our
intellectual property or that any issued patents will not be challenged by third
parties. In addition, other parties may independently develop similar or
competing technology or design around any patents that may be issued to us. Our
failure to protect our proprietary rights could have a material adverse effect
on our business, financial condition and results of operations.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD RESULT IN THE
LOSS OF SIGNIFICANT RIGHTS.
Patent, trademark and other intellectual property rights are becoming
increasingly important to us and other e-commerce vendors. Many companies are
devoting significant resources to developing
11
<PAGE> 14
patents that could affect many aspects of our business. Other parties may assert
infringement or unfair competition claims against us. We cannot predict whether
third parties will assert claims of infringement against us, or whether these
assertions or prosecutions will harm our business. If we are forced to defend
ourselves against any of these claims, whether they are with or without merit or
are determined in our favor, then we may face costly litigation, diversion of
technical and management personnel, inability to use our current web site
technology, or product shipment delays. As a result of a dispute, we may have to
develop non-infringing technology or enter into royalty or licensing agreements.
These royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of patent
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, our business,
financial condition and results of operations may be materially adversely
affected.
ANY FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE SYSTEMS OF THIRD
PARTIES ON WHICH WE RELY COULD ADVERSELY AFFECT OUR BUSINESS.
Our communications hardware and certain of our other computer hardware
operations are located at the facilities of Exodus Communications, Inc. in Santa
Clara, California. The hardware for our warehouse management and materials
handling systems is maintained in our Oakland, California distribution center.
Fires, floods, earthquakes, power losses, telecommunications failures, break-ins
and similar events could damage these systems. Computer viruses, electronic
break-ins or other similar disruptive problems could also adversely affect our
Webstore. Our business could be adversely affected if our systems were affected
by any of these occurrences. Our insurance policies may not adequately
compensate us for any losses that may occur due to any failures or interruptions
in our systems.
Our Webstore may experience slower response times or decreased traffic
capacity for a variety of reasons. In addition, our users depend on Internet
service providers, online service providers and other web site operators for
access to our Webstore. Many of them have experienced significant outages in the
past, and could experience outages, delays and other difficulties due to system
failures unrelated to our systems. Moreover, the Internet infrastructure may not
be able to support continued growth in its use. Any of these problems could have
a material adverse effect on our business, financial condition and results of
operations.
WE MAY BE ADVERSELY IMPACTED IF THE SOFTWARE, COMPUTER TECHNOLOGY AND OTHER
SYSTEMS WE USE ARE NOT YEAR 2000 COMPLIANT.
Any failure of our material systems, our vendors' material systems or the
Internet to be year 2000 compliant would have material adverse consequences for
us. These consequences would include difficulties in operating our Webstore
effectively, taking product orders, making product deliveries or conducting
other fundamental parts of our business. We also depend on the year 2000
compliance of the computer systems and financial services used by consumers. A
significant disruption in the ability of consumers to reliably access the
Internet, especially our Webstore, or to use their credit cards would have an
adverse effect on demand for our services and would have a material adverse
effect on our business, financial condition and results of operations.
WE MAY BE SUBJECT TO LIABILITY FOR THE INTERNET CONTENT THAT WE PUBLISH.
As a publisher of online content, we face potential liability for
negligence, copyright, patent or trademark infringement, or other claims based
on the nature and content of materials that we publish or distribute. If we face
liability, particularly liability that is not covered by our insurance or is in
excess of our insurance coverage, then our reputation and our business may
suffer. In the past, plaintiffs have brought these types of claims and sometimes
successfully litigated them against online services. Although we carry general
liability insurance, our insurance may not cover claims of these types or may be
inadequate to indemnify us for all liability that may be imposed on us.
12
<PAGE> 15
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL EXERCISE SIGNIFICANT
CONTROL OVER WEBVAN.
As of June 30, 1999 and giving effect to the issuance of 21,670,605 shares
of Series D preferred stock in July and August 1999, our executive officers and
directors and their affiliates beneficially owned, in the aggregate,
approximately 59.2% of our outstanding common stock, assuming conversion of all
preferred stock into common stock. As a result, these stockholders are able to
exercise significant control over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, which could delay or prevent someone from acquiring or merging
with us. See "Principal Stockholders".
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US DUE TO ANTI-TAKEOVER
PROVISIONS.
Our charter documents authorize 10,000,000 shares of undesignated preferred
stock, create a classified board of directors, eliminate the right of
stockholders to call a special meeting of stockholders, require stockholders to
comply with advance notice requirements before raising a matter at a meeting of
stockholders and eliminate the ability of stockholders to take action by written
consent. As a Delaware corporation, we are also subject to the Delaware
antitakeover statute contained in Section 203 of the Delaware General
Corporation Law. These provisions could make it more difficult for a third party
to acquire us, even if doing so would be beneficial to our stockholders. See
"Description of Capital Stock".
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND AN ACTIVE TRADING MARKET
MAY NOT DEVELOP FOLLOWING THIS OFFERING.
Before this offering, there has not been a public market for our common
stock and the trading market price for our common stock may decline below the
initial public offering price. We cannot predict the extent to which a market
will develop or how liquid that market might become. The initial public offering
price for the shares of our common stock will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices that will prevail in the trading market. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE FOLLOWING THIS OFFERING.
The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly Internet-related
companies, have been highly volatile. You may not be able to resell your shares
at or above the initial public offering price. The price at which our common
stock will trade after this offering is likely to be volatile and may fluctuate
substantially due to factors such as:
- our historical and anticipated quarterly and annual operating results;
- variations between our actual results and the expectations of investors
and analysts;
- announcements by us or others and developments affecting our business;
- investor perceptions of our company and comparable public companies; and
- conditions and trends in e-commerce industries.
In the past, securities class action litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. This type of litigation could result in substantial costs and a
diversion of management's attention and resources.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could decline. Based on shares outstanding as of June 30, 1999, upon completion
of this offering we will have outstanding shares of
13
<PAGE> 16
common stock, assuming no exercise of the underwriters' over-allotment option.
Of these shares, the shares of our common stock sold in this
offering will be freely tradeable, without restriction, in the public market.
Our directors, officers and securityholders have entered into lock-up agreements
in connection with this offering generally providing that they will not offer,
sell, contract to sell or grant any option to purchase or otherwise dispose of
our common stock or any securities exercisable for or convertible into our
common stock without the prior written consent of Goldman, Sachs & Co. The
lock-up agreements will expire as to 15% of the shares held by each stockholder
beginning on the third day following the public release of Webvan's earnings for
the year ended December 31, 1999, as to an additional 25% of the shares
beginning 45 days thereafter and as to the remaining shares 180 days after the
date of this prospectus.
In addition, approximately 42.8 million shares under outstanding options
and warrants and approximately 9.7 million shares reserved for future issuance
under our stock option plan as of June 30, 1999 will be eligible for sale in the
public market subject to vesting, the expiration of lock-up agreements and
restrictions imposed under Rules 144 and 701 under the Securities Act. See
"Shares Eligible for Future Sale".
14
<PAGE> 17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of
the securities laws. These forward-looking statements are subject to a number of
risks and uncertainties, many of which are beyond our control. All statements,
other than statements of historical facts included in this prospectus, regarding
our strategy, future operations, financial position, estimated revenues,
projected costs, prospects, plans and objectives of management are
forward-looking statements. When used in this prospectus, the words "will",
"believe", "anticipate", "intend", "estimate", "expect", "project" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain such identifying words. All
forward-looking statements speak only as of the date of this prospectus. Neither
we nor the underwriters undertake any obligation to update or revise publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise. Although we believe that our plans, intentions and
expectations reflected in or suggested by the forward-looking statements we make
in this prospectus are reasonable, we can give no assurance that these plans,
intentions or expectations will be achieved. We disclose important factors that
could cause our actual results to differ materially from our expectations
("cautionary statements") under "Risk Factors" and elsewhere in this prospectus.
The cautionary statements qualify all forward-looking statements attributable to
us or persons acting on our behalf.
15
<PAGE> 18
USE OF PROCEEDS
The net proceeds we receive from the sale of the common stock offered
hereby will be approximately $ million, after deducting the underwriters'
discounts and commissions and expenses payable by us estimated at $ . We
expect to use the net proceeds from this offering principally to fund the
construction of and equipment for distribution centers in other geographic
markets. We also expect to use the proceeds for general corporate purposes,
including working capital and funding of our expected operating losses. We may
use a portion of the net proceeds to pursue possible acquisitions of
complementary businesses, technologies or products; however, we have no present
understandings, commitments or agreements with respect to any such transactions.
Pending use of such net proceeds for the above purposes, we intend to invest
such funds in short-term interest-bearing investment-grade securities.
DIVIDEND POLICY
We have not paid any dividends since our inception and do not intend to pay
any dividends on our capital stock in the foreseeable future.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth our cash and equivalents and capitalization
as of June 30, 1999: (a) on an actual basis, (b) on a pro forma basis after
giving effect to the closing of the sale of an aggregate of 21,670,605 shares of
our Series D-2 preferred stock in July and August 1999 for approximately $275.0
million and the conversion of each outstanding share of preferred stock into one
share of common stock upon the closing of this offering, and (c) on a pro forma
basis as adjusted for this offering and application of the net proceeds
therefrom. You should read this table in conjunction with our consolidated
financial statements and the notes to those statements appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Cash and equivalents........................................ $ 21,836 $296,736 $
======== ======== ========
Restricted cash............................................. $ 3,453 $ 3,453 $
======== ======== ========
Lease obligations, net of current portion................... 2,137 2,137
-------- -------- --------
Long term debt, net of current portion...................... 11,811 11,811
-------- -------- --------
Redeemable common stock..................................... 1,556 1,556 --
Shareholders' equity:
Convertible preferred stock:
Series A preferred stock, no par value; 112,635,168
shares authorized, actual, no shares authorized pro
forma and pro forma as adjusted; 112,635,168 shares
issued and outstanding, actual, no shares issued and
outstanding pro forma and pro forma as adjusted...... 10,759 -- --
Series B preferred stock, no par value; 41,814,000
shares authorized, actual, 2,700,696 shares
authorized pro forma, no shares authorized pro forma
as adjusted; 39,113,304 shares issued and
outstanding, actual, no shares issued and outstanding
pro forma and pro forma as adjusted(1)............... 34,834 -- --
Series C preferred stock, no par value; 34,601,616
shares authorized, actual, 2,260,416 shares
authorized pro forma, no shares authorized pro forma
as adjusted; 32,341,200 shares issued and
outstanding, actual, no shares issued and outstanding
pro forma and pro forma as adjusted(2)............... 72,776 -- --
Series D preferred stock, no par value; no shares
authorized, actual, 29,550,831 shares authorized, pro
forma, no shares authorized pro forma as adjusted; no
shares issued and outstanding, actual, pro forma and
pro forma as adjusted(3)............................. -- -- --
Preferred stock; no shares authorized, actual and pro
forma, 10,000,000 shares authorized pro forma as
adjusted; no shares issued and outstanding actual, pro
forma and pro forma as adjusted........................ -- -- --
Common stock; 450,000,000 shares authorized, actual and
pro forma, 800,000,000 shares authorized pro forma as
adjusted; 81,908,562 shares issued and outstanding,
actual, 287,668,839 shares issued and outstanding pro
forma, shares issued and outstanding pro
forma as adjusted(4)................................... 29,611 422,880
Additional paid-in capital................................ 3,829 3,829
Deferred compensation....................................... (23,790) (23,790)
Accumulated deficit......................................... (48,338) (48,338)
Accumulated other comprehensive income (loss)............... (55) (55)
-------- -------- --------
Total shareholders' equity........................ 79,626 354,526
-------- -------- --------
Total capitalization.............................. $ 95,130 $370,030 $
======== ======== ========
</TABLE>
17
<PAGE> 20
- -------------------------
(1) Excludes warrants to purchase an aggregate of 2,397,804 shares of Series B
preferred stock at a weighted average exercise price of $0.91 per share.
(2) Excludes (a) options to purchase 430,416 shares of Series C preferred stock
at an exercise price of $2.32 per share as of March 31, 1999 and (b) a
warrant to purchase up to 1,800,000 shares of our Series C preferred stock
at an exercise price of $2.32 per share issued in June 1999.
(3) On July 19, 1999, we authorized 25,610,718 shares of Series D-1 preferred
stock and 25,610,718 shares of Series D-2 preferred stock. In July and
August 1999, we issued 21,670,605 shares of Series D-2 preferred stock. Each
of these shares will automatically convert into one share of common stock
immediately prior to the closing of this offering. No shares of Series D-1
preferred stock are issued and outstanding, actual, pro forma and pro forma
as adjusted.
(4) Excludes 50,150,910 shares of common stock reserved for issuance under our
stock option plan, of which 40,433,688 shares at a weighted average exercise
price of $0.27 per share were subject to outstanding options as of June 30,
1999.
18
<PAGE> 21
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$352.8 million or $1.23 per share. Our pro forma net tangible book value per
share represents the amount of our total tangible assets reduced by the amount
of our total liabilities and divided by the total number of shares of common
stock outstanding after giving effect to the issuance of 21,670,605 shares of
Series D preferred stock in July and August 1999 and the automatic conversion of
all outstanding shares of our preferred stock. Dilution per share represents the
difference between the amount per share paid by investors of shares of common
stock in this offering and the pro forma net tangible book value per share of
common stock immediately after the completion of this offering. After giving
effect to the sale of the shares of common stock offered by us at
an assumed initial public offering price of $ per share, and after
deducting the underwriting discount and estimated offering expenses payable by
us, our pro forma as adjusted net tangible book value at June 30, 1999 would
have been approximately $ million or $ per share of common
stock. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution of
per share to new investors of common stock. The following table illustrates
this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of June 30,
1999................................................... $1.23
Increase per share attributable to new investors..........
-----
Pro forma as adjusted net tangible book value per share
after the offering........................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes on a pro forma as adjusted basis after
giving effect to the offering, as of June 30, 1999, the differences between the
existing stockholders and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid at an assumed initial public offering price of
$ per share, and after deducting the underwriting discount and estimated
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 287,668,839 % $426,268,000 % $1.48
New investors.................
----------- ----- ------------ -----
Totals........................ 100.0% 100.0%
=========== ===== ============ =====
</TABLE>
In the preceding tables, the shares of common stock outstanding exclude:
- 50,150,910 shares of common stock reserved for issuance under our
stock option plans, of which 40,433,688 shares at a weighted average
exercise price of $0.27 were subject to outstanding options as of June
30, 1999, and
- 2,397,804 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $0.91 as of June 30,
1999.
To the extent outstanding options and warrants are exercised, there will be
further dilution to new investors.
19
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus. The consolidated
statement of operations data for the period from inception through December 31,
1997 and for the year ended December 31, 1998, and the consolidated balance
sheet data as of December 31, 1997 and 1998 are derived from, and are qualified
by reference to, the audited consolidated financial statements and the notes to
those statements included in this prospectus that have been audited by Deloitte
& Touche LLP. The consolidated statement of operations data for the six months
ended June 30, 1998 and 1999, and the consolidated balance sheet data at June
30, 1999 are derived from unaudited consolidated financial statements that
include, in the opinion of our management, all adjustments, consisting of only
normal, recurring adjustments, necessary for a fair presentation of the
information set forth therein. The consolidated results of operations for the
six months ended June 30, 1999 are not necessarily indicative of future results.
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17,
1996 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------------
1997 1998 1998 1999
CONSOLIDATED STATEMENTS OF --------------- ------------ ----------- -----------
OPERATIONS DATA: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales....................................... $ -- $ -- $ -- $ 395
Cost of goods sold.............................. -- -- -- 419
----------- ----------- ----------- -----------
Gross profit (loss)........................... -- -- -- (24)
Operating expenses:
Software development.......................... 244 3,010 765 6,308
General and administrative.................... 2,612 8,825 2,739 23,656
Amortization of deferred stock compensation... -- 1,060 43 3,953
----------- ----------- ----------- -----------
Total operating expenses.................... 2,856 12,895 3,547 33,917
----------- ----------- ----------- -----------
Interest income................................. 85 923 285 1,641
Interest expense................................ 69 32 -- 1,194
----------- ----------- ----------- -----------
Net interest income........................... 16 891 285 447
----------- ----------- ----------- -----------
Net loss........................................ $ (2,840) $ (12,004) $ (3,262) $ (33,494)
=========== =========== =========== ===========
Basic and diluted net loss per share............ $ (0.08) $ (0.18) $ (0.05) $ (0.46)
=========== =========== =========== ===========
Shares used in calculating basic and diluted net
loss per share................................ 37,406,785 67,114,048 65,075,326 73,280,388
=========== =========== =========== ===========
OTHER OPERATING DATA:
Capital expenditures............................ $ 265 $ 32,669 $ 4,283 $ 25,948
Depreciation and amortization................... 57 1,323 93 6,626
</TABLE>
The following table provides a consolidated summary of our balance sheet.
The Pro Forma column reflects the closing of the sale of 21,670,605 shares of
our Series D-2 preferred stock in July and August 1999 for approximately $275.0
million and the conversion of all outstanding shares of preferred stock into
common stock immediately prior to the closing of this offering. The Pro Forma As
Adjusted column reflects the Pro Forma adjustments as well as the issuance of
the common stock pursuant to this offering.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
---------------- ------------------------------------
PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents................................. $2,935 $13,839 $ 21,836 $296,736
Working capital...................................... 7,693 10,923 31,773 306,673
Total assets......................................... 8,279 60,009 112,429 387,329
Long-term liabilities................................ 17 14,337 14,216 14,216
Total shareholder's equity........................... 7,972 33,612 79,626 354,526
</TABLE>
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<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for historical information, the discussion in this prospectus
contains forward-looking statements that involve risks and uncertainties.
Webvan's actual results could differ materially from those discussed in this
prospectus. Factors that could cause or contribute to these differences include,
but are not limited to, the risks discussed in the section entitled "Risk
Factors" in this prospectus. See "Special Note Regarding Forward-Looking
Statements".
OVERVIEW
Webvan is an Internet retailer providing same-day delivery of consumer
products through an innovative proprietary business design which integrates our
Webstore, distribution center and delivery system. We provide our customers with
a personalized shopping experience which we believe is superior to traditional
retailers and current online retailers. Our current product offerings are
principally focused on food, non-prescription drug products and general
merchandise.
We were incorporated in December 1996, commenced our grocery delivery
service in May 1999 on a test basis to approximately 1,100 persons and
commercially launched our Webstore on June 2, 1999. For the period from
inception to June 1999, our primary activities consisted of raising capital,
recruiting and training employees, developing our business strategy, designing a
business system to implement our strategy, constructing and equipping our first
distribution center and developing relationships with vendors. Since launching
our service, we have continued these operating activities and have also focused
on building sales momentum, establishing additional vendor relationships,
promoting our brand name and enhancing our distribution, delivery and customer
service operations. Our cost of sales and operating expenses have increased
significantly since inception and are expected to continue to increase. This
trend reflects the costs associated with our formation as well as increased
efforts to promote the Webvan brand, build market awareness, attract new
customers, recruit personnel, build our operating systems and develop our
Webstore and associated systems that we use to process customers' orders and
payments.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. These
risks for Webvan include an unproven business system and our ability to
successfully manage our growth. To address these risks, we must develop and
increase our customer base, implement and successfully execute our business and
marketing strategy, continue to develop and enhance our Webstore, order
fulfillment, transaction processing and delivery systems, respond to competitive
developments and attract, retain and motivate quality personnel.
Since our inception, we have incurred significant losses, and as of June
30, 1999 we had an accumulated deficit of $48.3 million. Our initial
distribution center in Oakland, California is currently operating at
substantially less than capacity. We believe that our success will depend on our
ability to:
- substantially increase the number of subscribers to our service and the
number of orders placed by our customers;
- realize repeat orders from a significant number of customers;
- achieve favorable gross margins; and
- rapidly expand and build out distribution centers in new markets.
To meet these challenges, we intend to continue to invest heavily in
marketing and promotion, distribution facilities and equipment, technology and
personnel. As a result, we expect to incur substantial operating losses for the
foreseeable future and the rate at which such losses will be incurred may
increase significantly from current levels. See "Risk Factors -- We anticipate
future losses and negative cash flow". In addition, our limited operating
history makes the prediction of future results of operations difficult, and
accordingly, we cannot assure you that we will achieve or
21
<PAGE> 24
sustain revenue growth or profitability. See "Risk Factors -- Our limited
operating history makes financial forecasting difficult".
In connection with the grant of certain stock options during 1998 and the
first six months of 1999, we recorded deferred compensation of $11.8 million and
$17.0 million and compensation expense of $1.1 million and $4.0 million,
respectively, representing the difference between the deemed fair value and the
option exercise price as determined by our Board of Directors on the date of
grant. In connection with the grant of certain options in July and August 1999,
we recorded additional deferred compensation of $41.4 million. The aggregate
deferred compensation of $70.3 million is being amortized over the four-year
vesting period of the underlying options and will result in compensation expense
of approximately $8.0 million in the quarter ended September 30, 1999.
In connection with the sale of 150,000 shares of common stock in July 1999
at a price of $3.33 per share, we will record expense based on changes in the
fair value of the stock using an option pricing model and such expense will be
charged as services are rendered to Webvan.
In connection with the warrant issued to Bechtel to purchase 1,800,000
shares of Series C preferred stock, the costs of services provided by Bechtel
will include recognition of the changes in the fair value of the warrant using
an option pricing model. These costs will be amortized over the estimated useful
lives of the facilities constructed by Bechtel.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1998
NET SALES
Net sales are comprised of the price of groceries and other products we
sell, net of returns and credits. We commenced our grocery delivery service in
May 1999 and commercially launched our Webstore in June 1999. We therefore did
not generate any net sales in 1997 or 1998. We recognize revenue at the time our
products are delivered to customers.
COST OF GOODS SOLD
Cost of goods sold includes the cost of the groceries and other products we
sell as well as payroll and related expenses for the preparation of our home
replacement meals. We did not have any cost of goods sold in 1997 or 1998.
OPERATING EXPENSES
SOFTWARE DEVELOPMENT. Software development expenses include the payroll and
related costs for the team of software developers directly involved in
programming our computer systems. Software development expenses increased to
$3.0 million in 1998 from $0.2 million for the period from inception through
1997. This increase was primarily attributable to increased staffing,
consultants and associated costs related to creating and enhancing the features
and functionality of our Webstore, and implementing our order fulfillment,
inventory, distribution, accounting and delivery systems used to process
customer orders. Certain costs have been capitalized in accordance with
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". We believe that continued investment in
software development is critical to attaining our strategic objectives and, as a
result, expect software development expenses to increase significantly in future
quarters.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include
costs related to fulfillment and delivery of products, real estate, technology
operations, equipment leases, merchandising, finance, marketing, and
professional services. General and administrative expenses increased to $8.8
million in 1998 from $2.6 million for the period from inception through 1997.
The payroll expense for general and administrative functions increased by $3.2
million due to an increase in
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<PAGE> 25
headcount. Consulting and professional expenses increased by $0.8 million,
primarily related to marketing. In addition, rent and facility charges increased
by $1.1 million due to the addition of corporate office space and the
distribution center in Oakland, California. We expect general and administrative
expenses to increase as we expand our staff and incur additional costs to
support the expected growth of our business.
INTEREST INCOME (EXPENSE), NET
Interest income (expense), net consists of earnings on our cash and cash
equivalents and interest payments on our loan and lease agreements. Net interest
income increased to $891,000 in 1998 from $16,000 in the period from inception
through 1997. This increase was primarily attributable to earnings on higher
average cash and cash equivalent balances during 1998.
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
NET SALES
We commenced our grocery delivery service in May 1999 on a test basis to
approximately 1,100 customers and commercially launched our Webstore in June
1999. We did not have any net sales in the six months ended June 30, 1998. We
had net sales of $395,000 in the six months ended June 30, 1999.
COST OF GOODS SOLD
We did not have any cost of goods sold in the six months ended June 30,
1998. Our cost of goods sold was $419,000 in the six months ended June 30, 1999.
OPERATING EXPENSES
SOFTWARE DEVELOPMENT. Software development expenses increased to $6.3
million in the six months ended June 30, 1999 from $0.8 million in the six
months ended June 30, 1998. This increase was primarily attributable to $1.9
million for increased staffing and $3.4 million for consultants related to
enhancing the features, content and functionality of our Webstore and increasing
the capacity of our order processing, distribution center and delivery systems.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $23.7 million for the six months ended June 30, 1999 from $2.7 million for
the six months ended June 30, 1998. General and administrative expenses
pertaining to our distribution center in the six months ended June 30, 1999
totalled $9.9 million, as compared to zero in the six months ended June 30,
1998. Payroll and related expenses increased by $6.6 million due to increased
staffing at headquarters. Consulting and professional fees related to logistical
and marketing development increased by $1.3 million. Rent and facility charges
increased by $0.8 million due to additional corporate office space.
INTEREST INCOME (EXPENSE) NET
Net interest income increased to $447,000 in the six months ended June 30,
1999 from $285,000 in the six months ended June 30, 1998 primarily due to
earnings on higher average cash and cash equivalent balances.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of preferred stock which through June 30, 1999 totaled $118.3 million (net
of issuance costs). Net cash used in operating activities was $22.6 million in
the six months ended June 30, 1999, $2.2 million in the year ended December 31,
1998, and $2.4 million in the period from inception through 1997. Net cash used
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<PAGE> 26
in operating activities for each of these periods primarily consisted of net
losses as well as increases in prepaid expenses, partially offset by increases
in accounts payable, accrued liabilities and depreciation and amortization. The
significant increase in working capital during 1998 was primarily due to
proceeds from the sale of our preferred stock. Net cash used in investing
activities was $42.7 million in the six months ended June 30, 1999, $39.0
million in the year ended December 31, 1998, and $5.3 million in the period from
inception through December 31, 1997. Net cash used in investing activities for
each of these periods primarily consisted of leasehold improvements and
purchases of equipment and systems, including computer equipment and fixtures
and furniture. Net cash provided by financing activities was $73.3 million in
the six months ended June 30, 1999, $52.1 million in the year ended December 31,
1998, and $10.7 million in the period from inception through 1997. Net cash
provided by financing activities during the six months ended June 30, 1999 and
the year ended December 31, 1998 primarily consisted of proceeds from the
issuance of preferred stock of $72.8 million and $34.8 million, respectively. As
of June 30, 1999, we had $21.8 million of cash and equivalents.
In July 1999, we entered into a preferred stock purchase agreement whereby
we sold an aggregate of 21,670,605 shares of our Series D-2 preferred stock to
investors at a price of $12.69 per share for an aggregate purchase price of
approximately $275.0 million.
As of June 30, 1999, our principal commitments consisted of obligations of
approximately $18.2 million outstanding under capital leases and loans. As of
June 30, 1999, we had capital commitments of approximately $20.0 million
principally related to the construction of and equipment for our Atlanta,
Georgia distribution center. We anticipate capital expenditures of up to $150
million for the 12 months ending June 30, 2000. We anticipate a substantial
increase in our capital expenditures and lease commitments to support our
anticipated growth in operations, systems and personnel. The launch of each
distribution center will require us to commit to additional lease obligations
and to purchase equipment and install leasehold improvements.
In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. Although the Company has no specific capital commitment under this
agreement, our expenditures under the contract are estimated to be approximately
$1.0 billion.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through the next 12 months. Our future
capital needs will be highly dependent on the number of additional distribution
centers we open, the timing of these openings and the success of these
facilities once they are launched. Thus, any projections of future cash needs
and cash flows are subject to substantial uncertainty. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional equity or debt securities, obtain a line of credit or curtail
our expansion plans. However, the terms of our guaranty of our subsidiary's
credit facility contain restrictions on our ability to incur debt or issue
certain types of equity securities. In addition, if we issue additional
securities to raise funds, those securities may have rights, preferences or
privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. We use software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the year 2000
phenomenon. For example, we are dependent on the financial institutions involved
in processing our customers' credit card payments for
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<PAGE> 27
Internet services and a third party that hosts our servers. We are also
dependent on telecommunications vendors to maintain our communications network
and suppliers to deliver products to us.
Since inception, we have internally developed substantially all of the
systems for the operation of our web site. These systems include the software
used to provide our Webstore's search, customer interaction, and
transaction-processing and distribution functions, as well as monitoring and
back-up capabilities. Based upon our assessment to date, we believe that our
internally developed proprietary software is year 2000 compliant, but we cannot
assure you that unanticipated year 2000 problems will not occur.
We are currently assessing the year 2000 readiness of our third-party
supplied software, computer technology and other services, which include
software for use in our accounting, database and security systems. The failure
of such software or systems to be year 2000 compliant could have a material
negative impact on our corporate accounting functions and the operation of our
web site and distribution system. As part of the assessment of the year 2000
compliance of these systems, we have sought assurances from these vendors that
their software, computer technology and other services are year 2000 compliant.
To date, the amounts we have spent in connection with our year 2000 assessment
have been immaterial. Based upon the results of this assessment, we will develop
and implement, if necessary, a remediation plan with respect to third-party
software, third-party vendors and computer technology and services that may fail
to be year 2000 compliant. We expect to complete any required remediation during
the third quarter of 1999. At this time, the expenses associated with this
assessment and potential remediation plan that may be incurred in the future
cannot be determined; therefore, we have not developed a budget for these
expenses.
The failure of our software and computer systems and of our third-party
suppliers to be year 2000 compliant would have a material adverse effect on us.
The year 2000 readiness of the general system necessary to support our
operations is difficult to assess. For instance, we depend on the integrity and
stability of the Internet to provide our services. We also depend on the year
2000 compliance of the computer systems and financial services used by
consumers. Thus, the system necessary to support our operations consists of a
network of computers and telecommunications systems located throughout the world
and operated by numerous unrelated entities and individuals, none of which has
the ability to control or manage the potential year 2000 issues that may impact
the entire system. Our ability to assess the reliability of this system is
limited and relies solely on generally available news reports, surveys and
comparable industry data. Based on these sources, we believe most entities and
individuals that rely significantly on the Internet are reviewing and attempting
to remediate issues relating to year 2000 compliance, but it is not possible to
predict whether these efforts will be successful in reducing or eliminating the
potential negative impact of year 2000 issues.
A significant disruption in the ability of consumers to reliably access the
Internet or portions of it or to use their credit cards would have an adverse
effect on demand for our services and would have a material adverse effect on
us. At this time, we have not yet developed a contingency plan to address
situations that may result if we or our vendors are unable to achieve year 2000
compliance plan because we currently do not believe that such a plan is
necessary. The cost of developing and implementing such a plan, if necessary,
could be material. Any failure of our material systems, our vendors' material
systems or the Internet to be year 2000 compliant could have material adverse
consequences for us. These consequences could include difficulties in operating
our web site effectively, taking customer orders, making deliveries or
conducting other fundamental parts of our business.
NEW ACCOUNTING PRONOUNCEMENT
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 hedging accounting when
certain conditions are met. Webvan will adopt this statement
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<PAGE> 28
for its fiscal year ending December 31, 2001. Management has not fully assessed
the implications of adopting this new standard.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Webvan maintains a short-term investment portfolio primarily consisting of
corporate debt securities with maturities of thirteen months or less. These
available-for-sale securities are subject to interest rate risk and will rise
and fall in value if market interest rates change. The extent of this risk is
not quantifiable or predictable due to the variability of future interest rates.
Webvan does not expect any material loss with respect to its investment
portfolio.
Webvan's restricted cash balance is invested in certificates of deposit.
Accordingly, changes in market interest rates have no material effect on
Webvan's operating results, financial condition and cash flows. There is
inherent roll over risk on these certificates of deposit as they mature and are
renewed at current market rates. The extent of this risk is not quantifiable or
predictable due to the variability of future interest rates.
The following table provides information about Webvan's investment
portfolio and restricted cash as of June 30, 1999, and presents principal cash
flows and related weighted averages interest rates by expected maturity dates.
<TABLE>
<CAPTION>
YEAR OF MATURITY
-----------------------
1999 2000
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and Equivalents.................................... $21,836 --
Average interest rate................................. 4.95% --
Corporate Debt Securities............................... $14,289 $7,942
Average interest rate................................. 4.81% 5.29%
Certificates of Deposits................................ $ 3,453 --
Average interest rate................................. 4.52% --
</TABLE>
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<PAGE> 29
BUSINESS
OVERVIEW
Webvan is an Internet retailer providing same-day delivery of consumer
products through an innovative proprietary business design that integrates our
Webstore, distribution center and delivery system. We provide our customers with
a personalized shopping experience that we believe is superior to traditional
retailers and current online retailers. Our current product offerings are
principally focused on food, non-prescription drug products and general
merchandise.
The Webvan shopping experience provides customers with:
- the convenience of same-day direct home delivery within a
customer-selected 30-minute window;
- a broad selection of high quality fresh foods including produce, hand-cut
meats, fresh fish and live lobsters, as well as non-perishable grocery
items, chef-prepared meals, fine wines, premium quality cigars and
non-prescription drug products;
- prices that are generally at or below everyday supermarket prices;
- reliable and friendly delivery service by Webvan employees, free of
charge for orders over $50; and
- an easy to navigate Webstore offering user-friendly features including
the ability to create personalized shopping lists.
Our interactive Webstore and highly automated distribution center were
designed to provide high degrees of scalability and efficiency, enabling us to
operate with much lower overhead and reduced headcount compared to traditional
supermarkets. Our initial distribution center which serves the San Francisco Bay
Area was designed to process product volumes equivalent to approximately 18
supermarkets with substantially lower labor and real estate costs than those
stores would typically require.
Our proprietary distribution system and enabling software were designed to
optimize our inbound and outbound fulfillment operations and were created to be
readily replicated to facilitate our expansion into multiple geographic markets.
Following our commercial launch of operations in the San Francisco Bay Area in
June 1999, we plan to open a second distribution center in Atlanta, Georgia in
the second quarter of 2000 and to further expand with distribution centers in
other key geographic markets.
We believe that our innovative business design is the first solution to
adequately address the "last mile" problem of e-commerce fulfillment by
providing a highly efficient means of delivering goods directly and rapidly to
consumers. We also believe that the significant capital investment in our
business system provides us with a competitive advantage compared to traditional
supermarkets and other online grocers.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND E-COMMERCE
The rapid growth of the Internet and e-commerce is revolutionizing the way
in which businesses and consumers communicate, share information and conduct
business. International Data Corporation estimates that there were 63 million
web users in the United States at the end of 1998 and anticipates this number
will grow to approximately 177 million users by the end of 2003. This growth in
Internet usage is being fueled by a number of factors, including:
- a large and growing installed base of personal computers in the workplace
and at home;
- advances in the performance and speed of personal computers and modems;
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<PAGE> 30
- improvements in network security, system and bandwidth;
- faster, easier and cheaper access to the Internet;
- proliferation of content and services being provided on the Internet; and
- consumers' growing level of comfort and experience with e-commerce.
The unique characteristics of the Internet create a number of advantages
for online retailers and have dramatically affected the manner in which
companies distribute goods and services. Specifically, online retailers use the
Internet to:
- provide consumers with a broad selection of products and services,
increased information and enhanced convenience;
- operate with reduced overhead costs and greater economies of scale;
- frequently adjust featured selections, editorial content and pricing,
providing significant merchandising flexibility;
- "display" a larger number of products than traditional retailers at lower
cost; and
- obtain demographic and behavioral data about customers, increasing
opportunities for direct marketing and personalized services.
The Internet provides a powerful and convenient means for consumers to
order products and services. As a result of the increased use of the Internet
and the benefits of online retailing, consumer spending on the Internet is
growing rapidly. International Data Corporation estimates that consumer
purchases of goods and services over the Internet in the U.S. will increase from
$12.4 billion in 1998 to $75.0 billion in 2002. In addition, Forrester Research
estimates that online grocery spending in the U.S. will grow from $235 million
in 1998 to $10.8 billion by 2003 which will represent only 2% of the total
market for grocery products in 2003.
TRADITIONAL GROCERY RETAILING
The U.S. grocery market is large, with retail supermarket sales equal to
approximately $449 billion in 1998, according to Progressive Grocer. In
addition, the market for prepared meals or "home meal replacements" is growing
rapidly and, according to ACNielsen, comprises an incremental $100 billion
segment of the food industry.
Many consumers find supermarket shopping to be a time-consuming and
inconvenient experience. FMI has estimated that the average household made two
trips to the supermarket per week and spent approximately $86 on groceries per
week in 1998. Traditional store-based supermarkets face many challenges in
providing a satisfying shopping experience for consumers. Physical space
availability in stores limits the number of products supermarkets can offer and
reduces merchandising flexibility. This forces traditional store-based
supermarkets to limit their product selection to the most popular products,
further impairing customer selection. Traditional grocery retailers also face
significant costs associated with building and operating large brick and mortar
stores, including costs associated with personnel, real estate, construction,
store set-up, inventory and fixed assets. The challenges facing these
traditional retailers have created an opportunity for online grocery retailers
to provide a more compelling and cost-effective solution.
The Internet provides a medium that could significantly improve the
consumer grocery shopping experience. The Internet provides 24-hour shopping
convenience and the ability to monitor order and information accuracy, and
eliminates the need to wait in line. With an efficient business model, online
retailers will also be able to reduce labor, real estate and other operating
costs.
28
<PAGE> 31
ONLINE GROCERY RETAILING
Attempting to capitalize on the benefits of the Internet, several
companies, including NetGrocer and Peapod, have begun offering a variety of
grocery products online. Many of these services charge membership, delivery or
service fees and often offer many of their goods at prices higher than those of
traditional supermarkets. In addition, many of these online grocery efforts only
offer a limited selection of products, do not offer frozen foods or perishables
and do not stock a wide range of high-end items such as wine, prepared meals and
specialty products. These online grocers generally do not offer same-day
delivery and guarantee delivery within narrow time parameters. Many of these
early online grocers currently lack a highly automated and scalable distribution
and delivery model which would enable rapid and efficient expansion on a
national level. As a result, these companies rely on manual systems to fill the
orders they receive over the Internet and rely on third parties to deliver
orders to their customers.
Consumers are increasingly seeking a grocery shopping solution which will
allow them to save time and effort without sacrificing the wide selection, high
quality and low cost they have come to expect from traditional supermarkets. We
believe that online grocers lack a scalable distribution system and a business
model that optimizes cost efficiencies, which has made it difficult for them to
deliver a high quality, low cost shopping solution in an efficient manner.
THE WEBVAN SOLUTION
We provide a unique online shopping experience by offering customers a
broad selection of high-quality, competitively priced grocery and related
product offerings delivered directly and conveniently to their homes. Our
Webstore is designed to create a user-friendly, informative and personalized
shopping experience for customers while providing them with the time savings and
convenience of shopping online. We believe that our innovative business design
is the first solution to adequately address the "last mile" problem of
e-commerce fulfillment because our model enables us to efficiently fill a high
volume of orders and deliver products to our customers on the same day. We also
believe that our significant capital investment in our direct-to-the-home
delivery system provides us with a competitive advantage compared to traditional
supermarkets and other online grocers. Our delivery channel also enables us to
create brand awareness and customer loyalty that we believe will help to
strengthen our market position.
Our solution provides customers with the following key benefits:
- prices that are generally at or below everyday supermarket prices;
- a broad selection of high quality products;
- no membership or service fees and no delivery fees for orders over $50;
and
- same-day home delivery within a customer-selected 30-minute window.
The principal components of our solution include our:
BROAD SELECTION OF HIGH QUALITY PRODUCTS AT COMPETITIVE PRICES. Our
scalable Webstore and distribution system are designed to enable us to offer
over 50,000 different items to our customers. As of June 30, 1999, we were
offering consumers a broad selection of over 15,000 grocery and specialty items
including:
- farm fresh produce;
- premium meats hand cut in our butcher shop;
- fresh fish and other seafood including live lobsters;
- a variety of chef-prepared meals;
- bakery items including specialty breads, bagels and pastries;
29
<PAGE> 32
- non-perishable grocery items typically found in large supermarkets;
- non-prescription drug products and health and beauty items;
- specialty items including fine wines and premium quality cigars; and
- general merchandise such as office products and small appliances.
INTERACTIVE AND PERSONALIZED WEBSTORE. Our Webstore is an easy-to-use
online alternative to the traditional supermarket providing customers with
significant time savings and convenience. The Webstore is organized to provide
detailed product and nutritional information as well as interesting generalized
content. We believe our Webstore promotes customer loyalty by making the grocery
shopping experience easier for the consumer. Through our Webstore, consumers can
personalize their shopping experience by creating their own shopping lists and
by spending as much or as little time browsing and selecting products as is
appropriate for their specific needs. Customers may shop for products by:
- browsing clearly organized categories such as Produce, Meat and Seafood,
Prepared Food or Health and Beauty;
- going directly to a specific product by using our keyword search
technology; or
- accessing one of their personal shopping lists for immediate purchase or
editing.
Our Webstore utilizes a proprietary logistics technology to offer a
delivery window to the customer. A point-and-click time schedule will indicate
to the customer the 30-minute delivery slots which are currently available in
their specific location, based on the time of day, location and items purchased.
For example, a customer could shop at the Webstore at any time before 10:00 a.m.
and select a specified 4:30 p.m. -- 5:00 p.m. same-day delivery window.
HIGHLY AUTOMATED DISTRIBUTION CENTER. Our technologically advanced
distribution center is highly automated and is designed to provide economies of
scale and create significant cost savings compared to traditional supermarkets
and existing online grocers. Our distribution center is designed to process
product volumes equivalent to approximately 18 supermarkets and allow for a
highly flexible inventory selection of over 50,000 SKUs. The distribution center
is designed to fill customer orders using proprietary software and labor-saving
automation technology such as carousels and conveyors which bring individual
products directly to the worker, compared to traditional warehouse designs which
require the worker to move throughout rows of products to fill individual
orders. Our first distribution center is located in Oakland, California and
serves the San Francisco Bay Area. We plan to open a second distribution center
in Atlanta, Georgia in the second quarter of 2000 and to further expand with
distribution centers in other key geographic markets.
Our distribution center is designed to accommodate both a wide product
selection as well the finest in product quality. The design allows for
appropriate storage temperatures for individual product categories including
produce, meats and frozen foods and enables us to offer specialty products such
as premium wines and cigars. In addition to product storage, our distribution
center is designed with food preparation facilities which allow us to offer
chef-prepared meals, individually cut meats and fish and made-to-order fruit
baskets.
We have designed our initial distribution center in Oakland, California to
be a prototype that we can readily replicate in other locations. In July 1999,
we entered into an agreement with Bechtel Corporation for the construction of up
to 26 additional distribution centers for us on a turnkey basis over the next
three years.
EFFICIENT DELIVERY PROCESS. To facilitate rapid and predictable product
delivery to the customer's home, we utilize a hub-and-spoke fulfillment model
that is designed to minimize product and order handling. Customer orders are
packaged in individual plastic containers or "totes" at the distribution center
and are transferred by temperature-controlled trucks from the distribution
center to local stations. At the local stations, the totes are transferred to
smaller temperature-controlled vans for
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delivery to the home. Each distribution center will supply shipments to up to
10 - 12 stations, varying by market, which will be strategically positioned
throughout a particular delivery region within an approximate 50 mile radius of
each distribution center. Our hub-and-spoke model, centralized order fulfillment
and decentralized delivery, combined with our proprietary route and load
planning technology allows for a highly efficient, low cost fulfillment
solution.
SUPERIOR CUSTOMER SERVICE. Our home delivery model also provides us with an
important opportunity to interact with our customers. Because of the high
frequency of grocery purchases, our couriers will be able to help continually
reinforce our brand with the customer. Our couriers are valued employees and are
incentivized with competitive salaries and stock options. Our couriers have also
been trained to answer questions about the service and handle routine service
issues directly and promptly at the customer residence. Each courier
communicates with the route planning and delivery scheduling systems throughout
the delivery process through the use of a wireless mobile field device. If the
customer is not satisfied with the products received, the courier is able to
initiate a transaction to replace items or credit the customer's bill. We
believe this approach helps develop couriers who are highly focused on customer
service and on creating long-term consumer relationships.
STRATEGY
Our objective is to be the leading online retailer providing same-day
delivery of consumer products. Our current product offerings are principally
focused on food, non-prescription drug products and general merchandise. The key
elements of our strategy are as follows:
BUILD BRAND AWARENESS AND MARKET SHARE. We intend to establish Webvan as
the leading brand for buying groceries and consumer goods over the Internet for
home delivery. Through our public relations programs, advertising campaigns,
promotional activities and media partnerships, we plan to generate brand
awareness and drive customer trials of our services. Our efforts will focus on
building credibility with customers and achieving market acceptance for our
services. We will pursue online and traditional media marketing strategies on a
regional basis to achieve these results.
DELIVER SUPERIOR CUSTOMER SERVICE AND OPERATING PERFORMANCE. We intend to
offer our customers a compelling shopping experience by delivering orders on an
accurate, timely and reliable basis. We will strive to continuously improve our
delivery and service performance to enhance the customer experience. We are
focused on building strong, lasting customer relationships which will drive
repeat purchases and higher average order sizes. By interacting directly with
customers on a regular basis and providing high quality service, we believe we
will promote customer loyalty and establish Webvan as the leading online
retailer and distribution company providing same-day delivery direct to the
customer.
LEVERAGE EFFICIENT AND SCALABLE BUSINESS DESIGN. We have designed a
proprietary business system which integrates our interactive Webstore,
distribution center and delivery system. This design addresses the "last mile"
problem in Internet commerce by providing a highly efficient means of delivering
goods directly to the homes of consumers on the same day that an online order is
placed. Our software, automated distribution center and hub and spoke delivery
system were designed to accommodate a high volume of orders and to enable us to
offer over 50,000 different items to our customers. We believe that our scalable
and highly automated order fulfillment systems provide us with an advantage
compared to our online competitors which generally rely on manual order
fulfillment systems.
REPLICATE DISTRIBUTION CENTER AND DELIVERY SYSTEM IN ADDITIONAL GEOGRAPHIC
MARKETS. We believe that our compelling product and service offerings combined
with the broad scope of the Internet present opportunities to expand to
additional locations in major cities in the U.S. Our distribution center and
delivery system are designed to be readily replicated and we plan to pursue an
aggressive expansion strategy by opening additional distribution centers in key
geographic markets beginning in the second quarter of 2000. In July 1999, we
entered into an agreement with Bechtel Corporation for the construction of up to
26 additional distribution centers on a turnkey basis over the
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next three years. We believe that our alliance with Bechtel will enable us to
more aggressively roll out distribution centers in other markets by utilizing
Bechtel's engineering, design, procurement and construction expertise.
LEVERAGE DISTRIBUTION SYSTEM TO ENTER ADDITIONAL PRODUCT CATEGORIES. We
intend to use our distribution system to sell products in other product
categories to achieve additional revenue opportunities and favorable gross
margins. While our initial product focus is on groceries, non-prescription drugs
and general merchandise, we plan to pursue new product category opportunities
through a combination of internal growth, partnerships, strategic alliances and
acquisitions. We believe that our same-day distribution system can position us
as a preferred online provider for many consumer products that can be delivered
to the home.
THE WEBVAN WEBSTORE
Our Webstore is a user-friendly, informative and personalized web site
which enables users to quickly and easily navigate and purchase from a wide
selection of items. The Webstore makes the shopping experience easy for the
customer by offering them multiple methods for shopping the site. The store
directory is divided into eleven intuitively organized categories and allows the
customer to quickly and efficiently find items. Once customers find the item
they want, they may add it to the shopping cart or may save it to a shopping
list. The shopping cart is always visible on the screen and instantly updates
and calculates the order total while the customer shops. Our Webstore promotes
brand loyalty and repeat purchases by providing a convenient, easy-to-use
experience that encourages customers to return frequently.
HOME PAGE. Our home page serves as the entry point and gives visitors a
glimpse of the wide selection available on the site. On our home page, customers
find weekly specials on brand name products, a clearly defined directory
structure and links that showcase specific products and areas of the site.
BROWSING. Our Webstore displays a store directory which allows visitors to
browse through all the categories of products Webvan offers. The categories are
intuitively organized by type of product and enable the user to drill down from
general to more specific categories, such as moving from produce to fruits to
bananas. The browsing tool also enables customers to see all products in a
particular category before making a selection, similar to scanning the shelves
of a neighborhood store. In addition, each item on the site has an image and
nutritional information attached to it, which further enhances the user
experience.
SEARCHING. Our Webstore contains an interactive, searchable database of
over 15,000 SKUs. The customer can search based on product type, brand name or
category. The search results page displays each relevant item, along with the
product category and subcategories.
CONTENT AND FEATURES. Webvan offers an array of content on the site to
enhance the user experience and encourage visitors to try new items. Our weekly
electronic magazine, Sensations, features special recipes, cooking tips,
features authored by food and health experts, and the opportunity to interact
with culinary professionals. As we accumulate data, our Webstore can be
personalized to appeal to individual customer preferences and buying habits.
PERSONALIZATION AND LISTS. Our Webstore enables a customer to personalize
their shopping experience. The site's shopping list feature allows customers to
create and retain personal shopping lists in their profiles. Multiple lists can
be saved for weekly shopping, specific events or special occasions. Once a list
has been created and saved, it can be retrieved and modified at any time,
enabling customers to shop and check out in a few minutes. We believe that the
personalization of a customer's shopping experience is an important element of
our value proposition and we intend to continue to enhance our personalization
services.
DELIVERY SCHEDULING. Customers schedule their delivery by selecting a time
from a grid of 30-minute alternatives. Our real-time inventory tracking and
delivery route software systems are designed
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to help ensure that the groceries a customer orders will be available so that
they can be delivered at the delivery time window selected by the customer.
Using this system, the customer is able to select and schedule a delivery to
occur within an available specific 30-minute window, on the same day or up to
four days after the order is placed.
TECHNOLOGY
We have developed a technologically advanced systems platform, which
integrates our entire business process from end to end. We have built an array
of proprietary advanced inventory management, warehouse management, route
management and materials handling systems and software to manage the entire
customer ordering and delivery flow process. Our proprietary automated materials
handling controller provides real-time connectivity with the Webstore and
warehouse management system and issues instructions to the various mechanized
areas of the distribution center to ensure the proper fulfillment of orders. We
designed the system to utilize automated conveyors and carousels to transport
items to a few centrally located employees. As a result, the system is highly
scalable and allows us to increase volume without a proportionate increase in
human resources.
Once a delivery is scheduled, a route planning feature of the system
determines the most efficient route to deliver goods to the customer's home. The
courier communicates with the route planner and delivery scheduler modules
throughout the delivery process through the use of a wireless mobile field
device. Each aspect of this process is tightly integrated and enables us to
provide high quality service to our customers.
We outsource most of our network operations functions and employ our own
customer services personnel. The continued uninterrupted operation of our
Webstore and transaction-processing systems is essential to our business, and it
is the job of the site operations staff to ensure, to the greatest extent
possible, the reliability of our Webstore and transaction-processing systems.
Webvan's web and database servers are hosted at Exodus Communications, Inc. in
Santa Clara, California.
DISTRIBUTION CENTER ROLL OUT
We currently operate a 336,000 square foot distribution center facility in
Oakland, California. The distribution center was designed to process product
volumes equivalent to approximately 18 supermarkets and is the regional hub for
the receipt and distribution of products and allows for efficient sorting and
distribution of products. The distribution center is a clean, climate controlled
facility segmented into separate ambient, refrigerated and frozen areas that
store grocery items at optimal temperatures. Identical software systems will be
implemented at each distribution center, enabling the easy replication of the
distribution center model across multiple locations and allowing for central
management of the entire system.
We intend to pursue a roll out of distribution centers into various
locations in the U.S. to capitalize on what we view as a substantial market
opportunity. Our first facility in Oakland, California was commercially launched
in June 1999 and our second distribution center, located in Atlanta, Georgia, is
scheduled to be launched in the second quarter of 2000. We plan to open
additional distribution centers in major metropolitan markets. We plan to locate
our distribution centers in industrially zoned areas, which generally have lower
real estate costs than traditional supermarkets located in commercial areas.
In July 1999, we entered into an agreement with Bechtel Corporation for the
construction of up to 26 additional distribution centers over the next three
years in various locations that we designate. We believe that our alliance with
Bechtel will enable us to more aggressively roll out distribution centers in
other markets by utilizing their engineering, design, procurement and
construction expertise. Bechtel will be responsible for substantially all
aspects of the build-out program and will deliver completed distribution centers
to Webvan on a turnkey basis. Bechtel will also leverage its strengths in
engineering management to incorporate improvements to the design of our
distribution centers.
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Bechtel will perform such services within schedule and budgetary parameters
determined by Webvan, and will be eligible to receive incentive payments to the
extent distribution centers are completed within the preestablished parameters.
We also issued Bechtel a warrant to purchase up to 1,800,000 shares of our
stock. The warrant generally becomes exercisable for a certain number of shares
as distribution centers are completed within agreed upon schedule and budgetary
parameters.
DELIVERY OPERATIONS
The distribution center will serve as the center of our hub and spoke
delivery system. Orders are collected from the Webstore, routed and managed by
the distribution center, transferred to stations and delivered from the stations
to customers' homes. This model enables us to efficiently and cost effectively
deliver consumer goods to the home by combining centralized order fulfillment
with decentralized delivery. We use temperature-controlled trucks to deliver
from the distribution center to the station and smaller vans to deliver from the
station to the home. The stations are strategically positioned throughout a
delivery region within approximately 50 miles of a distribution center and
typically within approximately 10 miles of target customer residences. We
deliver to the customer's door in a smaller van complete with refrigeration
equipment to keep chilled and frozen items at temperatures that insure their
quality and freshness. Each customers' order is delivered in
environmentally-friendly reusable containers, called totes.
All of our couriers are Webvan employees. We utilize strict hiring
standards in choosing couriers and require each new employee to complete an
intensive training program. The courier training lasts three weeks and includes
32 hours of classroom training, 24 hours of driving training and 16 hours of on
the job training. Couriers are trained in responsible driving practices,
courtesy and the proper handling of totes and products. Our couriers receive a
competitive compensation package, including cash and stock options, and are
incentivized to reinforce our brand and help to create a lasting one-to-one
relationship with our customers. In addition, couriers have been trained to
answer questions about the service and handle service issues directly and
promptly at the customer residence. If the customer is not satisfied with the
products received, the courier is able to initiate a transaction to replace
items or credit the customer's bill.
CUSTOMER SERVICE
We believe that our ability to establish and maintain long-term
relationships with our customers and to encourage repeat visits and purchases
depends on the strength of our customer support and service operations and
staff. We seek to achieve frequent communication with and feedback from our
customers to continually improve the Webvan service. Webvan offers a number of
automated help options on the website and an easy-to-use direct email service to
enable customers to ask questions and to encourage feedback and suggestions. We
plan to respond to customer email inquiries within 12 hours of the submission
and allow for a maximum response time of 24 hours. Our team of customer support
and service personnel are responsible for handling general customer inquiries,
answering customer questions about the ordering process, and investigating the
status of orders, deliveries and payments. Users can contact customer service
representatives via our toll free telephone number to ask questions or pay bills
if customers are reluctant to enter their credit card number over the Internet.
Our automated customer service function distributes emails to customers after
registration and after each order is placed. We plan to enhance the automation
of the tools used by our customer support and service staff in the future.
MARKETING AND PROMOTION
Our marketing and promotion program is designed to strengthen the Webvan
brand name, drive trials of our service in our target markets, build strong
customer loyalty and maximize repeat usage and purchases. We intend to build our
brand name and customer loyalty through our public relations programs,
advertising campaigns and promotional activities. Our efforts will focus on
building credibility with customers and achieving market acceptance for our
services. We expect to advertise
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locally in our initial launch markets and plan to tailor our advertising to each
specific market. In addition, we plan to leverage our relationships with our
media investors, including CBS and Knight-Ridder, for television, online and
print advertising opportunities.
In the future, Webvan expects to be able to provide increasingly targeted
and customized services by using the customer purchasing, preference and
behavioral data obtained through the traffic and purchases generated at the
Webstore. We also build brand loyalty though personalized interaction with
customers through prompt, professional delivery persons and through use of
Webvan delivery vehicles. By offering customers a compelling and personalized
value proposition, our goal is to increase the number of visitors that make a
purchase, to encourage repeat visits and purchases and to extend customer
retention. In addition, loyal, satisfied customers generate strong word-of-mouth
support and awareness which drive new customer acquisitions and increased order
volumes.
MERCHANTS AND VENDORS
Webvan sources products from a network of food and drug manufacturers,
wholesalers and distributors. We currently rely on rapid fulfillment from
national and regional distributors for a substantial portion of our items. We
purchase certain top brands and high volume items directly from manufacturers
and may increase our use of direct suppliers as our product volumes increase
with additional distribution centers. We also utilize premium specialty
suppliers or local sources for gourmet foods, farm fresh produce, fresh fish and
meats. Because we cover a broad area and service high volumes from a single
point of distribution, we offer our suppliers a very efficient product supply
model which is reflected in the discounts and pricing we receive. When we select
a new product for purchase, it is entered into the inventory management system
and our Webstore. We employ advanced replenishment and expiration date controls
to manage our inventory and maintain product freshness. As of June 30, 1999, we
were purchasing products from 10 distributors and directly from over 160
vendors.
COMPETITION
The grocery retailing market is extremely competitive. Local, regional, and
national food chains, independent food stores and markets, as well as online
grocery retailers comprise our principal competition, although we also face
substantial competition from convenience stores, liquor retailers, membership
warehouse clubs, specialty retailers, supercenters, and drugstore chains. Many
of our existing and potential competitors, particularly traditional grocers and
retailers, are larger and have substantially greater resources than we do. We
expect this competition will intensify as more traditional and online grocery
retailers offer competitive services.
Our initial distribution center in Oakland, California, operates in the San
Francisco Bay Area market. In this market, we compete primarily with traditional
grocery retailers and with online grocers NetGrocer and Peapod. The number and
nature of competitors and the amount of competition we will experience will vary
by market area. In other markets, we expect to compete with current online
offerings from these companies and others. Many of these services charge
membership, delivery or service fees, and often offer their goods at a premium
to traditional supermarkets. In addition, most competing online retailers use
manual shopping and retrieval systems which lack the capability to process a
large number of orders for a large number of customers in a cost efficient
manner.
The principal competitive factors that affect our business are location,
breadth of product selection, quality, service, price and consumer loyalty to
traditional and online grocery retailers. We believe that we compete favorably
with respect to each of these factors although many traditional grocery
retailers may have substantially greater levels of consumer loyalty and serve
many more locations than we currently do. If we fail to effectively compete in
any one of these areas, we may lose existing and potential customers which would
have a material adverse effect on our business, financial condition and results
of operations.
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We also compete to retain customers once they have registered for Webvan's
services. Generally, online subscriber attrition rates, or the rates at which
subscribers cancel an online service, are high. High rates of member attrition
could have a material adverse effect on our business, financial condition and
results of operations.
GOVERNMENT REGULATION
In addition to regulations applicable to businesses generally or directly
applicable to electronic commerce, we are subject to a variety of regulations
concerning the handling, sale and delivery of food, alcohol and tobacco
products. It is uncertain whether the handling of certain food items in our
distribution facility, such as meat and fish, will subject us to regulation by
the United States Department of Agriculture. Although we have designed our food
handling operations to comply with USDA regulations, we cannot assure you that
the USDA will not require changes to our food handling operations. In addition,
we are subject to state and local regulations applicable to food, alcohol and
tobacco products. We will be required to obtain state licenses and permits for
the sale of alcohol and tobacco products in each location in which we seek to
open a distribution center. We cannot assure you that we will be able to obtain
any required permits or licenses in a timely manner, or at all. In addition, the
United States Congress is considering enacting legislation which would restrict
the interstate sale of alcoholic beverages over the Internet. We will also be
required to comply with local health regulations concerning the preparation and
packaging of our prepared meals and other food items. Any applicable federal,
state or local regulations or required permits or licenses may cause us to incur
substantial compliance costs or delay the availability of certain items at one
or more of our distribution centers. In addition, any inquiry or investigation
from a food regulatory authority could have a negative impact on our reputation.
Any of these events could have a material adverse effect on our business,
financial condition and results of operations.
In addition, because of the increasing popularity of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. Several states have proposed legislation to limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties. We
do not currently provide personal information regarding our users to third
parties. However, the adoption of such consumer protection laws could create
uncertainty in web usage and reduce the demand for our products and services.
We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of such laws were adopted prior
to the wide use of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws
intended to address such issues could create uncertainty in the Internet market
place. Such uncertainty could reduce demand for our services or increase the
cost of doing business as a result of litigation costs or increased service
delivery costs.
INTELLECTUAL PROPERTY
We regard patent rights, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as important to our success. We rely
on patent, trademark and copyright law, trade secret protection and
confidentiality or license agreements with our employees, customers, partners
and others to protect our proprietary rights; however, the steps we take to
protect our proprietary rights may be inadequate. We currently have no patents
protecting our technology. From time to time, we have filed and expect to file
patent applications directed to aspects of our proprietary
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technology. We cannot assure you that any of these applications will be
approved, that any issued patents will protect our intellectual property or that
any issued patents will not be challenged by third parties. In addition, other
parties may independently develop similar or competing technology or design
around any patents that may be issued to us.
EMPLOYEES
As of June 30, 1999, we had 414 full-time employees consisting of 40 in
software development, 76 in operations and administration, 23 in merchandising,
16 in marketing and 259 at our distribution center in Oakland. We expect to hire
additional personnel at our Oakland facility and to staff our other distribution
centers as they are opened. None of our employees are represented by a labor
union. We have not experienced any work stoppages and consider our employee
relations to be good.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. We are not currently a party to
any material litigation.
FACILITIES
Our corporate offices are located in Foster City, California, where we
lease a total of approximately 7,400 square feet under leases that expire in May
2002. We recently signed a lease for approximately 55,000 square feet of office
space in Foster City, California that expires in November 2011, and we will be
relocating our corporate offices to this facility in the fourth quarter of 1999.
In addition, we lease approximately 336,000 square feet in Oakland, California
for our distribution center under a lease that expires in June 2008, with an
option to extend the lease for an additional five years. We also lease an
aggregate of approximately 106,000 square feet for 16 local facilities for
distribution in the San Francisco Bay Area under leases that expire from June
2001 to May 2009. We have signed a lease for a site of approximately 350,000
square feet for our second distribution center site in Atlanta, Georgia. This
lease expires in July 2009, with two options to extend the lease for additional
five year periods.
We anticipate that we will require additional corporate office space within
the next 12 months. We are also evaluating sites for additional distribution
centers in other markets. Although we expect such space to be available as
needed, we cannot assure you that suitable additional space will be available on
commercially reasonable terms. We do not own any real estate and expect to lease
distribution center and station locations in the other markets we enter.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of Webvan as of June 30, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Louis H. Borders................... 51 President, Chief Executive Officer and Chairman
Kevin R. Czinger................... 40 Senior Vice President, Corporate Operations and
Finance
Arvind Peter Relan................. 36 Senior Vice President, Technology
Mark X. Zaleski.................... 36 Senior Vice President, Area Operations
Gary B. Dahl....................... 45 Vice President, Distribution
Leo L. Farley...................... 46 Vice President, Food Production
Mark J. Holtzman................... 39 Vice President and Controller
S. Coppy Holzman................... 44 Vice President, Merchandising
Vivek M. Joshi..................... 36 Vice President, Program Management
Christian T. Mannella.............. 36 Vice President, Marketing
David S. Rock...................... 50 Vice President, Real Estate
David M. Beirne(1)(2).............. 35 Director
Christos M. Cotsakos(2)............ 50 Director
Tim Koogle(1)...................... 47 Director
Michael J. Moritz(1)(2)............ 44 Director
</TABLE>
- -------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
LOUIS H. BORDERS has served as our Chairman and Chief Executive Officer
since founding Webvan in December 1996. Mr. Borders co-founded Synergy Software
in November 1989 and served on its board of directors from November 1989 to
November 1997. Mr. Borders founded Borders Books in 1971 and served as President
and Chief Executive Officer until 1983 and as Chairman from 1983 to 1992. He
also developed the advanced information systems used by Borders Books to manage
inventory across diverse geographic and demographic regions. In addition, Mr.
Borders is chairman of Mercury Capital Management, an investment firm he founded
in 1995. Mr. Borders holds a B.A. in Mathematics from the University of
Michigan.
KEVIN R. CZINGER has served as Senior Vice President, Corporate Operations
and Finance of Webvan since July 1999. From March 1999 to July 1999, he was
Chief Financial Officer of Webvan. From 1998 to 1999, Mr. Czinger served as a
managing director in the media and telecommunications group at Merrill Lynch &
Co., Inc. From 1996 to 1998, Mr. Czinger served as Chief Executive Officer of
Volcano Entertainment L.L.C., a record and music publishing company he founded.
From 1994 to 1996, Mr. Czinger served as Executive Vice President, Chief
Financial Officer and then Chief Operating Officer of Bertelsmann AG's
media/entertainment operations in North America. From 1991 to 1994, Mr. Czinger
was executive director and head of media banking group at Goldman Sachs
International, an investment banking firm. Mr. Czinger holds a B.A. from Yale
College and a J.D. from Yale Law School.
ARVIND PETER RELAN has served as Senior Vice President, Technology of
Webvan since February 1998. From May 1994 to February 1998, Mr. Relan served in
various management positions at Oracle Corporation, most recently as Vice
President of Internet Server Products in its Application Server Division. In
1995, Mr. Relan founded Oracle's Internet Server Division, including Oracle's
patented Web Request Broker technology, Oracle Application Server and Oracle
Internet Commerce Server. From 1988 to 1994, Mr. Relan held various positions at
Hewlett-Packard, including principal
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technologist for the HP Openview Platform. Mr. Relan holds a B.S. in Computer
Engineering from the University of California, Los Angeles and a M.S. in
Engineering Management from Stanford University.
MARK X. ZALESKI has served as Senior Vice President, Area Operations of
Webvan since July 1999. From December 1998 to July 1999, he served as Chief
Operating Officer of Webvan. From 1994 to 1998, Mr. Zaleski served in various
executive management positions for ACNielsen, most recently as Senior Vice
President and Group Managing Director of Central Europe. From 1985 to 1994, Mr.
Zaleski held several positions at Federal Express, most recently as a Managing
Director for Federal Express, Europe. From 1985 to 1988, Mr. Zaleski held
various management positions in hub, ground operation and sales for Federal
Express. Mr. Zaleski holds a B.S. in Business Administration and an M.B.A. from
the European University in Antwerp, Belgium.
GARY B. DAHL has served as Vice President, Distribution of Webvan since
April 1997. From March 1993 to April 1997, Mr. Dahl served as Senior Vice
President, Logistics of American Stores Company, a retail food and drug company.
From 1990 to 1993, Mr. Dahl was employed with Lucky Stores, as a Vice President
of Warehousing and Distribution. Mr. Dahl received his B.A. in Biology from
California State University, Long Beach and his M.P.H. in Public Health from the
University of California, Berkeley.
LEO L. FARLEY has served as Vice President, Food Production of Webvan since
July 1999. From 1998 to 1999, Mr. Farley was Vice President of Culinary Research
and Development for Sodexho Marriott Services. In this capacity, Mr. Farley was
responsible for menu and recipe development, culinary research and development
and food safety and quality assurance. From 1986 to 1998, Mr. Farley held
several executive management positions in finance, strategic planning, project
management and marketing with Marriott Management Services, the contract food
service division of Marriott International. Mr. Farley holds a B.A. in Political
Science from Drew University, an A.O.S. in culinary arts from the Culinary
Institute of America and an M.B.A. in finance from New York University.
MARK J. HOLTZMAN has served as Vice President and Controller of Webvan
since March 1999. Mr. Holtzman also serves as Chief Financial Officer of
Webvan -- Bay Area. From July 1997 to March 1999, Mr. Holtzman served as Chief
Financial Officer of Webvan. From December 1994 to July of 1997, Mr. Holtzman
served as Group Controller of MicroAge, a distributor and reseller of computer
products and services. From December 1989 to December 1994, Mr. Holtzman was
employed by Kenfil, Inc., a computer software distributor, becoming Chief
Financial Officer in 1993. Mr. Holtzman received his B.A. in Political Science
and Economics from University of California, Berkeley and his M.B.A. from the
University of Michigan. Mr. Holtzman is a Certified Public Accountant.
S. COPPY HOLZMAN has served as Vice President, Merchandising of Webvan
since joining us in September 1997. From February 1993 to August 1997, Mr.
Holzman served as President and CEO of Gentry Men's Clothing, a retail clothing
chain. From November 1990 to February 1993, Mr. Holzman was employed by
Federated Department Stores as Senior Vice President for Sourcing and
Production. Mr. Holzman holds a B.S. in Economics from the University of
Pennsylvania.
VIVEK M. JOSHI has served as Vice President, Program Management of Webvan
since August 1999. From May 1996 to August 1999, Mr. Joshi held several
positions at General Electric Company, most recently as General Manager,
Off-Highway/Transit Operations at GE Transportation Systems. From May 1996 to
June 1998, Mr. Joshi was Manager, Corporate Initiatives Group at GE Corporate.
From October 1993 to May 1996, Mr. Joshi was a management consultant at Booz
Allen & Hamilton, a global management consulting company. From July 1992 to
October 1993, Mr. Joshi was a Manufacturing Team Leader at Johnson & Johnson
Advanced Materials Company. Mr. Joshi holds a B.Tech in Chemical Engineering
from the Indian Institute of Technology, Bombay, and an M.S. in Chemical
Engineering and an M.B.A. from the University of Virginia.
CHRISTIAN T. MANNELLA has served as Vice President, Marketing of Webvan
since December 1998. From July 1990 to November 1998, Mr. Mannella held several
positions at MCI WorldCom, most recently as Vice President of Sales & Service
Operations. From December 1995 to March 1998,
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<PAGE> 42
Mr. Mannella was Vice President of Brand Marketing for MCI WorldCom. From
September 1989 to June of 1990, Mr. Mannella was employed by Credit Card Service
Corporation as Group Product Manager. From January 1986 to September 1989, Mr.
Mannella was employed as a Marketing Manager by Marriott International. From
July 1984 to January 1986, Mr. Mannella was a Management Consultant with
Laventhol & Horwath, CPAs. Mr. Mannella holds a B.A. in Hotel, Restaurant and
Institutional Management from Michigan State University.
DAVID S. ROCK has served as Vice President, Real Estate of Webvan since May
1999. From January 1997 to May 1999, Mr. Rock served as Webvan's Vice President,
Retail. From 1987 to 1996, Mr. Rock owned and operated a business brokerage firm
specializing in the sale and acquisition of food and beverage retail businesses.
DAVID M. BEIRNE has served as a member of the Board since October 1997. Mr.
Beirne has been a Managing Member of Benchmark Capital, a venture capital firm,
since June 1997. Prior to joining Benchmark, Mr. Beirne founded Ramsey/Beirne
Associates, an executive search firm, and served as its Chief Executive Officer
from October 1987 to June 1997. Mr. Beirne serves as a director of Scient
Corporation. Mr. Beirne received a B.S. in Management from Bryant College.
CHRISTOS M. COTSAKOS has served as a member of the Board since May 1998.
Mr. Cotsakos has been the Chief Executive Officer and Chairman of the Board of
E*TRADE Group, Inc. since December 1998. He joined E*TRADE in March 1996 as
President and Chief Executive Officer. Prior to joining E*TRADE, he served as
President, Co-Chief Executive Officer, Chief Operating Officer and a director of
ACNielsen, Inc. from March 1992 to January 1996. From March 1973 to March 1992,
he held a number of senior executive positions at FedEx Corporation. Mr.
Cotsakos serves as a director of National Processing Company, Inc., Digital
Island, Inc., Critical Path, Inc., and FOX Entertainment Group, Inc. Mr.
Cotsakos received a B.A. from William Paterson College, an M.B.A. from
Pepperdine University and is currently pursuing a Ph.D. in economics at the
Management School, University of London.
TIM KOOGLE has served as a member of the Board since June 1999. Mr. Koogle
has been the Chief Executive Officer of Yahoo!, Inc. and a member of Yahoo!'s
Board of Directors since August 1995. He has also been Yahoo!'s Chairman since
January 1999 and was its President from August 1995 until January 1999. Prior to
joining Yahoo!, Mr. Koogle was President of Intermec Corporation, a manufacturer
of data collection and data communication products, from 1992 to 1995. During
that time, he also served as a corporate Vice President of Intermec's parent
company, Western Atlas. Mr. Koogle also serves as a director of E-LOAN, Inc. Mr.
Koogle holds a B.S. degree from the University of Virginia and an M.S. degree
from Stanford University.
MICHAEL J. MORITZ has served as a member of the Board since October 1997.
Mr. Moritz has been a general partner of Sequoia Capital, a venture capital
firm, since 1988. Between 1979 and 1984, Mr. Moritz was employed in a variety of
positions by Time, Inc. Mr. Moritz also serves as a director of Yahoo!,
Flextronics International and eToys Inc. Mr. Moritz holds an M.A. degree in
history from Oxford University and an M.B.A. from the Wharton Business School of
the University of Pennsylvania.
Officers serve at the discretion of the Board and are appointed annually.
The employment of each of our officers is at will and may be terminated at any
time, with or without cause. There are no family relationships between any of
the directors or executive officers of Webvan.
BOARD COMPOSITION
Webvan currently has authorized five directors. Webvan's Restated
Certificate of Incorporation will provide that, effective upon the closing of
this offering, the terms of office of the members of the Board of Directors will
be divided into three classes: Class I, whose term will expire at the annual
meeting of stockholders to be held in 2000, Class II, whose term will expire at
the annual meeting of stockholders to be held in 2001, and Class III, whose term
will expire at the annual meeting of
40
<PAGE> 43
stockholders to be held in 2002. The Class I directors are Messrs. Cotsakos and
Koogle, the Class II directors are Messrs. Beirne and Moritz and the Class III
director is Mr. Borders. At each annual meeting of stockholders after the
initial classification, the successors to directors whose term will then expire
will be elected to serve from the time of election and qualification until the
third annual meeting following election. 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. This classification of the Board of Directors may
have the effect of delaying or preventing changes in control or management of
Webvan.
BOARD COMMITTEES
The Audit Committee of the Board of Directors reviews our internal
accounting procedures and consults with and reviews the services provided by our
independent accountants. The Audit Committee currently consists of Messrs.
Beirne, Koogle and Moritz.
The Compensation Committee of the Board of Directors reviews and recommends
to the Board the compensation and benefits of all of our executive officers,
administers our stock option plan and employee stock purchase plan and
establishes and reviews general policies relating to compensation and benefits
of our employees. The Compensation Committee currently consists of Messrs.
Beirne, Cotsakos and Moritz. No interlocking relationships exist between our
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
DIRECTOR COMPENSATION
Our directors do not receive cash for services they provide as directors.
In July 1998, Mr. Cotsakos was granted an option to purchase 2,190,276 shares of
common stock at an exercise price of $0.10 per share. The option granted to Mr.
Cotsakos vests at the rate of one-sixteenth ( 1/16th) of the shares subject to
the option per quarter.
COMPENSATION COMMITTEE INTERLOCKS
No executive officer of Webvan 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 Webvan's Board of Directors.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
We do not currently have any employment contract in effect with our Chief
Executive Officer.
Mr. Dahl is a party to an offer letter, dated March 31, 1997. Under the
offer letter, we agreed to pay Mr. Dahl a base salary of $200,000, subject to
annual adjustment.
Mr. Holzman is a party to an offer letter, dated September 2, 1997. Under
the offer letter, we agreed to pay Mr. Holzman a base salary of $250,000,
subject to annual adjustment. The offer letter provides that, in the event that
Mr. Holzman's employment is terminated for other than cause, we are obligated to
pay him a six month salary severance. This provision expires on October 1, 1999.
Mr. Holtzman is a party to an offer letter, dated June 5, 1997. Under the
offer letter, we agreed to pay Mr. Holtzman a base salary of $175,000, subject
to annual adjustment. The offer letter provides that in the event that Mr.
Holtzman's employment is terminated for other than cause, we are obligated to
pay him a monthly salary severance and option vesting for up to six months until
he is employed elsewhere at a comparable salary.
Mr. Relan is a party to an offer letter, dated February 2, 1998. Under the
offer letter, we agreed to pay Mr. Relan a base salary of $200,000, subject to
annual adjustment. The offer letter provides that in the event that Mr. Relan's
employment is terminated for any reason following the second
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<PAGE> 44
anniversary of his employment, we are obligated to, at our option, either (i)
pay to Mr. Relan the sum of $3.0 million or (ii) accelerate the vesting of all
of Mr. Relan's options to purchase our common stock. The offer letter further
provides that, in the event that Mr. Relan's employment is terminated without
cause, we are obligated to pay him six months of salary and benefits as
severance. Under Mr. Relan's offer letter, he has the right, expiring in March
2000, to cause Webvan to repurchase up to 1,914,000 shares of common stock
beginning on the first anniversary of his employment and an additional 1,914,000
shares of common stock beginning on the second anniversary of his employment, in
each case at a price of $0.37 per share. Mr. Relan also has the right to
participate in sales of our preferred stock prior to the initial public offering
of our common stock up to a maximum amount of $200,000 for each round of
financing.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by Webvan
during the fiscal year ended December 31, 1998 to our Chief Executive Officer
and our four other most highly compensated executive officers whose salary and
bonus exceeds $100,000 (collectively, the "Named Executive Officers") for
services rendered in all capacities to Webvan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM
----------------------------------- COMPENSATION
OTHER ANNUAL AWARDS OF ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION(2) STOCK OPTIONS COMPENSATION(3)
---------------------------- -------- ------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Louis H. Borders............... $ -- $ -- $ -- -- $ --
President and Chief Executive
Officer
Gary B. Dahl................... 178,600 8,750 -- 600,000 2,000
Vice President, Distribution
Mark J. Holtzman............... 150,000 7,500 13,835 1,200,000 2,000
Controller
S. Coppy Holzman............... 219,431 -- -- 900,000 1,491
Vice President, Merchandising
Arvind Peter Relan(4).......... 142,974 7,692 -- 7,956,000 2,000
Senior Vice President,
Technology
</TABLE>
- -------------------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted in those cases where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named Executive
Officer for such year.
(2) Represents a payment for a relocation allowance.
(3) Represents 401(k) plan matching by Webvan.
(4) Mr. Relan joined Webvan in February 1998.
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<PAGE> 45
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information for the fiscal year
ended December 31, 1998 with respect to each grant of stock options to the Named
Executive Officers:
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------ VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------
NAME GRANTED IN 1998(2) SHARE DATE 5% 10%
---- --------- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Louis H. Borders............. -- --% $ -- -- $ -- $ --
Gary B. Dahl................. 600,000 1.3 0.0125 1/06/2008 4,717 11,953
Mark J. Holtzman............. 1,200,000 2.6 0.0125 1/06/2008 9,433 23,906
S. Coppy Holzman............. 900,000 2.0 0.0125 1/06/2008 7,075 17,930
Arvind Peter Relan........... 7,656,000 16.5 0.0125 3/06/2008 60,185 152,521
Arvind Peter Relan........... 300,000 0.6 0.0125 5/13/2008 2,358 5,977
</TABLE>
- -------------------------
(1) Each of these options was granted pursuant to the Stock Plan and is subject
to the terms of such plan. These options were granted at an exercise price
equal to the fair market value of our common stock as determined by our
Board of Directors on the date of grant and, as long as the optionee
maintains continuous employment with Webvan, vest over a four year period at
the rate of one-fourth ( 1/4th) of the shares subject to the option on the
first anniversary of the date of grant and one-sixteenth ( 1/16th) of the
shares subject to the option per quarter thereafter.
(2) In 1998, we granted employees and consultants options to purchase an
aggregate of 46,436,478 shares of common stock.
(3) The gains shown are "option spreads" that would exist for the respective
options granted. These gains are based on the assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted over the full option term. These assumed annual compound rates of
stock price appreciation do not represent our estimate or projection of
future common stock prices.
AGGREGATED OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AT
SHARES DECEMBER 31, VALUE OF IN-THE-MONEY
ACQUIRED 1998(2) OPTIONS(3)
ON OPTIONS VALUE --------------------- ---------------------
NAME EXERCISE REALIZED(1) VESTED UNVESTED VESTED UNVESTED
---- ---------- ----------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Louis H. Borders......... -- $ -- -- -- $ -- $ --
Gary B. Dahl............. 2,250,000 26,250 1,068,750 1,781,250 441,835 736,392
Mark J. Holtzman......... 1,860,000 14,700 768,750 1,691,250 315,324 693,712
S. Coppy Holzman......... 2,250,000 26,250 984,375 2,165,625 406,090 893,397
Arvind Peter Relan....... 3,828,000 -- -- 7,956,000 -- 3,215,815
</TABLE>
- -------------------------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(2) The options are immediately exercisable for all of the option shares, but
any shares purchased under those options will be subject to repurchase by
Webvan at the original exercise price paid per share, if the optionee ceases
service with Webvan before vesting in such shares. The heading "Vested"
refers to shares that are no longer subject to repurchase and the heading
"Unvested" refers to shares subject to repurchase as of December 31, 1998.
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<PAGE> 46
(3) Based upon an assumed fair market value of $0.42 per share as of December
31, 1998 less the exercise price per share.
COMPENSATION PLANS
1997 Stock Plan
Webvan's Stock Plan was approved by the Board of Directors and the
stockholders in September 1997 and was amended in March 1998, July 1998, October
1998, December 1998 and January 1999. The Stock Plan provides for the grant to
employees of Webvan (including officers and employee directors) of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and for the grant of nonstatutory stock options to employees,
directors and consultants of Webvan. The Stock Plan is currently administered by
the Board of Directors (the "Administrator") which selects the optionees,
determines the number of shares to be subject to each option and determines the
exercise price of each option. The Stock Plan authorizes the issuance of an
aggregate of up to 72,000,000 shares of common stock. In August 1999, the Board
approved an amendment to the Stock Plan to increase the number of shares of
common stock reserved thereunder by 7,500,000 shares of common stock, subject to
stockholder approval. The maximum number of shares that may be granted to any
individual under the Stock Plan in any year is . As of June 30, 1999,
options to purchase an aggregate of 40,433,688 shares of common stock were
outstanding under the Stock Plan, and an aggregate of 9,717,222 shares of common
stock remained available for future grants. The number of shares of common stock
reserved for issuance under this plan will be subject to an annual increase on
each anniversary beginning January 1, 2000 equal to the lesser of:
- 16,000,000 shares;
- 4% of the outstanding shares on such date; or
- an amount determined by the Board.
The exercise price of all incentive stock options granted under the Stock
Plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of all nonstatutory stock options granted
under the Stock Plan shall be determined by the Administrator, but in no event
may be less than 85% of the fair market value on the date of grant. With respect
to any participant who owns stock possessing more than 10% of the voting power
of all classes of stock of Webvan, the exercise price of any incentive or
nonstatutory option granted must equal at least 110% of the fair market value on
the grant date and the maximum term of any such option must not exceed five
years. The term of all other options granted under the Stock Plan may not exceed
ten years.
In the event of a merger of Webvan with or into another corporation or a
sale of substantially all of our assets, the Stock Plan requires that each
outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, such
options will become fully vested and exercisable for a period of fifteen days
after notice from the Administrator. Unless terminated sooner, the Stock Plan
will terminate ten years from its effective date. The Board has authority to
amend or terminate the Stock Plan, provided that no such action may impair the
rights of the holder of any outstanding options without the written consent of
such holder.
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan, or the Purchase Plan, provides our
employees with an opportunity to purchase our common stock through accumulated
payroll deductions. This plan will become effective upon the closing of this
offering. A total of 5,000,000 shares of common stock have been reserved for
issuance under the Purchase Plan, none of which have been issued. The number of
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<PAGE> 47
shares reserved for issuance under the Purchase Plan will be subject to an
annual increase on each anniversary beginning January 1, 2000 equal to the
lesser of:
- the number of shares issued under the Purchase Plan in the prior year; or
- an amount determined by the Board.
The Purchase Plan will be administered by the Board of Directors or by a
committee appointed by the Board. The Purchase Plan permits eligible employees
to purchase common stock through payroll deductions up to a maximum of $25,000
for all purchases ending within the same calendar year and up to a maximum of
1,000 shares for each purchase period. Employees are eligible to participate if
they are employed by us for at least 20 hours per week and more than five months
in any calendar year. Unless the Board of Directors or its committee determines
otherwise, each offering period will run for six months. The first offering
period will commence on the date of this prospectus and end on or about
, 2000, and new offering periods will commence every six months
thereafter. In the event we are acquired, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
option, the offering period then in progress will be shortened by setting a new
exercise date. The price at which common stock will be purchased under the
Purchase Plan is equal to 85% of the fair market value of the common stock on
the first or last day of the applicable offering period, whichever is lower.
Employees may end their participation in the offering period at any time, and
participation automatically ends on termination of employment. Generally, the
Board of Directors may amend, modify or terminate the Purchase Plan at any time
as long as such amendment, modification or termination does not impair the
rights of plan participants. The Purchase Plan will terminate at 2009, unless
terminated earlier in accordance with its provisions.
401(k) Plan
Webvan adopted a retirement savings plan (the "401(k) Plan") that covers
all of our employees. An employee may elect to defer, in the form of
contributions to the 401(k) Plan, up to 15% of the total annual compensation
that would otherwise be paid to the employee, subject to statutory limitations.
Employee contributions are invested in selected mutual funds or money market
funds according to the directions of the employee. Webvan makes matching
contributions as a percentage of employee contributions, subject to established
limits. The employees' contributions are fully vested and nonforfeitable at all
times.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our 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 breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemption; or
- any transaction from which the director derived an improper personal
benefit.
Such 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 Certificate of Incorporation and Bylaws provide that we shall indemnify
our directors and executive officers and may indemnify other officers and
employees and our agents to the fullest extent permitted by law. We believe that
indemnification under our Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Our Bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions
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<PAGE> 48
in such capacity, regardless of whether the Bylaws would permit indemnification.
We have director and officer liability insurance that covers matters, including
matters arising under the Securities Act.
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 (including attorneys' fees), judgments, fines
and settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of Webvan, arising out of such person's
services as a director or executive officer of ours, any subsidiary of ours or
any other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of Webvan where indemnification will be required or
permitted. We are not aware of any pending or threatened litigation or
proceeding that might result in a claim for such indemnification.
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<PAGE> 49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALES OF STOCK TO INSIDERS
In April 1997, we issued 27,038,856 shares of common stock to the Louis H.
Borders Amended and Restated Revocable Trust dated December 4, 1987, and
17,361,144 shares of common stock to ISR GRAT I, a trust affiliated with Mr.
Borders, for an aggregate purchase price of $37,000. Louis H. Borders is our
President, Chief Executive Officer and Chairman.
In October 1997, we issued an aggregate of 111,643,872 shares of Series A
preferred stock to investors for an aggregate purchase price of approximately
$10.7 million. The following directors, executive officers, holders of more than
5% of a class of voting securities and members of such person's immediate
families purchased shares of Series A preferred stock:
<TABLE>
<CAPTION>
SHARES OF
SERIES A
PURCHASER PREFERRED STOCK
--------- ---------------
<S> <C>
Louis H. Borders............................................ 22,240,896
ISR GRAT I.................................................. 14,281,080
Benchmark Capital Partners.................................. 36,521,976
Sequoia Capital............................................. 36,521,976
</TABLE>
In May and June 1998, we issued an aggregate of 38,612,184 shares of Series
B preferred stock to investors for an aggregate purchase price of approximately
$35.3 million. SOFTBANK America Inc., a holder of more than 5% of our voting
securities, purchased 36,521,976 shares of Series B preferred stock in such
transaction.
In January and April 1999, we issued an aggregate of 32,341,200 shares of
Series C preferred stock to investors for an aggregate purchase price of
approximately $75.1 million. E*TRADE Group, Inc. and Yahoo! Inc. each purchased
4,304,100 shares of Series C preferred stock in such transaction. Christos M.
Cotsakos, a director of Webvan, is the President and CEO of E*TRADE Group, Inc.,
and Tim Koogle, a director of Webvan, is the Chief Executive Officer and
Chairman of Yahoo! Inc.
In June 1999, as contemplated by his offer letter, Kevin R. Czinger
purchased 450,000 shares of our common stock at a price of $1.35 per share.
In July 1999, we entered into an agreement to issue an aggregate of
21,670,605 shares of Series D-2 preferred stock to investors at an aggregate
purchase price of approximately $275.0 million. Entities affiliated with
SOFTBANK America Inc. will purchase 9,850,275 shares of Series D-2 preferred
stock and entities affiliated with Sequoia Investors Group will purchase
3,940,110 shares of Series D-2 preferred stock transaction.
In July 1999, we sold 150,000 shares of common stock to Yahoo! Inc. at a
price of $3.33 per share pursuant to a restricted stock purchase agreement.
These shares are subject to a repurchase option which expires at the rate of
one-sixteenth ( 1/16th) of the shares subject to the agreement per quarter as
long as Mr. Koogle remains on our Board of Directors.
Each share of Series A preferred stock, Series B preferred stock, Series C
preferred stock and Series D preferred stock will convert into one share of
common stock immediately prior to the closing of this offering. See the notes to
table of beneficial ownership in "Principal Stockholders" for further
information relating to the beneficial ownership of our capital stock.
OTHER AGREEMENTS WITH INSIDERS
We are a party to a voting agreement executed in September 1997, as amended
in December 1998, with the Louis H. Borders Amended and Restated Revocable Trust
dated December 4, 1987, and certain of our shareholders affiliated with or
related to Mr. Borders. Such shareholders each executed an irrevocable proxy
appointing the trustee of the trust as their proxy and attorney-in-fact. The
voting agreement and irrevocable proxy terminate immediately prior to the
closing of an initial underwritten public offering of our common stock pursuant
to a registration statement filed with the SEC.
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<PAGE> 50
Mark Zaleski, our Senior Vice President, Area Operations, is a party to an
offer letter, dated December 14, 1998. In March 1999, Webvan loaned Mr. Zaleski
$200,000 to be used towards the purchase of a house in the San Francisco Bay
Area. This loan was made as an interest-free employee relocation bridge loan, as
contemplated by his offer letter, and is repayable upon the first to occur of
March 1, 2000 or 15 days after the sale of his previous residence. The offer
letter also provides that in the event that Mr. Zaleski's employment is
terminated for other than cause, we are obligated to pay him a severance of six
months of salary and benefits as well as continued salary and benefits for up to
12 months until he obtains subsequent employment. In the event of such a
termination, the unvested portion of Mr. Zaleski's options will become
exercisable to the extent of an additional 12 months of vesting.
Mr. Czinger is a party to an offer letter dated March 17, 1999. The offer
letter provides that, in the event that Mr. Czinger's employment is terminated
for other than cause, we are obligated to pay him a lump sum severance of six
months of salary and benefits as well as continued salary and benefits for up to
six months until Mr. Czinger obtains subsequent employment. Mr. Czinger also has
the option to purchase 430,416 shares of our Series C preferred stock at an
exercise price of $2.32 per share by January 1, 2000. The offer letter further
provides that, if Mr. Czinger is involuntarily terminated by Webvan or a
successor company, the unvested portion of his options will become exercisable
to the extent of an additional 12 months of vesting.
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<PAGE> 51
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of June 30, 1999 with respect to (i) each
person (or group of affiliated persons) known by Webvan to own beneficially more
than 5% of the outstanding shares of common stock, (ii) each of our directors,
(iii) each of the Named Executive Officers, and (iv) all directors and executive
officers as a group. The address for each listed director and officer is c/o
Webvan Group, Inc., 1241 East Hillsdale Boulevard, Suite 210, Foster City,
California 94404. Except as otherwise indicated in the footnotes to the table,
each of the stockholders has sole voting and investment power with respect to
the shares of beneficially owned by such stockholders, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED(1)
------------------------ ------------------ -------------------
<S> <C> <C>
Louis H. Borders(2)....................................... 80,917,776 27.7%
SOFTBANK America Inc.(3).................................. 46,372,251 15.9
300 Delaware Avenue, Suite 900
Wilmington, Delaware 19801
Sequoia Capital(4)........................................ 40,462,086 13.8
Michael J. Moritz
Benchmark Capital Partners(5)............................. 36,521,976 12.5
David M. Beirne
Arvind Peter Relan(6)..................................... 3,903,000 1.3
S. Coppy Holzman(7)....................................... 2,643,750 *
Gary B. Dahl(8)........................................... 2,587,500 *
Mark J. Holtzman(9)....................................... 1,860,000 *
Christos Cotsakos(10)..................................... 684,461 *
Tim Koogle(11)............................................ -- --
All directors and officers as a group (13 persons)(12).... 173,990,549 59.2
</TABLE>
- -------------------------
* Less than 1%
(1) Applicable percentage ownership is based on 294,453,839 shares of common
stock outstanding as of June 30, 1999 and giving effect to the issuance of
21,670,605 shares of Series D preferred stock in July and August 1999.
Shares of common stock that a person has the right to acquire within 60
days of June 30, 1999 are deemed outstanding for purposes of computing the
percentage ownership of the person holding such rights, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person, except with respect to the percentage ownership of all directors
and executive officers as a group.
(2) Includes 36,358,224 shares held by Louis H. Borders, Trustee of the Louis
H. Borders Amended and Restated Revocable Trust dated December 4, 1987 (the
"Trust"); 31,642,224 shares held by ISR GRAT I and 12,917,328 shares held
by ISR GRAT II. ISR GRAT I holds shares for the benefit of the Trust and
will expire in February 2000. ISR GRAT II holds shares for the benefit of
Christina Borders, daughter of Mr. Borders, and will expire in December
2002. Mr. Borders is President, Chief Executive Officer and Chairman of
Webvan. Certain employees of Mercury Capital Management held options to
purchase 195,000 shares of common stock held by the Trust.
(3) Includes 9,717,243 shares held by SOFTBANK Capital Partners LP and 133,032
shares held by SOFTBANK Capital Advisors Fund LLP.
(4) Includes 33,417,612 shares held by Sequoia Capital VII ("Sequoia Capital");
3,940,110 shares held by Sequoia Capital Franchise Fund ("Sequoia Fund")
and Sequoia Capital Franchise Partners ("Sequoia Partners"); 1,460,880
shares held by Sequoia Technology Partners; 677,844 shares held by SQP
1997; 584,352 shares held by Sequoia International Partners and
49
<PAGE> 52
381,288 shares held by Sequoia 1997 LLC. Mr. Moritz, one of our directors,
is a general partner of Sequoia Capital, Sequoia Fund, Sequoia Partners,
Sequoia Technology, SQP, Sequoia International and Sequoia LLC. Mr. Moritz
disclaims beneficial ownership of such shares held by Sequoia Capital,
Sequoia Fund, Sequoia Partners, Sequoia Technology, SQP, Sequoia
International and Sequoia LLC, except to the extent of his pecuniary
interest therein.
(5) Includes 32,043,432 shares held by Benchmark Capital Partners, L.P.
("Benchmark Capital") and 4,478,544 shares held by Benchmark Founders'
Fund, L.P. ("Benchmark Founders"). Mr. Beirne, one of our directors, is a
managing member of Benchmark Capital Management Co., LLC, the general
partner of Benchmark Capital and Benchmark Founders. Mr. Beirne disclaims
beneficial ownership of such shares held by Benchmark Capital and Benchmark
Founders, except to the extent of his pecuniary interest therein.
(6) Includes 37,500 shares held by Renuka Prasad Relan, Trustee of the Renuka
Prasad Relan 1999 Grantor Trust, 37,500 shares held by Arvind Peter Relan,
Trustee of the Arvind Peter Relan 1999 Grantor Trust and 75,000 shares held
by Arvind Peter Relan and Renuka Prasad Relan, Trustees of the Relan Family
1999 Trust. Includes 75,000 shares subject to an option exercisable within
60 days of June 30, 1999. Of the shares included in the table, 1,435,500
shares are subject to a right of repurchase in favor of Webvan in the event
that Mr. Relan's employment with Webvan terminates. Such repurchase right
expired as to 25% of the shares in February 1999 and will expire as to
1/16 of the shares on a quarterly basis thereafter through February 2002.
(7) Includes 393,750 shares subject to an option exercisable within 60 days of
June 30, 1999. Of the shares included in the table, 1,265,625 shares are
subject to a right of repurchase in favor of Webvan in the event that Mr.
Holzman's employment with Webvan terminates. Such repurchase right expired
as to 25% of the shares in September 1998 and will expire as to 1/16th of
the shares on a quarterly basis thereafter through September 2001.
(8) Includes 337,500 shares subject to an option exercisable within 60 days of
June 30, 1999. Of the shares included in the table, 1,125,000 shares are
subject to a right of repurchase in favor of Webvan in the event that Mr.
Dahl's employment with Webvan terminates. Such repurchase right expired as
to 25% of the shares in April 1998 and will expire as to 1/16th of the
shares on a quarterly basis thereafter through April 2001.
(9) Of the shares included in the table, 783,750 shares are subject to a right
of repurchase in favor of Webvan in the event that Mr. Holtzman's
employment with Webvan terminates. Such repurchase right expired as to 25%
of the shares in July 1998 and will expire as to 1/16th of the shares on a
quarterly basis thereafter through July 2001.
(10) Represents shares issuable upon the exercise of options which are
exercisable within 60 days of June 30, 1999. Does not include 4,304,100
shares held by E*TRADE Group, Inc. Mr. Cotsakos is the Chairman of the
Board, President and Chief Executive Officer of E*TRADE Group, Inc. and
disclaims beneficial ownership of such shares.
(11) Does not include 4,304,100 shares held by Yahoo!, Inc. Mr. Koogle is the
Chairman of the Board and Chief Executive Officer of Yahoo!, Inc. and
disclaims beneficial ownership of such shares.
(12) Includes an aggregate of 1,490,711 shares subject to an option exercisable
within 60 days of June 30, 1999.
50
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Restated Certificate of Incorporation, which will be filed prior to the
closing of this offering, authorizes the issuance of up to 800,000,000 shares of
common stock, par value $0.0001 per share, and 10,000,000 shares of preferred
stock, par value $0.0001 per share, the rights and preferences of which may be
established by our Board of Directors. As of June 30, 1999, after giving effect
to the conversion of all outstanding shares of Series A, B, C and D preferred
stock prior to the closing of this offering, 292,453,839 shares of common stock
were issued and outstanding and held by approximately 120 stockholders.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record upon such matters and in such manner as may be provided by law. Subject
to preferences applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably dividends, if any, as
may be declared by the Board of Directors out of funds legally available for
dividend payments. In the event we liquidate, dissolve or wind up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
the preferred stock. Holders of common stock have no preemptive rights or rights
to convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the Board of Directors will be
authorized, absent any limitations prescribed by law, without stockholder
approval, to issue up to an aggregate of 10,000,000 shares of preferred stock,
in one or more series, each of the series to have rights and preferences,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall 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. 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.
REGISTRATION RIGHTS
Set forth below is a summary of the registration rights of the holders of
our Series A preferred stock, Series B preferred stock, Series C preferred stock
and Series D preferred stock each of which will convert into common stock
immediately prior to the consummation of this offering.
Demand Registrations. At any time on or after the first to occur of October
29, 2000 or six months following the closing date of the initial public offering
of our common stock, the holders of registration rights may request us to
register shares of common stock having a gross offering price of at least $25
million subject to our right, upon advice of our underwriters, to reduce the
number of shares proposed to be registered. We will be obligated to effect only
three registrations pursuant to such a request by holders of registration
rights. If shares requested to be included in a registration must be excluded
due to limitations on the number of shares to be registered on behalf of the
selling shareholders pursuant to the underwriters' advice, the shares registered
on behalf of the selling shareholders will be allocated among all holders of
shares with rights to be included in the registration on the basis of the number
of shares with such rights held by such shareholders.
Piggyback Registration Rights. The holders who have registration rights
have unlimited rights to request that shares be included in any
company-initiated registration of common stock other than registrations of
employee benefit plans or business combinations subject to Rule 145 under the
51
<PAGE> 54
Securities Act. In our initial registration, the underwriters may, for marketing
reasons, exclude all or part of the shares requested to be registered on behalf
of all shareholders having the right to request inclusion in such registration.
In our subsequent registrations, the underwriters may, for marketing reasons,
limit the shares requested to be registered on behalf of all shareholders having
the right to request inclusion in such registration to not less than 30%. In
addition, we have the right to terminate any registration we initiated prior to
its effectiveness regardless of any request for inclusion by any stockholders.
Form S-3 Registrations. After we have qualified for registration on Form
S-3 (which will not be available until at least 12 months after we become a
publicly reporting company), holders of registration rights may request in
writing that we effect an unlimited number of registrations of such shares on
Form S-3 provided that the gross offering price of the shares to be so
registered in each such registration exceeds $1,000,000. If such registration is
to be an underwritten public offering, the underwriters may reduce for marketing
reasons the number of shares to be registered on behalf of all shareholders
having the right to request inclusion in such registration. We are not obligated
to effect a registration on Form S-3 prior to expiration of 180 days following
effectiveness of the most recent registration requested by the holders.
Future Grants of Registration Rights. We cannot grant further registration
rights without the prior written consent of current stockholders owning at least
a majority of the then outstanding registrable securities, including grants to
any holder or prospective holder of any registration rights which would:
- be on equal or more favorable terms than the existing registration
rights;
- cause a reduction in the amount of registrable securities held by current
holders that would be registrable in a registration statement; or
- require us to effect a registration earlier than the date current holders
can first require a registration.
Transferability. The registration rights are transferable upon notice by
the holder to us of the transfer, provided that the transferee or assignee is
not deemed by the Board of Directors to be a competitor of ours and assumes the
rights and obligations of the transferor for such shares.
Termination. The registration rights will terminate on the first to occur
of five years after the date of our initial public offering or the date on which
the holder may sell the share pursuant to Rule 144, provided that the aggregate
of the shares held by the holder represent less than 1% of our then outstanding
equity securities.
WARRANTS
At June 30, 1999, we had outstanding warrants to purchase an aggregate of
2,397,804 shares of our Series B preferred stock, which is convertible into an
equivalent number of shares of common stock. The weighted average exercise price
of the warrants is $0.91 per share. Any warrant may be exercised by applying the
value of a portion of such warrant (equal to the number of shares issuable under
such warrant being exercised multiplied by the fair market value of the security
receivable upon exercise of such warrant, less the per share exercise price) in
lieu of payment of the exercise price per share. The warrants to purchase an
aggregate of 2,233,572 shares expire in November 2005. The warrant to purchase
164,232 shares expires in May 2008 or five years from effective date of our
initial public offering, whichever occurs first.
In connection with our agreement with Bechtel Corporation, we issued to
Bechtel a warrant to purchase up to 1,800,000 shares at an exercise price of
$2.32 per share. The warrant expires in July 2004 and is exercisable as to
150,000 shares as of July 31, 1999. The warrant generally becomes exercisable as
to the remaining shares as distribution centers are completed by Bechtel within
agreed upon schedule and budgetary parameters.
52
<PAGE> 55
DELAWARE ANTI-TAKEOVER LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
Provisions of Delaware law and our Certificate of Incorporation and Bylaws
could make more difficult our acquisition by a third party and the removal of
our incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of Webvan to first negotiate
with us. We believe that the benefits of increased protection of our ability to
negotiate with the proponent of an unfriendly or unsolicited acquisition
proposal outweigh the disadvantages of discouraging such proposals because,
among other things, negotiation could result in an improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. 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 Board of Directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
- on or subsequent to such date the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders.
A "business combination" generally includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. In general, 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.
Our Certificate of Incorporation and Bylaws do not provide for the right of
stockholders to act by written consent without a meeting or for cumulative
voting in the election of directors. In addition, our Certificate of
Incorporation permits the Board of Directors to issue preferred stock with
voting or other rights without any stockholder action. Our Certificate of
Incorporation provides for the Board of Directors to be divided into three
classes, with staggered three-year terms. As a result, only one class of
directors will be elected at each annual meeting of stockholders. Each of the
two other classes of directors will continue to serve for the remainder of its
respective three-year term. These provisions, which require the vote of
stockholders holding at least a majority of the outstanding common stock to
amend, may have the effect of deterring hostile takeovers or delaying changes in
our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. The transfer agent's address and telephone number
is 235 Montgomery Street, 23rd Floor, San Francisco, California 94104 and (415)
743-1423.
53
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse or are
released could adversely affect the prevailing market price and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares
of common stock. Of these shares, the shares sold in the offering,
plus any shares issued upon exercise of the underwriters' over-allotment option,
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates" as that term is defined in Rule 144 under the
Securities Act. In general, affiliates include officers, directors or 10%
stockholders.
The remaining 292,453,839 shares outstanding are "restricted securities"
within the meaning of Rule 144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of the restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
Our directors, officers and securityholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or convertible
into our common stock without the prior written consent of Goldman, Sachs & Co.
The lock-up agreements will expire as to 15% of the shares held by each
stockholder beginning on the third day following the public release of Webvan's
earnings for the year ended December 31, 1999, as to an additional 25% of the
shares beginning 45 days thereafter and as to the remaining shares 180 days
after the date of this prospectus. Notwithstanding possible earlier eligibility
for sale under the provisions of Rules 144, 144(k) and 701, shares subject to
lock-up agreements will not be salable until such agreements expire or are
waived by Goldman, Sachs & Co. Taking into account the lock-up agreements, and
assuming Goldman, Sachs & Co. does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
- Beginning on the date of this prospectus, only the shares sold in the
offering will be immediately available for sale in the public market.
- Beginning on or about February 1, 2000 (the third business day following
the public release of Webvan's earnings for the year ended December 31,
1999), approximately 40.6 million shares will be eligible for sale
pursuant to Rules 144, 144(k) and 701.
- Beginning on or about March 16, 2000 (45 days following the initial
lock-up expiration period), approximately 67.7 million additional shares
will be eligible for sale pursuant to Rules 144, 144(k) and 701.
- Beginning 180 days after the date of this prospectus, approximately 162.4
million additional shares will be eligible for sale pursuant to Rules
144, 144(k) and 701.
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding
which will equal approximately shares immediately after the
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
54
<PAGE> 57
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice, and the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate and
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell such shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell such shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act within 180 days following the date of this prospectus to
register shares to be issued pursuant to our employee benefit plans. As a
result, any options or rights exercised under the 1997 Stock Plan, the 1999
Employee Stock Purchase Plan or any other benefit plan after the effectiveness
of the registration statement will also be freely tradable in the public market.
However, such shares held by affiliates will still be subject to the volume
limitation, manner of sale, notice and public information requirements of Rule
144 unless otherwise resalable under Rule 701. As of June 30, 1999 there were
outstanding options for the purchase of 40,433,688 shares of common stock, of
which options to purchase 13,756,055 shares were exercisable. See "Risk
Factors -- Future sales of our common stock could cause our stock price to
decline," "Management -- Compensation Plans" and "Description of Capital
Stock -- Registration Rights."
LEGAL MATTERS
Certain legal matters will be passed upon on behalf of Webvan by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
Jeffrey D. Saper, a member of Wilson Sonsini Goodrich & Rosati, serves as our
Secretary. Certain legal matters will be passed upon for the underwriters by
Shearman & Sterling, New York, New York. As of the date of this prospectus, an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, P.C. and certain
members of Wilson Sonsini Goodrich & Rosati, P.C. beneficially owned an
aggregate of 2,068,944 shares of common stock.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for the period from December 17, 1996 (date of inception) to December 31, 1997
and for the year ended December 31, 1998 included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
55
<PAGE> 58
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to Webvan and the common
stock offered in this offering, we refer you to the registration statement and
to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to in this prospectus are not
necessarily complete. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matter involved.
The reports and other information we file with the SEC can be inspected and
copied at the public reference facilities that the SEC maintains at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of these materials can be obtained at prescribed rates
from the Public Reference Section of the SEC at the principal offices of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling 1(800) SEC-0330.
The SEC also maintains a web site (http://www.sec.gov) that makes available the
reports and other information we have filed with the SEC.
56
<PAGE> 59
WEBVAN GROUP, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998,
THE PERIOD FROM DECEMBER 17, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1997 AND CUMULATIVE FROM
DECEMBER 17, 1996 (DATE OF INCEPTION) TO MARCH 31, 1999
AND INDEPENDENT AUDITORS' REPORT
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Comprehensive F-4
Loss......................................................
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Webvan Group, Inc.:
We have audited the accompanying consolidated balance sheets of Webvan
Group, Inc. (formerly Intelligent Systems for Retail, Inc.) and subsidiary
(collectively, "Webvan") (a development stage company) as of December 31, 1998
and 1997, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity and cash flows for the year ended
December 31, 1998 and for the period from December 17, 1996 (date of inception)
to December 31, 1997. These financial statements are the responsibility of
Webvan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Webvan at December 31, 1998 and
1997, and the results of its operations and its cash flows for periods stated
above, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
San Jose, California
March 5, 1999
(August 5, 1999 as to the second sentence of Note 1 and as to Note 15 and August
, 1999 as to the first paragraph of Note 7)
To the Board of Directors and Shareholders of Webvan Group, Inc.:
The accompanying consolidated financial statements included herein reflect
the approval by Webvan's shareholders of the three-for-two stock split of
Webvan's common and preferred stock as described in Note 7 to the consolidated
financial statements. The above opinion is in the form that will be signed by
Deloitte & Touche LLP upon the effectiveness of such event assuming that from
July 15, 1999 to the effective date of such event, no other events shall have
occurred that would affect the accompanying consolidated financial statements or
notes thereto.
/s/ Deloitte & Touche LLP
San Jose, California
August 5, 1999
F-2
<PAGE> 61
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ JUNE 30, JUNE 30,
1997 1998 1999 1999
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents...................................... $ 2,935 $ 13,839 $ 21,836
Marketable securities..................................... 5,043 7,728 22,231
Inventories............................................... -- -- 596
Related party receivable.................................. -- -- 847
Prepaid expenses and other current assets................. 5 114 3,294
------- -------- -------- --------
Total current assets............................... 7,983 21,681 48,804
Property, Equipment and Leasehold Improvements, Net......... 208 32,624 56,186
Loan Fees, Net.............................................. -- 2,000 1,713
Investments................................................. -- 518 1,018
Deposits.................................................... 88 1,418 1,255
Restricted Cash............................................. -- 1,768 3,453
------- -------- -------- --------
Total Assets................................................ $ 8,279 $ 60,009 $112,429
======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 172 $ 6,815 $ 7,230
Accrued liabilities....................................... 118 706 5,813
Current portion capital lease obligations................. -- 133 621
Current portion long-term debt............................ -- 3,104 3,367
------- -------- -------- --------
Total current liabilities.......................... 290 10,758 17,031
------- -------- -------- --------
Deferred Rent............................................... 17 107 268
Capital Lease Obligations................................... -- 637 2,137
Long-Term Debt.............................................. -- 13,593 11,811
------- -------- -------- --------
Commitments and Contingencies (Notes 6 and 11).............. -- -- --
Redeemable Common Stock..................................... -- 1,302 1,556
Shareholders' Equity
Series A preferred stock, no par value; 112,635 shares
authorized; 112,583, 112,635, 112,635 shares and none
issued and outstanding at December 31, 1997, 1998, June
30, 1999 and pro forma, respectively; (liquidation
preferences of $10,789, $10,794 and $10,794 at December
31, 1997, 1998 and June 30, 1999, respectively)......... 10,754 10,759 10,759 $ --
Series B preferred stock, no par value; 41,814 shares
authorized; 39,101 and 39,113 shares and none issued and
outstanding; liquidation preference of $35,713 and
$35,724 at December 31, 1998, June 30, 1999 and pro
forma, respectively..................................... -- 34,823 34,834 --
Series C preferred stock, no par value; 32,341 shares
authorized; 32,341 shares and none issued and
outstanding June 30, 1999 and pro forma; liquidation
preference of $75,000................................... -- -- 72,776 --
Restricted common stock, no par value; 360,000 shares
authorized; 64,394, 78,590, 81,909 and 265,998 issued
and outstanding at December 31, 1997, 1998, June 30,
1999 and pro forma, respectively........................ 58 11,921 29,611 147,980
Additional paid-in capital................................ -- 1,686 3,829 3,829
Deferred compensation..................................... -- (10,737) (23,790) (23,790)
Deficit accumulated during the development stage.......... (2,840) (14,844) (48,338) (48,338)
Accumulated other comprehensive income (loss)............. -- 4 (55) (55)
------- -------- -------- --------
Total shareholders' equity......................... 7,972 33,612 79,626 79,626
------- -------- -------- --------
Total.............................................. $ 8,279 $ 60,009 $112,429
======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 62
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE
DECEMBER 17, FROM
1996 (DATE OF DECEMBER 17,
INCORPORATION) SIX MONTHS 1996 (DATE OF
TO YEAR ENDED ENDED JUNE 30, INCORPORATION)
DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
-------------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales.................. $ -- $ -- $ -- $ 395 $ 395
Cost of Goods Sold......... -- -- -- 419 419
------- -------- ------- -------- --------
Gross Profit (Loss)........ -- -- -- (24) (24)
------- -------- ------- -------- --------
Software Development
Expenses................. 244 3,010 765 6,308 9,562
General and Administrative
Expenses................. 2,612 8,825 2,739 23,656 35,093
Amortization of deferred
stock compensation....... -- 1,060 43 3,953 5,013
------- -------- ------- -------- --------
Total Expenses... 2,856 12,895 3,547 33,917 49,668
------- -------- ------- -------- --------
Interest Income............ 85 923 285 1,641 2,649
Interest Expense........... 69 32 -- 1,194 1,295
------- -------- ------- -------- --------
Net Interest Income........ 16 891 285 447 1,354
------- -------- ------- -------- --------
Net Loss................... (2,840) (12,004) (3,262) (33,494) (48,338)
Unrealized Gain (Loss) on
Marketable Securities.... -- 4 (2) (59) (55)
------- -------- ------- -------- --------
Comprehensive Loss......... $(2,840) $(12,000) $(3,264) $(33,553) $(48,393)
======= ======== ======= ======== ========
Basic and Diluted Net Loss
Per Share (Note 10)...... $ (0.08) $ (0.18) $ (0.05) $ (0.46) $ (0.86)
======= ======== ======= ======== ========
Shares Used in Calculating
Basic and Diluted Net
Loss Per Share (Note
10)...................... 37,407 67,114 65,075 73,280 56,221
======= ======== ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 63
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE CONVERTIBLE
SERIES A SERIES B SERIES C RESTRICTED
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------------- -------------------- -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------- ---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred, net
of $35 issuance costs, October
1997................................ 112,582,992 $10,754 -- $ -- -- $ -- -- $ --
Issuance of restricted common stock,
April through September 1997........ 64,380,972 53
Common stock issued for services,
December 1997....................... 13,500 5
Net loss.............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, December 31, 1997.......... 112,582,992 10,754 -- -- -- -- 64,394,472 58
Issuance of Series A preferred,
January 1998........................ 52,176 5
Issuance of Series B preferred, net
of $890 issuance costs, May through
September 1998...................... 39,101,304 34,823
Series B preferred warrants granted
for debt, May 1998..................
Exercise of options during 1998...... 14,195,250 66
Options granted for services,
September and November 1998.........
Deferred Compensation................ 11,797
Amortization of deferred
compensation........................
Accumulated other comprehensive
income..............................
Net loss.............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, December 31, 1998.......... 112,635,168 10,759 39,101,304 34,823 -- -- 78,589,722 11,921
Issuance of Series B preferred,
January 1999*....................... 12,000 11
Issuance of Series C preferred, net
of issuance costs of $2,363, January
through April 1999*................. 32,341,200 72,776
Exercise of stock options during
1999*............................... 2,868,840 76
Issuance of restricted common stock,
June 1999........................... 450,000 608
Issuance of warrant, June 1999.......
Deferred Compensation................ 17,006
Amortization of deferred
compensation........................
Accumulated other comprehensive
loss*...............................
Net loss*............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, June 30, 1999 *............ 112,635,168 $10,759 39,113,304 $34,834 32,341,200 $72,776 81,908,562 $29,611
=========== ======= ========== ======= ========== ======= ========== =======
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATED
ADDITIONAL DURING THE OTHER TOTAL
PAID-IN DEFERRED DEVELOPMENT COMPREHENSIVE SHAREHOLDERS'
CAPITAL COMPENSATION STAGE INCOME (LOSS) EQUITY
---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of Series A preferred, net
of $35 issuance costs, October
1997................................ $ -- $ -- $ -- $ -- $ 10,754
Issuance of restricted common stock,
April through September 1997........ 53
Common stock issued for services,
December 1997....................... 5
Net loss............................. (2,840) (2,840)
------ -------- -------- ---- --------
BALANCES, December 31, 1997.......... -- -- (2,840) -- 7,972
Issuance of Series A preferred,
January 1998........................ 5
Issuance of Series B preferred, net
of $890 issuance costs, May through
September 1998...................... 34,823
Series B preferred warrants granted
for debt, May 1998.................. 1,679 1,679
Exercise of options during 1998...... 66
Options granted for services,
September and November 1998......... 7 7
Deferred Compensation................ (11,797) --
Amortization of deferred
compensation........................ 1,060 1,060
Accumulated other comprehensive
income.............................. 4 4
Net loss............................. (12,004) (12,004)
------ -------- -------- ---- --------
BALANCES, December 31, 1998.......... 1,686 (10,737) (14,844) 4 33,612
Issuance of Series B preferred,
January 1999*....................... 11
Issuance of Series C preferred, net
of issuance costs of $2,363, January
through April 1999*................. 72,776
Exercise of stock options during
1999*............................... 76
Issuance of restricted common stock,
June 1999........................... 608
Issuance of warrant, June 1999....... 2,143 2,143
Deferred Compensation................ (17,006) --
Amortization of deferred
compensation........................ 3,953 3,953
Accumulated other comprehensive
loss*............................... (59) (59)
Net loss*............................ (33,494) (33,494)
------ -------- -------- ---- --------
BALANCES, June 30, 1999 *............ $3,829 $(23,790) $(48,338) $(55) $ 79,626
====== ======== ======== ==== ========
</TABLE>
- ---------------
* Unaudited
See notes to consolidated financial statements.
F-5
<PAGE> 64
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) TO YEAR ENDED JUNE 30, INCORPORATION)
DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
----------------- ------------ ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss....................................... $(2,840) $(12,004) $ (3,262) $(33,494) $(48,338)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 57 263 50 2,673 2,993
Accretion on redeemable common stock......... -- 1,242 564 254 1,496
Amortization of deferred stock
compensation............................... -- 1,060 43 3,953 5,013
Stock and stock options issued for
services................................... 95 7 -- -- 102
Issuance of warrant.......................... -- -- -- 2,143 2,143
Undistributed income on short-term
investments................................ (47) -- -- -- (47)
Changes in operating assets and liabilities:
Inventories................................ -- -- -- (596) (596)
Prepaid expenses and other current
assets................................... (5) (109) (1,671) (3,180) (3,294)
Accounts payable........................... 172 6,643 1,942 415 7,230
Accrued liabilities........................ 118 588 1,162 5,107 5,813
Deferred rent.............................. 17 90 3 161 268
------- -------- -------- -------- --------
Net cash used in operating activities.... (2,433) (2,220) (1,169) (22,564) (27,217)
------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Purchases of property, equipment and leasehold
improvements................................. (265) (32,669) (4,283) (25,948) (58,882)
(Purchases) sale of marketable securities...... (4,996) (2,681) 992 (14,562) (22,239)
Purchase of investments........................ -- (518) -- (500) (1,018)
Related party receivable....................... -- -- -- (200) (200)
Deposits....................................... (88) (1,330) (212) 163 (1,255)
Restricted cash................................ -- (1,768) (950) (1,685) (3,453)
------- -------- -------- -------- --------
Net cash used in investing activities.... (5,349) (38,966) (4,453) (42,732) (87,047)
------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from shareholder loans................ 2,038 -- -- -- 2,038
Repayment of shareholder loans................. (2,038) -- -- -- (2,038)
Proceeds from long-term debt................... -- 17,168 -- -- 17,168
Repayment of long-term debt.................... -- (471) -- (1,519) (1,990)
Proceeds from capital lease financing.......... -- 794 50 2,200 2,994
Repayment of capital lease obligations......... -- (32) -- (212) (244)
Loan fees capitalized.......................... -- (323) -- -- (323)
Net proceeds from Series A preferred stock..... 10,664 5 -- -- 10,669
Net proceeds from Series B preferred stock..... -- 34,823 34,328 11 34,834
Net proceeds from Series C preferred stock..... -- -- -- 72,776 72,776
Proceeds from restricted common stock issued... 53 78 161 37 168
Proceeds from redeemable common stock issued... -- 48 -- -- 48
------- -------- -------- -------- --------
Net cash provided by financing
activities............................. 10,717 52,090 34,539 73,293 136,100
------- -------- -------- -------- --------
Net Increase in Cash and Equivalents............. 2,935 10,904 28,917 7,997 21,836
Cash and Equivalents, Beginning of period........ -- 2,935 2,935 13,839 --
------- -------- -------- -------- --------
Cash and Equivalents, End of period.............. $ 2,935 $ 13,839 $ 31,852 $ 21,836 $ 21,836
======= ======== ======== ======== ========
Supplemental Cash Flow Information:
Interest paid.................................. $ 69 $ 32 $ -- $ 28 $ 129
======= ======== ======== ======== ========
Income taxes paid.............................. $ 1 $ 1 $ -- $ -- $ 2
======= ======== ======== ======== ========
Restricted common stock issued for short-term
receivables.................................. $ -- $ -- $ -- $ 647 $ 647
======= ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 65
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Webvan Group, Inc., formerly Intelligent Systems for
Retail, Inc., and subsidiary (a development stage company) (collectively,
"Webvan") was incorporated in California on December 17, 1996. On April 21,
1999, Intelligent Systems for Retail, Inc. changed its name to Webvan Group,
Inc. Webvan will be an Internet-based service provider offering an array of
groceries, home meal replacements, drugstore items and other merchandise.
Presently, Webvan continues in the process of developing its system software,
the completion of its initial distribution center, and its internet "Webstore".
Webvan began selling and delivering products on an initial test basis during the
first quarter of 1999.
On March 26, 1998, Webvan formed a wholly-owned subsidiary Webvan -- Bay
Area, Inc. ("WBA"). WBA represents Webvan's distribution center and cross
docking stations that will provide the internet-based retail service and home
delivery.
As of June 30, 1999, Webvan was a development stage company. Successful
completion of the Company's development program and, ultimately, the attainment
of profitable operations is dependent upon future events, including obtaining
adequate financing to fulfill its development activities, increasing its
customer base, implementing and successfully executing its business and
marketing strategy, continuing to develop and enhance its Webstore fulfillment
transactions and hiring quality personnel.
CONSOLIDATION -- The accompanying consolidated financial statements include
the accounts of Webvan and its wholly-owned subsidiary, WBA. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS -- Webvan considers all highly liquid instruments acquired
with an original maturity of three months or less when purchased to be cash
equivalents. The recorded carrying amounts of the Company's cash equivalents
approximate to their fair market value due to their highly liquid nature.
MARKETABLE SECURITIES -- Webvan considers all investments with a maturity
of more than three months but less than one year when purchased and investments
to be sold within one year to be short-term and available for sale.
RELATED PARTY RECEIVABLE -- In March 1999, the Company loaned an officer
$200,000 to be used towards the purchase of a house. The loan is interest free
and is due on the earlier of 15 days after the sale of the officer's previous
residence or March 1, 2000.
RESTRICTED CASH -- During 1998, Webvan entered into lease and credit card
merchant bank service agreements which required Webvan to hold three standby
letters of credit. The letters of credit require Webvan to maintain certain
balances on deposit which restricts the use of cash and equivalents. See Note 5
for the amounts of these deposits. These agreements expire at various dates
ranging from 1999 through 2007.
F-7
<PAGE> 66
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject Webvan to concentrations of credit risk consist principally of cash,
cash equivalents and short-term investments to the extent these exceed federal
insurance limits. Risks associated with cash, cash equivalents and marketable
securities are mitigated by banking with and purchasing commercial paper, market
auction preferred stock, corporate notes, and corporate bonds from credit-worthy
institutions.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS -- Property, equipment and
leasehold improvements are stated at cost less accumulated depreciation and
amortization. Depreciation is taken on assets placed into service using the
straight-line method over estimated useful lives of three to five years.
Leasehold improvements are amortized, using the straight-line method, over the
shorter of the lease term or the useful lives of the improvements.
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". The Company assesses the impairment of long-lived assets
whenever events and circumstances indicate that the carrying value of an asset
may not be recoverable. No such impairments have been identified to date.
LONG-TERM INVESTMENTS -- are recorded under the cost method of accounting
(Note 2).
LOAN FEES -- Webvan capitalizes loan and capital lease origination fees and
amortizes them over the life of the related obligations.
REDEEMABLE COMMON STOCK -- Redeemable common stock represents the estimated
value of common stock held by shareholders who have certain put rights.
INCOME TAXES -- Income taxes are provided at current rates. Deferred income
taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and amounts
used for income tax purposes.
STOCK OPTIONS -- As permitted by SFAS No. 123, Webvan accounts for stock
options to employees using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." As required by SFAS No. 123, the pro forma impact on earnings and
earnings per share resulting from the fair value method is disclosed in Note 8.
REVENUE RECOGNITION -- The Company recognizes revenues from product sales
and delivery, net of returns and discounts, when the products are delivered to
customers.
NET LOSS PER SHARE -- Basic net loss per share excludes dilution and is
computed by dividing net loss by the weighted average number of common shares
outstanding for the period (excluding shares subject to repurchase). Diluted net
loss per common share was the same as basic net loss per common share for all
periods presented since the effect of any potentially dilutive securities is
excluded as they are anti-dilutive because of Webvan's net losses.
UNAUDITED INTERIM FINANCIAL INFORMATION -- The interim financial
information as of June 30, 1999 and for the six months ended June 30, 1998 and
1999 and for the cumulative period from December 17, 1996 (date of inception)
through June 30, 1999 is unaudited and has been prepared on the same basis as
the audited financial statements. In the opinion of management, such unaudited
financial information includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the interim
information. Operating results for the six months ended
F-8
<PAGE> 67
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999.
UNAUDITED PRO FORMA INFORMATION -- Upon the closing of the planned initial
public offering, each of the outstanding shares of convertible preferred stock
will convert into one share of common stock. The pro forma balance sheet
presents Webvan's balance sheet as if this had occurred at June 30, 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1997, the Financial
Accounting Standards Board ("FASB") adopted SFAS No. 130 "Reporting
Comprehensive Income," which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from non owner sources. Webvan adopted this statement during the year ended
December 31, 1998.
In February 1998, the FASB adopted SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits, an Amendment of FASB
Statements No. 87, 88, and 106," which revises employers' disclosures about
pension and other postretirement benefit plans. This statement does not change
the measurement or recognition of those plans, but standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures. Webvan adopted this statement
during the year ended December 31, 1998.
In March 1998, the Accounting Standards Committee of the American Institute
of Certified Public Accountants issued Statement of Position ("SOP") 98-1,
"Accounting for Costs of Computer Software Developed or Obtained for Internal
Use." SOP 98-1 provides guidance for an enterprise on accounting for the costs
of computer software developed or obtained for internal use. Webvan adopted this
statement during the year ended December 31, 1998 and has capitalized software
costs according to the provisions of the standard. These costs are amortized on
a straight-line basis over the useful life of the software once it is placed
into service.
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 hedging accounting when
certain conditions are met. Webvan will adopt this statement for its fiscal year
ending December 31, 2000. Management has not fully assessed the implications of
adopting this new standard.
2. INVESTMENTS
On November 24, 1998, an agreement was signed between an equipment
manufacturer and Webvan. The agreement set out the terms for Webvan to acquire
1,000 shares of such equipment manufacturer for a total amount of $1,000,000
which represents a less than 10% interest in the manufacturer. Investments are
recorded at cost as fair market value is not readily determinable. Long-term
investments principally include $500,000 paid for such shares in December 1998.
Webvan paid the additional $500,000 for such shares in January 1999 to complete
this transaction.
F-9
<PAGE> 68
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
3. MARKETABLE SECURITIES
The fair value of marketable securities at June 30, 1999 (unaudited), and
at December 31, 1998 and 1997 are presented below. Fair values are based on
quoted market prices. The Company's marketable securities are classified as
available-for-sale, as the Company intends to sell them as needed for
operations. Balances at year-end consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999
(UNAUDITED)
-------------------------------------
UNREALIZED
AMORTIZED GAIN (LOSS) MARKET
COST ON INVESTMENT VALUE
--------- ------------- -------
<S> <C> <C> <C>
Money market funds................................. $ 8 $ -- $ 8
Commercial paper................................... 36,129 (12) 36,117
Foreign debt securities............................ 1,638 (6) 1,632
Corporate notes.................................... 6,346 (36) 6,310
------- ---- -------
Total.................................... 44,121 (54) 44,067
Less amounts included in cash and equivalents...... 21,843 (7) 21,836
------- ---- -------
$22,278 $(47) $22,231
======= ==== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
UNREALIZED
AMORTIZED GAIN ON MARKET
COST INVESTMENT VALUE
--------- ---------- -------
<S> <C> <C> <C>
Money market funds.................................... $ 27 $-- $ 27
Commercial paper...................................... 9,781 3 9,784
Commercial notes...................................... 3,164 1 3,165
Commercial bonds...................................... 1,285 -- 1,285
Market auction preferred.............................. 7,306 -- 7,306
------- -- -------
Total....................................... 21,563 4 21,567
Less amounts included in cash and equivalents......... 13,837 2 13,839
------- -- -------
$ 7,726 $2 $ 7,728
======= == =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Money market funds.......................................... $ 44
Commercial paper............................................ 7,859
------
Total at cost which approximates market........... 7,903
Less amounts included in cash and equivalents............... 2,860
------
$5,043
======
</TABLE>
F-10
<PAGE> 69
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements at December 31, 1997, 1998
and June 30, 1999 consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1997 1998 1999
---- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software........................... $121 $ 2,284 $ 8,917
Machinery and equipment................................... 3 2,026 18,742
Leasehold improvements.................................... 32 407 19,195
Furniture and fixtures.................................... 109 287 625
---- ------- -------
265 5,004 47,479
Accumulated depreciation and amortization................. (57) (310) (2,696)
---- ------- -------
208 4,694 44,783
Construction in progress.................................. -- 27,930 11,403
---- ------- -------
Property, equipment and leasehold improvements, net....... $208 $32,624 $56,186
==== ======= =======
</TABLE>
Equipment under capital leases amounted to $794,000 at 1998. Accumulated
amortization on capital leases as of December 31, 1998 was $72,155.
Construction in progress includes costs incurred in the construction of
Webvan's distribution center located in Oakland. Such costs include the purchase
and installation of materials handling equipment, refrigeration and freezer
storage units. Webvan retains up to ten percent on all construction contracts in
process until final settlement of such contracts.
During the first six months of 1999, $2.2 million of computer equipment and
software was financed with capital leases.
5. DEPOSITS
Deposits consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Software licenses........................................... $ 899 $ --
Payroll service provider.................................... 329 436
Real property leases........................................ 178 807
Other....................................................... 12 12
------ ------
$1,418 $1,255
====== ======
</TABLE>
6. BORROWING ARRANGEMENTS
In December 1998, WBA entered into a $17,000,000 loan and security
agreement. The loan is payable in $472,000 monthly installments from January
1999 through June 2002 with an additional $2,550,000 payment of the remaining
balance payable in June 2002. Based upon this repayment
F-11
<PAGE> 70
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
schedule, the imputed interest on this loan is 15.2%. The loan is secured by
substantially all the assets of Webvan.
Related to the above financing, Webvan issued warrants to the lenders to
purchase an aggregate of 2,233,578 shares of Series B preferred stock at an
exercise price of $0.91 per share (see Note 9). Webvan also paid $323,000 in
loan fees.
As part of an operating lease the landlord agreed to finance $168,340 of
improvements. The loan is payable in monthly installments including interest at
11% from January 1, 1999 through July 2003.
Future principal maturities under loan agreements as of December 31, 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $ 3,104
2000...................................................... 3,909
2001...................................................... 4,545
2002...................................................... 5,113
2003...................................................... 26
-------
16,697
Less current maturities..................................... 3,104
-------
$13,593
=======
</TABLE>
CAPITAL LEASE OBLIGATIONS
In March 1998, Webvan entered into a $3,000,000 nonrevolving master lease
agreement. The agreement specifies equipment which Webvan can purchase prior to
March 23, 1999 under the lease agreement. As of December 31, 1998, $2,230,000
was available for future financing, and obligations outstanding totaled
$770,000. As part of the leasing arrangement, warrants for 164,226 shares of
Series B preferred stock were granted to the provider at an exercise price of
$0.91 per share (see Note 9).
Future lease payments under the lease agreement as of December 31, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $ 241
2000...................................................... 241
2001...................................................... 240
2002...................................................... 232
2003...................................................... 59
------
Total future lease payments................................. 1,013
Less portion relating to interest........................... 243
------
Total capital lease obligations............................. 770
Less current portion........................................ 133
------
Total long-term portion..................................... $ 637
======
</TABLE>
F-12
<PAGE> 71
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
7. SHAREHOLDERS' EQUITY
STOCK SPLITS
In March 1998, January 1999, July 1999 and August 1999, the Board of
Directors authorized two-for-one, two-for-one, two-for-one and three-for-two
stock splits, respectively, on the then outstanding shares, warrants and
options. The splits have been retroactively reflected in the financial
statements and notes to the financial statements.
CONVERTIBLE PREFERRED STOCK
Significant terms of outstanding Series A and B preferred stock are as
follows:
- In the event of liquidation, dissolution, or winding up of Webvan, the
holders of Series A and Series B preferred stock are entitled to receive
$0.0958 and $0.91 per share (subject to adjustment for stock splits and
like events), respectively, plus any declared but unpaid dividends prior
to any distribution to the common shareholders. After the preferred
shareholders have received payment, any remaining assets would be shared
by all preferred and common shareholders on a pro rata basis.
- Each share of preferred stock is convertible at the option of the holder
into one share of common stock (subject to adjustments for stock splits
and like events). Shares will automatically be converted upon an
underwritten initial public offering (IPO) of Webvan's common shares
meeting certain criteria.
- Each share of preferred stock has voting rights equivalent to the number
of shares of common stock into which it is convertible. In addition, for
so long as there are outstanding at least 12,000,000 shares in the case
of the Series A preferred stock, and 12,000,000 shares in the case of the
Series B preferred stock, the holders of each of the Series A preferred
stock and Series B preferred stock shall be entitled to approve
amendments to the articles of incorporation, approve the payment or
declaration of dividends, approve the merger or consolidation of Webvan,
approve the sale of all or substantially all of the assets of the
Company, and approve other actions specified in the articles of
incorporation. In addition, for so long as there are at least 12,000,000
shares of Series A preferred stock outstanding, the holders of the Series
A preferred stock shall be entitled to nominate and elect two directors.
- Dividends may be declared at the discretion of the Board of Directors and
are non-cumulative. Dividends of $0.0067 per share on Series A preferred
stock and $0.0617 on Series B preferred stock (as adjusted for any stock
splits or like events) must be declared and paid before payment of any
common stock dividends.
- Prior to the sale of any shares in a subsequent stock offering, the
existing preferred shareholders shall have a right of first refusal to
purchase the shares, subject to certain exceptions. In addition, upon
written notice of a sale of preferred shares by Webvan's founder, each
shareholder has the right to sell its co-sale pro rata share of the
shares proposed to be sold. These provisions expire upon an initial
public offering.
PREFERRED STOCK -- SERIES C
On January 21, 1999, Webvan authorized the sale and issuance of up to
32,341,200 shares of its Series C preferred stock at a purchase price of $2.32
per share. As of June 30, 1999, Webvan had
F-13
<PAGE> 72
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
issued 32,341,200 shares of Series C preferred stock. The actual cash proceeds,
net of $2 million of issuance costs, amounted to $73 million.
RESTRICTED COMMON STOCK
At December 31, 1998, Webvan had 360,000,000 authorized shares of common
stock of which 78,589,722 were issued and outstanding. At December 31, 1998,
Webvan had reserved shares of common stock for issuance as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Issuance under stock options plan........................... 46,010
Issuance upon conversion of Series A preferred stock........ 112,635
Issuance upon conversion of Series B preferred stock........ 41,814
-------
Total shares reserved....................................... 200,459
=======
</TABLE>
Significant terms of the restricted common stock are as follows:
- In the event that the continuous status of an employee, consultant or
director of Webvan terminates for any reason, Webvan shall upon the date
of such termination have an irrevocable right for a period of 90 days
from such termination date to repurchase any unreleased (unvested) shares
at the original purchase price.
- The shares shall be released from the repurchase option immediately
(i.e., fully vested) or over a three-year period depending on the
specific terms of the agreement and the parties involved. As of December
31, 1998, 66,000,000 shares (see Note 8) were subject to repurchase under
the applicable restricted stock purchase agreements.
- Prior to the sale of any common shares owned by certain shareholders,
Webvan shall have a right of first refusal to purchase the shares. These
rights shall terminate upon the closing of an IPO, a sale of all or
substantially all the assets of Webvan, or a merger.
- In connection with a possible IPO, the shareholders agree not to sell any
shares without the prior written consent of Webvan or the underwriters
managing the IPO for up to 180 days from the effective date of such
registration.
- Each share of common stock issued and outstanding shall have one vote.
8. STOCK OPTION PLAN
On September 17, 1997, Webvan adopted the 1997 Stock Plan (the Plan) and
reserved 30,000,000 shares of Webvan's common stock for issuance under the Plan,
which expires on September 17, 2007. Options are granted at fair market value at
the date of grant as determined by the Board of Directors. As provided for in
the Plan, incentive and non-statutory stock options may be granted to employees,
officers, directors or consultants. Incentive options may only be granted to
employees and at an exercise price of no less than fair value on the date of
grant. Non-statutory options may be granted at an exercise price of no less than
85% of fair value. For owners of more than 10% of Webvan's stock, options may
only be granted for an exercise price of no less than 110% of fair value.
Options generally become exercisable at a rate of 25% on the one year
anniversary of the vesting commencing date, which may precede the grant date,
with an additional 6.25% exercisable at the end of each quarter thereafter until
fully vested at the end of the fourth year.
F-14
<PAGE> 73
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
Vesting may not exceed five years for grants to owners of more than 10% of
Webvan's voting power, nor exceed ten years for all other option holders.
Stock option activity under the 1997 Stock Plan is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE
(IN THOUSANDS) PRICE
-------------- --------
<S> <C> <C>
Options granted during 1997 (weighted average fair value of
$0.00016)................................................. 12,588 $0.00081
Options canceled during 1997................................ (108) 0.00081
-------
Balance, December 31, 1997 (none exercisable)............... 12,480 0.00081
Options granted during 1998 (weighted average fair value of
$0.01740)................................................. 46,437 0.10206
Options exercised during 1998............................... (18,981) 0.00645
Options canceled during 1998................................ (3,210) 0.02735
-------
Balance, December 31, 1998.................................. 36,726 0.12361
Options granted during 1999 (unaudited)..................... 6,990 1.90332
Options exercised during 1999 (unaudited)................... (2,869) 0.02554
Options canceled during 1999 (unaudited).................... (413) 0.12429
-------
Balance, June 30, 1999 (unaudited).......................... 40,434 $0.26546
=======
</TABLE>
Additional information regarding options outstanding as of December 31,
1998 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
------------------------------------- ---------------------
NUMBER WEIGHTED NUMBER
OF AVERAGE WEIGHTED OF WEIGHTED
SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE (IN CONTRACTUAL EXERCISE (IN EXERCISE
PRICES THOUSANDS) LIFE (YEARS) PRICE THOUSANDS) PRICE
- ------------------- ---------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C>
$0.00081 2,163 8.09 $0.00081 924 $0.00081
$0.01250 13,062 9.07 $0.01250 873 $0.01250
$0.10000 13,998 9.60 $0.10000 -- --
$0.41667 7,503 9.94 $0.41667 -- --
------ -----
$0.00081 - $0.41667 36,726 9.39 $0.12773 1,797 $0.00650
====== =====
</TABLE>
At December 31, 1998, shares of common stock available for future option
grants totaled 16,293,522. During 1998 and in January 1999, Webvan's Board of
Directors increased the 30,000,000 shares of common stock reserved under the
plan as follows: 12,000,000 in May 1998; 6,000,000 in July 1998; 6,000,000 in
October 1998; 12,000,000 in December 1998 and 6,000,000 in January 1999. As a
result, 50,150,910 shares are reserved in the option pool as of June 30, 1999.
ADDITIONAL STOCK PLAN INFORMATION
As discussed in Note 1, Webvan accounts for its stock-based awards using
the intrinsic value method in accordance with APB 25. Based on the stock value
and exercise prices, no compensation expense has been recognized in the
financial statements for employee stock arrangements.
F-15
<PAGE> 74
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", (SFAS 123) requires the disclosure of pro forma net
income and earnings per share as if Webvan had adopted the fair value method as
of the beginning of the period ended December 31, 1997. Webvan's calculations
were made using the minimum value method with the following weighted average
assumptions: expected life of 60 months following the grant date; risk free
interest rates of 6% in 1998; and no dividends during the expected term.
Webvan's calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. If the computed fair value of 1998 and
1997 awards had been charged to compensation over the vesting period of the
awards, the net loss would have been $24,000 greater in 1998 and $1,000 greater
in 1997.
9. NONCASH FINANCING ACTIVITIES
STOCK AND OPTIONS FOR RECRUITING
Webvan issued the following shares and options for recruiting services that
represent noncash operating expenses (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FAIR
NUMBER FAIR VALUE AT
DATE OF VALUE ISSUANCE
ISSUED SHARES PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Stock:
Series A preferred stock................ 1997 939 $0.09583 $90
Restricted common....................... 1997 360 0.01250 5
Series A preferred stock................ 1998 51 0.09583 5
</TABLE>
<TABLE>
<CAPTION>
FAIR
SHARES EXERCISE VALUE
DATE COVERED BY PRICE AT GRANT
ISSUED OPTIONS PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Stock options --
Restricted common....................... 1998 159 $0.10000 $7
</TABLE>
DEFERRED COMPENSATION
In connection with the grant of certain stock options in 1998 and 1999, the
Company recorded deferred compensation of $11,797,000 and $17,006,000 and
compensation expense of $1,060,000 and $3,953,000, respectively, representing
the difference between the deemed fair value and the option exercise price as
determined by the Board of Directors on the date of grant. The deferred
compensation is being amortized over the four-year vesting period of the
underlying options.
WARRANTS FOR DEBT
Webvan issued the following warrants in connection with its long-term debt
and capital lease arrangements (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FAIR
SHARES EXERCISE VALUE
DATE COVERED BY PRICE AT GRANT
ISSUED WARRANTS PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Series B preferred stock warrants......... 1998 2,398 $ 0.91 $1,679
</TABLE>
F-16
<PAGE> 75
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
The above shares and shares covered by options and warrants reflect the
two-for-one stock splits in March 1998, January 1999 and July 1999 and the
three-for-two stock split in August 1999. The fair value of the options and
warrants was determined using the Black-Scholes option pricing model this the
following assumptions: expected life of seven years; risk-free interest rate of
6% in 1998 and 1997; no dividends during the expected term and volatility of
80%. The calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. The warrants expire November 2005.
10. NET LOSS PER SHARE
The following is a reconciliation of the numerators and denominators used
in computing basic and diluted net loss per share (in thousands except per share
amounts):
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF YEAR SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) ENDED JUNE 30, INCORPORATION)
TO DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss (numerator),
basic and
diluted............ $(2,840) $(12,004) $(3,262) $(33,494) $(48,338)
------- -------- ------- -------- --------
Shares (denominator):
Weighted average
common shares
outstanding..... 37,407 76,934 70,518 84,689 62,322
Weighted average
common shares
outstanding and
subject to
repurchase...... -- (9,820) (5,443) (11,409) (6,101)
------- -------- ------- -------- --------
Shares used in
computation, basic
and diluted........ 37,407 67,114 65,075 73,280 56,221
======= ======== ======= ======== ========
Net loss per share,
basic and
diluted............ $ (0.08) $ (0.18) $ (0.05) $ (0.46) $ (0.86)
======= ======== ======= ======== ========
</TABLE>
F-17
<PAGE> 76
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
For the above-mentioned periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following (in thousands, except per share amounts):
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF YEAR SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) ENDED JUNE 30 INCORPORATION)
TO DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Convertible preferred
stock.............. 112,583 151,736 151,163 184,090 184,090
Shares of common
stock subject to
repurchase......... -- 14,456 16,629 9,345 9,345
Outstanding options.. 12,480 36,726 15,870 40,434 40,434
Warrants............. -- 2,398 -- 2,398 2,398
-------- -------- -------- -------- --------
Total...... 125,063 205,316 183,662 236,267 236,267
======== ======== ======== ======== ========
Weighted average
exercise price of
options............ $0.00083 $0.12773 $0.01043 $0.27431 $0.27431
======== ======== ======== ======== ========
Weighted average
exercise price of
warrants........... $ -- $ 0.91 $ -- $ 0.91 $ 0.91
======== ======== ======== ======== ========
</TABLE>
11. INCOME TAXES
While Webvan is in the development stage, substantially all losses incurred
for financial statements purposes will be deferred for income tax purposes. In
the year that Webvan first generates revenues from operations, expenditures
accumulated during the development stage will start being amortized for income
tax purposes over a five-year period. The deduction of these expenses for
financial statement purposes in years preceding the deduction for income tax
purposes is a temporary difference that creates a deferred tax asset. At
statutory rates, the deferred tax asset amounts to approximately $6.7 million
which has been offset by a valuation allowance of the same amount due to lack of
operating history combined with risks and uncertainties surrounding Webvan's
ability to generate future taxable income.
Webvan has net research and development credits of approximately $234,000
and $129,000 which can be carried forward to offset future federal income taxes
and state franchise taxes, respectively. If unused, carryovers expire during
2012 and 2002 for federal and state purposes, respectively. Deferred tax assets
that relate to these credits have been fully reserved.
F-18
<PAGE> 77
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
12. LEASES
Webvan leases facilities under noncancelable operating lease agreements
which expire at various dates through 2008.
Future lease payments under the lease agreements as of December 31, 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999................................................... $ 1,790
2000................................................... 1,834
2001................................................... 1,900
2002................................................... 1,665
2003................................................... 1,577
Thereafter.................................................. 7,070
-------
Total future lease payments....................... $15,836
=======
</TABLE>
Facilities rent expense was $1,026 and $123 for the periods ended December
31, 1998 and 1997, respectively.
13. EMPLOYEE BENEFIT PLAN
Webvan has a 401(k) profit-sharing plan (the 401(k) Plan) that covers
substantially all employees. The 401(k) Plan provides for voluntary salary
reduction contributions of up to 15% of eligible participants' annual
compensation subject to Internal Revenue Code limitations. Under the terms of
the 401(k) Plan, Webvan will match 100% of employees' contributions for the
first $500 and 25% thereafter to a maximum of $2,000 per year. Matching
contributions made during the period ended December 31, 1997 and 1998 were
$17,000 and $81,000, respectively.
14. RELATED PARTY TRANSACTIONS
From inception through October 1997, Webvan's founder advanced $2,037,679
to the Company in exchange for notes payable bearing 8% interest payable. The
notes were due on demand or upon Webvan's obtaining equity financing. The notes
were fully repaid with interest of $68,709 on October 30, 1997 after issuance of
Series A preferred stock on October 29, 1997.
A general contractor of Webvan has subcontracted with an equipment
manufacturer (see Note 2) to install equipment in Webvan's distribution center.
A total of $4.9 million of this work was completed by December 31, 1998 and is
included in construction in progress within property, equipment and leasehold
improvements.
F-19
<PAGE> 78
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
15. SUBSEQUENT EVENTS
On July 8, 1999, the Company signed an agreement (the "Agreement") with a
contractor to design, develop and construct up to 26 distribution center
warehouse facilities ("Distribution Centers") in the United States. The
Agreement expires July 8, 2002, unless extended by written agreement. As part of
the Agreement, the contractor was granted a warrant to purchase up to 1,800,000
shares of the Company's Series C preferred stock at $2.32 per share (the
"Warrant"). The Warrant is exercisable as to 150,000 shares on July 8, 1999 and
generally become exercisable as to the remaining shares as Distribution Centers
are completed by the contractor within agreed upon schedule and budgetary
parameters.
On July 15, 1999, Webvan entered into an agreement that provided for the
sale of 21,670,605 shares of its Series D-2 preferred stock at a price of $12.69
per share totaling approximately $275 million.
F-20
<PAGE> 79
UNDERWRITING
Webvan and the underwriters for the U.S. offering named below (the "U.S.
Underwriters") have entered into an underwriting agreement with respect to the
shares being offered in the United States. Subject to certain conditions, each
U.S. Underwriter has severally agreed to purchase the number of shares indicated
in the following table. Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., Deutsche Bank
Securities Inc. and Thomas Weisel Partners LLC are the representatives of the
U.S. Underwriters.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ -----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
BancBoston Robertson Stephens Inc...........................
Bear, Stearns & Co. Inc.....................................
Deutsche Bank Securities Inc................................
Thomas Weisel Partners LLC..................................
-----------------
Total.....................................................
=================
</TABLE>
If the U.S. Underwriters sell more shares than the total number set forth
in the table above, the U.S. Underwriters have an option to buy up to an
additional shares from Webvan to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the U.S. Underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the U.S. Underwriters by Webvan. Such amounts are
shown assuming both no exercise and full exercise of the U.S. Underwriters'
option to purchase additional shares.
<TABLE>
<CAPTION>
PAID BY WEBVAN
--------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total....................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
Webvan has entered into underwriting agreements with the underwriters for
the sale of shares outside the United States. The terms and conditions
of both offerings are the same and the sale of shares in both offerings are
conditioned on each other. Goldman Sachs International, Donaldson, Lufkin &
Jenrette International, Merrill Lynch International, BancBoston Robertson
Stephens International Limited, Bear, Stearns International Limited, Deutsche
Bank Securities, Inc. and Thomas Weisel Partners LLC are representatives of the
underwriters for the international offering outside the United States (the
"International Underwriters"). Webvan has granted the International Underwriters
a similar option to purchase up to an aggregate of an additional
shares.
The underwriters for both of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a
U-1
<PAGE> 80
part of the distribution of the shares. The underwriters also have agreed that
they may sell shares among each of the underwriting groups.
Pursuant to lock-up agreements, Webvan and its directors, officers,
employees and other securityholders have agreed not to dispose of or hedge any
of their common stock or securities convertible into or exchangeable for shares
of common stock during the lock-up period, except with the prior written consent
of the representatives. According to the lock-up agreements, the lock-up period
will expire as to 15% of the shares held by each stockholder beginning on the
third day following the public release of Webvan's earnings for the year ended
December 31, 1999, as to an additional 25% of the shares beginning 45 days
thereafter and as to the remaining shares 180 days after the date of this
prospectus. This agreement does not apply to any existing employee benefit plan.
See "Shares Eligible for Future Sale" for a discussion of certain transfer
restrictions.
Prior to the offerings, there has been no public market for the shares. The
initial public offering price for the common stock will be negotiated among
Webvan and the representatives of the underwriters. Among the factors to be
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, will be Webvan's historical
performance, estimates of Webvan's business potential and earnings prospects, an
assessment of Webvan's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.
Webvan has applied to have the common stock listed on the Nasdaq National
Market under the symbol "WBVN".
In connection with the offerings, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offerings are in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect that market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock offered hereby for certain
individuals designated by Webvan who have expressed an interest in purchasing
such shares of common stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the underwriters to the general public on the same basis as other shares offered
hereby.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998 Thomas Weisel Partners has been named as a lead or co-manager of 54 filed
public offerings of equity securities, of which 31 have been completed, and has
acted as a syndicate member in an additional 27 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
Webvan or any of
U-2
<PAGE> 81
Webvan's officers, directors or other controlling persons, except for its
contractual relationship with Webvan under the terms of the underwriting
agreement entered into in connection with this offering.
In July 1999, entities affiliated with Goldman, Sachs & Co. purchased an
aggregate of 7,880,220 shares of Webvan's Series D-2 preferred stock for an
aggregate purchase price of approximately $100.0 million.
Webvan estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$ .
Webvan has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.
U-3
<PAGE> 82
Inside Gatefold Graphics
[artwork which depicts the Webvan solution, illustrated by pictures of the
Company's Webstore, delivery service, distribution center and food products
together with captions explaining the pictures and diagram]
<PAGE> 83
Inside Front Cover Graphics
[artwork consists of the Webvan logo and
website address and pictures of food products]
<PAGE> 84
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus is an
offer to sell only the shares offered hereby, but only under circumstances where
it is lawful to do so. The information contained in this prospectus is current
only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Summary Consolidated Financial Data... 3
Risk Factors.......................... 4
Special Note Regarding Forward-Looking
Statements.......................... 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 19
Selected Consolidated Financial
Data................................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 27
Management............................ 38
Certain Relationships and Related
Transactions........................ 47
Principal Stockholders................ 49
Description of Capital Stock.......... 51
Shares Eligible for Future Sale....... 54
Legal Matters......................... 55
Experts............................... 55
Available Information................. 56
Index to Financial Statements......... F-1
Underwriting.......................... U-1
</TABLE>
-------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Shares
WEBVAN GROUP, INC.
Common Stock
-------------------------
LOGO
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the securities being registered. All amounts shown are estimates except for
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $
NASD filing fee............................................
Nasdaq National Market Fees................................
Blue Sky qualification fees and expenses...................
Printing and engraving expenses............................
Accountant's fees and expenses.............................
Legal fees and expenses....................................
Miscellaneous..............................................
----------
Total............................................ $
==========
</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 such section.
The Registrant's Restated Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest 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 and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
The Registrant has director and officer liability insurance that covers
matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since the Registrant's inception in December 1996, the Registrant has
issued and sold the following unregistered securities:
1. Between April and September 1997, the Registrant issued an aggregate of
64,034,472 shares of Common Stock of the Registrant to founders and
their family members and advisors pursuant to restricted stock purchase
agreements for an aggregate amount of $53,362.06.
2. Between September 1997 and July 1999, the Registrant granted and issued
options to purchase an aggregate of 69,172,878 shares of Common Stock
of the Registrant to employees, consultants and directors pursuant to
the Registrant's 1997 Stock Plan with an aggregate exercise price of
$21,967,344.13.
II-1
<PAGE> 86
3. In October 1997, the Registrant issued an aggregate of 111,643,872
shares of Series A Preferred Stock of the Registrant to venture
investor, affiliated investors, unaffiliated investors and founder for
an aggregate amount of $10,699,204.40.
4. From December 1997 to February 1998, the Registrant issued an aggregate
of 991,296 shares of Series A Preferred Stock of the Registrant to
consultants for an aggregate amount of $94,999.20.
5. From April 1998 to July 1999, the Registrant issued an aggregate of
21,939,090 shares of Common Stock of the Registrant to employees and
consultants pursuant to the Registrant's 1997 Stock Plan with an
aggregate exercise price of $203,437.12.
6. In May 1998, the Registrant issued 16,380,000 shares of Series B
Preferred Stock of the Registrant to a venture investor for an amount
of $14,960,400.
7. In May 1998, the Registrant granted and issued a warrant to purchase
164,232 shares of Series B Preferred Stock of the Registrant an
equipment lessor for an exercise price of $149,998.56.
8. In June 1998, the Registrant issued an aggregate of 21,341,976 shares
of Series B Preferred Stock of the Registrant to venture investors for
an aggregate amount $19,492,338.08.
9. From June 1998 to September 1998, the Registrant issued an aggregate of
1,391,328 shares of Series B Preferred Stock of the Registrant to
consultants and affiliated investors for an aggregate amount of
$1,270,746.24.
10. In November 1998, the Registrant granted and issued warrants to
purchase an aggregate of 2,233,572 shares of Series B Preferred Stock
of the Registrant to equipment lessors for an aggregate exercise price
of $2,039,995.76.
11. In January 1999, the Registrant issued an aggregate of 32,281,200
shares of Series C Preferred Stock of the Registrant to venture
investors for an aggregate amount of $74,999,988.
12. In April 1999, the Registrant issued an aggregate of 60,000 shares of
Series C Preferred Stock of the Registrant to consultants and
affiliated investors for an aggregate amount of $139,400.
13. In June 1999, the Registrant issued 450,000 shares of Common Stock of
the Registrant to an officer for an amount of $607,500.
14. In July and August 1999, the Registrant issued an aggregate of
21,670,605 shares of Series D-2 Preferred Stock of the Registrant to
venture investors and affiliated investors for an aggregate amount of
$274,999,997.40.
15. In June and July 1999, the Registrant granted and issued warrants to
purchase an aggregate of 1,208,000 shares of Series C Preferred Stock
of the Registrant to a landlord of one of the Registrant's facilities
and a construction project manager for an aggregate exercise price of
$4,209,880.
There were no underwriters involved in connection with any transaction set
forth above. The issuances of the securities in paragraphs 2, 5 and 13 of this
Item 15 were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder as grants of options pursuant to
written compensatory benefit plans approved by the Registrant's Board of
Directors. The other issuances set forth in this Item 15 were deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering.
II-2
<PAGE> 87
In all of such transactions, the recipients of securities 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 securities issued.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1* Certificate of Incorporation of the Registrant
3.2* Restated Certificate of Incorporation of the Registrant to
be filed prior to the closing of the offering
3.3* Bylaws of the Registrant
4.1* Specimen Common Stock Certificate
4.2 Registration Rights Agreement dated October 29, 1997, as
amended
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* 1997 Stock Plan and form of agreements thereunder
10.3* 1999 Employee Stock Purchase Plan
10.4 Lease Agreement dated April 1, 1998 between the Registrant
and Lincoln Coliseum Distribution Center for premises in
Oakland, California
10.5 Lease Agreement dated March 4, 1999 between the Registrant
and AMB Property, LP for premises in Atlanta, Georgia
10.6 Lease Agreement dated January 21, 1997 between the
Registrant and Dove Holdings, Inc. for premises in Foster
City, California
10.7 Lease and Security Agreement dated November 18, 1998 between
the Registrant and Lighthouse Capital Partners and other
lenders
10.8 Offer Letter dated March 18, 1999 between the Registrant and
Kevin R. Czinger
10.9 Offer Letter dated February 2, 1998 between the Registrant
and Arvind Peter Relan
10.10 Offer Letter dated December 14, 1998 between the Registrant
and Mark X. Zaleski
10.11 Offer Letter dated March 31, 1997 between the Registrant and
Gary B. Dahl
10.12 Offer Letter dated June 5, 1997 between the Registrant and
Mark J. Holtzman
10.13 Offer Letter dated September 3, 1997 between the Registrant
and S. Coppy Holzman
10.14+ Contract dated July 8, 1999 for turnkey design/build
construction and related services between the Registrant and
Bechtel Corporation
10.15+ Warrant dated July 8, 1999 issued to Bechtel Corporation
10.16 Warrant dated May 27, 1998 issued to Comdisco Ventures
10.17 Warrant dated November 18, 1998 issued to Lighthouse Capital
Partners
23.1* Consent of Deloitte & Touche LLP, Independent Auditors
23.2* 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 has been requested for certain portions of this
exhibit.
II-3
<PAGE> 88
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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 of 1933, 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> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto, duly authorized in Foster City, California, on August 6,
1999.
Webvan Group, Inc.
By: /s/ LOUIS H. BORDERS
------------------------------------
Louis H. Borders
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Louis H. Borders and Kevin R. Czinger,
and each of them his attorney-in-fact, with the power of substitution, for him
in any and all capacities, to sign any amendment or post-effective amendment to
this Registration on Form S-1 or abbreviated registration statement (including,
without limitation, any additional registration filed pursuant to Rule 462 under
the Securities Act of 1933) with respect thereto and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on August 6, 1999 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ LOUIS H. BORDERS President, Chief Executive Officer and
- ----------------------------------------------------- Chairman of the Board of Directors
Louis H. Borders (Principal Executive Officer)
/s/ KEVIN R. CZINGER Senior Vice President,
- ----------------------------------------------------- Corporate Operations
Kevin R. Czinger and Finance
(Principal Financial and Accounting Officer)
/s/ DAVID M. BEIRNE Director
- -----------------------------------------------------
David M. Beirne
/s/ CHRISTOS M. COTSAKOS Director
- -----------------------------------------------------
Christos M. Cotsakos
Director
- -----------------------------------------------------
Tim Koogle
/s/ MICHAEL J. MORITZ Director
- -----------------------------------------------------
Michael J. Moritz
</TABLE>
II-5
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<S> <C> <C>
1.1* Form of Underwriting Agreement..............................
3.1* Certificate of Incorporation of the Registrant..............
3.2* Restated Certificate of Incorporation of the Registrant to
be filed prior to the closing of the offering...............
3.3* Bylaws of the Registrant....................................
4.1* Specimen Common Stock Certificate...........................
4.2 Registration Rights Agreement dated October 29, 1997, as
amended.....................................................
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* 1997 Stock Plan and form of agreements thereunder...........
10.3* 1999 Employee Stock Purchase Plan...........................
10.4 Lease Agreement dated April 1, 1998 between the Registrant
and Lincoln Coliseum Distribution Center for premises in
Oakland, California.........................................
10.5 Lease Agreement dated March 4, 1999 between the Registrant
and AMB Property, LP for premises in Atlanta, Georgia.......
10.6 Lease Agreement dated January 21, 1997 between the
Registrant and Dove Holdings, Inc. for premises in Foster
City, California............................................
10.7 Lease and Security Agreement dated November 18, 1998 between
the Registrant and Lighthouse Capital Partners and other
lenders.....................................................
10.8 Offer Letter dated March 18, 1999 between the Registrant and
Kevin R. Czinger............................................
10.9 Offer Letter dated February 2, 1998 between the Registrant
and Arvind Peter Relan......................................
10.10 Offer Letter dated December 14, 1998 between the Registrant
and Mark X. Zaleski.........................................
10.11 Offer Letter dated March 31, 1997 between the Registrant and
Gary B. Dahl................................................
10.12 Offer Letter dated June 5, 1997 between the Registrant and
Mark J. Holtzman............................................
10.13 Offer Letter dated September 3, 1997 between the Registrant
and S. Coppy Holzman........................................
10.14+ Contract dated July 8, 1999 for turnkey design/build
construction and related services between the Registrant and
Bechtel Corporation.........................................
10.15+ Warrant dated July 8, 1999 issued to Bechtel Corporation....
10.16 Warrant dated May 27, 1998 issued to Comdisco Ventures......
10.17 Warrant dated November 18, 1998 issued to Lighthouse Capital
Partners....................................................
23.1* Consent of Deloitte & Touche LLP, Independent Auditors......
23.2* 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 has been requested for certain portions of this
exhibit.
<PAGE> 1
EXHIBIT 4.2
WEBVAN GROUP, INC.
FOURTH AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Fourth Amendment (the "AMENDMENT") to Registration Rights Agreement
is made as of July __, 1999 by and among Webvan Group, Inc., a California
corporation (the "COMPANY"), the Shareholders (as defined below) and the New
Investors listed on Exhibit A hereto (the "NEW INVESTORS").
RECITALS
A. The Company, the holders of the Company's Series A Preferred Stock,
the holders of the Company's Series B Preferred Stock and the holders of the
Company's Series C Preferred Stock (the "SHAREHOLDERS") are parties to that
certain Registration Rights Agreement dated as of October 29, 1997, as amended
as of May 28, 1998, September 30, 1998 and January 21, 1999 (the "RIGHTS
AGREEMENT").
B. The Company proposes to sell up to 14,447,070 shares of its Series
D-2 Preferred Stock to the New Investors pursuant to that certain Series D
Preferred Stock Purchase Agreement dated the date hereof (the "SERIES D PURCHASE
AGREEMENT") which shares are convertible under certain circumstances into shares
of the Company's Series D-1 Preferred Stock (the Series D-1 Preferred Stock and
the Series D-2 Preferred Stock are collectively referred to herein as the
"SERIES D SHARES").
C. On July 9, 1999, the Company issued to Bechtel Corporation a warrant
to purchase up to 600,000 shares of the Company's Series C Preferred Stock (the
"WARRANT SHARES").
D. The Company and the Shareholders desire that the Company sell the
shares of Series D-2 Preferred Stock to the New Investors and that the Rights
Agreement be amended as set forth herein to provide certain rights to the
holders of the Series D Shares and the Warrant Shares.
E. Pursuant to Section 12 of the Rights Agreement, the Company may not
grant further registration rights without the written consent of the Holders of
a majority of the then outstanding Registrable Securities (as defined therein),
subject to certain limited exceptions.
F. The Shareholders desire to waive their Right of First Refusal to
purchase any Series D Shares pursuant to Section 17 of the Rights Agreement.
G. Pursuant to Section 23 thereof, the Rights Agreement may be amended
and all Rights of First Refusal waived upon the written consent of the Company
and the holders of at least seventy percent (70%) of the Registrable Securities
(as defined therein) then held by persons entitled to registration rights
thereunder.
H. The Company and Shareholders holding not less than the minimum number
of shares required to amend the Rights Agreement hereby consent in writing to
this Amendment.
<PAGE> 2
AGREEMENT
1. Amendment of Rights Agreement. The Rights Agreement is hereby amended
as follows:
(a) For all purposes of the Rights Agreement (as amended by this
Amendment), the term "Shares" shall include the Series D Shares and the Warrant
Shares.
(b) For all purposes of the Rights Agreement (as amended by this
Amendment), the term "Shareholders" shall include the New Investors.
(c) The definitions of Initiating Holder and Registrable
Securities in Section 1 of the Rights Agreement are amended to provide as
follows:
"INITIATING HOLDERS" shall mean any Holders who in the
aggregate are Holders of fifteen percent (15%) or more of the outstanding
Registrable Securities.
"REGISTRABLE SECURITIES" shall mean shares of Common
Stock (i) issued or issuable pursuant to the conversion of the Shares, and (ii)
issued in respect of the Shares or the securities issued pursuant to the
conversion of the Shares upon any stock split, stock dividend, recapitalization,
substitution, or similar event; provided, however, that Registrable Securities
shall not include any (a) shares of Common Stock which have previously been
registered, (b) shares of Common Stock which have previously been sold to the
public, or (c) securities which would otherwise be Registrable Securities held
by a Holder who is then permitted to sell all of such securities within any
three (3) month period following the Company's initial public offering pursuant
to Rule 144 if such securities then held by such Holder constitute less than one
percent of the Company's outstanding equity securities.
(d) Section 4 of the Rights Agreement is hereby amended to
provide as follows:
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 (other than under
circumstances described in Sections 5, 6 and 8 hereof), 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 be accompanied (except (i) for
a transfer to a holder's spouse, ancestors, descendants or a trust for any of
their benefit, or (ii) in transactions involving the distribution without
consideration of Restricted Securities by a holder to any of its partners or
retired partners or to the estate of any of its partners or retired partners or
(iii) to any other affiliate of the holder) by either (i) a written opinion of
legal counsel to the holder 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
distribution 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
2
<PAGE> 3
Securities in accordance with the terms of the notice delivered by such holder
to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear the restrictive legend set forth in
Section 3 above, except that such certificate shall not bear such restrictive
legend after the date of the Company's initial public offering under the
Securities Act if the opinion of counsel or "no-action" letter referred to above
expressly indicates that such legend is not required in order to establish
compliance with the Act or if such legend is no longer required pursuant to Rule
144(k).
(e) Section 5(a)(ii)(B) of the Rights Agreement is amended to
provide as follows:
After the Company has effected three (3) such registrations
pursua/nt to this Section 5(a) and such registrations have been declared or
ordered effective and the sales of such Registrable Securities have closed; or
(f) Section 5(a)(ii)(C) of the Rights Agreement is amended to
change the reference therein to "$10,000,000" to "$100,000,000."
(g) The second paragraph of Section 5(b) of the Rights Agreement
is amended to provide as follows:
If officers or directors of the Company shall request
inclusion of securities of the Company other than Registrable Securities in any
registration pursuant to Section 5, or if holders of securities of the Company
who are entitled by contract with the Company to have securities included in
such a registration (such officers, directors, and other shareholders being
collectively referred to as the "Other Shareholders") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters (the "Underwriter") selected for such underwriting
by the Company and reasonably acceptable to the Initiating Holders.
Notwithstanding any other provision of this Section 5, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the Underwriter may (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the
registration and underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated in the following priority: first, among all Holders of Registrable
Securities (and pro rata among such holders on the basis of all Registrable
Securities then held by such holders) and second, among all Other Shareholders
in proportion, as nearly as practicable, to the amounts of securities which they
had requested to be included in such registration at the time of filing the
registration statement. If any Holder or Other Shareholder disapproves of the
terms of any such underwriting, such holder may elect to withdraw therefrom by
written notice to the Company and the Underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration. If the Underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the underwriter so agrees
and if the number of Registrable Securities
3
<PAGE> 4
and other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
(h) Section 8(iv) of the Rights Agreement is amended to change
the reference therein to "Section 6(b)" to "Section 5(b)."
(i) Section 9 of the Rights Agreement is amended to add the
following subsections (d) through (g):
(d) Use its reasonable efforts to cause the shares being
registered pursuant to such registration to be listed on each securities
exchange on which similar securities issued by the Company are then listed.
(e) Use its reasonable efforts to register or qualify
any shares being registered pursuant to such registration under the state
securities or blue sky laws of any such jurisdiction as any Holder may
reasonably request, provided that the Company shall not be required to qualify
generally to do business in any jurisdiction where it would (i) not otherwise be
required to qualify but for its obligations under this section (e), (ii) subject
itself to taxation or (iii) be required to file a consent to general service of
process.
(f) Make appropriate members of its management available
to participate in any "road show" presentations undertaken by the underwriters
in connection with such registration.
(g) Use its reasonable efforts to cause the Company's
independent public accountants to issue a "comfort letter" in such form as is
customarily provided with respect to such registration.
(h) Use its reasonable efforts to cause the Company's
legal counsel to issue an opinion in such form as is customarily provided with
respect to such registration.
(j) Section 10(a) of the Rights Agreement is amended to provide
as follows:
The Company will indemnify and hold harmless each Holder, each
of its officers, directors, managing directors, agents and partners, and each
person controlling or managing such Holder or any such partner, if Registrable
Securities held by such Holder are included in the securities 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, against all claims, losses, damages and liabilities (or actions in
respect thereof), whether joint or several, arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement) 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 or alleged violation by the Company of the Securities Act, the
Exchange Act, any applicable state securities law or any rule or regulation
thereunder relating to action or
4
<PAGE> 5
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, managing directors, agents and partners, and each person
controlling or managing such Holder or any such partner, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, as such expenses are incurred
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 alleged untrue statement) or omission (or alleged
omission) based upon information furnished in writing to the Company by such
Holder or underwriter and stated to be specifically for use therein.
(k) Section 10(b) of the Rights Agreement is amended to provide
as follows:
Each Holder and Other Shareholder will, if Registrable
Securities or other securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify and hold harmless the Company, each of its directors,
officers and agents and 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 the Securities Act, and the rules and
regulations thereunder, each other such Holder and Other Shareholder and each of
their officers, directors and partners, and each person controlling such Holder
or Other Shareholder, against all claims, losses, damages and liabilities (or
actions in respect thereof), whether joint or several, 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, in light of the circumstances in which they were made, not misleading,
and will reimburse the Company and such Holders, Other Shareholders, directors,
officers, agents, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
of defending any such claim, loss, damage, liability or action, as such expenses
are incurred, 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 information furnished in
writing to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein. Notwithstanding the foregoing, no Holder shall be
required to indemnify the Company or its directors, officers, agents or
underwriters if, in the case of settlement of litigation, such settlement is
effected without the consent of the Holders of not less than a majority of the
then outstanding Registrable Securities. In no event shall the liability of a
Holder or Other Shareholder for indemnification under this Section 10 exceed the
proceeds received by such Holder or Other Shareholder in the offering of the
Registrable Securities.
(l) Section 10(c) of the Rights Agreement is amended to provide
as follows:
Each party entitled to indemnification under this
Section 10 (the "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
5
<PAGE> 6
the defense of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
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 the Indemnifying Party
is prejudiced thereby, and provided further, however, that an indemnified party
(together with all other indemnified parties) shall have the right to retain one
separate counsel, with the reasonable fees and expenses of such counsel to be
paid by the indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. No Indemnifying
Party in the defense of any such claim or litigation shall, except with the
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 or which includes any
admission of fault by such Indemnified Party. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(m) Section 10(d) of the Rights Agreement is amended to provide
as follows:
If the indemnification provided for in this Section 10 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
herein, 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. 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 indemnified party shall be required to contribute any
amount in excess of the proceeds received by such party in connection with such
registration statement less any amounts paid pursuant to the indemnification
provisions of this Section 10.
(n) Section 14 of the Rights Agreement is amended to provide as
follows:
"14. [intentionally omitted]"
(o) Section 15 of the Rights Agreement is amended to provide as
follows:
The rights to cause the Company to register
Shareholder's securities granted to Shareholder by the Company under Sections 5,
6 and 8 hereof may be transferred or assigned by Shareholder to a transferee or
assignee of any of the Restricted Securities, provided that the
6
<PAGE> 7
Company is given written notice by Shareholder at the time of said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned, and provided further that the transferee or
assignee of such rights is not deemed by the Board of Directors of the Company,
in its reasonable judgment, to be a competitor of the Company and the Company so
notifies the Shareholder within ten (10) days of receiving such notice that it
deems such transferee or assignee to be a competitor; and provided further that
the transferee or assignee of such rights assumes the obligations of a
Shareholder under this Agreement.
(p) Section 16 of the Rights Agreement is amended to provide as
follows:
Each Shareholder agrees not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Shareholder during a period of time determined by the Company and
its underwriters (not to exceed 180 days) following the effective date of the
registration statement of the Company filed under the Securities Act with
respect to the Company's initial public offering, provided that all executive
officers and directors of the Company who then hold Common Stock (or other
securities) of the Company enter into similar agreements and that the Company
shall use all reasonable efforts to cause all holders of five percent (5%) or
more of the Company's then outstanding Common Stock to enter into similar
agreements. Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the Shares (or securities) subject to the foregoing restriction
until the end of said period. Notwithstanding the foregoing, Goldman Sachs and
its affiliates may engage in any brokerage, investment advisory, financial
advisory, anti-raid advisory, merger advisory, financing, asset management,
trading, market making, arbitrage and other similar activities conducted in the
ordinary course of Goldman Sachs and its affiliates' business.
(q) Section 17(a)(i) of the Rights Agreement is amended to add a
new section (F) as follows:
(F) up to an aggregate of 2,626,742 shares of Series D-1
Preferred Stock or Series D-2 Preferred Stock to such
persons as the Company's Board of Directors may approve
with the consent of the holders of at least seventy
percent (70%) of the then outstanding Series D Shares.
2. Waiver of Right of First Refusal. By execution of this Amendment,
each Shareholder, on behalf of itself and each of the other Shareholders, hereby
waives the Right of First Refusal pursuant to Section 17 of the Rights Agreement
to purchase any of the Series D Shares.
3. Governing Law. This Amendment and the legal relations among the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Amendment or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations among the parties arising under this Amendment.
7
<PAGE> 8
4. Entire Agreement. The Rights Agreement, as amended hereby,
constitutes the full and entire understanding and agreement among the parties
regarding the subject matter herein. Except as otherwise expressly provided in
the Rights Agreement, as amended hereby, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
5. Full Force and Effect. Except as amended hereby, the Rights Agreement
shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment
to Registration Rights Agreement as of the date set forth above.
"COMPANY"
WEBVAN GROUP, INC.
(formerly Intelligent Systems for
Retail, Inc.)
By: /s/ LOUIS H. BORDERS
---------------------------------
Louis H. Borders, President
Address: 1241 E. Hillsdale Blvd.,
Suite 210
Foster City, CA 94404
"SHAREHOLDERS"
BENCHMARK CAPITAL PARTNERS, L.P.
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co. LLC
---------------------------------
By: /s/ DAVID M. BEIRNE
---------------------------------
Managing Partner
Address: 2480 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attn: David M. Beirne
SEQUOIA CAPITAL VII, a California Limited
Partnership
SEQUOIA TECHNOLOGY PARTNERS VII, a
California Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
---------------------------------
a California Limited Liability Company,
its General Partner
By: /s/ MICHAEL J. MORITZ
---------------------------------
Managing Partner
Address: 3000 Sand Hill Road, Bldg. 4,
Suite 280
Menlo Park, California 94025
Attn: Michael J. Moritz
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 10
LOUIS H. BORDERS AMENDED AND RESTATED
REVOCABLE TRUST DATED DECEMBER 4, 1987
By: /s/ LOUIS H. BORDERS
---------------------------------
Louis H. Borders, Trustee
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Louis H. Borders
ISR GRAT I
ISR GRAT II
By: /s/ HUME R. STEYER
---------------------------------
Hume R. Steyer, Trustee
Address: Seward & Kissell
One Battery Park Plaza
New York, NY 10004
STANFORD UNIVERSITY
By:
---------------------------------
Title:
------------------------------
Address: 2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
------------------------------------
ERIC GREENBERG
Address: 42 Casa Way
San Francisco, California 94123
WS INVESTMENT COMPANY 97B
By:
---------------------------------
Jeffrey D. Saper, Partner
Address: 650 Page Mill Road
Palo Alto, California 94304
Attn: Jim Terranova
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 11
------------------------------------
JEFFREY D. SAPER
Address: 650 Page Mill Road
Palo Alto, California 94304
------------------------------------
J. ROBERT SUFFOLETTA
Address: 650 Page Mill Road
Palo Alto, California 94304
SOFTBANK AMERICA INC.
/s/ FRANCIS B. JACOBS II
------------------------------------
Francis B. Jacobs II, Vice President
Address: Attention: Francis B. Jacobs II
300 Delaware Avenue, Suite 900
Wilmington, Delaware 19801
THE VATTIKUTI FAMILY L.L.C. DATED 09/04/98
------------------------------------
Raj Vattikuti, Member
Address: 4692 West Wickford
Bloomfield Hills, MI 48302
MARKAS HOLDING B.V.
By: /s/ M.C. VAN DER SLUYS-PLANTE
---------------------------------
Title: MANAGING DIRECTOR
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 12
KNIGHT RIDDER INVESTMENT COMPANY
By: /s/
---------------------------------
Title: SVP CFO
------------------------------
YAHOO! INC.
By: /s/ TIMOTHY KOOGLE
---------------------------------
Title: CEO
------------------------------------
SHELDON SOLOW
CBS CORPORATION
By: /s/ FREDRIC A. REYNOLDS
---------------------------------
Title: EXECUTIVE VICE PRESIDENT, CFO
FLEXTRONICS INTERNATIONAL LTD.
By: /s/ MUIN MIKING
---------------------------------
Title: DIRECTOR
AMB PROPERTY, L.P.
By: AMB Property Corporation, general
partner
By: /s/ DAVID S. FRIES
---------------------------------
Title: MANAGING DIRECTOR
------------------------------
E*TRADE GROUP INC.
By: /s/
---------------------------------
Title:ASSISTANT CORPORATE SECRETARY
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 13
SMALLCAP WORLD FUND, INC.
By: Capital Research and Management Company
By: /S/ MICHAEL DOWNER
---------------------------------
Title: SECRETARY
------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 14
"NEW INVESTORS"
SOFTBANK CAPITAL PARTNERS LP
By: SOFTBANK Capital Partners LLC
By: /s/ RONALD D. FISHER
---------------------------------
Title: Manager
SOFTBANK CAPITAL ADVISORS FUND LLC
By: /s/ RONALD D. FISHER
---------------------------------
Title: Manager
GS CAPITAL PARTNERS III, L.P.
By: GS Advisors III, L.P.
---------------------------------
Its General Partner
By: GS Advisors III, L.L.C.
---------------------------------
Its General Partner
By: /s/ EVE M. GERRIETS, V.P.
---------------------------------
Authorized Signatory
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 15
GOLDMAN, SACHS & CO. VERWALTUNGS GMBH
By: /s/ JOSEPH GLEBERMAN
---------------------------------
Managing Director
and
/s/ EVE M. GERRIETS
------------------------------------
Managing Director or Registered Agent
GS CAPITAL PARTNERS III OFFSHORE, L.P.
By: GS Advisors III (Cayman), L.P.
---------------------------------
Its General Partner
By: GS Advisors III, L.L.C.
---------------------------------
Its General Partner
By: /s/ EVE M. GERRIETS, V.P.
---------------------------------
Authorized Signatory
STONE STREET FUND 1999, L.P.
By: /s/ EVE M. GERRIETS
---------------------------------
Title: V.P.
------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 16
THE GOLDMAN SACHS GROUP, INC.
By: /s/ JOSEPH GLEBERMAN
---------------------------------
Title: V.P.
------------------------------
SEQUOIA CAPITAL FRANCHISE FUND
SEQUOIA CAPITAL FRANCHISE PARTNERS
By: SCFF Management, LLC
A Delaware Limited Liability
Company
its General Partner
By: /s/ MICHAEL J. MORITZ
---------------------------------
Managing Member
BECHTEL CORPORATION
By:
---------------------------------
Title:
------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 17
EXHIBIT A
SCHEDULE OF NEW INVESTORS
<TABLE>
<CAPTION>
NUMBER
OF NUMBER
SERIES D OF
NAME AND ADDRESS OF SHAREHOLDER SHARES WARRANT SHARES
------------------------------- ------ --------------
<S> <C> <C>
SOFTBANK Capital Partners LP 6,478,162
SOFTBANK Capital Advisors Fund LLC 88,688
c/o SOFTBANK America Inc.
Attention: Francis B. Jacobs II
300 Delaware Avenue, Suite 900
Wilmington, Delaware 19801
GS Capital Partners III, L.P. 2,942,731
Goldman Sachs & Co. Verwaltungs GmbH 135,851
GS Capital Partners III Offshore, L.P. 808,993
Stone Street Fund 1999, L.P. 52,535
The Goldman Sachs Group, Inc. 1,313,370
85 Broad Street
New York, NY 10004
Sequoia Capital Franchise Fund 2,626,740
Sequoia Capital Franchise Partners
3000 Sand Hill Road, Bldg. 4, Suite 280
Menlo Park, California 94025
Attn: Michael J. Moritz
Bechtel Corporation
50 Beale Street
San Francisco, CA 94105 1,200,000
---------- ---------
TOTAL 14,447,070 1,200,000
========== =========
</TABLE>
<PAGE> 18
INTELLIGENT SYSTEMS FOR RETAIL, INC.
THIRD AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Third Amendment (the "AMENDMENT") to Registration Rights Agreement
is made as of January 21, 1999 by and among Intelligent Systems for Retail,
Inc., a California corporation (the "COMPANY"), the Shareholders (as defined
below) and the New Investors listed on Exhibit A hereto (the "NEW INVESTORS").
RECITALS
A. The Company, the holders of the Company's Series A Preferred Stock
and the holders of the Company's Series B Preferred Stock (the "SHAREHOLDERS")
are parties to that certain Registration Rights Agreement dated as of October
29, 1997, as amended as of May 28, 1998 and September 30, 1998 (the "RIGHTS
AGREEMENT").
B. The Company proposes to sell up to 10,780,400 shares of its Series
C Preferred Stock (the "SERIES C SHARES") to the New Investors pursuant to that
certain Series C Preferred Stock Purchase Agreement dated the date hereof (the
"SERIES C PURCHASE AGREEMENT").
C. The Company and the Shareholders desire that the Company sell the
Series C Shares to the New Investors and that the Rights Agreement be amended as
set forth herein.
D. Pursuant to Section 12 of the Rights Agreement, the Company may not
grant further registration rights without the written consent of the Holders of
a majority of the then outstanding Registrable Securities (as defined therein),
subject to certain limited exceptions.
E. The Shareholders desire to waive their Right of First Refusal to
purchase any Series C Shares pursuant to Section 17 of the Rights Agreement.
F. Pursuant to Section 23 thereof, the Rights Agreement may be amended
and all Rights of First Refusal waived upon the written consent of the Company
and the holders of at least seventy percent (70%) of the Registrable Securities
(as defined therein) then held by persons entitled to registration rights
thereunder.
G. The Company and Shareholders holding not less than the minimum
number of shares required to amend the Rights Agreement hereby consent in
writing to this Amendment.
AGREEMENT
1. Amendment of Rights Agreement. The Rights Agreement is hereby
amended as follows:
(a) For all purposes of the Rights Agreement (as amended by
this Amendment), the term "Shares" shall include the Series C Shares.
<PAGE> 19
(b) For all purposes of the Rights Agreement (as amended by
this Amendment), the term "Shareholders" shall include the New Investors.
(c) All references in Section 5(a) of the Rights Agreement to
"$10,000,000" are hereby changed to "$25,000,000."
(d) The reference in Section 5(a)(ii)(C) of the Rights
Agreement to "$4.60 per share" is hereby changed to "$10.46 per share."
2. Waiver of Right of First Refusal. By execution of this Amendment,
each Shareholder, on behalf of itself and each of the other Shareholders, hereby
waives the Right of First Refusal pursuant to Section 17 of the Rights Agreement
to purchase any of the Series C Shares.
3. Governing Law. This Amendment and the legal relations among the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Amendment or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations among the parties arising under this Amendment.
4. Entire Agreement. The Rights Agreement, as amended hereby,
constitutes the full and entire understanding and agreement among the parties
regarding the subject matter herein. Except as otherwise expressly provided in
the Rights Agreement, as amended hereby, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
5. Full Force and Effect. Except as amended hereby, the Rights
Agreement shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this Third Amendment
to Registration Rights Agreement as of the date set forth above.
"COMPANY"
INTELLIGENT SYSTEMS FOR RETAIL, INC.
By: /s/ LOUIS H. BORDERS
---------------------------------
Louis H. Borders, President
Address: 1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404
"SHAREHOLDERS"
BENCHMARK CAPITAL PARTNERS, L.P.
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co. LLC
By: /s/ DAVID M. BEIRNE
---------------------------------
Managing Partner
Address: 2480 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attn: David M. Beirne
SEQUOIA CAPITAL VII, a California Limited
Partnership
SEQUOIA TECHNOLOGY PARTNERS VII, a California
Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
a California Limited Liability Company,
its General Partner
By: /s/ MICHAEL J. MORTIZ
Managing Partner
Address: 3000 Sand Hill Road, Bldg. 4,
Suite 280
Menlo Park, California 94025
Attn: Michael J. Moritz
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 21
LOUIS H. BORDERS AMENDED AND RESTATED
REVOCABLE TRUST DATED DECEMBER 4, 1987
By: /s/ LOUIS H. BORDERS
---------------------------------
Louis H. Borders, Trustee
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Louis H. Borders
ISR GRAT I
ISR GRAT II
By: /s/ HUME R. STEYER
---------------------------------
Hume R. Steyer, Trustee
Address: Seward & Kissell
One Battery Park Plaza
New York, NY 10004
STANFORD UNIVERSITY
By:
---------------------------------
Title:
------------------------------
Address: 2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
/s/ ERIC GREENBERG
------------------------------------
ERIC GREENBERG
Address: 42 Casa Way
San Francisco, California 94123
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 22
WS INVESTMENT COMPANY 97B
By: /s/ JEFFREY D. SAPER
---------------------------------
Jeffrey D. Saper, Partner
Address: 650 Page Mill Road
Palo Alto, California 94304
Attn: Jim Terranova
/S/ JEFFREY D. SAPER
------------------------------------
JEFFREY D. SAPER
Address: 650 Page Mill Road
Palo Alto, California 94304
/s/ J. ROBERT SUFFOLETTA
------------------------------------
J. ROBERT SUFFOLETTA
Address: 650 Page Mill Road
Palo Alto, California 94304
SOFTBANK AMERICA INC.
By: /s/ RON FISHER
---------------------------------
Ron Fisher
Title: VICE CHAIRMAN
Address: Attention: Ron Fischer, Vice
Chairman
10 Langley Road, Suite 403
Newton Center, MA 02159
THE VATTIKUTI FAMILY L.L.C. DATED 09/04/98
/s/ RAJ VATTIKUTI
------------------------------------
Raj Vattikuti, Member
Address: 4692 West Wickford
Bloomfield Hills, MI 48302
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 23
"NEW INVESTORS"
MARKAS HOLDING B.V.
Print Name
/s/ MRS. M.C. VAN DER SLUYS-PLANTE
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: MRS. M.C. VANDER SLUYS-PLANTE
------------------------------------
Title: MANAGING DIRECTOR
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 24
"NEW INVESTORS"
CAPITAL RESEARCH AND MANAGEMENT
COMPANY ON BEHALF OF SMALLCAP
WORLD FUND, INC.
------------------------------------
Print Name
/s/ MICHAEL J. DOWNER
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: MICHAEL J. DOWNER
------------------------------------
Title: SECRETARY
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 25
"NEW INVESTORS"
E*TRADE GROUP, INC.
------------------------------------
Print Name
/S/ LEN PERKIS
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: LEN PERKIS
---------------------------------
Title: CFO
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 26
"NEW INVESTORS"
CBS CORPORATION
------------------------------------
Print Name
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: /s/ FREDRIC A. REYNOLDS
---------------------------------
Title: EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
---------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 27
"NEW INVESTORS"
FLEXRONICS INTERNATIONAL, LTD.
------------------------------------
Print Name
/s/ MUIN MIKING
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: C.F. ALAIN AHKONG
---------------------------------
Title: DIRECTOR
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 28
"NEW INVESTORS"
AMB PROPERTY, L.P.
------------------------------------
Print Name
By: AMB PROPERTY CORPORATION
BY: DAVID S. FRIES
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: DAVID S. FRIES
---------------------------------
Title: MANAGING DIRECTOR, GENERAL
COUNSEL AND SECRETARY
---------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 29
"NEW INVESTORS"
KNIGHT RIDDER INVESTMENT COMPANY
------------------------------------
Print Name
/s/ ALAN SILVERGLAT
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: ALAN SILVERGLAT
---------------------------------
Title: VICE PRESIDENT
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 30
"NEW INVESTORS"
YAHOO! INC.
------------------------------------
Print Name
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By: /S/ TIMOTHY KOOGLE
---------------------------------
Title: CHAIRMAN AND CEO
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 31
"NEW INVESTORS"
SHELDON H. SOLOW
------------------------------------
Print Name
/s/ SHELDON H. SOLOW
------------------------------------
Signature
If New Investor is an entity, please
print name and title of signatory.
By:
---------------------------------
Title:
------------------------------
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 32
EXHIBIT A
SCHEDULE OF NEW INVESTORS
CLOSING - JANUARY 21, 1999
<TABLE>
<CAPTION>
Name and Address of Shareholder Number of Shares
--------------------------------------------------- -----------------
<S> <C>
Markas Holding B.V. 2,152,000
c/o LVMH Group
30 Avenue Hoche
Paris, France 75008
Knight Ridder Investment Company 1,147,800
50 W. San Fernando Street
San Jose, CA 95113
Yahoo! Inc. 1,434,700
3400 Central Expressway
Santa Clara, CA 95051
Sheldon Solow 1,004,300
9 West 57th Street
New York, NY 10019
CBS Corporation 717,400
51 West 52nd Street, 35th Floor
New York, NY 10019
Flextronics International Ltd. 717,400
514 Chai Chee Lane #04-13
Bedok Industrial Estate
Singapore 469029
AMB Property, L.P. 717,400
505 Montgomery, 5th Floor
San Francisco, CA 94111
E-Trade Group Inc. 1,434,700
4 Embarcadero Place
Palo Alto, CA 94303
Kane & Co. 1,434,700
c/o The Capital Group ----------
333 South Hope Street
Los Angeles, CA 90071
TOTAL 10,760,400
==========
</TABLE>
[SIGNATURE PAGE TO THIRD AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 33
INTELLIGENT SYSTEMS FOR RETAIL, INC.
SECOND AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Second Amendment (the "AMENDMENT") to Registration Rights Agreement
is made as of September 30, 1998 by and among Intelligent Systems for Retail,
Inc., a California corporation (the "COMPANY"), the Shareholders (as defined
below) and the warrantholders listed on Exhibit A hereto (the "WARRANTHOLDERS").
RECITALS
A. The Company and the holders of the Company's Series A Preferred Stock
and Series B Preferred Stock (collectively, the "SHAREHOLDERS") are parties to
that certain Registration Rights Agreement dated as of October 29, 1997, as
amended as of May 28, 1998 (the "RIGHTS AGREEMENT").
B. On or about the date hereof, the Company is issuing to the
Warrantholders warrants to purchase up to an aggregate of 372,263 shares of the
Company's Series B Preferred Stock (the "WARRANTS") in connection with a $17
million secured loan facility.
C. The Company and the Shareholders desire that the Rights Agreement be
amended as set forth herein.
D. Pursuant to Section 12 of the Rights Agreement, the Company may not
grant further registration rights without the prior written consent of the
Holders of at least a majority of the then outstanding Registrable Securities
(as defined therein), subject to certain limited exceptions.
E. Pursuant to Section 23 thereof, the Rights Agreement may be amended
upon the written consent of the Company and the holders of at least seventy
percent (70%) of the Registrable Securities (as defined therein) then held by
persons entitled to registration rights thereunder.
F. The Company and Shareholders holding not less than the minimum number
of shares required to amend the Rights Agreement hereby consent in writing to
this Amendment.
AGREEMENT
1. Amendment of Rights Agreement. The Rights Agreement is hereby amended
as follows:
(a) For all purposes of the Rights Agreement (as amended by
this Amendment) (except for Section 17 thereof), the term "Shares" shall include
the shares of Series B Preferred Stock issuable upon exercise of the Warrants.
(b) For all purposes of the Rights Agreement (as amended by
this Amendment) (except for Section 17 thereof), the term "Shareholders" shall
include the Warrantholders.
<PAGE> 34
(c) Notwithstanding anything to the contrary herein, the
Warrantholders are not entitled to any rights pursuant to Section 17 of the
Rights Agreement and shall not become a party to Section 17 of the Rights
Agreement for any purpose.
(d) Section 18 of the Rights Agreement is hereby amended to
read in full as follows:
"Termination of Rights. The provisions of this Agreement, other
than Section 16 hereof, shall terminate upon the first to occur of (a)
the fifth (5th) anniversary of the closing date of the Public Offering;
and (b) as to any Holder on the date on which all Shares and shares of
Common Stock issued or issuable upon conversion of the Shares held by
such Holder may be sold pursuant to Rule 144, provided that such Shares
represent less than one percent (1%) of the Company's then outstanding
equity securities."
2. No Right of First Refusal. By execution of this Amendment, each
Shareholder, on behalf of itself and each of the other Shareholders, hereby
acknowledges that pursuant to Section 17(a)(i)(C) thereof, the right of first
refusal contained in Section 17 of the Rights Agreement does not apply to the
issuance of the Warrants or the shares of Series B Preferred Stock issuable upon
exercise of the Warrants or the shares of Common Stock issuable upon conversion
of such shares of Series B Preferred Stock.
3. Governing Law. This Amendment and the legal relations among the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Amendment or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations among the parties arising under this Amendment.
4. Entire Agreement. The Rights Agreement, as amended hereby,
constitutes the full and entire understanding and agreement among the parties
regarding the subject matter herein. Except as otherwise expressly provided in
the Rights Agreement, as amended hereby, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
5. Full Force and Effect. Except as amended hereby, the Rights Agreement
shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 35
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment
to Registration Rights Agreement as of the date set forth above.
"COMPANY"
INTELLIGENT SYSTEMS FOR RETAIL, INC.
By: /S/ LOUIS H. BORDERS
---------------------------------
Louis H. Borders, President
Address: 1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404
"SHAREHOLDERS"
BENCHMARK CAPITAL PARTNERS, L.P.
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co. LLC
By: /s/ DAVID M. BEIRNE
---------------------------------
Managing Partner
Address: 2480 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attn: David M. Beirne
SEQUOIA CAPITAL VII, a California Limited
Partnership
SEQUOIA TECHNOLOGY PARTNERS VII, a California
Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC
a California Limited Liability Company,
its General Partner
By: /s/ MICHAEL J. MORITZ
---------------------------------
Managing Partner
Address: 3000 Sand Hill Road, Bldg. 4,
Suite 280
Menlo Park, California 94025
Attn: Michael J. Moritz
[SIGNATURE PAGE TO SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 36
LOUIS H. BORDERS AMENDED AND RESTATED
REVOCABLE TRUST DATED DECEMBER 4, 1987
By: /s/ LOUIS H. BORDERS
---------------------------------
Louis H. Borders, Trustee
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Louis H. Borders
ISR GRAT I
By: /s/ HUME R. STEYER
---------------------------------
Title: HUME R. STEYER, TRUSTEE
------------------------------
Address: Steward & Kissell
One Battery Park Plaza
New York, NY 10004
Attn: Hume R. Steyer, Esq.
STANFORD UNIVERSITY
By: /s/ CAROL GILMER
---------------------------------
Title: Gift Administrator, Stanford
Management Co.
------------------------------
Address: 2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
/S/ ERIC GREENBERG
------------------------------------
ERIC GREENBERG
Address: 42 Casa Way
San Francisco, California 94123
[SIGNATURE PAGE TO SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 37
WS INVESTMENT COMPANY 97B
By: /s/ JEFFREY D. SAPER
---------------------------------
Jeffrey D. Saper, Partner
Address: 650 Page Mill Road
Palo Alto, California 94304
Attn: Jim Terranova
/s/ JEFFREY D. SAPER
------------------------------------
JEFFREY D. SAPER
Address: 650 Page Mill Road
Palo Alto, California 94304
/s/ J. ROBERT SUFFOLETTA
------------------------------------
J. ROBERT SUFFOLETTA
Address: 650 Page Mill Road
Palo Alto, California 94304
SOFTBANK HOLDINGS INC.
By: /S/ RONALD D. FISHER
---------------------------------
Ronald D. Fisher
Title: VICE CHAIRMAN
------------------------------
/s/ RAJ VATTIKUTI
------------------------------------
RAJ VATTIKUTI
[SIGNATURE PAGE TO SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 38
"WARRANTHOLDERS"
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS II, L.P.,
its general partner
By: LIGHTHOUSE CAPITAL PARTNERS,
INC., its general partner
By: /s/ RICHARD D. STUBBLEFIELD
------------------------------------
Name: Richard D. Stubblefield
Title: Managing Director
Address for Notices:
Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
Fax: (415) 925-3387
VENTURE LENDING & LEASING, INC.
By: /s/ SALVADOR O. GUTIERREZ
---------------------------------
Name: Salvador O. Gutierrez
Title: President
VENTURE LENDING & LEASING II, INC.
By: /s/ SALVADOR O. GUTIERREZ
---------------------------------
Name: Salvador O. Gutierrez
Title: President
Address for Notices:
Western Technology Investments
2010 North First Street, Suite 310
San Jose, CA 95131
Attention: Salvador O. Gutierrez
Fax: (408) 436-8625
[SIGNATURE PAGE TO SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 39
DOMINION VENTURES, INC.
By: /s/ MICHAEL LEE
---------------------------------
Name: Michael Lee
Title: Partner
Address for Notices:
3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
Attention: Renee C. Baker
Fax: (650) 854-1957
MMC/GATX PARTNERSHIP NO. 1
By: MEIER MITCHELL & COMPANY, as
General Partner
By: /s/ JAMES V. MITCHELL
---------------------------------
Name: James V. Mitchell
Title: Secretary
Address for Notices:
MMC/GATX Partnership No. 1
c/o GATX Capital Corporation
Four Embarcadero Center, Suite 2200
San Francisco, CA 94111
Attention: Contract Administration
Fax: (415) 955-3288
[SIGNATURE PAGE TO SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 40
IMPERIAL BANK
By: /s/ JAMES BYRON
---------------------------------
Name: James Byron
Title: Assistant Vice President
Address for Notices:
2460 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Attention: Steve Kattner
Fax: (650) 233-3020
[SIGNATURE PAGE TO SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 41
EXHIBIT A
WARRANTHOLDERS
<TABLE>
<CAPTION>
Name and Address of New Investor Number of Shares
-------------------------------- ----------------
<S> <C>
Lighthouse Capital Partners II, L.P. 109,489
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
Venture Lending & Leasing, Inc. 32,847
Western Technology Investments
2010 North First Street, Suite 310
San Jose, CA 95131
Attention: Salvador O. Gutierrez
Venture Lending & Leasing II, Inc. 76,643
Western Technology Investments
2010 North First Street, Suite 310
San Jose, CA 95131
Attention: Salvador O. Gutierrez
Dominion Ventures, Inc. 65,693
3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
Attention: Renee C. Baker
MMC/GATX Partnership No. 1 65,693
c/o GATX Capital Corporation
Four Embarcadero Center, Suite 2200
San Francisco, CA 94111
Attention: Contract Administration
Imperial Bank 21,898
2460 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Attention: Steve Kattner
</TABLE>
<PAGE> 42
EXHIBIT 4.2
[insert other amendments of registration rights here - they are formatted in
Word the document is regright2.doc]
<PAGE> 43
INTELLIGENT SYSTEMS FOR RETAIL, INC.
AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Amendment (the "AMENDMENT") to Registration Rights Agreement is
made as of May 28, 1998 by and among Intelligent Systems for Retail, Inc., a
California corporation (the "COMPANY"), the Shareholders (as defined below) and
the New Investors listed on Exhibit A hereto (the "NEW INVESTORS").
RECITALS
A. The Company and the holders of the Company's Series A Preferred Stock
(the "SHAREHOLDERS") are parties to that certain Registration Rights Agreement
dated as of October 29, 1997 (the "RIGHTS AGREEMENT").
B. The Company proposes to sell up to 6,613,160 shares of its Series B
Preferred Stock (the "SERIES B SHARES") to the New Investors pursuant to that
certain Series B Preferred Stock Purchase Agreement dated the date hereof (the
"SERIES B PURCHASE AGREEMENT").
C. The Company and the Shareholders desire that the Company sell the
Series B Shares to the New Investors and that the Rights Agreement be amended as
set forth herein.
D. Pursuant to Section 12 of the Rights Agreement, the Company may not
grant further registration rights without the written consent of the Holders of
a majority of the then outstanding Registrable Securities (as defined therein),
subject to certain limited exceptions.
E. The Shareholders desire to waive their Right of First Refusal to
purchase any Series B Shares pursuant to Section 17 of the Rights Agreement.
F. Pursuant to Section 23 thereof, the Rights Agreement may be amended
and all Rights of First Refusal waived upon the written consent of the Company
and the holders of at least seventy percent (70%) of the Registrable Securities
(as defined therein) then held by persons entitled to registration rights
thereunder.
G. The Company and Shareholders holding not less than the minimum number
of shares required to amend the Rights Agreement hereby consent in writing to
this Amendment.
AGREEMENT
1. Amendment of Rights Agreement. The Rights Agreement is hereby amended
as follows:
-1-
<PAGE> 44
(a) For all purposes of the Rights Agreement (as amended by this
Amendment), the term "Shares" shall include the Series B Shares.
(b) For all purposes of the Rights Agreement (as amended by this
Amendment), the term "Shareholders" shall include the New Investors.
(c) Section 17(a)(i) of the Rights Agreement is hereby amended to
add subsection (F) as follows:
"(F) up to 400,000 shares of the Company's Series B
Preferred Stock issued pursuant to transactions approved by the Company's Board
of Directors."
(d) Section 4 of the Rights Agreement is hereby amended to read
in full as follows:
"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 (other than under circumstances
described in Sections 5, 6 and 8 hereof), 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 be accompanied (except for a transfer to a
holder's affiliate, spouse, ancestors, descendants or a trust for any of their
benefit, or in transactions involving the distribution without consideration of
Restricted Securities by a holder to any of its partners or retired partners or
to the estate of any of its partners or retired partners) by either (i) a
written opinion of legal counsel to the holder 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 distribution 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 such holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the restrictive legend set forth in Section 3 above,
except that such certificate shall not bear such restrictive legend after the
date of the Company's initial public offering under the Securities Act if the
opinion of counsel or "no-action" letter referred to above expressly indicates
that such legend is not required in order to establish compliance with the Act
or if such legend is no longer required pursuant to Rule 144(k)."
2. Waiver of Right of First Refusal. By execution of this Amendment,
each Shareholder, on behalf of itself and each of the other Shareholders, hereby
waives the Right of First Refusal pursuant to Section 17 of the Rights Agreement
to purchase any of the Series B Shares.
3. Governing Law. This Amendment and the legal relations among the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Amendment or the enforcement
-2-
<PAGE> 45
of any and all rights, duties, liabilities, obligations, powers, and other
relations among the parties arising under this Amendment.
4. Entire Agreement. The Rights Agreement, as amended hereby,
constitutes the full and entire understanding and agreement among the parties
regarding the subject matter herein. Except as otherwise expressly provided in
the Rights Agreement, as amended hereby, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
5. Full Force and Effect. Except as amended hereby, the Rights Agreement
shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 46
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Registration Rights Agreement as of the date set forth above.
"COMPANY"
By: /S/ LOUIS H. BORDERS
-------------------------------------------------
Louis H. Borders, President
Address: 1241 E. Hillsdale Blvd., Suite 210
Forest City, CA 94404
"SHAREHOLDERS:
BENCHMARK CAPITAL PARTNERS, L.P.
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co. LLC
By: /S/ DAVID M. BEIRNE
-------------------------------------------------
Managing Partner
Address: 2480 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attn: David M. Beirne
SEQUOIA CAPITAL VII, a California Limited Partnership
SEQUIOIA TECHNOLOGY PARTNERS VII , a California
Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC,
a California Limited Liability Company,
its General Partner
By: /S/ MICHAEL J. MORITZ
-------------------------------------------------
Managing Partner
Address: 3000 Sand Hill Road. Bldg. 4, Suite 280
Menlo Park, California 94025
Attn: Michael J. Moritz
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 47
LOUIS H. BORDERS AMENDED AND RESTATED REVOCABLE
TRUST DATED DECEMBER 4, 1987
By: /S/ LOUIS H. BORDERS
--------------------------------------------------
Louis H. Borders, Trustee
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Louis H. Borders
ISR GRAT I
By: /S/HUME R. STEYER
-----------------------------
Title: TRUSTEE
---------------------------
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Andrew Martzloff
STANFORD UNIVERSITY
By: /S/ CAROL GILMER
---------------------------------------------------
GIFT ADMINISTRATOR,
Title: STANFORD MANAGEMENT CO.
------------------------------------------------
Address: 2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
/S/ ERIC GREENBERG
------------------------------------------------------
ERIC GREENBERG
Address: 42 Casa Way
San Francisco, California 94123
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 48
WS INVESTMENT COMPANY 97B
By: /S/ JEFFREY D. SAPER
-----------------------------------------------
Jeffrey D. Saper, Partner
Address: 650 Page Mill Road
Palo Alto, California 94304
Attn: Jim Terranova
/S/ JEFFREY D. SAPER
----------------------------------------------------
JEFFREY D. SAPER
Address: 650 Page Mill Road
Palo Alto, California 94304
/S/ J. ROBERT SUFFOLETTA
----------------------------------------------------
J. ROBERT SUFFOLETTA
Address: 650 Page Mill Road
Palo Alto, California 94304
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 49
"NEW INVESTORS"
SOFTBANK HOLDINGS INC.
By: /S/ RONALD D. FISHER
-------------------------------
Ronald D. Fisher
Title: VICE CHAIRMAN
-------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 50
/S/ RAJ VATTIKUTI
--------------------------------------
Raj Vattikuti
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
<PAGE> 51
EXHIBIT A
SCHEDULE OF NEW INVESTORS
FIRST CLOSING - MAY 28, 1998
<TABLE>
<CAPTION>
Name and Address of New Investor Number of Shares
-------------------------------- ----------------
<S> <C>
SOFTBANK HOLDINGS INC. 2,730,000
Attention: Ron Fisher, Vice Chairman
10 Langley Road, Suite 403
Newton Center, MA 02159
</TABLE>
<PAGE> 52
EXHIBIT A
SCHEDULE OF NEW INVESTORS
SECOND CLOSING - JUNE 12, 1998
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares
----------------------------- ----------------
<S> <C>
SOFTBANK HOLDINGS, INC. 3,356,996
Attention: Ron Fisher, Vice Chairman
10 Langley Road, Suite 403
Newton Center, MA 02159
RAJ VATTIKUTI 200,000
32605 W. 12 Mile Road, Suite 250
Farmington Hills, MI 48334
TOTAL: 3,556,996
</TABLE>
<PAGE> 53
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT"), dated as of
October 29, 1997, is entered into by and among Intelligent Systems For Retail,
Inc., a California corporation (the "COMPANY"), and the purchasers listed on
Exhibit A attached hereto (collectively, the "SHAREHOLDERS").
R E C I T A L S
A. The Shareholders and the Company are parties to a Series A Preferred
Stock Purchase Agreement dated as of the date hereof (the "PURCHASE AGREEMENT").
B. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
C. The Shareholders and the Company desire that the transactions
contemplated by the Purchase Agreement be consummated.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
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 other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the common stock of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"HOLDER" shall mean any holder, or an assignee under Section 15
hereof, of outstanding Registrable Securities.
"INITIATING HOLDERS" shall mean any Holders who in the aggregate
are Holders of thirty percent (30%) or more of the outstanding Registrable
Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall 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.
"REGISTRABLE SECURITIES" shall mean shares of Common Stock (i)
issued or issuable pursuant to the conversion of the Shares, and (ii) issued in
respect of securities issued pursuant to the conversion of the Shares upon any
stock split, stock dividend, recapitalization, substitution, or
-1-
<PAGE> 54
similar event; provided, however, that Registrable Securities shall not include
any (a) shares of Common Stock which have previously been registered, (b) shares
of Common Stock which have previously been sold to the public, or (c) securities
which would otherwise be Registrable Securities held by a Holder who is then
permitted to sell all of such securities within any three (3) month period
following the Company's initial public offering pursuant to Rule 144 if such
securities then held by such Holder constitute less than one percent of the
Company's outstanding equity securities.
"REGISTRATION EXPENSES" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Sections 5, 6 and 8 hereof, including all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the reasonable fees and expenses (not to
exceed $15,000) of one counsel for the selling Shareholders (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
other expenses which are not Registration Expenses.
"SHARES" shall mean shares of the Company's Series A Preferred
Stock.
2. Restrictions on Transferability. The Restricted Securities held by
the Shareholders shall not be transferred except upon the conditions specified
in this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act or, in the case of Section 16 hereof, to assist
in an orderly distribution. Each Shareholder will cause any proposed transferee
of Restricted Securities held by that Shareholder to agree to take and hold
those securities subject to the provisions and upon the conditions specified in
this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Shares, and
(ii) shares of the Company's Common Stock issued upon conversion of the Shares,
and (iii) any other securities issued in respect of the Shares, or the Common
Stock issued upon conversion of the Shares, upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend substantially 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, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF SUCH REGISTRATION OR AN
-2-
<PAGE> 55
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE 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 OFFICE
OF THE CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(i) or
the "no-action" letter referred to in Section 4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
initial public offering of the Company's Common Stock under the Securities Act.
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 (other than under circumstances described in
Sections 5, 6 and 8 hereof), 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 be accompanied (except for a transfer to a holder's
spouse, ancestors, descendants or a trust for any of their benefit, or in
transactions involving the distribution without consideration of Restricted
Securities by a holder to any of its partners or retired partners or to the
estate of any of its partners or retired partners) by either (i) a written
opinion of legal counsel to the holder 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 distribution 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 such holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear the
restrictive legend set forth in Section 3 above, except that such certificate
shall not bear such restrictive legend after the date of the Company's initial
public offering under the Securities Act if the opinion of counsel or
"no-action" letter referred to above expressly indicates that such legend is not
required in order to establish compliance with the Act or if such legend is no
longer required pursuant to Rule 144(k).
5. Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders a written request that the Company effect any registration
with respect to at least that
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number of Registrable Securities which would result in an aggregate offering of
at least $10,000,000, the Company will:
(i) promptly given written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration (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) 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 delivered to the
Company within fifteen (15) days after receipt of such written notice
from the Company; provided that the Company shall not be obligated to
effect, or to take any action to effect, any such registration 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; or
(B) After the Company has effected two (2) such
registrations pursuant to this Section 5(a) and such
registrations have been declared or ordered effective and the
sales of such Registrable Securities have closed; or
(C) Prior to the first to occur of three (3) years following
the date hereof and six (6) months following the closing of the
initial offering to the public of the Company's stock pursuant
to a firm commitment registered underwriting for the account of
the Company at an offering price of at least $4.60 per share (as
adjusted) and in which the aggregate gross proceeds received by
the Company exceed $10,000,000 (the "PUBLIC OFFERING").
Subject to the foregoing clauses (A), (B), and (C), the Company
shall file with the Commission a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable, after receipt
of the request or requests of the Initiating Holders; provided, however, that if
the Company shall furnish to such Holders 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 on or before the time
filing would be required and it is therefore essential to defer the filing of
such registration statement, the Company shall have the right to defer such
filing (but not more than once during any twelve (12) month period) for a period
of not more than one hundred twenty (120) days after receipt of the request of
the Initiating Holders.
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The registration statement filed pursuant to the request of the
Initiating Holders, may, subject to the provisions of Section 5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no right to include any of its securities in any such
registration except as provided in Section 5(b) below.
(b) Underwriting. If the Initiating 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, and the Company shall include such information in the written notice
referred to in Section 5(a)(i) above. 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 to the extent provided herein. A Holder may elect to include in
such underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company shall request inclusion
of securities of the Company other than Registrable Securities in any
registration pursuant to Section 5, or if holders of securities of the Company
who are entitled by contract with the Company to have securities included in
such a registration (such officers, directors, and other shareholders being
collectively referred to as the "OTHER SHAREHOLDERS") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters (the "UNDERWRITER") selected for such underwriting
by the Company and reasonably acceptable to the Initiating Holders.
Notwithstanding any other provision of this Section 5, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the Underwriter may (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the
registration and underwriting to not less than thirty percent (30%) of the
securities to be included in such offering. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following priority: first, among all Holders of
Registrable Securities (and pro rata among such holders on the basis of all
Registrable Securities then held by such holders) and second, among all Other
Shareholders in proportion, as nearly as practicable, to the amounts of
securities which they had requested to be included in such registration at the
time of filing the registration statement. If any Holder or Other Shareholder
disapproves of the terms of any such underwriting, such holder may elect to
withdraw therefrom by written notice to the Company and the Underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration. If the Underwriter has not limited the number
of Registrable Securities or other securities to be underwritten, the Company
may include its securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities and other
securities which would otherwise have been included in such registration and
underwriting will not thereby be limited.
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6. Company Registration.
(a) If the Company shall determine to register any of its
securities either for its own account or for the account of a security holder or
holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration, and in any underwriting
involved therein, all of the Registrable Securities specified in
a written request or requests made by any Holder within fifteen
(15) days after receipt of the written notice from the Company
described in clause (i) above, except as set forth in Section
6(b) below. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the Underwriter selected for underwriting by the Company.
Notwithstanding any other provision of this Section 6, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, and (a) if such registration is the first registered
offering of the Company's securities to the public, the Underwriter may (subject
to the allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto, and (b) if such registration is other than the
first registered offering of the sale of the Company's securities to the public,
the Underwriter may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the secondary portion of
the registration and underwriting to not less than thirty percent (30%) of the
securities included in such offering. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting by persons
other than the Company shall be allocated to Holders of Registrable Securities
and Other Shareholders in proportion, as nearly as practicable, to the amounts
of securities which they had requested to be included in such registration at
the time of filing the registration statement. If any Holder or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the Underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
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7. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by the holders of a majority of the
Registrable Securities held by the Initiating Holders requesting such
registration, the registration statement does not become effective, unless such
withdrawal is caused by a material adverse change in the business, operations or
prospects of the Company after such request for registration, or unless the
Initiating Holders agree to have such registration considered a registration
pursuant to Section 5(a)(ii)(B). If the Company is not required to pay any
Registration Expenses, then the Holders and Other Shareholders requesting
registration shall bear such Registration Expenses pro rata on the basis of the
number of their shares so included in the registration request, and such
registration shall not be considered a registration for purposes of Section
5(a)(ii)(B).
8. Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act within six (6) months
following the effective date of the first registration of any securities of the
Company for a registered public offering. After the Company has qualified for
the use of Form S-3, Initiating Holders shall have the right to request an
unlimited number of registrations on Form S-3 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the intended method of disposition of such shares by each such holder),
subject only to the following limitations:
(i) The Company shall not be obligated to cause a
registration on Form S-3 to become effective prior to one
hundred eighty (180) days following the effective date of a
Company-initiated registration (other than a registration
effected solely to qualify an employee benefit plan or to effect
a business combination pursuant to Rule 145), provided that the
Company shall use its best efforts to achieve such effectiveness
promptly following such one hundred eighty (180) day period;
(ii) The Company shall not be obligated to cause a
registration on Form S-3 to become effective prior to expiration
of one hundred eighty (180) days following the effective date of
the most recent registration pursuant to a request by Initiating
Holders under this Agreement; provided, however, that the
Company shall use its best efforts to achieve such effectiveness
promptly following such one hundred eighty (180) day period;
(iii) The Company shall not be required to effect a
registration pursuant to this Section 8 unless the Holder or
Holders requesting registration propose to dispose of shares of
Registrable Securities having an aggregate price to the public
(before deduction of underwriting discounts and expenses of
sale) of at least $1,000,000; and
(iv) The Company shall not be required to maintain and keep
any such registration on Form S-3 effective for a period
exceeding ninety (90) days from the effective date thereof. The
Company shall give notice to all Holders and all holders
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<PAGE> 60
of registration rights under any other agreement of the Company
granting Form S-3 or similar demand registration rights of the
receipt of a request for registration pursuant to this Section 8
and shall provide a reasonable opportunity for all such other
holders to participate in the registration. Subject to the
foregoing, the Company will use its best efforts to effect as
soon as practicable the registration of all shares of
Registrable Securities on Form S-3 to the extent requested by
the Holder or Holders thereof for purposes of disposition. In
the event the Underwriter determines that market factors require
a limitation on the number of shares to be underwritten, then
shares shall be excluded from such registration and underwriting
pursuant to the method described in Section 6(b).
9. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder
advised as to the initiation of such registration and as to the completion
thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of ninety (90)
days or until the Holder or Holders have completed the distribution described in
the registration statement relating thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions.
10. Indemnification.
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(a) The Company will indemnify and hold harmless each Holder,
each of its officers, directors and partners, and each person controlling such
Holder, if Registrable Securities held by such Holder are included in the
securities 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, against all claims, losses, damages and
liabilities (or actions in respect thereof), whether joint or several, arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement) 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 or alleged violation by the
Company of the Securities Act, the Exchange Act, any applicable state securities
law or any rule or regulation thereunder 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 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 and defending any
such claim, loss, damage, liability or action, as such expenses are incurred
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 alleged untrue statement) or omission (or alleged
omission) based upon information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities or other securities held by such Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify and hold harmless the Company, each of its directors,
officers and agents and 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 the Securities Act, and the rules and
regulations thereunder, each other such Holder and Other Shareholder and each of
their officers, directors and partners, and each person controlling such Holder
or Other Shareholder, against all claims, losses, damages and liabilities (or
actions in respect thereof), whether joint or several, 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, in light of the circumstances in which they were made, not misleading,
and will reimburse the Company and such Holders, Other Shareholders, directors,
officers, agents, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
of defending any such claim, loss, damage, liability or action, as such expenses
are incurred, 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 information furnished to the
Company by such Holder or Other Shareholder and stated to be specifically for
use therein. Notwithstanding the foregoing, no Holder shall be required to
indemnify the Company or its directors, officers, agents or underwriters if, in
the case of settlement of litigation, such settlement is effected without the
consent of the Holders of not less than a majority of the then outstanding
Registrable Securities. In no event shall the liability of a Holder or Other
Shareholder for indemnification under this Section 10 exceed
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<PAGE> 62
the proceeds received by such Holder or Other Shareholder in the offering of the
Registrable Securities.
(c) Each party entitled to indemnification under this Section 10
(the "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 any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be 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
the Indemnifying Party is prejudiced thereby, and provided further, however,
that an indemnified party (together with all other indemnified parties) shall
have the right to retain one separate counsel, with the reasonable fees and
expenses of such counsel to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in such
proceeding. No Indemnifying Party in the defense of any such claim or litigation
shall, except with the 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. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 10 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
herein, 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. 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.
(e) Notwithstanding the foregoing provisions of this Section 10,
to the extent that any provision contained in the underwriting agreement entered
into in connection with the underwritten public offering related to any such
claim for indemnification or contribution are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.
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(f) The obligations of the Company and the Holders under this
Section 10 shall survive the completion of any offering of Registrable
Securities pursuant to this Agreement, and otherwise.
11. Information by Holder. Each Holder and each Other Shareholder
holding securities included in any registration shall furnish to the Company
such information regarding such Holder or Other Shareholder as the Company may
reasonably request and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
12. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least a majority of the then outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company giving such holder or prospective holder any
registration rights the terms of which are equal to or more favorable than the
registration rights granted to Holders hereunder or which would cause a
reduction in the amount of Registrable Securities of the Holders that would be
registrable in a registration statement contemplated by this Agreement or to
require the Company to effect a registration earlier than the date on which
Holders can first require a registration under Section 5(a).
13. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration or pursuant to a
registration statement on Form S-3, 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 from
and after ninety (90) days following 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 best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(c) So long as a Shareholder owns any Restricted Securities,
furnish to the Shareholder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety (90) days following 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 Exchange Act (at any time
after it has become subject to such reporting requirements).
14. No-Action Letter or Opinion of Counsel in Lieu of Registration.
Notwithstanding anything in this Agreement to the contrary, if at any time after
the date of the Company's initial public offering of its securities under the
Securities Act the Company shall have obtained from the Commission a "no-action"
letter in which the Commission has indicated that it will take no action if,
without registration under the Securities Act, any Holder disposes of
Registrable Securities covered by any request for registration made under this
Agreement in the manner in which such Holder proposes to dispose of the
Registrable Securities included in such request, or if in the opinion of
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counsel for the Company concurred in by counsel for such Holder no registration
under the Securities Act is required in connection with such disposition, the
Registrable Securities included in such request shall not be eligible for
registration under this Agreement; provided, however, with respect to any Holder
who may deemed to be an "affiliate," as that term is defined under Rule 144, if,
notwithstanding the opinion of such counsel, the Holder is unable to dispose of
all of the Registrable Securities included in his request in the manner in which
such Holder so proposes without registration, the Registrable Securities
included in such request shall be eligible for registration under this
Agreement.
15. Transfer or Assignment of Registration Rights. The rights to cause
the Company to register Shareholder's securities granted to Shareholder by the
Company under Sections 5, 6 and 8 hereof may be transferred or assigned by
Shareholder to a transferee or assignee of any of the Restricted Securities,
provided that the Company is given written notice by Shareholder at the time of
said transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights is not deemed by the Board of Directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided further that the transferee or assignee of such rights assumes the
obligations of a Shareholder under this Agreement.
16. "Market Stand-off" Agreement. Each Shareholder agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by such Shareholder during a period of time determined by the
Company and its underwriters (not to exceed 180 days) following the effective
date of the registration statement of the Company filed under the Securities Act
with respect to the Company's initial public offering, provided that all
executive officers and directors of the Company who then hold Common Stock (or
other securities) of the Company enter into similar agreements and that the
Company shall use all reasonable efforts to cause all holders of five percent
(5%) or more of the Company's then outstanding Common Stock to enter into
similar agreements. Such agreement shall be in writing in a form satisfactory to
the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the Shares (or securities) subject to the foregoing
restriction until the end of said period.
17. Right of First Refusal.
(a) New Issuances. The Company hereby grants to the Shareholders
the right of first refusal (the "RIGHT OF FIRST REFUSAL") 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 right of first refusal, is the ratio of (X) the sum of the
number of shares of Common Stock then owned by such Shareholder and the number
of shares of Common Stock issuable upon the conversion of the Shares then owned
by such Shareholder, to (Y) the sum of the total number of shares of Common
Stock then outstanding and the total number of shares of Common Stock issuable
upon the conversion or exercise of the total number of shares or options to
purchase shares then outstanding or reserved for issuance. This right of first
refusal shall be subject to the following provisions:
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(i) "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:
(A) shares of Common Stock issuable upon conversion
of the Shares;
(B) securities of the Company issued pursuant to the
bonafide acquisition of a business by the Company by merger, purchase of assets,
or other acquisition or reorganization approved by the Board of Directors;
(C) securities of the Company issued in connection
with equipment lease financing transactions or bank financing transactions
approved by the Board of Directors, including the affirmative vote or consent of
each of the directors elected by the holders of the Company's Series A Preferred
Stock pursuant to Article III, Section 3 of the Company=s Restated Articles of
Incorporation;
(D) shares of Common Stock, or options to purchase
shares of Common Stock, issued or granted to officers, directors, employees and
consultants of the Company pursuant to stock plans and option plans or other
arrangements approved by the Board of Directors, including the affirmative vote
or consent of each of the directors elected by the holders of the Company's
Series A Preferred Stock pursuant to Article III, Section 3 of the Company=s
Restated Articles of Incorporation;
(E) shares of Common Stock or Preferred Stock issued
in connection with any stock split, stock dividend, or recapitalization by the
Company.
(ii) In the event that the Company proposes to undertake
an issuance of New Securities, it shall give each Shareholder written notice of
its intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Shareholder shall
have twenty (20) 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.
(iii) In the event that the Shareholders fail to exercise
in full the right of first refusal within the twenty (20) day period specified
above, the Company shall have one hundred twenty (120) 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 sixty (60) days from the date of said
agreement) the New Securities respecting which the rights of the Shareholders
were not exercised at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold the New Securities within such one hundred twenty (120) day period (or sold
and issued New Securities in accordance with the foregoing within sixty (60)
days from the date of such agreement) the Company shall not thereafter issue or
sell any New
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<PAGE> 66
Securities, without first offering such New Securities to the Shareholders in
the manner provided above.
(iv) The Right of First Refusal granted under this Section
17 shall expire immediately prior to the Public Offering.
(v) This Right of First Refusal is nonassignable except to
any transferee to whom registration rights may be transferred pursuant to
Section 15 of this Agreement.
(vi) This Right of First Refusal shall terminate as to any
Shareholder (or any transferee or assignee of such Shareholder) at such time as
such Shareholder ceases to own any Shares or Common Stock issuable upon
conversion of the Shares.
18. Termination of Rights. The provisions of this Agreement shall
terminate upon the first to occur of (a) the fifth (5th) anniversary of the
closing date of the Public Offering; and (b) as to any Holder on the date on
which all Shares and shares of Common Stock issued or issuable upon conversion
of the Shares held by such Holder may be sold pursuant to Rule 144, provided
that such Shares represent less than one percent (1%) of the Company's then
outstanding equity securities.
19. Governing Law. This Agreement and the legal relations between the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
20. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties regarding rights to registration.
Except as otherwise expressly provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
21. Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger or by overnight
courier service, addressed (a) if to a Shareholder, at the address set forth on
Exhibit A attached hereto, or at such other address as the Shareholder shall
have furnished to the other parties hereto in writing, or (b) if to any other
holder of any securities, at such address as such holder shall have furnished
the other parties hereto 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
Shares who has so furnished an address to the Company, or (c) if to the Company,
at the address of its principal offices set forth on the signature page of this
Agreement, or at such other address as the Company shall have furnished to the
other parties hereto in writing.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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<PAGE> 67
23. Amendments. Any provision of this Agreement may be amended, waived
or modified upon the written consent of the Company and the Shareholders (or
their assignees to whom Shareholders have expressly assigned their rights in
compliance with Section 15 hereof) who then hold at least seventy percent (70%)
of the Registrable Securities then held by persons entitled to registration
rights hereunder, provided further, any such amendment, waiver or modification
applies by its terms to each applicable Shareholder and each such assignee and,
provided further, that a Shareholder or such assignee hereunder may waive any of
such Holder's rights or the Company's obligations hereunder without obtaining
the consent of any other Shareholder or assignee.
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<PAGE> 68
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
INTELLIGENT SYSTEMS FOR RETAIL, INC.
By: /S/ LOUIS H. BORDERS
--------------------------------------
Louis H. Borders, President
Address: 1241 E. Hillsdale Blvd., Suite 210
Forest City, CA 94404
SHAREHOLDERS
BENCHMARK CAPITAL PARTNERS, L.P.
BENCHMARK FOUNDERS' FUND, L.P.
By: Benchmark Capital Management Co. LLC
By: /S/ DAVID M. BEIRNE
--------------------------------------
Managing Partner
Address: 2480 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attn: David M. Beirne
SEQUOIA CAPITAL VII, a California Limited Partnership
SEQUIOIA TECHNOLOGY PARTNERS VII , a California
Limited Partnership
SQP 1997
SEQUOIA 1997 LLC
SEQUOIA INTERNATIONAL PARTNERS
By: SC VII-A Management, LLC,
a California Limited Liability Company,
its General Partner
By: /S/ MICHAEL J. MORITZ
--------------------------------------
Managing Partner
Address: 3000 Sand Hill Road. Bldg. 4, Suite 280
Menlo Park, California 94025
Attn: Michael J. Moritz
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<PAGE> 69
LOUIS H. BORDERS AMENDED AND RESTATED REVOCABLE
TRUST DATED DECEMBER 4, 1987
By: /S/ LOUIS H. BORDERS
---------------------------------------
Louis H. Borders, Trustee
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Louis H. Borders
SR GRAT I
By: /S/ ANDREW MARTZLOFF
-------------------------------
Andrew Martzloff
Address: 435 Tasso Street, Suite 300
Palo Alto, California 94301
Attn: Andrew Martzloff
STANFORD UNIVERSITY
By: /S/ CAROL GILMER
--------------------------------
GIFT ADMINISTRATOR,
Title: STANFORD MANAGEMENT CO.
------------------------------
Address: 2770 Sand Hill Road
Menlo Park, California 94025
Attn: Carol Gilmer
WS INVESTMENT COMPANY 97B
By: /S/ JEFFREY D. SAPER
----------------------------------------------
Jeffrey D. Saper, Partner
Address: 650 Page Mill Road
Palo Alto, California 94304
Attn: Jim Terranova
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<PAGE> 70
/S/ JEFFREY D. SAPER
-------------------------------------------
JEFFREY D. SAPER
Address: 650 Page Mill Road
Palo Alto, California 94304
/S/ ERIC GREENBERG
-------------------------------------------
ERIC GREENBERG
Address: 42 Casa Way
San Francisco, California94123
/S/ J. ROBERT SUFFOLETTA
-------------------------------------------
J. ROBERT SUFFOLETTA
Address: 650 Page Mill Road
Palo Alto, California 94304
-18-
<PAGE> 1
EXHIBIT 10.1
WEBVAN GROUP, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is made as of this <<Date>>
by and between Webvan Group, Inc., a California corporation (the "COMPANY"), and
<<Name>> ("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.
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 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 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, had no reasonable cause to believe Indemnitee's conduct
was unlawful. The termination of any action 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 (i) 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, or (ii) with respect to any
criminal action or proceeding, Indemnitee 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 proceeding 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
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<PAGE> 2
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, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action 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 its shareholders, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudicated by court orders or judgment to be liable to the Company in
the performance of Indemnitee's duty to the Company and its shareholders unless
and only to the extent that the court in which such action or proceeding is or
was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for expenses and then only to the extent that the court shall
determine.
2. 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 or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding). Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
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
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 his 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 is or will 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). Notice
shall be deemed received three (3) business days after the date postmarked if
sent by domestic certified or registered mail, properly addressed; otherwise
notice shall be deemed received when such notice shall actually be received by
the Company. 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 2 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee (or at such earlier time as
is provided in the applicable section). If a claim under this Agreement, under
any statute, or under any provision of the Company's Articles of Incorporation
or Bylaws providing for indemnification, is not paid in full by the Company
within the time allowed, 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 12 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 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 2(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, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) 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
-2-
<PAGE> 3
an actual determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) 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.
(d) Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be reasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. Notwithstanding the foregoing, the Company
shall not be permitted to settle any action or claim on behalf of Indemnitee in
any manner which would require any acknowledgment of wrongdoing on the part of
Indemnitee without Indemnitee's written consent, which consent shall not be
unreasonably withheld. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(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 Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute or rule which
expands the right of a California corporation to indemnify a member of its Board
of Directors, an officer or other corporate agent, such changes shall be ipso
facto, within the preview 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 California corporation to indemnify a
member of its Board of Directors, an officer or other corporate agent, 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 Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested Directors, the Corporation
Law of the State of California, 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 such capacity at the time of
any action, suit or other covered proceeding.
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<PAGE> 4
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
6. 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
subsidiary or parent of the Company.
7. 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 Section 7. 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.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or
omissions or transactions from which a director may not be relieved of liability
under the California General Corporation Law.
(b) 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 or otherwise as required under
Section 317 of the California Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit.
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<PAGE> 5
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the 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 the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(d) 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), but
such exception shall only apply to the extent such expenses or liabilities have
been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company, provided
that such limitation shall not apply to any expenses incurred by Indemnitee
which except for this paragraph would be paid hereunder and which remain
outstanding after all payments are received from an insurance company.
(e) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and 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.
9. 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 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.
10. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original.
11. 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.
12. 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 costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the 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
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<PAGE> 6
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 costs and expenses, including reasonable 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.
13. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic 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.
14. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
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 California.
15. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
16. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable to
corporation effectively to bring suit to enforce such rights.
17. CONTINUATION OF INDEMNIFICATION. All agreements and obligations of
the Company contained herein shall continue during the period that Indemnitee is
a director, officer or agent of the Company and shall continue thereafter so
long as Indemnitee shall be subject to any possible claim or threatened, pending
or completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Indemnitee was
serving in the capacity referred to herein.
18. AMENDMENT AND TERMINATION. Subject to Section 17, no amendment,
modification, termination or cancellation of this Agreement shall be effective
unless in writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WEBVAN GROUP, INC.
By:
----------------------------------------
Title:
-------------------------------------
Address: 1241 E. Hillsdale Blvd., Suite
210
Foster City, CA 94404-1214
AGREED TO AND ACCEPTED:
- --------------------------
(Name)
Address:
------------------------------
------------------------------
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<PAGE> 1
EXHIBIT 10.4
LEASE AGREEMENT
(NNN)
BASIC LEASE INFORMATION
LEASE DATE: April 1, 1998
LANDLORD: LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
LANDLORD'S ADDRESS: c/o LPC MS, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
TENANT: Intelligent Systems for Retail, Inc.,
a California corporation, dba ISR
TENANT'S ADDRESS: 1241 E. Hillsdale Boulevard, Suite 210
Foster City, California 94404
PREMISES: An approximately 336,680 rentable square foot
Building and the Lot as shown on Exhibit A
hereto
PREMISES ADDRESS: 5800 Coliseum Way
Oakland, California 94621
BUILDING: Approximately 336,680 rentable square feet
LOT (BUILDING'S TAX PARCEL): APNs 34-2342-5-7, 34-2342-8-2 and 34-2342-5-5
EARLY OCCUPANCY DATE: June 1, 1998
TERM: August 1, 1998 ("Commencement Date"), through
July 31, 2008 ("Expiration Date")
BASE RENT (PARAGRAPH 3): One hundred one thousand four and 00/100
Dollars ($101,004.00) per month, subject to
increase for any Amortized Excess TI Costs in
accordance with the provisions of Exhibit B
hereto
ADJUSTMENTS TO BASE RENT: Commencing August 1, 1999, the monthly Base
Rent shall increase to $104,370.80, subject to
increase for any Amortized Excess TI Costs in
accordance with the provisions of Exhibit B
hereto Commencing February 1, 2001, the
monthly Base Rent shall increase to
$111,104.40, subject to increase for any
Amortized Excess TI Costs in accordance with
the provisions of Exhibit B hereto
Commencing August 1, 2003, the monthly Base
Rent shall increase to $121,204.80, subject to
increase for any Amortized Excess TI Costs in
accordance with the provisions of Exhibit B
hereto
Commencing February 1, 2006, the monthly Base
Rent shall increase to
<PAGE> 2
$134,672.00, subject to increase for any
Amortized Excess TI Costs in accordance with
the provisions of Exhibit B hereto
LETTER OF CREDIT (PARAGRAPH 4): Letter of Credit in the amount of Nine Hundred
Fifty Thousand and 00/100 Dollars
($950,000.00) as set forth in Section 4 hereof
and Exhibit I hereto
DAMAGE DEPOSIT (PARAGRAPH 5): Fifty Thousand Dollars ($50,000.00)
*TENANT'S OPERATING
EXPENSES (PARAGRAPH 7.1): 100% of the Building
*TENANT'S TAX EXPENSES
(PARAGRAPH 7.2): 100% of the Building
*TENANT'S UTILITY EXPENSES
(PARAGRAPH 8): 100% of the Building
*The amount of Tenant's Share of the expenses as referenced above shall be
subject to modification as set forth in this Lease.
PERMITTED USES (PARAGRAPH 10): The Premises shall be used for offices,
central commissary (food
preparation/processing center, including
preparation/processing center, including but
not limited to kitchen facilities, baking,
cooking, meat and seafood cutting and produce
preparation), general warehousing, both
ambient and cold storage, and sale and
distribution at retail and/or wholesale of any
and all consumer goods and products, including
but not limited to, foods, beverages and other
groceries, prepackaged alcohol (for
off-premises consumption only), house and
garden supplies, books, music, software,
health and beauty aids, cleaning and
janitorial supplies, office supplies and
equipment, medical supplies and
pharmaceuticals, clothing and fashion, sports
and hobbies, pet food and supplies, toys,
hardware and tools, jewelry, collectibles,
electronic equipment, appliances, computers
and other general retail merchandise;
provided, however, that such uses are
permitted by the City of Oakland and all other
governmental agencies having jurisdiction
thereof.
BROKER (PARAGRAPH 39): Christopher Jacobs, Duane Fitch and Douglas
Norton of CB Commercial for Tenant Duane Fitch
and Larry Jones of CB Commercial and LPC MS,
Inc. for Landlord
<PAGE> 3
EXHIBITS: Exhibit A - Premises, Building and Lot
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - Covenants, Conditions and Restrictions
(Intentionally Omitted)
Exhibit E - Hazardous Materials Disclosure
Certificate - Example
Exhibit F - Change of Commencement Date - Example
Exhibit G - Tenant's Initial Hazardous Materials
Disclosure Certificate
Exhibit H - Sign Criteria (Intentionally Omitted)
Exhibit I - Letter of Credit
Exhibit J - Subordination, Non-disturbance and
Attornment Agreement
Exhibit K - Landlord's Waiver and Agreement
Exhibit L - Tenant's Initial Alterations
Exhibit M - Assignment and Assumption Agreement
ADDENDA: Addendum 1: Option to Extend the Term
Addendum 2: Agreement to Install Satellite Antenna
Receiving Dish
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. PREMISES 4
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES 4
3. RENT 5
4. LETTER OF CREDIT 6
5. DAMAGE DEPOSIT 7
6. TENANT IMPROVEMENTS 7
7. ADDITIONAL RENT 7
8. UTILITIES 10
9. LATE CHARGES 10
10. USE OF PREMISES 10
11. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES 12
12. REPAIRS AND MAINTENANCE 13
13. INSURANCE 14
14. WAIVER OF SUBROGATION 17
15. LIMITATION OF LIABILITY AND INDEMNITY 16
16. ASSIGNMENT AND SUBLEASING 16
17. AD VALOREM TAXES 19
18. SUBORDINATION 19
19. RIGHT OF ENTRY 20
20. ESTOPPEL CERTIFICATE 20
21. TENANT'S DEFAULT 20
22. REMEDIES FOR TENANT'S DEFAULT 21
23. HOLDING OVER 22
24. LANDLORD'S DEFAULT 22
25. PARKING 23
26. SALE OF PREMISES 23
27. WAIVER 23
28. CASUALTY DAMAGE 23
29. CONDEMNATION 24
30. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS 24
31. FINANCIAL STATEMENTS 26
32. GENERAL PROVISIONS 27
33. SIGNS 28
34. MORTGAGEE PROTECTION 28
35. QUITCLAIM 29
36. INTENTIONALLY OMITTED 29
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
37. WARRANTIES OF TENANT 29
38. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT 29
39. BROKERAGE COMMISSION 29
40. QUIET ENJOYMENT 30
41. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS 30
42. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS 30
43. TENANT EQUIPMENT FINANCING 31
44. TENANT'S SATELLITE DISH 31
</TABLE>
<PAGE> 6
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date set forth on Page
1. The Basic Lease Information set forth on Pages 1 and 2 hereof and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Landlord hereby leases the Premises to Tenant upon the terms and
conditions contained herein. For purposes of this Lease the term "Premises"
shall mean and refer to the entirety of the Building and the Lot. For purposes
of this Lease the term "Lot" shall mean and refer to those portions of the
Premises exclusive of the Building and shall include, but not be limited to,
parking areas, access and perimeter roads, sidewalks, rail spurs, landscaped
areas and similar areas and facilities. Landlord and Tenant hereby agree that
for purposes of this Lease, as of the Lease Date, the rentable square footage
area of the Premises (i.e. the Building and the Lot) shall be deemed to be the
number of rentable square feet as set forth in the Basic Lease Information on
Page 1 hereof. Tenant further acknowledges that the number of rentable square
feet of the Building and/or the Lot may subsequently change after the Lease Date
commensurate with any actual physical modifications to any of the foregoing
resulting from a casualty or condemnation, subject, however, to the provisions
of Sections 28 and 29 hereof.
2. ADJUSTMENT OF EARLY OCCUPANCY DATE AND COMMENCEMENT DATE; AND CONDITION OF
THE PREMISES:
2.1 If Landlord cannot deliver to Tenant possession of the Premises (in
the condition that exists on the day after the previous occupants--Caliber
Logistics, Inc., The Glidden Company, and The Glidden Company's subtenant, Santa
Clara Warehouse, Inc.--vacate the Building) without any improvements,
alterations, repairs, refurbishment or other modifications being made thereto on
the Early Occupancy Date, Landlord shall not be subject to any liability nor
shall the validity of this Lease be affected; provided, the Early Occupancy Date
and the Commencement Date shall be extended commensurately by the period of time
Landlord is delayed in so delivering to Tenant possession of the Premises
without any improvements, alterations, repairs, refurbishment or other
modifications being made thereto. In the event the actual Early Occupancy Date,
the actual Commencement Date and/or the actual Expiration Date of this Lease is
other than the Early Occupancy Date, Commencement Date and/or Expiration Date
specified in the Basic Lease Information, as the case may be, Landlord and
Tenant shall execute a written amendment to this Lease, substantially in the
form of Exhibit F hereto, wherein the parties shall specify the actual Early
Occupancy Date, Commencement Date, Expiration Date and the date on which Tenant
is to commence paying Base Rent, Additional Rent and all other sums payable by
Tenant hereunder. It is the parties' intention that (i) the Early Occupancy Date
of this Lease shall be the date specified in the Basic Lease Information, June
1, 1998, (ii) any delays in Landlord commencing and/or completing any of the
Landlord Work (defined below) shall not affect nor otherwise extend the Early
Occupancy Date of June 1, 1998, (iii) Tenant commencing and/or completing the
Tenant Improvements shall not affect nor otherwise extend the Early Occupancy
Date of June 1, 1998, and (iv) Tenant shall be solely and wholly responsible for
the construction and substantial completion of the Tenant Improvements. If the
Early Occupancy Date is extended beyond June 1, 1998, the Commencement Date and
Expiration Date of this Lease shall be extended commensurately by the same time
period. The word "Term" whenever used herein refers to the initial term of this
Lease and any extension thereof. By taking possession of the Premises without
any improvements, alterations, repairs, refurbishment or other modifications
being made thereto, Tenant shall be deemed to have accepted the Premises in good
condition and state of repair except for the Landlord Work (defined below).
Tenant hereby acknowledges and agrees that neither Landlord nor Landlord's
agents or representatives has made any representations or warranties as to the
suitability, safety or fitness of the Premises for the conduct of Tenant's
business, Tenant's intended use of the Premises or for any other purpose.
2.2 If Landlord cannot deliver to Tenant possession of the Premises on
or before October 1, 1998 [in the condition that exists on the date after the
previous occupants (as set forth in Section 2.1 above)
<PAGE> 7
vacate the Building without any improvements, alterations, repairs,
refurbishment or other modifications being made thereto], then either Landlord
or Tenant may terminate this Lease by delivering thirty days' prior written
notice, if at all, to the other party. The effective date of any such
termination shall in no event be prior to November 1, 1998.
2.3 LANDLORD WORK: As soon as possible after all of the Existing
Occupants have vacated the Premises and delivered to Landlord possession
thereof, Landlord, during the Early Occupancy Period, shall cause the following
work to be performed in and about the Premises (collectively, the "Landlord
Work"): (i) cause the Premises to be in broom-clean condition; (ii) cause the
following described components of the Building to be placed in good working
order: (a) roof and building structure; (b) roof membrane; (c) windows; (d)
skylights; (e) interior and exterior lighting; (f) electrical systems; and (g)
plumbing systems; and (iii) repaint the Building stripe on the exterior of the
Building, and reseal and stripe the parking lot. Tenant shall notify Landlord,
in writing, within thirty (30) days following the actual Early Occupancy Date of
any items specified in clause (ii) above that is not in good working order (the
"Tenant Defect Notice"), and Landlord shall correct any such deficiencies or
defects of such items and place same in good working order within forty-five
(45) days after Landlord's receipt of the Tenant Defect Notice or within such
longer period of time as is necessary to correct any such deficiencies or
defects, so long as Landlord has commenced such repair within fifteen (15) days
of Tenant's Defect Notice and thereafter diligently prosecutes such repair to
completion. The costs and expenses incurred by Landlord to perform the work
described in clause (iii) above shall be included in the 1998 Operating Expenses
for the Premises. Tenant's employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall use their good faith and best efforts to
cooperate, work in harmony and not, in any manner, interfere with Landlord or
Landlord's agents or representatives in performing the Landlord Work.
3. EARLY OCCUPANCY PERIOD AND RENT:
3.1 EARLY OCCUPANCY PERIOD: During the period commencing on the actual
Early Occupancy Date and ending on the date which is sixty (60) days thereafter
(the "Early Occupancy Period"), Tenant shall be permitted to use and occupy the
Premises, however, any such use and occupancy by Tenant shall be at Tenant's
sole risk and subject to all of the provisions of this Lease except as otherwise
expressly set forth herein. During the Early Occupancy Period Tenant shall only
use the Premises for purposes of (i) planning, installing and constructing the
Tenant Improvements in the Premises, and (ii) installing in the Premises
Tenant's equipment (including telephone, telecommunications and data lines),
furnishings and fixtures to make the Premises ready for Tenant's use and
occupancy to conduct its operations therein. Except for the requirement that
Tenant pay for all utilities and Utility Expenses to the extent incurred during
the Early Occupancy Period, Tenant shall otherwise commence paying Rent (defined
below) on the actual Commencement Date regardless of whether or not the
planning, design and/or construction of the Tenant Improvements are commenced or
completed. Tenant shall be solely responsible for the security of its property
or equipment or that of its contractors or agents, stored in the Premises during
the Early Occupancy Period. In consideration for Landlord permitting Tenant to
use and occupy the Premises during the Early Occupancy Period, Tenant shall
indemnify, defend (with counsel reasonably acceptable to Landlord) and hold the
Indemnitees (defined in Section 15 below) harmless from and against any and all
claims, damages, liabilities, liens, losses, actions, judgments, costs and
expenses (including without limitation, attorneys' fees and costs) arising from
Tenant's and any of Tenant's Representatives' use and occupancy of any portion
of the Premises during the Early Occupancy Period, or from any activity
permitted or suffered by Tenant or any of Tenant's Representatives in or about
the Premises during the Early Occupancy Period, or any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease during the Early Occupancy Period, or arising from any intentional
or negligent act or omission of Tenant or any of Tenant's Representatives during
the Early Occupancy Period; provided, however, the foregoing indemnity shall not
include claims, damages, liabilities, liens, losses, actions, judgments, costs
and expenses (including without limitation, attorneys' fees and costs) for
damage or injury to the extent caused by the sole and active negligence or
willful misconduct of Landlord and its designated agents or employees, unless
covered by insurance Tenant is required by this Lease to maintain. During the
Early Occupancy Period, Landlord shall not be liable for any claims, damages
(including, but not limited to, consequential damages) or losses of any nature
incurred or suffered
<PAGE> 8
by Tenant or any of Tenant's Representatives, or any other person in or about
the Premises, arising from or in connection with this Lease or the use of the
Premises (including any claims, damages or losses arising from any act or
neglect of any other persons including construction workers hired by Landlord),
except to the extent such claims, damages or losses arise solely from the sole
and active negligence or willful misconduct of Landlord (provided, however, in
no event shall Landlord be liable for any consequential damages).
3.2 RENT: On the date that Tenant executes this Lease, Tenant shall
deliver to Landlord the original executed Lease, the sum of $121,854.57, which
amount equals the Base Rent, the estimated Operating Expenses and Early
Occupancy Rent for the first month of the Term of the Lease (the "Advanced
Rent") (which Advanced Rent shall be applied against the Rent payable for the
first month Tenant is required to pay Base Rent), the Letter of Credit (defined
below) and all insurance certificates evidencing the insurance required to be
obtained by Tenant under Section 13 of this Lease and under the provisions of
Exhibit B hereto. Tenant agrees to pay Landlord, without prior notice or demand,
or abatement, offset, deduction or claim (except as otherwise set forth in
Section 28 hereof), the Base Rent specified in the Basic Lease Information
(including any Amortized Excess TI Costs) and the Early Occupancy Rent (defined
below), payable in advance at Landlord's address specified in the Basic Lease
Information on the actual Commencement Date and thereafter on the first (1st)
day of each month throughout the balance of the Term of this Lease after first
giving Tenant credit for the Advanced Rent. In addition to the Base Rent set
forth in the Basic Lease Information (including any Amortized Excess TI Costs)
and the Early Occupancy Rent (defined below), Tenant shall pay Landlord in
advance on the actual Commencement Date and thereafter on the first (1st) day of
each month throughout the balance of the Term of this Lease, as Additional Rent,
the Administrative Expenses, Operating Expenses and Tax Expenses, after first
giving Tenant credit for the Advanced Rent. The term "Rent" whenever used herein
refers to the aggregate of all these amounts. The Rent for any fractional part
of a calendar month at the commencement or termination of the Lease term shall
be a prorated amount of the Rent for a full calendar month based upon a thirty
(30) day month. The prorated Rent for the last calendar month of the Term of
this Lease shall be paid on the first day of the calendar month in which the
date of termination or expiration occurs.
3.3 EARLY OCCUPANCY RENT: In addition to the monthly Base Rent
specified in the Basic Lease Information (including any Amortized Excess TI
Costs), and as part of the "Rent" payable by Tenant hereunder in accordance with
the provisions of Section 3.2 above, Tenant shall pay to Landlord, as Additional
Rent, the amount of $2,535.18 (the "Early Occupancy Rent") monthly on the first
(1st) day of each month of the first sixty (60) months only of the initial term
of this Lease. The monthly amount of the Early Occupancy Rent equals the
amortization (at the annual interest rate of ten percent (10%) for a 60-month
period) of one month's Base Rent of $101,004.00 plus one month's estimated
Operating Expenses, Tax Expenses and Administrative Expenses of $18,315.39.
4. LETTER OF CREDIT:
4.1 Upon Tenant's executing this Lease, Tenant shall deliver to
Landlord for the full and faithful performance by Tenant of its obligations
under this Lease, an irrevocable and unconditional negotiable standby Letter of
Credit in exactly the form and containing the terms as set forth in the form of
letter of credit attached hereto as Exhibit I (the "Letter of Credit") issued by
Wells Fargo Bank ("Issuer"), a solvent bank under the supervision of the
Superintendent of Banks of the State of California or a National Banking
Association, payable in Foster City, California, and made in favor of Landlord,
as the beneficiary thereof. The Letter of Credit shall be in a face amount equal
to Nine Hundred Fifty Thousand and 00/100 U.S. Dollars ($950,000.00) and,
subject to the provisions of this Section 4, the expiration date shall be
September 1, 2008 (the "L/C Expiration Date"). The face amount of the Letter of
Credit shall decline by $110,000.00 (less the amount of any draw or draws made
in the preceding calendar year) each year commencing at the end of the third
(3rd) year of the Term of this Lease. Therefore, the face amount of the Letter
of Credit shall decline to $180,000.00 at the end of the ninth (9th) year of the
Term of this Lease and shall remain in this amount until the L/C Expiration
Date, or any extension pursuant to Addendum 1 hereto.
<PAGE> 9
4.2 Notwithstanding the foregoing, the face amount of the Letter of
Credit shall be reduced as follows: if at any time following the second (2nd)
year of the Term of this Lease, Tenant's net worth exceeds Thirty-Five Million
Dollars ($35,000,000.00) AND Tenant's net income exceeds Eight Million Dollars
($8,000,000.00) (both as reported in Tenant's audited annual financial
statements as prepared by a certified public accountant), then the face amount
of the Letter of Credit shall decline to Four Hundred Fifty Thousand Dollars
($450,000.00). Furthermore, if Tenant's net worth AND net income meet the
above-stated criteria for a second consecutive year of the Term of this Lease,
then the face amount of the Letter of Credit shall further decline to One
Hundred Eighty Thousand Dollars ($180,000.00), which face amount shall remain
for the duration of the Term of this Lease until the L/C Expiration Date.
Notwithstanding the foregoing, if Tenant's financial condition does not meet the
above-stated criteria for the second of the two (2) consecutive years but
Tenant's financial condition meets the above-stated criteria in any two (2)
subsequent and consecutive years of the Term of this Lease, then at that time
the face amount of the Letter of Credit shall decline to One Hundred Eighty
Thousand Dollars ($180,000.00), which face amount shall remain for the duration
of the Term of this Lease until the L/C Expiration Date, or any extension
pursuant to Addendum 1 hereto.
4.3 The Letter of Credit shall be (a) at sight and irrevocable and (b)
subject to the Uniform Customs and Practices for Documentary Credits (1993-Rev)
International Chamber of Commerce Publication #500. Tenant hereby acknowledges
and agrees that Landlord is entering into this Lease in material reliance upon
the ability of Landlord to draw upon the Letter of Credit upon the occurrence of
any default on the part of Tenant hereunder which continues beyond any
applicable notice and cure periods. Tenant further acknowledges and agrees that
if Landlord cannot draw upon the Letter of Credit within the times and in the
manner as anticipated by Landlord herein, Landlord shall suffer irreparable
damage, harm and injury. From time to time during the Term of this Lease,
including, but not limited to, the event whereby Tenant meets certain financial
condition criterion as set forth in Section 4.2 hereinabove, it is anticipated
by the parties that the Letter of Credit will need to be amended and modified.
Landlord and Tenant hereby covenant and agree to cooperate with one another to
promptly effectuate any such amendments and modifications, including without
limitation, executing and submitting to the Issuer any and all documents or
instruments as may be reasonably required to effectuate same. The L/C Expiration
Date is intended by the parties to be the date which is one hundred twenty-one
(121) months after the actual Commencement Date of this Lease. When the parties
actually know the actual Commencement Date of this Lease, and if the actual
Commencement Date is not August 1, 1998, the parties will execute and submit to
the Issuer such further applications, documents and instruments as may be
necessary to cause the L/C Expiration Date to be the date which is one hundred
twenty-one (121) months after the actual Commencement Date of this Lease. In
addition to the foregoing, each and every time during the Term of this Lease
there is a change in the identity or address of the parties, including without
limitation, any change in the identity of Landlord due to the sale, transfer or
other conveyance by Landlord of its rights and interests in, to and under this
Lease to any other party, person or entity, the Letter of Credit shall
immediately be amended to reflect such changes and the parties hereby agree to
execute and submit to the Issuer such further applications, documents and
instruments as may be necessary to effectuate same. It is the intention of the
parties that each and every successor and assign of both Landlord and Tenant be
bound by and subject to the terms and provisions of this Section 4. Landlord
may, at any time and without notice to Tenant and without first obtaining
Tenant's consent thereto, assign all or any portion of its interest in and to
the Letter of Credit to another party, person or entity, regardless of whether
or not such assignment is separate from or as a part of the assignment by
Landlord of its rights and interests in and to this Lease. Tenant further
covenants and warrants that it will neither assign nor encumber the Letter of
Credit or any part thereof and that neither Landlord nor its successors or
assigns will be bound by any such assignment, encumbrance, attempted assignment
or attempted encumbrance. In no event or circumstance shall Tenant have the
right to any use of the Letter of Credit and, specifically, Tenant may not use
the Letter of Credit as a credit or to otherwise offset any payments required
hereunder, including, but not limited to, Rent or any portion thereof. In the
event Landlord shall not have drawn on the Letter of Credit as provided in this
Section 4, Landlord covenants and agrees to return to Tenant the original Letter
of Credit within thirty-one (31) days following the expiration or earlier
termination of this Lease and Landlord's receipt of written notice from Tenant
requesting the return of the original Letter of Credit.
<PAGE> 10
5. DAMAGE DEPOSIT. Upon Tenant's execution of this Lease, Tenant shall deliver
to Landlord, as a Damage Deposit for the performance by Tenant of its
obligations under this Lease, the amount specified in the Basic Lease
Information. If Tenant is in default, Landlord may, but without obligation to do
so, use the Damage Deposit, or any portion thereof, to cure the default or to
compensate Landlord for all damages to the Premises sustained by Landlord
resulting from Tenant's default. Tenant shall, immediately on demand, pay to
Landlord a sum equal to the portion of the Damage Deposit so applied or used so
as to replenish the amount of the Damage Deposit held to increase such deposit
to the amount initially deposited with Landlord. As soon as practicable after
the termination of this Lease (but in no event later than sixty (60) days after
such termination), Landlord shall return the Damage Deposit to Tenant, less such
amounts as are reasonably necessary, to remedy Tenant's default(s) hereunder (if
any), or to otherwise restore the Premises to a clean and safe condition,
reasonable wear and tear excepted. Landlord shall not be required to keep the
Damage Deposit separate from other funds, and, unless otherwise required by
law, Tenant shall not be entitled to interest on the Damage Deposit. In no event
or circumstance shall Tenant have the right to any use of the Damage Deposit
and, specifically, Tenant may not use the Damage Deposit as a credit or to
otherwise offset any payments required hereunder, including, but not limited to,
Rent or any portion thereof.
6. TENANT IMPROVEMENTS: Tenant hereby agrees to accept the Premises on the Early
Occupancy Date as suitable for Tenant's intended use and as then being in good
operating order, condition and repair, in its then "AS IS" condition, except for
the performance by Landlord of the Landlord Work in accordance with the
provisions of Section 2.2 hereof. Tenant shall install and construct the Tenant
Improvements (as such term is defined in Exhibit B hereto) in accordance with
the terms, conditions, criteria and provisions set forth in Exhibit B. Landlord
and Tenant hereby agree to and shall be bound by the terms, conditions and
provisions of Exhibit B. Tenant acknowledges and agrees that neither Landlord
nor any of Landlord's agents, representatives or employees has made any
representations as to the suitability, fitness or condition of the Premises for
the conduct of Tenant's business or for any other purpose, including without
limitation, any storage incidental thereto. Any exception to the foregoing
provisions must be made by express written agreement by both parties.
Notwithstanding anything to the contrary contained herein, Tenant shall allow
Landlord to, concurrently with Tenant (if Tenant so desires, otherwise
separately), or after the expiration or earlier termination of this Lease,
individually, make a claim against Tenant's general contractor, namely TRI-COM
Refrigeration, Inc. (the "Tenant's General Contractor") for any patent or latent
defects in the initial design or construction of the upgrade of the fire
protection system to .495 per 2,000 square feet in the south 93,400 square feet
of the Building as set forth in Section 1 of Exhibit B hereto. In addition to
the foregoing, Landlord shall be entitled to enforce, concurrently with Tenant,
or after the expiration or earlier termination of this Lease, individually, any
warranties made or given to Tenant from the Tenant's General Contractor and any
major subcontractors with respect to the Tenant Improvements. Landlord shall be
a third party beneficiary of Tenant's construction agreements, and accordingly,
Tenant hereby agrees to include a provision in Tenant's construction contracts
to effectuate same.
7. ADDITIONAL RENT : It is intended by Landlord and Tenant that this Lease be a
"triple net lease." The costs and expenses described in this Section 7 and all
other sums, charges, costs and expenses specified in this Lease other than Base
Rent (including any Amortized Excess TI Costs) are to be paid by Tenant to
Landlord as additional rent (collectively, "Additional Rent").
7.1 OPERATING EXPENSES: In addition to the Base Rent set forth in
Section 3, Tenant shall pay the Operating Expenses as Additional Rent. The term
"Operating Expenses" as used herein shall mean the total amounts paid or payable
by Landlord in connection with the maintenance, repair and operation of the
Premises. The term "Operating Expenses" shall not include those costs and
expenses incurred by Landlord to discharge its obligations under Section 12.3
hereof. The Operating Expenses may include, but are not limited to, the
following:
7.1.1 Landlord's cost of repairs to, and maintenance of, the
roof, the roof membrane and the exterior walls of the Building
(excluding the cost for replacement of the entire roof, which
replacement cost is of a capital nature and the method of reimbursement
by Tenant is as set forth in Section 7.1.4 below);
<PAGE> 11
7.1.2 Landlord's cost of maintaining the Lot, including
without limitation, the cost of maintaining, repairing, patching,
overlaying, sealing and striping the parking lot area, excluding the
cost for replacement of the entire parking lot, which replacement cost
shall be considered to be of a capital nature and the method of
reimbursement by Tenant is set forth in Section 7.1.4 below;
7.1.3 Landlord's annual cost of insurance insuring against
fire and extended coverage (including, if Landlord elects, "all risk"
or "special purpose" coverage) and all other insurance, including, but
not limited to, earthquake, flood and/or surface water endorsements for
the Premises, rental value insurance against loss of Rent in an amount
equal to the amount of Rent for a period of at least six (6) months but
not more than eighteen (18) months commencing on the date of loss, and
subject to the provisions of Section 28 below, any deductible in the
event of an actual loss or casualty for which a deductible is required
to be paid;
7.1.4 Landlord's cost of: (i) modifications and/or new
improvements to the Premises (including without limitation, the Lot)
required by any rules, laws or regulations effective subsequent to the
Lease Date; (ii) reasonably necessary replacement improvements to the
Premises which improvements are of comparable and/or industry-standard
quality and design to that of the existing improvements after the Lease
Date; and (iii) new improvements to the Premises that reduce operating
costs or improve life/safety conditions, all as reasonably determined
by Landlord; provided, however, if any of the foregoing are in the
nature of capital improvements (including for purposes hereof, the
replacement of the entire roof and the replacement of the entire
parking lot), then the cost of such capital improvements shall be
amortized on a straight-line basis over a reasonable period, which
shall be the lesser of fifteen (15) years or the reasonably estimated
useful life of such modifications as customarily determined in the
industry for comparable buildings in the Oakland, San Leandro, San
Lorenzo, Hayward and Union City market area, new improvements or
replacement improvements in question (at an interest rate equal to the
prevailing prime rate plus two percent (2%)), and Tenant shall pay the
monthly amortized portion of such costs (including interest charges) as
part of the Operating Expenses herein;
7.1.5 Subject to the provisions of Section 12.2 hereof, if
Landlord elects to so procure, Landlord's cost of preventative
maintenance and repair contracts for the presently existing heating,
ventilation and air conditioning systems serving the office portion of
the Premises;
7.1.6 Landlord's cost of security measures (to the extent such
security measures are necessary to fulfill Landlord's obligations
hereunder in the event of an emergency or unsafe condition, as
reasonably determined by Landlord) and fire protection services for the
Premises;
7.1.7 If Tenant uses any such rail spur or rail crossing,
Landlord's cost for the maintenance and repair of any rail spur and
rail crossing, and for the creation and negotiation of, and pursuant
to, any rail spur or track agreements, licenses, easements or other
similar undertakings;
7.1.8 Landlord's cost of supplies, equipment, rental equipment
and other similar items necessary and used solely for the operation
and/or maintenance of the Premises; and
7.1.9 Landlord's cost for the repairs and maintenance items
set forth in Section 12.2 below.
7.2 TAX EXPENSES: In addition to the Base Rent set forth in Section 3,
Tenant shall pay all real property taxes applicable to the land and improvements
included within the Lot on which the Building is situated and one hundred
percent (100%) of all personal property taxes now or hereafter assessed or
levied against the Premises or Tenant's personal property. Tenant shall also pay
one hundred percent (100%) of any increase in real property taxes attributable,
in Landlord's sole discretion, to any and all alterations, Tenant Improvements
or other improvements of any kind whatsoever placed in, on or about the Premises
<PAGE> 12
for the benefit of, at the request of, or by Tenant. The term "Tax Expenses"
shall mean and include, without limitation, any form of tax and assessment
(general, special, supplemental, ordinary or extraordinary), commercial rental
tax, payments under any improvement bond or bonds, license fees, license tax,
business license fee, rental tax, transaction tax, levy, or penalty imposed by
authority having the direct or indirect power of tax (including any city,
county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement district thereof) as against any legal or
equitable interest of Landlord in the Premises, as against Landlord's right to
rent or as against Landlord's business of leasing the Premises or the occupancy
of Tenant or any other tax, fee, or excise, however described, including, but
not limited to, any value added tax, or any tax imposed in substitution
(partially or totally) of any tax previously included within the definition of
real property taxes, or any additional tax the nature of which was previously
included within the definition of real property taxes. The term "Tax Expenses"
shall not include any franchise, estate, inheritance, net income, or excess
profits tax imposed upon Landlord.
7.3 ADMINISTRATIVE EXPENSES: The Administrative Expenses set forth in
this Section 7.3 are considered part of Additional Rent. In addition to the Base
Rent set forth in Section 3 hereof, Tenant shall pay Landlord, without prior
notice or demand, commencing on the Commencement Date and continuing thereafter
on the first (1st) day of each month throughout the balance of the Term of this
Lease, as compensation to Landlord for accounting and management services
rendered on behalf of the Premises, one-twelfth (1/12th) of an amount equal to
ten percent (10%) of the estimated amount of the aggregate of the Operating
Expenses and Tax Expenses (collectively, the "Administrative Expenses"). Any
reconciliation of the Administrative Expenses shall be substantially in the same
manner as specified in Section 7.5 below, to the extent such provisions are
applicable. Tenant's obligation to pay such Administrative Expenses shall
survive the expiration or earlier termination of this Lease.
7.4 PAYMENT OF EXPENSES: Landlord shall estimate the Operating Expenses
and Tax Expenses for the calendar year in which the Lease commences. Commencing
on the Commencement Date, one-twelfth (1/12th) of this estimated amount shall be
paid by Tenant to Landlord, as Additional Rent, and thereafter on the first
(1st) day of each month throughout the remaining months of such calendar year.
Thereafter, Landlord may estimate such expenses as of the beginning of each
calendar year during the Term of this Lease and Tenant shall pay one-twelfth
(1/12th) of such estimated amount as Additional Rent hereunder on the first
(1st) day of each month during such calendar year and for each ensuing calendar
year throughout the Term of this Lease. Tenant's obligation to pay the Operating
Expenses and Tax Expenses which have accrued prior to the termination or earlier
expiration of this Lease shall survive the expiration or earlier termination of
this Lease.
7.5 ANNUAL RECONCILIATION: By June 30th of each calendar year following
the calendar year in which this Lease is executed, or as soon thereafter as
reasonably possible, but in no event later than September 30th of each calendar
year, Landlord shall furnish Tenant with an accounting of actual Operating
Expenses and Tax Expenses, together with copies of actual property tax bills and
either a copy of Landlord's general ledger for pertinent Operating Expense
accounts, or copies of actual invoices, the choice of which is at Landlord's
sole discretion, if Tenant so requests. Within thirty (30) days of Landlord's
delivery of such accounting, Tenant shall pay to Landlord the amount of any
underpayment. Notwithstanding the foregoing, failure by Landlord to give such
accounting by such date shall not constitute a waiver by Landlord of its right
to collect any of Tenant's underpayment within two (2) years after Landlord's
delivery of such accounting, with the exception of supplemental taxes, for which
Landlord may collect any such underpayment at any time. Landlord shall credit
the amount of any overpayment by Tenant toward the next estimated monthly
installment(s) falling due, or where the Term of the Lease has expired, refund
the amount of overpayment to Tenant within ninety (90) days of such accounting.
If the Term of the Lease expires prior to the annual reconciliation of expenses
Landlord shall have the right to reasonably estimate Tenant's expenses, and if
Landlord determines that an underpayment is due, Tenant hereby agrees that
Landlord shall be entitled to deduct such underpayment from Tenant's Damage
Deposit. If Landlord reasonably determines that an overpayment has been made by
Tenant, Landlord shall refund said overpayment to Tenant as soon as practicable
thereafter. Notwithstanding the foregoing, failure of Landlord to accurately
estimate Tenant's expenses or to otherwise perform such reconciliation of
expenses, including without limitation, Landlord's failure to deduct any portion
of any underpayment from Tenant's
<PAGE> 13
Damage Deposit, shall not constitute a waiver of Landlord's right to collect any
of Tenant's underpayment within three (3) years of the date of Landlord's
delivery of the then applicable accounting after the expiration or earlier
termination of this Lease.
7.6 AUDIT: After delivery to Landlord of at least thirty (30) days
prior written notice, Tenant, at its sole cost and expense through any
accountant designated by it, shall have the right to examine and/or audit the
books and records evidencing such costs and expenses for the previous one (1)
calendar year, during Landlord's reasonable business hours but not more
frequently than once during any calendar year. Any such accounting firm
designated by Tenant may not be compensated on a contingency fee basis. The
results of any such audit (and any negotiations between the parties related
thereto) shall be maintained strictly confidential by Tenant and its accounting
firm and shall not be disclosed, published or otherwise disseminated to any
other party other than to Landlord and its authorized agents. If through such
audit it is determined that there is a discrepancy of more than five percent
(5%) of the total amount of expenses paid by Tenant hereunder, then Landlord
shall reimburse Tenant for the reasonable accounting costs and expenses incurred
by Tenant in performing such audit up to a maximum amount of Two Thousand
Dollars ($2,000.00). However, if through such audit it is determined that there
is a discrepancy of five percent (5%) or less of the total amount of expenses
paid by Tenant hereunder, then Tenant shall reimburse Landlord for the
reasonable accounting costs and expenses associated with said audit as well as
those reasonable costs and expenses incurred by Landlord for any outside
accounting firms or auditors used in connection with such audit, up to a maximum
amount of Two Thousand Dollars ($2,000.00). Landlord and Tenant shall use their
best efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Landlord and Tenant in the accounting of such costs and
expenses.
8. UTILITIES: Prior to the Early Occupancy Date, Tenant shall cause all of the
Utility Expenses (hereinafter defined) to be placed in Tenant's name with
invoices to be sent directly to Tenant at the Premises. In addition to the Base
Rent set forth in Section 3 hereof, Tenant shall pay directly the cost of all
water, sewer use, sewer discharge fees and sewer connection fees, gas, heat,
electricity, trash or refuse collection, janitorial service, telephone,
telecommunications and other utilities (collectively, the "Utility Expenses")
billed or metered separately to the Premises and/or Tenant. Tenant shall also
pay any and all assessments or charges for utility or similar purposes included
within any tax bill for the Lot on which the Building is situated, including
without limitation, entitlement fees, allocation unit fees, and/or any similar
fees or charges, and any penalties related thereto. Tenant further agrees to
timely and faithfully pay, prior to delinquency, any amount, tax, charge,
surcharge, assessment or imposition levied, assessed or imposed upon the
Premises, or Tenant's use and occupancy thereof. Commencing on the Early
Occupancy Date, Tenant shall pay directly to the providers thereof all costs,
fees, charges and similar sums for all of the utilities, services and other
matters described in this Section 8, including without limitation, any and all
Utility Expenses (collectively, the "Utility Charges"). If at any time during
the Term of this Lease Tenant shall fail to timely and fully pay any of such
Utility Charges after the lapse of the 10-day notice and cure period specified
in Section 21.3 hereof, in addition to all other remedies available to Landlord
hereunder, Landlord may, but without obligation to do so, pay any of such
Utility Charges. In the event Landlord pays any of such Utility Charges, Tenant
shall pay to Landlord, as Additional Rent, all of such Utility Charges plus ten
percent (10%) for overhead, as part of the Operating Expenses payable by Tenant
hereunder.
9. LATE CHARGES: Any and all sums or charges set forth in this Section 9 are
considered part of Additional Rent. Tenant acknowledges that late payment (the
sixth (6th) day of each month or any time thereafter) by Tenant to Landlord of
Base Rent, Operating Expenses, Tax Expenses and Utility Expenses, subject to
Section 8 herein, and Administrative Expenses or other sums due hereunder, will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of such costs being extremely difficult and impracticable to fix. Such costs
include, without limitation, processing and accounting charges, and late charges
that may be imposed on Landlord by the terms of any note secured by any
encumbrance against the Premises, and late charges and penalties due to the late
payment of real property taxes on the Premises. Therefore, if any installment of
Rent or any other sum due from Tenant is not received by Landlord within five
(5) calendar days of the date due, Tenant shall promptly pay to Landlord all of
the following, as
<PAGE> 14
applicable: (a) an additional sum equal to seven percent (7%) of such delinquent
amount plus interest on such delinquent amount at the rate equal to the prime
rate plus three percent (3%) for the time period exceeding thirty (30) days that
such payments are delinquent as a late charge for the first instance during any
calendar year in which Landlord does not receive Rent within said five (5) day
period, and ten percent (10%) of such delinquent amount as a late charge for
each and every successive instance during any calendar year in which Landlord
does not receive Rent within said five (5) day period, (b) the amount of
Seventy-five Dollars ($75.00) for each three-day notice prepared for, or served
on, Tenant, (c) the amount of Fifty Dollars ($50.00) relating to checks for
which there are not sufficient funds. If Tenant delivers to Landlord a check for
which there are not sufficient funds, Landlord may, at its sole option, require
Tenant to replace such check with a cashier's check for the amount of such check
and all other charges payable hereunder. The parties agree that this late charge
and the other charges referenced above represent a fair and reasonable estimate
of the costs that Landlord will incur by reason of late payment by Tenant.
Acceptance of any late charge or other charges shall not constitute a waiver by
Landlord of Tenant's default with respect to the delinquent amount, nor prevent
Landlord from exercising any of the other rights and remedies available to
Landlord for any other breach of Tenant under this Lease. If a late charge or
other charge becomes payable for any three (3) installments of Rent within any
twelve (12) month period, then Landlord, at Landlord's sole option, can either
require the Rent be paid quarterly in advance or be paid monthly in advance by
electronic funds transfer. Notwithstanding the foregoing, should Tenant fail to
pay the sum(s) due hereunder within five (5) days of the due date as hereinabove
set forth, Landlord shall have the obligation, the first (1st) time only that
Tenant fails to pay such sum(s) during each calendar year of the term of the
Lease, to send a facsimile notice of such failure to such individual at such
facsimile number as Tenant may first designate in writing, and if Tenant pays
such overdue sum within three (3) days after confirmation that such notice has
been received at such facsimile number, there shall be no assessment of a late
charge.
10. USE OF PREMISES:
10.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND REGULATIONS:
The Premises are to be used solely for the purposes and uses specified in the
Basic Lease Information and for no other uses or purposes without Landlord's
prior written consent, which consent shall not be unreasonably withheld or
delayed so long as the proposed use (i) does not involve the use of Hazardous
Materials other than as expressly permitted under the provisions of Section 30
below, (ii) does not require any additional parking in excess of the parking
spaces required by law, and (iii) conforms with all zoning ordinances and Laws
then in effect. The use of the Premises by Tenant and its employees, directors,
officers, affiliates, representatives, agents, invitees, licensees, subtenants,
customers or contractors (collectively, "Tenant's Representatives") shall be
subject to, and at all times in compliance with, the following:
(a) any and all applicable laws, ordinances, statutes, orders
and regulations as same exist from time to time (collectively, the
"Laws");
(b) any and all documents, matters or instruments, including
without limitation, any declarations of covenants, conditions and
restrictions, and any supplements thereto, each of which has been
recorded prior to the Lease Date in any official or public records with
respect to any portion of the Premises (the "Recorded Matters");
(c) any and all documents, matters, or instruments, including
without limitation, any declarations of covenants, conditions and
restrictions, and any supplements thereto, that are recorded after the
Lease Date, and any amendments, modification and/or cancellations of
the Recorded Matters that are recorded after the Lease Date
(collectively, "Subsequently Recorded Matters"). If Landlord agrees to
any such Subsequently Recorded Matters (to which it is a party or with
respect to which Landlord has direct approval of) without Tenant's
prior written consent, then this Lease shall be deemed to supersede
such Subsequently Recorded Matters in the event of any conflict.
Notwithstanding anything herein to the contrary, if any of the
Subsequently Recorded Matters to which Landlord is not a party or with
respect to which Landlord has no direct approval of (i.e., Subsequently
Recorded Matters which are recorded or imposed by any applicable
<PAGE> 15
governmental authorities) adversely affect Tenant's use under this
Lease (excluding any liens related to any mortgage, deed of trust or
similar type of security interest, and any improvements to be made to
the Premises), then Landlord, upon receipt of written notice of such
matters, shall notify Tenant, in writing, of all such Subsequently
Recorded Matters; and
(d) any and all rules and regulations set forth in Exhibit C,
attached to and made a part of this Lease, and any other reasonable
rules and regulations promulgated by Landlord now or hereafter enacted
relating to parking and the operation of the Premises provided same are
enforced on a non-discriminatory basis, do not materially and adversely
affect Tenant's operations in and from the Premises and/or adversely
affect Tenant's normal hours of operation (collectively, the "Rules and
Regulations").
Notwithstanding the foregoing, should any conflict exist between any rules and
regulations not set forth in Exhibit C hereto, the provisions of the Lease will
prevail. Tenant agrees to, and does hereby, assume full and complete
responsibility to ensure that the Premises are adequate to fully meet the needs
and requirements of Tenant's intended operations of its business within the
Premises, and Tenant's use of the Premises and that same are in compliance with
all applicable Laws throughout the Term of this Lease, including without
limitation, any fire protection improvements or equipment, in-rack fire
sprinklers, hose racks, reels, smoke vents and hatches, draft curtains, and the
fire sprinkler systems in the Building. Tenant shall be solely responsible for
complying with all applicable Laws, and, specifically, the high-pile storage
requirements of the City of Oakland and any other agencies or regulatory bodies
having jurisdiction thereof. Additionally, Tenant shall be solely responsible
for the payment of all costs, fees and expenses associated with any
modifications, improvements or alterations to the Premises occasioned by the
enactment of, or changes to, any Laws arising from Tenant's particular use of
the Premises or alterations, improvements or additions made to the Premises
regardless of when such Laws became effective.
10.2 PROHIBITION ON USE: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything therein
which will in any way conflict with any of the requirements of the Board of Fire
Underwriters or similar body now or hereafter constituted or in any way increase
the existing rate of or affect any policy of fire or other insurance upon the
Building or any of its contents, or cause a cancellation of any insurance
policy; provided, however, notwithstanding the foregoing, if Tenant permissibly
uses the Premises for the purposes allowed by the provisions of this Lease and
such permissible use increases the rate of premiums paid for such insurance,
then Tenant shall not be considered in breach of the foregoing restriction so
long as Tenant agrees to pay, and actually does promptly pay, as Additional Rent
any such increase in the rate of or premiums for such insurance. No auctions may
be held or otherwise conducted in, on or about the Premises without Landlord's
written consent thereto, which consent may be given or withheld in Landlord's
sole discretion. Tenant shall not do or permit anything to be done in or about
the Premises which will in any way obstruct or interfere with the rights of
Landlord or other persons or businesses in the area, or use or allow the
Premises to be used for any unlawful purpose; nor shall Tenant cause, maintain
or permit any private or public nuisance in, on or about any portion of the
Premises, including, but not limited to, any offensive odors, noises, fumes or
vibrations (other than (i) customary odors resulting from food preparation,
provided such food preparation is in compliance with all Laws, including without
limitation, the requirements of the Department of Health, (ii) fumes associated
with vehicle exhaust, and (iii) vibrations associated with Tenant's
refrigeration equipment, and other equipment and vehicles of Tenant or Tenant's
Representatives). Tenant shall not damage or deface or otherwise commit or
suffer to be committed any waste in, upon or about the Premises. Tenant shall
not place or store, nor knowingly permit any other person or entity to place or
store, any property, equipment, materials, supplies, personal property or any
other items or goods outside of the Premises for any period of time. Tenant
shall not permit any live animals, including, but not limited to, any household
pets, to be brought or kept in or about the Premises. Tenant shall place no
loads upon the floors, walls, or ceilings in excess of the maximum designed load
permitted by the applicable Uniform Building Code or which may damage the
Building or outside areas; nor place any chemicals or corrosive materials in the
drainage systems that cause damage to such systems other than normal wear and
tear; nor dump or store waste materials, refuse or other such materials, or
allow such to remain outside the Building area, except for any non-hazardous or
non-harmful materials which may be stored in refuse dumpsters or in any enclosed
trash areas provided.
<PAGE> 16
11. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES:
11.1 ALTERATIONS AND ADDITIONS: The Tenant Improvements described in
Exhibit B hereto and Tenant's Initial Alterations described in Exhibit L hereto
are not part of the improvements, alterations and/or additions to which the
provisions of Section 11.1 relate. Tenant shall be permitted to make, at its
sole cost and expense, non-structural alterations and additions to the Premises
without obtaining Landlord's prior written consent, provided the cost of same
does not exceed $50,000 each job and $100,000 cumulatively each calendar year
(the "Permitted Improvements"). Tenant, however, shall first notify Landlord of
such alterations or additions so that Landlord may post a Notice of
Non-Responsibility on the Premises. Within twenty (20) business days of
Landlord's receipt of Tenant's written notice of any item comprising the
Permitted Improvements, Landlord shall notify Tenant, in writing, whether or not
Landlord will require Tenant to remove such item from the Premises upon the
expiration or earlier termination of this Lease. Except for the Permitted
Improvements, Tenant shall not install any signs, fixtures, improvements, nor
make or permit any other alterations or additions to the Premises without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed. If any such alteration or addition is
expressly permitted by Landlord, Tenant shall deliver at least twenty (20) days
prior notice to Landlord, from the date Tenant intends to commence construction,
sufficient to enable Landlord to post a Notice of Non-Responsibility. In all
events, Tenant shall obtain all permits or other governmental approvals prior to
commencing any of such work and deliver a copy of same to Landlord. All
alterations and additions shall be installed by a licensed contractor approved
by Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed, at Tenant's sole expense in compliance with all applicable Laws
(including, but not limited to, the ADA as defined herein), Recorded Matters,
and Rules and Regulations. Tenant shall keep the Premises and the property on
which the Premises are situated free from any liens arising out of any work
performed, materials furnished or obligations incurred by or on behalf of
Tenant. As a condition to Landlord's consent to the installation of any
fixtures, additions or other improvements, the cost of which exceeds One Hundred
Thousand Dollars ($100,000.00), and which work is structural in nature (other
than the initial Tenant Improvements and Tenant's Initial Alterations), Landlord
may require Tenant to post and obtain a completion and indemnity bond for up to
one hundred percent (100%) of the cost of the work. Notwithstanding the above,
provided that Tenant's General Contractor's financial condition (at the time
that such alteration or addition is proposed by Tenant) has not materially and
adversely changed from its financial condition at the time of execution of this
Lease, then Tenant's General Contractor shall be deemed to have been approved by
Landlord for purposes hereof.
11.2 SURRENDER OF PREMISES: Upon the termination of this Lease, whether
by forfeiture, lapse of time or otherwise, or upon the termination of Tenant's
right to possession of the Premises, Tenant will at once surrender and deliver
up the Premises, together with the attached fixtures (other than trade fixtures,
and other than any furniture bolted for earthquake purposes which shall be
deemed to be not attached to the Premises), additions and improvements which
Landlord has notified Tenant, in writing prior to the time of their
installation, that Landlord will require Tenant not to remove, to Landlord in
good condition and repair (including, but not limited to, replacing all light
bulbs and ballasts not in good working condition) and in the condition in which
the Premises existed as of the Commencement Date, except for reasonable wear and
tear, and repairs not required to be made by Tenant as expressly provided in
this Lease, or to the extent Landlord has actually received insurance proceeds
for such casualty damage. Reasonable wear and tear shall not include any damage
or deterioration to the floors of the Premises arising from the use of forklifts
in, on or about the Premises (including, without limitation, any marks or stains
of any portion of the floors caused by forklifts), and any damage or
deterioration that would have been prevented by proper maintenance by Tenant or
Tenant otherwise performing all of its obligations under this Lease. Upon such
termination of this Lease, Tenant shall remove the Permitted Improvements (to
the extent Landlord has notified Tenant in writing, at the time set forth in
Section 11.1, that it will require such removal), all tenant signage, trade
fixtures, non-attached fixtures, furniture, furnishings, equipment, personal
property, additions, and other improvements (to the extent Landlord has notified
Tenant, in writing, prior to the time of their installation, as set forth above,
that Landlord will require such removal) unless Landlord reasonably requests, in
writing, that Tenant not remove some or all of such attached
<PAGE> 17
fixtures (other than trade fixtures), additions or improvements installed by, or
on behalf of Tenant or situated in or about the Premises. By the date which is
forty-five (45) days prior to such termination of this Lease, Landlord shall
notify Tenant in writing of those attached fixtures (other than trade fixtures),
alterations, additions and other non-attached improvements which Landlord shall
require Tenant not to remove from the Premises. Tenant shall repair any damage
caused by the installation or removal of such signs, trade fixtures, furniture,
furnishings, equipment, fixtures, additions and improvements which are to be
removed from the Premises by Tenant hereunder. If Landlord fails to so notify
Tenant at least forty-five (45) days prior to such termination of this Lease,
then Tenant shall remove all tenant signage, alterations, furniture,
furnishings, trade fixtures, equipment, cabling and other lines of a
non-standard nature, additions and other improvements (other than the Tenant
Improvements and those improvements or alterations not required to be removed by
Landlord at the time of installation) installed in or about the Premises by, or
on behalf of Tenant. Tenant shall cause the removal of such items and the repair
of the Premises to be completed prior to such termination of this Lease. For
purposes hereof, and notwithstanding anything to the contrary contained herein,
Tenant's racking and in-rack sprinkler systems shall be deemed to be part of
Tenant's trade fixtures and shall be removed from the Premises by Tenant upon
the expiration or earlier termination of this Lease.
11.3 TENANT'S INITIAL ALTERATIONS: Landlord and Tenant agree that
Tenant shall be permitted to install certain specialized improvements, trade
fixtures and equipment in the Premises in accordance with Exhibit L hereto
(hereinafter "Tenant's Initial Alterations"). Prior to the expiration or earlier
termination of this Lease, Tenant shall, at its sole cost and expense, demolish
and/or remove (as the case may be) from the Premises Tenant's Initial
Alterations including, but not limited to, all alterations set forth in Section
2 of Exhibit L hereto. Tenant shall restore the Premises to the condition
existing prior to the installation of Tenant's Initial Alterations and shall
repair in good and workmanlike manner to the satisfaction of Landlord all damage
to the Premises caused by the installation or construction of Tenant's Initial
Alterations. Notwithstanding the foregoing, Tenant shall not demolish, and shall
otherwise leave intact and in good condition and repair, the office and restroom
area to be remodeled or constructed by Tenant as part of Tenant's Initial
Alterations on the south wall of the Building, as well as all standard, generic
warehouse improvements (as determined by Landlord), including, but not limited
to, dock levelers, dock seals and lights, electrical panels for generic
electrical distribution, metal halide lighting, smoke hatches, skylights, draft
curtains, and upgrades to the main fire protection system (excluding in-rack
sprinklers and sprinkler drops to accommodate Tenant's Initial Alterations).
12. REPAIRS AND MAINTENANCE:
12.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for those
portions of the Building to be maintained by Landlord, as provided in Sections
12.2 and 12.3 below, Tenant shall, at Tenant's sole cost and expense, keep and
maintain the Premises in good, clean and safe condition and repair to the
reasonable satisfaction of Landlord including, but not limited to, repairing any
damage caused by Tenant or Tenant's Representatives and replacing any property
so damaged by Tenant or Tenant's Representatives. Without limiting the
generality of the foregoing, Tenant shall be solely responsible for maintaining,
repairing and replacing (a) all mechanical systems, heating, ventilation and air
conditioning systems exclusively serving the Premises, (b) all plumbing,
electrical wiring and equipment exclusively serving the Premises, (c) all
interior lighting (including, without limitation, light bulbs and/or ballasts)
and exterior lighting serving the Premises or adjacent to the Building, (d) all
glass, windows, window frames, window casements, skylights, interior and
exterior doors, door frames and door closers, (e) all roll-up doors, ramps and
dock equipment, including without limitation, dock bumpers, dock plates, dock
seals, dock levelers and dock lights, (f) all tenant signage, (g) lifts for
disabled persons, (h) sprinkler systems, fire protection systems and security
systems exclusively serving the Premises, (i) all partitions, fixtures,
equipment, interior painting, and interior walls and floors of the Premises and
every part thereof, (j) the fence around the perimeter of the Lot as well as the
gates associated with such fence, and (k) the satellite dish described in
Section 44 herein as well as portions of the roof affected by the installation,
maintenance and/or removal of the satellite dish. In addition to the foregoing,
Tenant shall be solely responsible for the provision of any security measures in
any manner relating to Tenant's operations, including without limitation,
security measures for any items of personal property, inventory or equipment
placed or
<PAGE> 18
otherwise temporarily stored outside of the Building.
12.2 REIMBURSABLE REPAIRS AND MAINTENANCE OBLIGATIONS: Subject to the
provisions of Sections 7 and 10 of this Lease and except for (i) the obligations
of Tenant set forth in Section 12.1 above, (ii) the obligations of Landlord set
forth in Section 12.3 below, and (iii) the repairs rendered necessary by the
intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives, Landlord agrees, at Landlord's expense, subject to
reimbursement pursuant to Section 7 above, to keep in good repair the plumbing
systems exterior to the Premises, any rail spur and rail crossing if used by
Tenant, the roof, roof membrane, exterior walls of the Building, signage
(exclusive of tenant signage), and exterior electrical wiring and equipment,
exterior painting of the Building, and underground utility and sewer pipes
outside the exterior walls of the Building. For purposes of this Section 12.2,
the term "exterior" shall mean outside of the Building. Tenant shall procure and
maintain (a) the heating, ventilation and air conditioning systems preventative
maintenance and repair contract(s); such contract(s) to be on a bi-monthly or
quarterly basis, as reasonably determined by Landlord. Landlord shall procure
and maintain the fire and sprinkler protection services and preventative
maintenance and repair contract(s), including, without limitation, monitoring
services; such contract(s) to be on a bi-monthly or quarterly basis, as
reasonably determined by Landlord. Landlord reserves the right, but without the
obligation to do so, to procure and maintain (i) the heating, ventilation and
air conditioning systems preventative maintenance with quarterly service and
repair contract(s) for the office areas of the Building, and only if Tenant
fails to procure and maintain same. If Landlord so elects to procure and
maintain any such contract(s), Landlord shall first give Tenant twenty (20)
days' prior written notice of such election, during which twenty (20) day period
Tenant may procure such contract. If Tenant fails to procure such contract
during the period, then Landlord shall procure such contract, and Tenant will
reimburse Landlord for the cost thereof in accordance with the provisions of
Section 7 above. During the time period Tenant procures and maintains any of
such contract(s), all of the following shall apply: (i) Tenant shall do so in
compliance with all codes and Laws; (ii) Tenant will promptly deliver to
Landlord, within seven (7) days of Landlord's written request therefor, a true
and complete copy of each such contract and any and all renewals or extensions
thereof, and each service report or other summary received by Tenant pursuant to
or in connection with such contract(s); and (iii) such contract shall provide
for and include without limitation replacement of filters, oiling and
lubricating of machinery, parts replacement, adjustment of drive belts, oil
changes, and other industry standard preventative maintenance procedures.
12.3 LANDLORD'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for repairs
rendered necessary by the intentional or negligent acts or omissions of Tenant
or any of Tenant's Representatives, Landlord agrees, at Landlord's sole cost and
expense without any reimbursement as part of Operating Expenses specified
herein, to (a) keep in good repair the structural portions of the floors,
foundations, exterior perimeter walls of the Building and load-bearing walls not
altered by Tenant (exclusive of glass and exterior doors), and (b) replace the
structural portions of the roof of the Building (excluding the roof membrane)
as, and when, Landlord determines such replacement to be necessary in Landlord's
sole but reasonable discretion.
12.4 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE OBLIGATIONS:
Except for normal maintenance and repair of the items described above and except
for the installation of a satellite dish in accordance with the provisions of
Addendum 2 hereto, Tenant shall have no right of access to or right to install
any device on the roof of the Building nor make any penetrations of the roof of
the Building without the express prior written consent of Landlord. If Tenant
refuses or neglects to repair and properly maintain the Premises as required
herein and to the reasonable satisfaction of Landlord, upon prior notice to
Tenant and after expiration of the applicable cure period, both as specified in
Section 21.3 hereof Landlord may, but without obligation to do so, at any time
thereafter make such repairs and/or maintenance without Landlord having any
liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, trade fixtures, equipment, fixtures or other property, or to
Tenant's business by reason thereof, except to the extent any damage is caused
by the willful misconduct or gross negligence of Landlord or its authorized
agents and representatives. In the event Landlord makes such repairs and/or
maintenance, upon completion thereof Tenant shall pay to Landlord, as additional
rent, the Landlord's costs for making such repairs and/or maintenance, plus ten
percent (10%) for overhead, upon presentation of a bill therefor. The
obligations of Tenant hereunder shall survive the expiration of the Term of this
Lease or the earlier
<PAGE> 19
termination thereof. Except as provided in Section 42 below, Tenant hereby
waives any right to repair at the expense of Landlord under any applicable Laws
now or hereafter in effect respecting the Premises.
13. INSURANCE:
13.1 TYPES OF INSURANCE: Tenant shall maintain in full force and effect
at all times during the Term of this Lease, at Tenant's sole cost and expense,
for the protection of Tenant and Landlord, as their interests may appear,
policies of insurance issued by a carrier or carriers reasonably acceptable to
Landlord and its lender(s) which afford the following coverages: (i) worker's
compensation: statutory limits; (ii) employer's liability, as required by law,
with a minimum limit of $100,000 per employee and $500,000 per occurrence; (iii)
commercial general liability insurance (occurrence form) providing coverage
against any and all claims for bodily injury and property damage occurring in,
on or about the Premises arising out of Tenant's and Tenant's Representatives'
use and/or occupancy of the Premises. Such insurance shall include coverage for
blanket contractual liability, fire damage, premises, personal injury, completed
operations, products liability, personal and advertising, and a plate-glass
rider to provide coverage for all glass in, on or about the Premises including,
without limitation, skylights. Such insurance shall have a combined single limit
of not less than One Million Dollars ($1,000,000) per occurrence with a Two
Million Dollar ($2,000,000) aggregate limit and excess/umbrella insurance in the
amount of Two Million Dollars ($2,000,000). If Tenant has other locations which
it owns or leases, the policy shall include an aggregate limit per location
endorsement. If necessary, as reasonably determined by Landlord, Tenant shall
provide for restoration of the aggregate limit; (iv) comprehensive automobile
liability insurance: a combined single limit of not less than $2,000,000 per
occurrence and insuring Tenant against liability for claims arising out of the
ownership, maintenance, or use of any owned, hired or non-owned automobiles; (v)
"all risk" or "special purpose" property insurance, including without
limitation, sprinkler leakage, boiler and machinery comprehensive form, if
applicable, covering damage to or loss of any personal property, trade fixtures,
inventory, fixtures and equipment located in, on or about the Premises, and in
addition, coverage for business interruption of Tenant, together with, if the
property of Tenant's invitees is to be kept in the Premises, warehouser's legal
liability or bailee customers insurance for the full replacement cost of the
property belonging to invitees and located in the Premises. Such insurance shall
be written on a replacement cost basis (without deduction for depreciation) in
an amount not less than ninety percent (90%) of the full replacement value of
the aggregate of the items referred to in this subparagraph (v); (vi) flood and
earthquake insurance on a replacement cost basis (without deduction for
depreciation) in an amount not less than ninety percent (90%) of the full
replacement value of the following: Tenant's inventory; Tenant's food
preparation systems and all equipment and fixtures relating thereto; Tenant's
refrigerated food storage rooms, including without limitation, portable metal
panel systems, partition walls and ceilings, and plumbing, mechanical and
electrical systems relating thereto; (such flood and earthquake insurance shall
specifically exclude Tenant's automated material handling system and equipment,
together with all related computer hardware and software, as such material
handling system and equipment is contemplated in Tenant's Initial Alterations or
as additional material handling systems and equipment shall be acquired and
located in the Premises at any time during the term of this Lease). Tenant shall
also maintain earthquake sprinkler leakage coverage on all of Tenant's personal
property, trade fixtures, inventory, fixtures and equipment located in, on or
about the Premises, including without limitation, all of Tenant's Initial
Alterations; and (vii) such other insurance or higher limits of liability as is
then customarily required to be carried for similar types of buildings within
the general vicinity of the Premises or as may be reasonably required by any of
Landlord's lenders.
13.2 INSURANCE POLICIES: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
"General Policyholders Rating" of at least A-:X as set forth in the most current
issue of "A.M. Best's Rating Guides." The deductible amount under the coverage
for flood and earthquake shall not exceed fifteen percent (15%) of any loss
relating thereto. Any deductible amounts under any of the insurance policies
required hereunder (except flood and earthquake) shall not exceed Ten Thousand
Dollars ($10,000.00). Tenant shall deliver to Landlord certificates of insurance
and true and complete copies of any and all endorsements required herein for all
insurance required to be maintained by Tenant hereunder at the time of execution
of this Lease by Tenant. Tenant shall, at least thirty (30) days prior to
<PAGE> 20
expiration of each policy, furnish Landlord with certificates of renewal or
"binders" thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to modification except after thirty
(30) days prior written notice to the parties named as additional insureds as
required in this Lease (except for cancellation for nonpayment of premium, in
which event cancellation shall not take effect until at least ten (10) days'
notice has been given to Landlord). Tenant shall have the right to provide
insurance coverage which it is obligated to carry pursuant to the terms of this
Lease under a blanket insurance policy, provided such blanket policy expressly
affords coverage for the Premises and for Landlord as required by this Lease.
13.3 ADDITIONAL INSUREDS AND COVERAGE: Landlord, any property
management company and/or agent of Landlord for the Premises and any lender(s)
of Landlord having a lien against the Premises shall be named as additional
insureds under all of the policies required in Section 13.1(iii) above.
Additionally, such policies shall provide for severability of interest. All
insurance to be maintained by Tenant shall, except for workers' compensation and
employer's liability insurance, be primary, without right of contribution from
insurance maintained by Landlord. Any umbrella/excess liability policy (which
shall be in "following form") shall provide that if the underlying aggregate is
exhausted, the excess coverage will drop down as primary insurance. The limits
of insurance maintained by Tenant shall not limit Tenant's liability under this
Lease. It is the parties' intention that the insurance to be procured and
maintained by Tenant as required herein shall provide coverage for any and all
damage or injury arising from or related to Tenant's operations of its business
and/or Tenant's or Tenant's Representatives' use of the Premises. It is not
contemplated or anticipated by the parties that the aforementioned risks of loss
be borne by Landlord's insurance carriers, rather it is contemplated and
anticipated by Landlord and Tenant that such risks of loss be borne by Tenant's
insurance carriers pursuant to the insurance policies procured and maintained by
Tenant as required herein.
13.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: In the event
Tenant does not purchase the insurance required in this Lease or keep the same
in full force and effect throughout the Term of this Lease (including any
renewals or extensions), Landlord may after having given Tenant ten (10) days
prior written notice, but without obligation to do so, purchase the necessary
insurance and pay the premiums therefor. If Landlord so elects to purchase such
insurance, Tenant shall promptly pay to Landlord as Additional Rent, the amount
so paid by Landlord, upon Landlord's demand therefor. If Tenant fails to
maintain any insurance required in this Lease, Tenant shall be liable for all
losses, damages and costs resulting from such failure.
13.5 LANDLORD'S INSURANCE: Landlord shall maintain in full force and
effect during the Term of this Lease, subject to reimbursement as provided in
Section 7, policies of insurance which afford such coverages as are commercially
reasonable and as is consistent with other properties in Landlord's portfolio.
Notwithstanding the foregoing, Landlord shall obtain and keep in force during
the Term of this Lease, as an item of Operating Expenses, a policy or policies
in the name of Landlord, with loss payable to Landlord and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lender(s)"),
insuring loss or damage to the Building, including all improvements, fixtures
(other than trade fixtures) and permanent additions. However, all alterations,
additions and improvements made to the Premises by Tenant (other than the Tenant
Improvements) and including, but not limited to, Tenant's Initial Alterations,
shall be insured by Tenant rather than by Landlord. The amount of such insurance
procured by Landlord shall be equal to at least eighty percent (80%) of the full
replacement cost of the Building, including all improvements and permanent
additions as the same shall exist from time to time, or the amount required by
Lenders. At Landlord's option, such policy or policies shall insure against all
risks of direct physical loss or damage (including, without limitation, the
perils of flood and earthquake), including coverage for any additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. If any such insurance coverage procured
by Landlord has a deductible clause, the deductible shall not exceed
commercially reasonable amounts, and in the event of any casualty, the amount of
such deductible shall be an item of Operating Expenses as so limited.
Notwithstanding anything to the contrary contained herein, to the extent the
cost of maintaining insurance with respect to the Premises is increased as a
result of Tenant's acts, omissions, use or occupancy
<PAGE> 21
of the Premises, Tenant shall pay one hundred percent (100%) of, and for, such
increase(s) as Additional Rent.
14. WAIVER OF SUBROGATION: Landlord and Tenant hereby mutually waive their
respective rights of recovery against each other for any loss of, or damage to,
either parties' property to the extent that such loss or damage is insured by an
insurance policy required to be in effect at the time of such loss or damage.
Each party shall obtain any special endorsements, if required by its insurer
whereby the insurer waives its rights of subrogation against the other party.
This provision is intended to waive fully, and for the benefit of the parties
hereto, any rights and/or claims which might give rise to a right of subrogation
in favor of any insurance carrier. The coverage obtained by Tenant and Landlord
pursuant to Section 13 of this Lease shall include, without limitation, a waiver
of subrogation endorsement attached to the certificate of insurance. The
provisions of this Section 14 shall not apply in those instances in which such
waiver of subrogation would invalidate such insurance coverage or would cause
either party's insurance coverage to be voided or otherwise uncollectible.
15. LIMITATION OF LIABILITY AND INDEMNITY: Except to the extent of damage
resulting from the gross negligence or willful misconduct of Landlord or its
authorized representatives, Tenant agrees to protect, defend (with counsel
reasonably acceptable to Landlord) and hold Landlord and Landlord's lenders,
partners, members, property management company (if other than Landlord), agents,
directors, officers, employees, representatives, successors and assigns
(collectively, the "Landlord's Indemnitees") harmless and indemnify the
Landlord's Indemnitees from and against all liabilities, damages, claims,
losses, judgments, charges and expenses (including reasonable attorneys' fees,
costs of court and expenses necessary in the prosecution or defense of any
litigation including the enforcement of this provision) arising from or in any
way related to, directly or indirectly, (i) Tenant's or Tenant's
Representatives' use of the Premises, (ii) the conduct of Tenant's business,
(iii) from any activity, work or thing done, permitted or suffered by Tenant in
or about the Premises, (iv) any liability for injury to person or property of
Tenant, Tenant's Representatives, or third party persons, and/or (v) Tenant's
failure to perform any covenant or obligation of Tenant under this Lease. Tenant
agrees that the obligations of Tenant herein shall survive the expiration or
earlier termination of this Lease.
Landlord agrees to protect, defend (with counsel reasonably acceptable
to Tenant) and hold Tenant and Tenant's lenders, partners, members, agents,
directors, officers, employees, representatives, shareholders, successors and
assigns and each of their respective lenders, partners, members, agents,
directors, officers, employees, representatives, shareholders, successors and
assigns (collectively, the "Tenant's Indemnitees") harmless and indemnify the
Tenant's Indemnitees from and against all liabilities, damages, claims, losses,
judgments, charges and expenses (including reasonable attorneys' fees, costs of
court and expenses necessary in the prosecution or defense of any litigation
including the enforcement of this provision) arising from (i) Landlord's gross
negligence or willful misconduct, or (ii) Landlord's breach (after any
applicable cure periods) of its obligations to pay Taxes, and/or its obligations
under Sections 12.2 and 12.3 herein. Landlord agrees that the obligations of
Landlord herein shall survive the expiration or earlier termination of this
Lease. Except as otherwise set forth in Section 42 below, Tenant shall not, in
any event or circumstance, be permitted to offset or otherwise credit against
any payments of Rent required herein for matters for which Landlord may be
liable hereunder. Landlord and its authorized representatives shall not be
liable for any interference with light or air, or for any latent defect in the
Premises.
16. ASSIGNMENT AND SUBLEASING:
16.1 PROHIBITION: Tenant shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer this
Lease (collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Tenant of all or any portion of the Premises without in each
instance first obtaining the prior written consent of Landlord, which consent
shall not be unreasonably withheld, delayed or conditioned,
<PAGE> 22
but which shall be subject to the provisions of this Section 16. Tenant hereby
agrees that Landlord may withhold its consent to any proposed sublease or
assignment if at the time of Tenant's request for Landlord's consent to any
proposed assignee or subtenant (i) Tenant is in default of its obligations under
this Lease beyond applicable notice and cure periods, or (ii) the use to be made
of the Premises by the proposed assignee or subtenant differs from the uses
permitted under this Lease, or differs from customary uses generally acceptable
in comparable warehouse buildings in the San Leandro, Oakland, San Lorenzo,
Hayward, Union City market. Tenant further agrees that Landlord may withhold its
consent to any proposed sublease or assignment if the proposed sublessee or
assignee or its business is subject to compliance with additional requirements
of the ADA (defined below) for which Landlord would be responsible hereunder
and/or Environmental Laws (defined below) beyond those requirements which are
applicable to Tenant, unless the proposed sublessee or assignee shall (a) first
deliver plans and specifications for complying with such additional ADA
requirements and/or Environmental Laws and obtain Landlord's written consent
thereto, and (b) comply with all Landlord's reasonable conditions for or
contained in such consent, including without limitation, requirements for
security to assure the lien-free completion of such improvements. No consent to
any assignment or sublease shall constitute a waiver of the provisions of this
Section 16, and all subsequent assignments or subleases may be made only with
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned, but which shall be subject to the provisions
of this Section 16.
16.2 REQUEST FOR CONSENT: Except as otherwise provided in Section 16.6,
if Tenant seeks to sublet or assign all or any portion of the Premises, Tenant
shall deliver to Landlord at least thirty (30) days prior to the proposed
commencement of the sublease or assignment (the "Proposed Effective Date") the
following information and documents (the "Tenant's Notice"): (i) the name,
address and nature of the business of the proposed assignee or sublessee; (ii)
such information as to such assignee's or sublessee's financial responsibility
and condition as Landlord may reasonably require (including without limitation,
audited financial statements for no more than the three (3) most recent
consecutive fiscal years) to enable Landlord to determine its financial
condition; (iii) the aforementioned plans and specifications, if any; and (iv)
the Proposed Effective Date of such proposed assignment or sublease. Within ten
(10) business days after Landlord's receipt of the Tenant's Notice from Tenant
that Tenant seeks to sublet or assign all or any portion of the Premises,
Landlord shall deliver to Tenant a copy of Landlord's standard form of sublease
or assignment agreement (as applicable), which assignment form shall be
substantially in the form attached hereto as Exhibit M, which instrument shall
be utilized for each proposed sublease or assignment (as applicable), and such
instrument shall include a provision whereby the assignee or sublessee assumes
all of Tenant's obligations hereunder and agrees to be bound by the terms
hereof. Tenant shall give Landlord the Tenant's Notice by registered or
certified mail addressed to Landlord at Landlord's address specified in the
Basic Lease Information. Within thirty (30) days after Landlord's receipt of the
Tenant's Notice (the "Landlord Response Period") Landlord shall notify Tenant,
in writing, of its determination with respect to such requested proposed
assignment or sublease and the election to recapture as set forth in Section
16.3 below. If Landlord does not elect to recapture pursuant to the provisions
of Section 16.3 hereof and Landlord does consent to the requested proposed
assignment or sublease, Tenant may thereafter assign its interests in and to
this Lease or sublease all or a portion of the Premises to the same party and on
the same terms as set forth in the Tenant's Notice. Within said Landlord
Response Period, in addition to the other provisions hereof, Landlord shall have
the right to withhold consent to the proposed assignment or sublease (a) if the
proposed use is prohibited by the provisions of this Lease, and in particular,
the provisions of Section 10 hereof or if said use differs from customary uses
generally acceptable in comparable warehouse buildings in the San Leandro,
Oakland, San Lorenzo, Hayward, Union City market, (b) the proposed assignee's or
subtenant's financial condition, in the reasonable judgment of Landlord, is not
reasonably adequate and sufficient in relation to the then remaining obligations
of Tenant under this Lease, or (c) if Tenant publicly offers or advertises to
assign or sublet at a rate that is below the then current market rate being
charged for space of similar nature and size by landlords of comparable
warehouse buildings in the San Leandro, Oakland, San Lorenzo, Hayward, Union
City market. Should Landlord fail to respond to Tenant's notice within
Landlord's Response Period, then, after Tenant's giving Landlord thirty (30)
days written notice (hereinafter the "Second Response Period"), the proposed
assignment or sublease shall be deemed approved by Landlord. Each permitted
assignee or sublessee shall assume and be deemed to assume this Lease and shall
be and remain liable jointly and severally with Tenant for payment of Rent and
for the due performance of, and compliance with all the terms, covenants,
conditions and agreements
<PAGE> 23
herein contained on Tenant's part to be performed or complied with, for the
Term of this Lease. No assignment or subletting shall affect the continuing
primary liability of Tenant (which, following assignment, shall be joint and
several with the assignee), and Tenant shall not be released from performing any
of the terms, covenants and conditions of this Lease. An assignee of Tenant
shall become directly liable to Landlord for all obligations of Tenant
hereunder, but no sublease or assignment by Tenant shall relieve Tenant of any
liability under this Lease. Tenant hereby acknowledges and agrees that it
understands that Landlord's accounting department may process and accept Rent
payments without verifying that such payments are being made by Tenant, a
permitted sublessee or a permitted assignee in accordance with the provisions of
this Lease. Although such payments may be processed and accepted by such
accounting department personnel, any and all actions or omissions by the
personnel of Landlord's accounting department shall not be considered as
acceptance by Landlord of any proposed assignee or sublessee nor shall such
actions or omissions be deemed to be a substitute for the requirement that
Tenant obtain Landlord's prior written consent to any such subletting or
assignment, and any such actions or omissions by the personnel of Landlord's
accounting department shall not be considered as a voluntary relinquishment by
Landlord of any of its rights hereunder nor shall any voluntary relinquishment
of such rights be inferred therefrom. Except as otherwise expressly set forth in
Section 16.6 below, for purposes hereof, in the event Tenant is a corporation,
partnership, joint venture, trust or other entity other than a natural person,
any change in the direct or indirect ownership of Tenant (whether pursuant to
one or more transfers) which results in a change of more than fifty percent
(50%) in the direct or indirect ownership of Tenant shall be deemed to be an
assignment within the meaning of this Section 16 and shall be subject to all the
provisions hereof. Any and all options, first rights of refusal, tenant
improvement allowances and other similar rights granted to Tenant in this Lease,
if any, shall not be assignable by Tenant (except for a permissible assignment
to a Related Entity, or to a non-related entity having a net worth of at least
Twenty Five Million Dollars ($25,000,000.00) and a net income of at least Four
Million Dollars ($4,000,000.00) for the most recent fiscal year, as part of this
Lease) unless expressly authorized in writing by Landlord. As Additional Rent
hereunder, Tenant shall pay to Landlord, within thirty (30) days of Landlord's
written demand therefor, a fee in the amount of five hundred dollars ($500) plus
Tenant shall reimburse Landlord for actual legal and other expenses incurred by
Landlord in connection with any actual or proposed assignment or subletting.
16.3 RECAPTURE: Except for an assignment to a Related Entity in
accordance with the provisions of Section 16 of the Lease, in the event the
sublease or assignment (i) by itself or taken together with prior sublease(s) or
partial assignment(s) covers or totals, as the case may be, more than
twenty-five percent (25%) of the rentable square feet of the Premises or (ii) is
for a term which by itself or taken together with then existing or pending
subleases or partial assignments is greater than fifty percent (50%) of the
period remaining in the Term of this Lease as of the time of the Proposed
Effective Date, then Landlord shall have the right, to be exercised by giving
written notice to Tenant within Landlord's Response Period or the Second
Response Period, to recapture the space described in the sublease or assignment.
If such recapture notice is given, it shall serve to terminate this Lease with
respect to the proposed sublease or assignment space, or, if the proposed
sublease or assignment space covers all the Premises, it shall serve to
terminate the entire Term of this Lease in either case, as of the Proposed
Effective Date. However, no termination of this Lease with respect to part or
all of the Premises shall become effective without the prior written consent,
where necessary, of the holder of each deed of trust encumbering the Premises or
any part thereof. If this Lease is terminated pursuant to the foregoing with
respect to less than the entire Premises, the Rent shall be adjusted on the
basis of the proportion of square feet retained by Tenant to the square feet
originally demised and this Lease as so amended shall continue thereafter in
full force and effect. Notwithstanding the foregoing, Landlord shall not have
the right to recapture the proposed sublease or assignment space if the proposed
sublease or assignment is to an entity or party not considered to be a Related
Entity under this Lease if (a) such non-related entity or party has a net worth
of at least Ten Million Dollars ($10,000,000.00) and a net income of at least
Three Million Dollars ($3,000,000.00) for the most recent fiscal year and (b)
such non-related entity or party agrees to pay ninety percent (90%) of the then
Fair Rental Value (as such term is defined in Addendum 1 hereto) of the proposed
assignment or sublease space; provided, however, that ninety percent (90%) of
Fair Rental Value shall not be less than the Base Rent and Adjustments to Base
Rent as set forth in the Basic Lease Information.
16.4 EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the event
of any sublease or
<PAGE> 24
assignment of all or any portion of the Premises where the rent or other
consideration provided for or with respect to the sublease or assignment either
initially or over the term of the sublease or assignment exceeds the Rent or pro
rata portion of the Rent, as the case may be, for such space reserved in the
Lease, Tenant shall pay the Landlord monthly, as Additional Rent, at the same
time as the monthly installments of Rent are payable hereunder, fifty percent
(50%) of the excess of each such payment of rent or other consideration in
excess of the Rent called for hereunder.
16.5 WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee, or failure by Landlord to take action against any assignee or
sublessee, Tenant agrees that Landlord may, at its option, proceed against
Tenant without having taken action against or joined such assignee or sublessee,
except that Tenant shall have the benefit of any indulgences, waivers and
extensions of time granted to any such assignee or sublessee.
16.6 RELATED ENTITY EXCEPTION: Notwithstanding anything to the contrary
contained in this Section 16 and so long as Tenant (a) is not in default of any
of its obligations under this Lease beyond any applicable notice and cure
periods, and (b) complies with all of the requirements of this Section 16.6,
Tenant shall not be required to obtain Landlord's prior written consent in any
of the following instances:
(i) to any assignment or sublease to any franchisee, joint
venture partner or any entity controlled or under common control with
Tenant or to a parent or wholly-owned subsidiary of Tenant (as such
terms may be defined in Rule 12b-2 of the Securities Exchange Act of
1934, as amended or supplemented from time to time), and in the case of
a sublease, the subtenants do not sublease more than an aggregate of
Five Thousand (5,000) rentable square feet of space, and each
subtenant's use of said subleased space conforms to the provisions of
this Lease, and in particular, Section 10 hereof; and
(ii) to any assignment to Tenant's successor in interest by
merger, consolidation, or acquisition of substantially all of Tenant's
assets so long as the successor in interest's net worth is equal to or
great than Twenty Five Million Dollars ($25,000,000.00) AND the
successor in interest's net income exceeds Four Million Dollars
($4,000,000.00) (both as reported in the successor in interest's
audited financial statements) for the most recent fiscal year, or, if
such successor in interest does not meet such financial criterion, then
such successor in interest delivers to Landlord a letter of credit in
the form and the amount then required by Landlord.
Tenant shall deliver to Landlord a photocopy of the assignment or
sublease on or about the effective date thereof. The assignee or subtenant shall
use the Premises in accordance with the uses permitted herein, and in
particular, under Section 10 hereof, and shall be subject to all other terms,
covenants and provisions of this Lease. As a condition precedent to any
assignment or sublease made under this Section 16.6, Tenant shall give Landlord
at least ten (10) days' written notice of its intention to assign this Lease or
to sublet all or any portion of the Premises, which notice shall include: (A)
notice that Tenant intends to assign or sublease under Section 16.6 of the
Lease; (B) the terms and conditions of the assignment or sublease; and (C)
sufficient financial information to enable Landlord to determine whether or not
the assignee or Tenant's successor in interest has satisfied the financial
criterion set forth in subsection (ii) above. No assignment or subletting under
or pursuant to the provisions of this Section 16.6 shall affect the continuing
primary liability of Tenant (which, following assignment, shall be joint and
several with the assignee) throughout the term of the Lease and any renewal
periods provided herein, and Tenant shall not be released from performing any of
the terms, covenants and conditions of this Lease throughout the term of the
Lease and any renewal periods provided herein. An assignee of Tenant under or
pursuant to the provisions of this Section 16.6 shall become directly liable to
Landlord for all obligations of Tenant hereunder, but no sublease or assignment
by Tenant under or pursuant to the provisions of this Section 16.6 shall relieve
Tenant of any liability under this Lease. For purposes of this Lease the term
"Related Entity" shall mean and refer to an entity which conforms with the
requirements of this Section 16.6.
17. AD VALOREM TAXES: Prior to delinquency, Tenant shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or
<PAGE> 25
installed on or in the Premises by, or on behalf of, Tenant; and if requested by
Landlord in writing, Tenant shall promptly deliver to Landlord copies of
receipts for payment of all such taxes and assessments. To the extent any such
taxes are not separately assessed or billed to Tenant, Tenant shall pay the
amount thereof as invoiced by Landlord.
18. SUBORDINATION: At the election of Landlord or any bona fide mortgagee or
deed of trust beneficiary with a lien on all or any portion of the Premises or
any ground lessor of the Lot, the rights of Tenant under this Lease and this
Lease shall be subject and subordinate at all times to: (i) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Building or the land upon which the Building is situated or both, and (ii) the
lien of any mortgage or deed of trust which may now exist or hereafter be
executed in any amount for which the Building, the Lot, ground leases or
underlying leases, or Landlord's interest or estate in any of said items is
specified as security. Notwithstanding the foregoing, Landlord or any such
ground lessor, mortgagee, or any beneficiary shall have the right to subordinate
or cause to be subordinated any such ground leases or underlying leases or any
such liens to this Lease. If any ground lease or underlying lease terminates for
any reason or any mortgage or deed of trust is foreclosed or a conveyance in
lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination and upon the request of such successor to Landlord, attorn to and
become the Tenant of the successor in interest to Landlord, provided such
successor in interest will not and agrees not to disturb Tenant's use, occupancy
or quiet enjoyment of the Premises so long as Tenant is not in default of the
terms and provisions of this Lease beyond any applicable cure periods. The
successor in interest to Landlord following foreclosure, sale or deed in lieu
thereof shall not be (a) liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) subject
to any offsets or defenses which Tenant might have against any prior lessor; (c)
bound by prepayment of more than one (1) month's Rent; or (d) liable to Tenant
for the Damage Deposit nor responsible to Tenant for the return or
relinquishment of the Letter of Credit if the Damage Deposit is not actually
received by, or the Letter of Credit is not actually assigned and delivered to,
such successor in interest. Landlord shall be responsible to Tenant for the
return of the Damage Deposit or relinquishment of the Letter of Credit, until
and unless Landlord actually transfers such Damage Deposit or Letter of Credit
to the successor in interest. Tenant covenants and agrees to execute (and
acknowledge if required by Landlord, any lender or ground lessor) and deliver,
within ten (10) days of a demand or request by Landlord and in the form
requested by Landlord, ground lessor, mortgagee or beneficiary, any additional
documents evidencing the priority or subordination of this Lease with respect to
any such ground leases or underlying leases or the lien of any such mortgage or
deed of trust. Tenant's failure to timely execute and deliver such additional
documents shall, at Landlord's option, constitute a material default hereunder.
Tenant hereby acknowledges that as of the date on which Landlord and Tenant
execute this Lease there is a deed of trust encumbering, and in force against,
the Premises (i.e. the Building and the Lot) in favor of Principal Mutual Life
Insurance Company (the "Current Lender"). As soon as practicable after the
parties execute this Lease but in no event later than forty-five (45) days
thereafter, Landlord shall cause the Current Lender to execute, acknowledge and
record in the official records of Alameda County, California (the "Official
Records") a subordination, non-disturbance and attornment agreement
substantially in the form of Exhibit J attached hereto, entitled "Subordination,
Non-Disturbance and Attornment Agreement." If Landlord at any time during the
Term of this Lease causes any portion of the Premises to be encumbered by a new
deed of trust or mortgage pursuant to which the beneficiary of such deed of
trust or mortgage is a party or entity other than the Current Lender, the
parties acknowledge and agree that the form and substance of any subordination,
non-disturbance and attornment agreement that may be requested to be executed
and delivered by Tenant in connection therewith will be the "Subordination,
Non-Disturbance and Attornment Agreement" attached to the Lease as Exhibit J. If
the foregoing occurs and/or if any party which acquires, or otherwise succeeds
to, Landlord's interest in the Premises, the Building or the Lot (including
without limitation, any ground lessee) encumbers or places a lien against any
portion of the Premises with a mortgage, deed of trust or similar security
instrument and the beneficiary thereof requires this Lease to be subordinated to
such encumbrance or lien, Landlord or the successor of Landlord will provide to
Tenant a subordination, non-disturbance and attornment agreement in the form
attached hereto as Exhibit J. Landlord or the successor of Landlord, the subject
beneficiary and Tenant shall cause any such subordination, non-disturbance and
attornment agreement to be executed, acknowledged and recorded concurrently
with, or as soon as practicable after, the execution and recordation of any such
lien, deed of
<PAGE> 26
trust or mortgage. In addition to the foregoing, if Landlord enters into a
ground lease with regard to the Building and/or the Lot and such ground lessee
requires this Lease to be subordinated to such ground lease, the ground lessee
and ground lessor will provide to Tenant a subordination, non-disturbance and
attornment agreement in the form attached hereto as Exhibit J.
19. RIGHT OF ENTRY: Tenant grants Landlord or its agents the right to enter the
Premises upon twenty-four (24) hours prior written or verbal notice (except in
an emergency, in which event no prior notice shall be required) for purposes of
inspection, exhibition, posting of notices, repair or alteration. It is further
agreed that Landlord shall have the right to use any and all means Landlord
deems necessary to enter the Premises in an emergency. Landlord shall have the
right to place "for rent" or "for lease" signs on the outside of the Building
and in the Lot during the last nine (9) months of the Lease Term. Landlord shall
also have the right to place industry standard "for sale" signs on the outside
of the Building and in the Lot. Tenant hereby waives any claim from damages or
for any injury or inconvenience to or interference with Tenant's business, or
any other loss occasioned thereby except for any claim for any of the foregoing
arising out of the gross negligence or willful misconduct of Landlord or its
authorized representatives.
20. ESTOPPEL CERTIFICATE: Tenant shall execute (and acknowledge if required by
any lender or ground lessor) and deliver to Landlord, within ten (10) business
days after Landlord provides such to Tenant, a statement in writing certifying
that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification), the date to which the Rent and other
charges are paid in advance, if any, acknowledging that there are not, to
Tenant's know-ledge, any uncured defaults on the part of Landlord hereunder or
specifying such defaults as are claimed, and such other matters as Landlord may
reasonably require. Any such statement may be conclusively relied upon by
Landlord and any prospective purchaser or encumbrancer of the Premises. Tenant's
failure to deliver such statement within such time shall be conclusive upon the
Tenant that (a) this Lease is in full force and effect, without modification
except as may be represented by Landlord; (b) there are no uncured defaults in
Landlord's performance; and (c) not more than one month's Rent has been paid in
advance. Failure by Tenant to so deliver such certified estoppel certificate
shall be a material default of the provisions of this Lease.
21. TENANT'S DEFAULT: The occurrence of any one or more of the following events
shall, at Landlord's option, constitute a material default by Tenant of the
provisions of this Lease:
21.1 The abandonment (as statutorily defined) of the Premises by
Tenant. Tenant agrees to notice and service of notice as provided for in this
Lease and waives any right to any other or further notice or service of notice
which Tenant may have under any statute or law now or hereafter in effect;
21.2 The failure by Tenant to make any payment of Rent, Additional Rent
or any other payment required hereunder within five (5) business days after
Landlord's delivery of written notice to Tenant that said payment is past due.
Tenant agrees that any such written notice delivered by Landlord, to the fullest
extent permitted by law, shall serve as the statutorily required notice under
applicable law. In addition to the foregoing, Tenant agrees to notice and
service of notice as provided for in this Lease;
21.3 The failure by Tenant to observe, perform or comply with any of
the conditions, covenants or provisions of this Lease (except failure to make
any payment of Rent and/or Additional Rent) and such failure is not cured within
(i) thirty (30) days of the date on which Landlord delivers written notice of
such failure to Tenant for all failures other than with respect to Hazardous
Materials (defined in Section 30 hereof) or Utility Charges, (ii) fifteen (15)
days of the date on which Landlord delivered written notice of such failure to
Tenant for all failures in any way related to Hazardous Materials, and (iii) ten
(10) days of the date on which Landlord delivered written notice of such failure
to Tenant for all failures in any way related to Utility Charges. However,
Tenant shall not be in default of its obligations hereunder if such failure
cannot reasonably be cured within such thirty (30), fifteen (15), or ten (10)
day period, as applicable, and Tenant promptly commences, and thereafter
diligently proceeds with same to completion, all actions necessary to cure such
failure as soon as is commercially reasonable, but in no event shall the
<PAGE> 27
completion of such cure be later than ninety (90) days after the date on which
Landlord delivers to Tenant written notice of such failure, unless Landlord,
acting reasonably and in good faith, otherwise expressly agrees in writing to a
longer period of time based upon the circumstances relating to such failure as
well as the nature of the failure and the nature of the actions necessary to
cure such failure;
21.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant's assets or this leasehold, Tenant's insolvency or
inability to pay Tenant's debts or failure generally to pay Tenant's debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant's assets, Tenant taking
any action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant's assets or
this leasehold;
21.5 The making of any material misrepresentation or material omission
by Tenant in any materials delivered by or on behalf of Tenant to Landlord
pursuant to this Lease.
22. REMEDIES FOR TENANT'S DEFAULT:
22.1 LANDLORD'S RIGHTS: In the event of Tenant's material default under
this Lease beyond any applicable cure periods as provided in Section 21 herein,
Landlord may terminate Tenant's right to possession of the Premises by any
lawful means in which case upon delivery of written notice by Landlord this
Lease shall terminate on the date specified by Landlord in such notice and
Tenant shall immediately surrender possession of the Premises to Landlord. In
addition, the Landlord shall have the immediate right of re-entry whether or not
this Lease is terminated, and if this right of re-entry is exercised following
abandonment (as statutorily defined) of the Premises by Tenant, Landlord may
consider any personal property belonging to Tenant and left on the Premises for
a period of time exceeding fifteen (15) days to also have been abandoned;
provided, however, that said fifteen (15) days is not in addition to the
statutorily required time period under applicable law. No re-entry or taking
possession of the Premises by Landlord pursuant to this Section 22 shall be
construed as an election to terminate this Lease unless a written notice of such
intention is given to Tenant. If Landlord relets the Premises or any portion
thereof, (i) Tenant shall be liable immediately to Landlord for all costs
Landlord incurs in reletting the Premises or any part thereof, including,
without limitation, broker's commissions, expenses of cleaning, redecorating,
and further improving the Premises and other similar industry standard costs
(collectively, the "Reletting Costs"), and (ii) the rent received by Landlord
from such reletting shall be applied to the payment of, first, any indebtedness
from Tenant to Landlord other than Base Rent, Operating Expenses, Tax Expenses,
Administrative Expenses and Utility Expenses; second, all costs including
maintenance, incurred by Landlord in reletting; and, third, Base Rent, Operating
Expenses, Tax Expenses, Administrative Expenses, Utility Expenses and all other
sums due under this Lease. Any and all of the Reletting Costs shall be fully
chargeable to Tenant and shall not be prorated or otherwise amortized in
relation to any new lease for the Premises or any portion thereof. After
deducting the payments referred to above, any sum remaining from the rental
Landlord receives from reletting shall be held by Landlord and applied in
payment of future Rent as Rent becomes due under this Lease. In no event shall
Tenant be entitled to any excess rent received by Landlord. Reletting may be for
a period shorter or longer than the remaining term of this Lease. No act by
Landlord other than giving written notice to Tenant shall terminate this Lease.
Acts of maintenance, efforts to relet the Premises or the appointment of a
receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a termination of Tenant's right to possession. So
long as this Lease is not terminated, Landlord shall have the right to remedy
any default of Tenant, to maintain or improve the Premises, to cause a receiver
to be appointed to administer the Premises and new or existing subleases and to
add to the Rent payable hereunder all of Landlord's reasonable costs in so
doing, with interest at the maximum rate permitted by law from the date of such
expenditure. Landlord shall use all commercially reasonable efforts to mitigate
its damages hereunder.
<PAGE> 28
22.2 DAMAGES RECOVERABLE: If Tenant breaches this Lease and abandons
the Premises before the end of the Term, or if Tenant's right to possession is
terminated by Landlord because of a breach or default under this Lease, then in
either such case, Landlord may recover from Tenant all damages suffered by
Landlord as a result of Tenant's failure to perform its obligations hereunder,
including, but not limited to, the portion of any broker's or leasing agent's
commission incurred with respect to the leasing of the Premises to Tenant for
the balance of the Term of the Lease remaining after the date on which Tenant is
in default of its obligations hereunder, and all Reletting Costs, and the worth
at the time of the award (computed in accordance with paragraph (3) of
Subdivision (a) of Section 1951.2 of the California Civil Code) of the amount by
which the Rent then unpaid hereunder for the balance of the Lease Term exceeds
the amount of such loss of Rent for the same period which Tenant proves could be
reasonably avoided by Landlord and in such case, Landlord prior to the award,
may relet the Premises for the purpose of mitigating damages suffered by
Landlord because of Tenant's failure to perform its obligations hereunder;
provided, however, that even though Tenant has abandoned the Premises following
such breach, this Lease shall nevertheless continue in full force and effect for
as long as Landlord does not terminate Tenant's right of possession, and until
such termination, Landlord shall have the remedy described in Section 1951.4 of
the California Civil Code (Landlord may continue this Lease in effect after
Tenant's breach and abandonment and recover Rent as it becomes due, if Tenant
has the right to sublet or assign, subject only to reasonable limitations) and
may enforce all its rights and remedies under this Lease, including the right to
recover the Rent from Tenant as it becomes due hereunder. The "worth at the time
of the award" within the meaning of Subparagraphs (a)(1) and (a)(2) of Section
1951.2 of the California Civil Code shall be computed by allowing interest at
the rate of ten percent (10%) per annum. Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of any default of Tenant
hereunder.
22.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and remedies
of Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditor's rights generally.
22.4 WAIVER OF A TENANT DEFAULT: The waiver by Landlord of any default
of any provision of this Lease shall not be deemed or construed a waiver of any
other default by Tenant hereunder or of any subsequent default of this Lease,
except for the default specified in the waiver.
23. HOLDING OVER: If Tenant holds possession of the Premises after the
expiration of the Term of this Lease with Landlord's consent, Tenant shall
become a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during such hold over period shall be 150% of the
Base Rent due on the last month of the Lease Term, payable in advance on or
before the first day of each month, unless otherwise agreed by Landlord and
Tenant in writing. Acceptance by Landlord of the monthly Base Rent without the
additional fifty percent (50%) increase of Base Rent shall not be deemed or
construed as a waiver by Landlord of any of its rights to collect the increased
amount of the Base Rent as provided herein at any time. Such month-to-month
tenancy shall not constitute a renewal or extension for any further term. All
options, if any, granted under the terms of this Lease shall be deemed
automatically terminated and be of no force or effect during said month-to-month
tenancy. Termination of such tenancy shall occur by either Landlord or Tenant
giving written notice of termination to the other party at least thirty (30)
days prior to the effective date of termination. This paragraph shall not be
construed as Landlord's permission or lack of permission for Tenant to hold
over. Acceptance of Base Rent by Landlord following expiration or termination of
this Lease shall not constitute a renewal of this Lease.
24. LANDLORD'S DEFAULT: Landlord shall not be deemed in breach or "Default" of
this Lease unless Landlord fails within a reasonable time to perform an
obligation required to be performed by Landlord hereunder. For purposes of this
provision (except as otherwise set forth below), a reasonable time shall
<PAGE> 29
not be less than thirty (30) days after receipt by Landlord of written notice
specifying the nature of the obligation Landlord has not performed; provided,
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days, after receipt of written notice, is reasonably necessary for
its performance, then Landlord shall not be in breach or default of this Lease
if performance of such obligation is commenced within such thirty (30) day
period and thereafter diligently pursued to completion. In the event of a
Default (i.e., a breach or default by Landlord of its obligations beyond the
notice and cure periods specified herein) by Landlord of its obligations under
this Lease, Tenant may exercise the rights conferred upon Tenant in Section 42
hereof. Notwithstanding the foregoing, if the obligation of Landlord in question
is to repair the structural components of the roof (for which Landlord is
expressly responsible under Section 12.3 of this Lease) because the condition
thereof, through no fault of Tenant or Tenant's Representatives, is causing
leakage of water into the Premises, Landlord shall respond within five (5)
business days after Landlord's receipt of a written demand from Tenant for
repairs to be made. Should Landlord fail to commence any such required roof
repairs within five (5) business days, and diligently pursue the same to
completion, then Tenant shall have the right to cause such repairs to be made at
Landlord's expense. In such event, Tenant shall deliver to Landlord a written
demand for the actual reasonable costs incurred by Tenant therefor (for purposes
hereof, "actual reasonable costs" shall include costs incurred for overtime
and/or expedited services to the extent reasonably appropriate given the damage
sustained to the Premises) together with written documentation evidencing such
costs and Landlord shall pay to Tenant such actual reasonable costs; provided,
if Landlord fails to pay to Tenant the undisputed amount of such actual
reasonable costs for said roof repairs within thirty (30) days of Landlord's
receipt of Tenant's written demand therefor, thereafter Tenant may pursue all
remedies available at law or in equity with respect thereto. If there exists a
good faith dispute between the parties regarding any portion of such actual
reasonable costs for said roof repairs, the parties shall meet, confer and
promptly resolve any such dispute.
25. PARKING: Tenant shall have the right to use on an exclusive basis all
parking spaces on the Lot during the Term of this Lease. Landlord shall exercise
reasonable efforts to insure that such spaces are available to Tenant for its
use, but Landlord shall not be required to enforce Tenant's right to use the
same.
26. SALE OF PREMISES: In the event of any sale of the Premises by Landlord or
the cessation otherwise of Landlord's interest therein, Landlord shall be and is
hereby entirely released from any and all of its obligations to perform or
further perform under this Lease and from all liability hereunder accruing from
or after the date of such sale or transfer; and the purchaser, at such sale or
any subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any and
all of the covenants and obligations of the Landlord under this Lease. For
purposes of this Section 26, the term "Landlord" means only the owner and/or
agent of the owner as such parties exist as of the date on which Tenant executes
this Lease. A ground lease or similar long term lease by Landlord of the entire
Building shall be deemed a sale within the meaning of this Section 26. Tenant
agrees to attorn to such new owner provided such new owner agrees not to disturb
Tenant's use, occupancy or quiet enjoyment of the Premises so long as Tenant is
not in default of any of the provisions of this Lease beyond applicable cure
periods.
27. WAIVER: No delay or omission in the exercise of any right or remedy of
either party on any default by the other party shall impair such a right or
remedy or be construed as a waiver. The subsequent acceptance of Rent by
Landlord after default by Tenant of any covenant or term of this Lease shall not
be deemed a waiver of such default, other than a waiver of timely payment for
the particular Rent payment involved, and shall not prevent Landlord from
maintaining an unlawful detainer or other action based on such breach. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
Rent and other sums due hereunder shall be deemed to be other than on account of
the earliest Rent or other sums due, nor shall any endorsement or statement on
any check or accompanying any check or payment be deemed an accord and
satisfaction; and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or other sum or pursue any
other remedy provided in this Lease. No failure, partial exercise or delay on
the part of either party in exercising any right, power
<PAGE> 30
or privilege hereunder shall operate as a waiver thereof.
28. CASUALTY DAMAGE: If the Premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give prompt written notice thereof to
Landlord. In case the Building shall be so damaged by fire or other casualty
that fifty percent (50%) or more of the Building requires substantial alteration
or reconstruction, in Landlord's reasonable opinion, Landlord or Tenant may
terminate this Lease by notifying the other party in writing of such termination
within ninety (90) days after the date of such damage, in which event the Rent
shall be abated as of the date of such damage but only to the extent and during
the time period Tenant is not reasonably able, in Tenant's good faith business
judgment, to conduct its operations in the Building during such ninety (90) day
period. If the Building or any part thereof shall be damaged by fire or other
casualty such that the reparation of such damage or casualty shall require more
than nine (9) months to complete [subject to extension for delays attributable
to Tenant's or any of Tenant's Representatives' acts or omissions (collectively,
"Tenant Delays"), or to acts or events beyond Landlord's control including, but
not limited to, acts of God, earthquakes, strikes, lockouts, boycotts,
discontinuance of any utility or other service required for performance of the
reparation work, moratoriums, governmental agencies, delays on the part of
governmental agencies, weather, and the lack of availability or shortage of
specialized materials used in the construction of the Building (collectively,
"Force Majeure Delays")], then either Tenant or Landlord may terminate this
Lease by notifying the other party of such election to terminate this Lease
within thirty (30) days after the date on which it is determined by Landlord of
the length of time necessary to substantially complete such repairs, in which
event the Rent shall be abated as of the date of such damage but only to the
extent and during the time period Tenant is not reasonably able, in Tenant's
good faith business judgment, to conduct its operations in the damaged portion
of the Building. Landlord shall notify Tenant in writing of the determination of
the percentage of the Building damaged or the length of time to complete the
reparation of such damage as soon as reasonably possible after Landlord is
notified in writing of the damage, but in all events within ninety (90) days of
Landlord's receipt of such notification from Tenant in writing. If neither party
exercises their rights to so elect to terminate this Lease in accordance with
the aforesaid provisions, and provided insurance proceeds are available to fully
repair the damage (excluding any deductible), Landlord shall within ninety (90)
days after the date of such damage commence to repair and restore the Building
and shall proceed with reasonable diligence to restore the Building (except that
Landlord shall not be responsible for any Tenant Delays or any Force Majeure
Delays and all time periods for performance by Landlord shall be extended
commensurately by the period of time attributable to such delays) to
substantially the same condition in which it was immediately prior to the
happening of the casualty; provided, Landlord shall not be required to rebuild,
repair, or replace any part of Tenant's furniture, furnishings, fixtures,
equipment removable by Tenant, the Tenant Improvements (other than the upgrade
for the fire protection system as set forth in Exhibit B hereto) or any other
improvements, alterations or additions installed by or for the benefit of Tenant
under the provisions of this Lease, or Tenant's Initial Alterations. Landlord
shall not in any event be required to spend for such work an amount in excess of
the insurance proceeds (excluding any deductible) actually received by Landlord
as a result of the fire or other casualty. Landlord shall not be liable for any
inconvenience or annoyance to Tenant, injury to the business of Tenant, loss of
use of any part of the Premises by the Tenant or loss of Tenant's personal
property resulting in any way from such damage or the repair thereof, except
that, subject to the provisions of the next sentence, Landlord shall allow
Tenant a fair diminution of Rent during the time and to the extent the Building
is unfit for occupancy. Notwithstanding anything to the contrary contained
herein, if the Building or any portion thereof be damaged by fire or other
casualty resulting from the intentional or negligent acts or omissions of Tenant
or any of Tenant's Representatives, (i) the Rent shall not be diminished during
the repair of such damage, (ii) Tenant shall not have any right to terminate
this Lease due to the occurrence of such casualty or damage, and (iii) Tenant
shall be liable to Landlord for the cost and expense of the repair and
restoration of all or any portion of the Building caused thereby (including,
without limitation, any deductible) to the extent such cost and expense is not
covered by insurance proceeds. In the event the holder of any indebtedness
secured by the Building requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within thirty (30) days after
the date of notice to Tenant of any such event, whereupon all rights and
obligations shall cease and terminate hereunder except for those obligations
expressly intended to survive any such termination of this Lease. Except as
otherwise provided in this Section 28, Tenant hereby
<PAGE> 31
waives the provisions of Sections 1932(2.), 1933(4.), 1941 and 1942 of the
California Civil Code.
29. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose ("Condemned"), then Tenant or
Landlord may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent shall
be adjusted to the date of termination. Tenant shall not because of such
condemnation assert any claim against Landlord or the condemning authority for
any compensation because of such condemnation, and Landlord shall be entitled to
receive the entire amount of any award without deduction for any estate of
interest or other interest of Tenant; provided, however, the foregoing
provisions shall not preclude Tenant, at Tenant's sole cost and expense, from
obtaining any separate award to Tenant for loss of or damage to Tenant's trade
fixtures, equipment and removable personal property or for damages for cessation
or interruption of Tenant's business provided such award is separate from
Landlord's award and provided further such separate award does not diminish nor
impair the award otherwise payable to Landlord. In addition to the foregoing,
Tenant shall be entitled to seek compensation for the relocation costs
recoverable by Tenant pursuant to the provisions of California Government Code
Section 7262. If neither party elects to terminate this Lease, Landlord shall,
if necessary, promptly proceed to restore the Building to substantially the same
condition then existing prior to such partial condemnation, allowing for the
reasonable effects of such partial condemnation, and a proportionate allowance
shall be made to Tenant, as solely determined by Landlord, for the Rent
corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of such partial condemnation and
restoration. Landlord shall not be required to spend funds for restoration in
excess of the amount received by Landlord as compensation awarded.
30. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS:
30.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to executing
this Lease, Tenant has completed, executed and delivered to Landlord Tenant's
initial Hazardous Materials Disclosure Certificate (the "Initial HazMat
Certificate"), a copy of which is attached hereto as Exhibit G and incorporated
herein by this reference. Tenant covenants, represents and warrants to Landlord
that, to the best of Tenant's knowledge after due inquiry, the information on
the Initial HazMat Certificate is true and correct and accurately describes the
use(s) of Hazardous Materials which will be made and/or used on the Premises by
Tenant. Within fifteen (15) days of Landlord's written request therefor, Tenant
shall commencing with the date which is one year from the Commencement Date and
continuing every year thereafter, complete, execute, and deliver to Landlord, a
Hazardous Materials Disclosure Certificate ("the "HazMat Certificate")
describing Tenant's present use of Hazardous Materials on the Premises, and any
other reasonably necessary documents related to such Hazardous Materials as
requested by Landlord. The HazMat Certificate required hereunder shall be in
substantially the form as that which is attached hereto as Exhibit E.
30.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease, the term
Hazardous Materials shall mean and include (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
become regulated by any Environmental Laws; (b) petroleum, petroleum by
products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; or (g) any other material, waste or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as all such
terms are used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below). For purposes of this Lease, the term
"Hazardous Materials" shall not include nominal amounts of ordinary household
cleaners, office supplies and janitorial supplies which are not actionable under
any Environmental Laws.
30.3 PROHIBITION; ENVIRONMENTAL LAWS: Except for and to the extent of
the type and quantities of Hazardous Materials specified in the Initial HazMat
Certificate, Tenant shall not be entitled to use nor store any Hazardous
Materials on, in, or about any portion of the Premises without, in each
instance, obtaining Landlord's prior written consent thereto. If Landlord
consents to any such usage or storage, then
<PAGE> 32
Tenant shall be permitted to use and/or store only those Hazardous Materials
that are necessary for Tenant's business and to the extent disclosed in the
HazMat Certificate and as expressly approved by Landlord in writing, provided
that such usage and storage is only to the extent of the quantities of Hazardous
Materials as specified in the then applicable HazMat Certificate as expressly
approved by Landlord and provided further that such usage and storage is in full
compliance with any and all local, state and federal environmental, health
and/or safety-related laws, statutes, orders, standards, courts' decisions,
ordinances, rules and regulations (as interpreted by judicial and administrative
decisions), decrees, directives, guidelines, permits or permit conditions,
currently existing and as amended, enacted, issued or adopted in the future
which are or become applicable to Tenant or all or any portion of the Premises
(collectively, the "Environmental Laws"). Tenant agrees that any material
changes to the type and/or quantities of Hazardous Materials specified in the
most recent HazMat Certificate may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord's sole
discretion. Tenant shall not be entitled nor permitted to install any tanks
under, on or about the Premises for the storage of Hazardous Materials without
the express written consent of Landlord, which may be given or withheld in
Landlord's sole discretion. Landlord shall have the right at all times during
the Term of this Lease to (i) inspect the Premises upon twenty-four (24) hours'
prior notice, except in the event of an emergency and/or an actual spill or
release, in which event(s) no prior notice shall be required, (ii) conduct tests
and investigations to determine whether Tenant is in compliance with the
provisions of this Section 30, and (iii) request lists of all Hazardous
Materials used, stored or otherwise located on, under or about any portion of
the Premises and/or the Lot thereof. The cost of all such inspections, tests and
investigations shall be proportionately borne by Tenant commensurate with the
extent of Hazardous Materials revealed by any such inspection, test or
investigation (such determination to be made by one or more environmental
consultants selected by Landlord) to be present in, on or about the Premises
and/or the Lot thereof due to the acts or omissions of Tenant or any of Tenant's
Representatives and all other costs and expenses shall be borne by parties other
than Tenant. The aforementioned rights granted herein to Landlord and its
representatives shall not create (a) a duty on Landlord's part to inspect, test,
investigate, monitor or otherwise observe the Premises or the activities of
Tenant and Tenant's Representatives with respect to Hazardous Materials,
including without limitation, Tenant's operation, use and any remediation
related thereto, or (b) liability on the part of Landlord and its
representatives for Tenant's use, storage, disposal or remediation of Hazardous
Materials, it being understood that Tenant shall be solely responsible for all
liability in connection therewith.
30.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials on, under or about any portion of the Premises or in any of
the Lot thereof, provided, however, that Tenant has actual knowledge of such
event(s). Tenant, at its sole cost and expense, covenants and warrants to
promptly investigate, clean up, remove, restore and otherwise remediate
(including, without limitation, preparation of any feasibility studies or
reports and the performance of any and all closures) any spill, release,
discharge, disposal, emission, migration or transportation of Hazardous
Materials arising from or related to the intentional or negligent acts or
omissions of Tenant or Tenant's Representatives such that the affected portions
of the Premises and any adjacent property are returned to the condition existing
prior to the appearance of such Hazardous Materials. Any such investigation,
clean up, removal, restoration and other remediation shall only be performed
after Tenant has obtained Landlord's prior written consent, which consent shall
not be unreasonably withheld so long as such actions would not potentially have
a material adverse long-term or short-term effect on any portion of the
Premises. Notwithstanding the foregoing, Tenant shall be entitled to respond
immediately to an emergency without first obtaining Landlord's prior written
consent. Tenant, at its sole cost and expense, shall conduct and perform, or
cause to be conducted and performed, all closures as required by any
Environmental Laws or any agencies or other governmental authorities having
jurisdiction thereof. If Tenant fails to so promptly investigate, clean up,
remove, restore, provide closure or otherwise so remediate, Landlord may, but
without obligation to do so, take any and all steps necessary to rectify the
same and Tenant shall promptly reimburse Landlord, upon demand, for all costs
and expenses to Landlord of performing investigation, clean up, removal,
restoration, closure and remediation work. All such work undertaken by Tenant,
as required herein, shall be performed in such a manner so as to enable Landlord
to make full economic use of the Premises after the satisfactory completion of
such work.
<PAGE> 33
30.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's obligations as
set forth hereinabove, Tenant and Tenant's officers and directors agree to, and
shall, protect, indemnify, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord and the other Indemnitees harmless from and against
any and all claims, judgments, damages, penalties, fines, liabilities, losses
(including, without limitation, diminution in value of any portion of the
Premises, damages for the loss of or restriction on the use of rentable or
usable space, and from any adverse impact of Landlord's marketing of any space
within the Building), suits, administrative proceedings and costs (including,
but not limited to, reasonable attorneys' and consultant fees and court costs)
arising at any time during or after the Term of this Lease in connection with or
related to, directly or indirectly, the use, presence, transportation, storage,
disposal, migration, removal, spill, release or discharge of Hazardous Materials
on, in or about any portion of the Premises as a result (directly or indirectly)
of the intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives. Neither the written consent of Landlord to the presence, use or
storage of Hazardous Materials in, on, under or about any portion of the
Premises nor the strict compliance by Tenant with all Environmental Laws shall
excuse Tenant and Tenant's officers and directors from its obligations of
indemnification pursuant hereto. Tenant shall not be relieved of its
indemnification obligations under the provisions of this Section 30.5 due to
Landlord's status as either an "owner" or "operator" under any Environmental
Laws.
30.6 SURVIVAL: Tenant's obligations and liabilities pursuant to the
provisions of this Section 30 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition of
all or any portion of the Premises is not in compliance with the provisions of
this Lease with respect to Hazardous Materials, including without limitation all
Environmental Laws at the expiration or earlier termination of this Lease, then
in Landlord's sole discretion, Landlord may require Tenant to hold over
possession of the Premises until Tenant can surrender the Premises to Landlord
in the condition in which the Premises existed as of the Commencement Date and
prior to the appearance of such Hazardous Materials except for reasonable wear
and tear, including without limitation, the conduct or performance of any
closures as required by any Environmental Laws. For purposes hereof, the term
"reasonable wear and tear" shall not include any deterioration in the condition
or diminution of the value of any portion of the Premises in any manner
whatsoever related to directly, or indirectly, Hazardous Materials. Any such
holdover by Tenant will be with Landlord's consent and will otherwise be subject
to the provisions of Section 23 of this Lease, provided, however, that Tenant
shall not have the right to terminate until such time as all closure
documentation has been received by Landlord in form and substance acceptable to
Landlord.
30.7 TENANT'S EXCULPATION: Tenant shall not be liable for nor otherwise
obligated to Landlord under any provision of the Lease with respect to (i) any
claim (including without limitation, third-party claims), remediation
obligation, investigation obligation, liability, cause of action, attorney's
fees, consultants' cost, expense or damage resulting from any Hazardous Material
present in, on or about the Premises to the extent not caused nor otherwise
permitted, directly or indirectly, by Tenant or Tenant's Representatives; or
(ii) the removal, investigation, monitoring or remediation of any Hazardous
Material present in, on or about the Premises caused by any source, including
third parties other than Tenant or any of Tenant's Representatives, as a result
of or in connection with the acts or omissions of persons other than Tenant or
Tenant's Representatives; provided, however, Tenant shall be fully liable for
and otherwise obligated to Landlord under the provisions of this Lease for all
liabilities, costs, damages, penalties, claims, judgments, expenses (including
without limitation, attorneys' and experts' fees and costs) and losses to the
extent (a) Tenant or any of Tenant's Representatives contributes to the presence
of such Hazardous Materials or Tenant and/or any of Tenant's Representatives
exacerbates the conditions caused by such Hazardous Materials, or (b) Tenant
and/or Tenant's Representatives allows or permits persons over which Tenant or
any of Tenant's Representatives has control and/or for which Tenant or any of
Tenant's Representatives are legally responsible for, to cause such Hazardous
Materials to be present in, on, under, through or about any portion of the
Premises or does not take all reasonably appropriate actions to prevent such
persons over which Tenant or any of Tenant's Representatives has control and/or
for which Tenant or any of Tenant's Representatives are legally responsible from
causing the presence of Hazardous Materials in, on, under, through or about any
portion of the Premises.
<PAGE> 34
31. FINANCIAL STATEMENTS: Tenant, for the reliance of Landlord, any lender
holding or anticipated to acquire a lien upon any portion of the Premises or any
prospective purchaser of any portion of the Premises, within ten (10) days after
Landlord's request therefor, but not more often than once annually so long as
Tenant is not in default of this Lease, shall deliver to Landlord the most
recent audited annual financial statements of Tenant which statements shall be
prepared or compiled by a certified public accountant and shall present fairly
the financial condition of Tenant at such dates and the result of its operations
and changes in its financial positions for the periods ended on such dates. If
an audited financial statement has not been prepared, Tenant shall provide
Landlord with an unaudited annual financial statement and/or such other
information, the type and form of which are acceptable to Landlord in Landlord's
reasonable discretion, which reflects the financial condition of Tenant. All
assignees and subtenants of Tenant, including without limitation, all Related
Entities of Tenant, shall comply with the provisions of this Section 31.
32. GENERAL PROVISIONS:
32.1 TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
32.2 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
32.3 RECORDATION. Concurrently with Landlord's and Tenant's execution
of this Lease, Landlord and Tenant shall execute and have acknowledged a short
form memorandum of this Lease (the "Memorandum"). As soon as reasonably
practicable after the parties' delivery to Landlord of the signed Memorandum,
Landlord shall record the Memorandum. Tenant shall not record this Lease.
32.4 LANDLORD'S PERSONAL LIABILITY. The liability of Landlord (which,
for purposes of this Lease, shall include Landlord and the owner of the Building
if other than Landlord) to Tenant for any default by Landlord under the terms of
this Lease shall be limited to the actual interest of Landlord and its present
or future partners or members in the Premises, and Tenant agrees to look solely
to the Premises for satisfaction of any liability and shall not look to other
assets of Landlord nor seek any recourse against the assets of the individual
partners, members, directors, officers, shareholders, agents or employees of
Landlord (including without limitation, any property management company of
Landlord); it being intended that Landlord and the individual partners, members,
directors, officers, shareholders, agents and employees of Landlord (including
without limitation, any property management company of Landlord) shall not be
personally liable in any manner whatsoever for any judgment or deficiency. The
liability of Landlord under this Lease is limited to its actual period of
ownership of title to the Premises, and Landlord shall be automatically released
from further performance under this Lease upon transfer of Landlord's interest
in the Premises or the Building, except for obligations or liabilities accruing
during Landlord's actual period of ownership prior to the date of transfer of
ownership.
32.5 SEPARABILITY. Any provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provision shall remain in full force and
effect.
32.6 CHOICE OF LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.
32.7 ATTORNEYS' FEES. In the event any dispute between the parties
results in litigation or other proceeding, the prevailing party shall be
reimbursed by the party not prevailing for all reasonable costs and expenses,
including, without limitation, reasonable attorneys' and experts' fees and costs
incurred by the prevailing party in connection with such litigation or other
proceeding, and any appeal thereof. Such costs, expenses and fees shall be
included in and made a part of the judgment recovered by the prevailing party,
if any.
<PAGE> 35
32.8 ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party, that is not in writing and
signed by all parties to this Lease, shall be binding.
32.9 WARRANTY OF AUTHORITY. Each person executing this Lease on behalf
of a party represents and warrants that (1) such person is duly and validly
authorized to do so on behalf of the entity it purports to so bind, and (2) if
such party is a partnership, corporation or trustee, that such partnership,
corporation or trustee has full right and authority to enter into this Lease and
perform all of its obligations hereunder. Each party hereby warrants that this
Lease is valid and binding upon itself and enforceable against itself in
accordance with its terms.
32.10 NOTICES. Any and all notices and demands required or permitted to
be given hereunder to Landlord shall be in writing and shall be sent: (a) by
United States mail, certified and postage prepaid; or (b) solely for purposes
associated with any legal proceeding involving or relating to this Lease, by
personal delivery; or (c) by overnight courier, addressed to Landlord at 101
Lincoln Centre Drive, Fourth Floor, Foster City, California 94404-1167. Any and
all notices and demands required or permitted to be given hereunder to Tenant
shall be in writing and shall be sent: (i) by United States mail, certified and
postage prepaid; or (ii) solely for purposes associated with any legal
proceeding involving or relating to this Lease, by personal delivery; or (iii)
by overnight courier, all of which shall be addressed to Tenant at the Premises.
Notice and/or demand shall be deemed given upon the earlier of actual receipt or
the third day following deposit in the United States mail. Any notice or
requirement of service required by any statute or law now or hereafter in
effect, including, but not limited to, California Code of Civil Procedure
Sections 1161, 1161.1, and 1162 (including any amendments, supplements or
substitutions thereof), is hereby waived by Tenant.
32.11 JOINT AND SEVERAL. If Landlord or Tenant consists of more than
one person or entity, the obligations of all such persons or entities shall be
joint and several.
32.12 COVENANTS AND CONDITIONS. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.
32.13 WAIVER OF JURY TRIAL. The parties hereto shall and they hereby do
waive trial by jury in any action, proceeding or counterclaim brought by either
of the parties hereto against the other on any matters whatsoever arising out of
or in any way related to this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Premises, the Building or the Park, and/or any
claim of injury, loss or damage.
32.14 COUNTERCLAIMS. In the event Landlord commences any proceedings
for nonpayment of Rent, Additional Rent, or any other sums or amounts due
hereunder, Tenant shall not interpose any counterclaim of whatever nature or
description in any such proceedings, unless such counterclaim must, as a matter
of law, be joined with Landlord's proceeding; provided, however, nothing
contained herein shall be deemed or construed as a waiver of the Tenant's right
to assert such claims in any separate action brought by Tenant or the right to
offset the amount of any final judgment owed by Landlord to Tenant.
32.15 MERGER. The voluntary or other surrender of this Lease by Tenant,
the mutual termination or cancellation hereof by Landlord and Tenant, or a
termination of this Lease by Landlord for a material default by Tenant
hereunder, shall not work a merger, and, at the sole option of Landlord, (i)
shall terminate all or any existing subleases or subtenancies, or (ii) may
operate as an assignment to Landlord of any or all of such subleases or
subtenancies. Landlord's election of either or both of the foregoing options
shall be exercised by delivery by Landlord of written notice thereof to Tenant
and all known subtenants under any sublease.
33. SIGNS: All signs and graphics of every kind visible in or from public view
or corridors or the exterior of the Premises shall be subject to Landlord's
prior written approval and any applicable
<PAGE> 36
governmental laws, ordinances, and regulations, which approval shall not be
unreasonably withheld or delayed. Tenant shall remove all such signs and
graphics prior to the termination of this Lease. Such installations and removals
shall be made in a manner as to avoid damage or defacement of the Premises; and
Tenant shall repair any damage or defacement, including without limitation,
discoloration caused by such installation or removal. If Tenant fails to do so
upon the expiration or earlier termination of this Lease, Landlord shall have
the right, at its option, to deduct from the Damage Deposit such sums as are
reasonably necessary and actually expended to remove such signs, including, but
not limited to, the costs and expenses associated with any repairs necessitated
by such removal. Notwithstanding the foregoing, in no event shall any neon,
flashing or moving sign(s) or banners be permitted hereunder. Tenant further
agrees to maintain any such sign, awning, canopy, advertising matter, lettering,
decoration or other thing as may be approved in good condition and repair at all
times.
34. MORTGAGEE PROTECTION: Upon any default on the part of Landlord, Tenant will
give written notice by registered or certified mail to any beneficiary of a deed
of trust or mortgagee of a mortgage covering the Premises who has provided
Tenant with a subordination, non-disturbance and attornment agreement in
accordance with the provisions of Section 18 herein, together with an address
for receiving notice, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default (which in no event shall be more than
seventy-five (75) days). If such default cannot be cured within such time
period, then such additional time as may be reasonably necessary will be given
to such beneficiary or mortgagee to effect such cure so long as such beneficiary
or mortgagee has commenced the cure within the original time period and
thereafter diligently pursues such cure to completion, in which event this Lease
shall not be terminated while such cure is being diligently pursued. Tenant
agrees that each lender to whom this Lease has been assigned by Landlord is an
express third party beneficiary hereof. Tenant shall not make any prepayment of
Rent more than one (1) month in advance without the prior written consent of
each such lender. Tenant waives the collection of any deposit from such
lender(s) or any purchaser at a foreclosure sale of such lender(s)' deed of
trust unless the lender(s) or such purchaser shall have actually received and
not refunded the deposit. Tenant agrees to make all payments under this Lease to
the lender with the most senior encumbrance upon receiving a direction, in
writing, to pay said amounts to such lender. Tenant shall comply with such
written direction to pay without determining whether an event of default exists
under such lender's loan to Landlord.
35. QUITCLAIM: Upon any termination of this Lease, Tenant shall, at Landlord's
request, execute, have acknowledged and deliver to Landlord a quitclaim deed of
Tenant's interest in and to the Premises. If Tenant fails to so deliver to
Landlord such a quitclaim deed, Tenant hereby agrees that Landlord shall have
the full authority and right to record such a quitclaim deed signed only by
Landlord and such quitclaim deed shall be deemed conclusive and binding upon
Tenant.
36. Intentionally omitted
37. REPRESENTATIONS OF TENANT: Tenant hereby represents to Landlord, for the
express benefit of Landlord, that Tenant has undertaken a complete and
independent evaluation of the risks inherent in the execution of this Lease and
the operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Tenant has elected to enter into this Lease and
hereby assumes all risks with respect thereto. Tenant hereby further represents
to Landlord, for the express benefit of Landlord, that in entering into this
Lease, Tenant has not relied upon any statement, fact, promise or representation
(whether express or implied, written or oral) not specifically set forth herein
in writing and that any statement, fact, promise or representation (whether
express or implied, written or oral) made at any time to Tenant, which is not
expressly incorporated herein in writing, is hereby waived by Tenant.
38. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Landlord and Tenant hereby
agree and acknowledge that the Premises may be subject to the requirements of
the Americans with Disabilities Act,
<PAGE> 37
a federal law codified at 42 U.S.C. 12101 et seq, including, but not limited to
Title III thereof, all regulations and guidelines related thereto, together with
any and all laws, rules, regulations, ordinances, codes and statutes now or
hereafter enacted by local or state agencies having jurisdiction thereof,
including all requirements of Title 24 of the State of California, as the same
may be in effect on the date of this Lease and may be hereafter modified,
amended or supplemented (collectively, the "ADA"). Any Tenant Improvements to be
constructed hereunder shall be in compliance with the requirements of the ADA,
and all costs incurred for purposes of compliance therewith shall be a part of
and included in the costs of the Tenant Improvements. Tenant shall be solely
responsible for conducting its own independent investigation of this matter and
for ensuring that the design of all Tenant Improvements strictly comply with all
requirements of the ADA. Subject to reimbursement pursuant to Section 7 of the
Lease, if any barrier removal work or other work is required to the Premises
under the ADA, then such work shall be the responsibility of Landlord; provided,
if such work is required under the ADA as a result of Tenant's particular use of
the Premises or any work or alteration made to the Premises by or on behalf of
Tenant, then such work shall be performed by Landlord at the sole cost and
expense of Tenant. Except as otherwise expressly provided in this provision,
Tenant shall be responsible at its sole cost and expense for fully and
faithfully complying with all applicable requirements of the ADA, including
without limitation, not discriminating against any disabled persons in the
operation of Tenant's business in or about the Premises, and offering or
otherwise providing auxiliary aids and services as, and when, required by the
ADA. Within ten (10) days after receipt, Landlord and Tenant shall advise the
other party in writing, and provide the other with copies of (as applicable),
any notices alleging violation of the ADA relating to any portion of the
Premises; any claims made or threatened in writing regarding noncompliance with
the ADA and relating to any portion of the Premises; or any governmental or
regulatory actions or investigations instituted or threatened regarding
noncompliance with the ADA and relating to any portion of the Premises. Tenant
shall and hereby agrees to protect, defend (with counsel reasonably acceptable
to Landlord) and hold Landlord and the other Indemnitees harmless and indemnify
the Indemnitees from and against all liabilities, damages, claims, losses,
penalties, judgments, charges and expenses (including reasonable attorneys'
fees, costs of court and expenses necessary in the prosecution or defense of any
litigation including the enforcement of this provision) arising from or in any
way related to, directly or indirectly, Tenant's or Tenant's Representatives'
violation of the ADA. Tenant agrees that the obligations of Tenant herein shall
survive the expiration or earlier termination of this Lease.
39. BROKERAGE COMMISSION: Landlord and Tenant each represents and warrants for
the benefit of the other that it has had no dealings with any real estate
broker, agent or finder in connection with the Premises and/or the negotiation
of this Lease, except for the Broker(s) (as set forth on Page 1), and that it
knows of no other real estate broker, agent or finder who is or might be
entitled to a real estate brokerage commission or finder's fee in connection
with this Lease or otherwise based upon contacts between the claimant and
Tenant. Each party shall indemnify and hold harmless the other from and against
any and all liabilities or expenses arising out of claims made for a fee or
commission by any real estate broker, agent or finder in connection with the
Premises and this Lease other than Broker(s), if any, resulting from the actions
of the indemnifying party. Any real estate brokerage commission or finder's fee
payable to the Broker(s) in connection with this Lease shall only be payable and
applicable to the extent of the initial Term of the Lease and to the extent of
the Premises as same exist as of the date on which Tenant executes this Lease.
Unless expressly agreed to in writing by Landlord and Broker(s), no real estate
brokerage commission or finder's fee shall be owed to, or otherwise payable to,
the Broker(s) for any renewals or other extensions of the initial Term of this
Lease or for any additional space leased by Tenant other than the Premises as
same exists as of the date on which Tenant executes this Lease. Tenant further
represents and warrants to Landlord that Tenant will not receive (i) any portion
of any brokerage commission or finder's fee payable to the Broker(s) in
connection with this Lease or (ii) any other form of compensation or incentive
from the Broker(s) with respect to this Lease.
40. QUIET ENJOYMENT: Landlord covenants with Tenant, upon the paying of Rent and
observing and keeping the covenants, agreements and conditions of this Lease on
its part to be kept, and during the periods that Tenant is not otherwise in
default of any of the terms or provisions of this Lease beyond applicable cure
periods as provided in Section 21 herein, (i) that Tenant shall and may
peaceably and
<PAGE> 38
quietly hold, occupy and enjoy the Premises during the Term of this Lease, and
(ii) neither Landlord, nor any successor or assign of Landlord, shall disturb
Tenant's occupancy or enjoyment of the Premises.
41. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Tenant pursuant to this Lease, after Landlord's
notice and beyond applicable cure periods as provided in Section 21 herein,
and/or if the failure of Tenant relates to a matter which in Landlord's judgment
reasonably exercised is of an emergency nature and such failure shall remain
uncured for a period of time commensurate with such emergency, then Landlord
may, at Landlord's option without any obligation to do so, and in its sole but
reasonable discretion as to the necessity therefor, perform any such term,
provision, covenant or condition, or make any such payment and Landlord by
reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant. If
Landlord so performs any of Tenant's obligations hereunder, the full amount of
the cost and expense entailed or the payment so made or the amount of the loss
so sustained shall immediately be owing by Tenant to Landlord, and Tenant shall
promptly pay to Landlord upon demand, as Additional Rent, the full amount
thereof with interest thereon from the date of payment at the greater of (i) ten
percent (10%) per annum, or (ii) the highest rate permitted by applicable law.
42. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Landlord
shall fail to perform any of the terms, provisions, covenants or conditions
(other than those described in Sections 12.2 and 12.3 of this Lease) to be
performed or complied with by Landlord pursuant to this Lease, after the
expiration of all applicable cure periods for Landlord's and any mortgagee's
benefit as set forth in Sections 24 and 34 respectively and to the extent
applicable, then Tenant may, at Tenant's option without any obligation to do so,
after delivery to Landlord of an additional commercially reasonable advance
written notice, which advance notice shall not be less than an additional ten
(10) days, perform any such term, provision, covenant or condition. If Tenant so
performs any of Landlord's obligations hereunder, the full amount of the
reasonable cost and expense incurred by Tenant shall be owing by Landlord to
Tenant, and Landlord shall pay to Tenant the full undisputed amount thereof
within sixty (60) days of Landlord's receipt of Tenant's written demand and
accompanying invoices or other documentation therefor.
In addition, notwithstanding anything to the contrary contained in this
Lease, if Landlord shall fail to perform any of Landlord's repair and/or
maintenance obligations set forth under Sections 12.2 and 12.3 of this Lease,
and such failure is not cured within thirty (30) days of the date on which
Tenant delivers written notice of such failure to Landlord (or, if such failure
cannot reasonably be cured within such thirty (30) day period, then such
additional period as may be required, provided Landlord has promptly commenced
to cure and is diligently proceeding thereafter to complete such cure as soon as
is commercially reasonable, but in no event more than an additional one hundred
eighty (180) days), then Tenant may, at Tenant's option without any obligation
to do so, perform any such repair and/or maintenance obligation.
(Notwithstanding the foregoing, if the failure of Landlord relates to the
structural components of the roof because the condition thereof, through no
fault of Tenant or Tenant's Representatives, is causing leakage of water into
the Premises, then the provisions of Section 24 with respect thereto shall
apply). If Tenant so performs or causes to be performed any of Landlord's
obligations under Section 12.2, then Tenant shall pay the reasonable cost of
such repair and/or maintenance obligations directly and, accordingly, shall have
no obligation to reimburse Landlord in accordance with the provisions of Section
7 herein with respect thereto. If Tenant so performs or causes to be performed
any of Landlord's obligations under Section 12.3, then the full undisputed
amount of the cost and expense incurred by Tenant shall be owing by Landlord to
Tenant, and Landlord shall pay to Tenant the full amount thereof within sixty
(60) days of Landlord's receipt of Tenant's written demand and accompanying
invoices or other documentation therefor. Notwithstanding the foregoing, if any
such repair or maintenance is due solely to alterations or modifications to the
Premises made or caused by Tenant or Tenant's Representatives, then the
provisions of this Section 42 shall not apply and Tenant shall have no rights
hereunder.
<PAGE> 39
Notwithstanding the foregoing, if there exists a good faith dispute
between the parties regarding any portion of such actual reasonable costs or
expenses, then the parties shall meet, confer and promptly resolve any such
dispute.
43. TENANT EQUIPMENT FINANCING: Landlord hereby acknowledges that Tenant has
informed Landlord that Tenant intends to obtain financing from one or more
lenders for equipment to be used in Tenant's operations conducted within the
Premises (the "Equipment Financings"). Landlord hereby agrees to execute and
deliver to Tenant a waiver by Landlord in favor of each such lender of any
rights Landlord may have in and to such equipment, such waiver to be in
substantially the form of the Landlord's Waiver and Agreement, attached hereto
as Exhibit K and made a part hereof (the "Waiver"). Tenant shall not do any of
the following in connection with any such Equipment Financings: (i) record or
permit the recordation of the Waivers in the official records in the county in
which the Premises are located; and/or (ii) file any UCC-1 financing statements
with regard to such equipment in which reference is made to any portion of the
Premises which would have the effect of causing a lien to be placed against any
portion of the Premises. Tenant hereby agrees to immediately deliver to Landlord
written notice of the date on which any such Equipment Financing is fully paid
by Tenant to any such lender.
44. TENANT'S SATELLITE DISH: Tenant has advised Landlord that it desires to
install a satellite dish not more than eight (8) feet in diameter on the roof of
the Building (the "Satellite Dish"). Landlord and Tenant hereby covenant and
agree that the installation, repair, maintenance and replacement of the
Satellite Dish by Tenant shall be governed by, and in accordance with, the
provisions of Addendum 2 attached hereto, entitled "Agreement to Install
Satellite Antenna Receiving Dish."
IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced on Page 1 of this Lease.
TENANT:
Intelligent Systems for Retail, Inc.,
a California corporation, dba ISR
/S/ LOUIS H. BORDERS
- -------------------------------------
Louis H. Borders, President
/S/ DAVID S. ROCK
- -------------------------------------
David S. Rock, Secretary/Vice President, Retail
LANDLORD:
LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
By: LINCOLN COLISEUM, A California Limited Partnership
By: LPC MS, Inc.,
as agent for LINCOLN COLISEUM,
A California Limited Partnership
By: /S/
-------------------------------------
Senior Vice President
<PAGE> 40
By: PATRICIAN ASSOCIATES, INC.,
a California corporation
By: /S/ JOHN URBAN
--------------------------------------
Its: VICE PRESIDENT, COMMERCIAL REAL ESTATE
--------------------------------------
By: MICHAEL S. DUFFY
--------------------------------------
Its: VICE PRESIDENT
--------------------------------------
Date: April 6, 1998
<PAGE> 41
EXHIBIT A
PREMISES
This exhibit, entitled "Premises", is and shall constitute EXHIBIT A to that
certain Lease Agreement, dated for reference purposes as of April 1, 1998 (the
"Lease"), by and between LINCOLN COLISEUM DISTRIBUTION CENTER, A California
Limited Partnership ("Landlord"), and Intelligent Systems for Retail, a
California corporation, dba ISR ("Tenant"), for the leasing of certain premises
located at 5800 Coliseum Way, Oakland, California (the "Premises").
The Premises consist of the rentable square footage of space specified in the
Basic Lease Information and has the address specified in the Basic Lease
Information. The Building is a part of and is situated within the Lot specified
in the Basic Lease Information. The cross-hatched area depicts the Premises:
<PAGE> 42
EXHIBIT B TO LEASE AGREEMENT
TENANT IMPROVEMENTS
This exhibit, entitled "Tenant Improvements", is and shall constitute EXHIBIT B
to that certain Lease Agreement, dated for reference purposes as of April 1,
1998 (the "Lease"), by and between LINCOLN COLISEUM DISTRIBUTION CENTER, A
California Limited Partnership ("Landlord"), and Intelligent Systems for Retail,
a California corporation, dba ISR ("Tenant"), for the leasing of certain
premises located at 5800 Coliseum Way, Oakland, California (the "Premises"). The
terms, conditions and provisions of this EXHIBIT B are hereby incorporated into
and are made a part of the Lease. Any capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms as set
forth in the Lease.
1. TENANT TO CONSTRUCT TENANT IMPROVEMENTS. Subject to the provisions below,
Tenant shall be solely responsible for the planning, construction and completion
of the interior tenant improvements ("Tenant Improvements") to the Premises in
accordance with the terms and conditions of this Exhibit B. The Tenant
Improvements shall not include any improvements which are not considered, in
Landlord's reasonable opinion, to be generic and reusable by future tenants of
the Building, and shall not include Tenant's telephone and telecommunications
equipment, personal property, trade fixtures, furniture, furnishings, equipment
or similar items. Tenant Improvements shall not include Tenant's Initial
Alterations, as set forth in Exhibit L hereto, fire sprinkler upgrade (other
than the sprinkler system modifications in the south 94,300 square foot section
of the Building), racking, in-rack sprinklers, hose racks, draft curtains, smoke
vents and hose reels. The Tenant Improvements shall be limited to the following:
1. Additional warehouse lighting;
2. Upgrade of fire protection system to .495/2,000 sf in the
south 94,300 sf of the Building;
3. Cleaning, patching, and sealing of the entire warehouse floor
in the Building;
4. Demolition of gyp-board demising wall (as shown on the
attached Exhibit B-3), assembly area, the offices and
restrooms on the north end of the Premises, and the aerosol
storage room in warehouse;
5. Upgrade of Building electrical service to an approximate total
of 4,000 amps at 480 volts; and
6. Any modifications required by the City of Oakland (or any
governing body) to bring the Premises in compliance with the
current ADA. The first $30,000 of any such ADA work
(hereinafter the "ADA Allowance") shall be at Landlord's sole
cost and expense and shall not be part of the Tenant
Improvement allowance herein. Landlord shall pay such amount
to Tenant in accordance with Section 5 herein.
2. TENANT IMPROVEMENT PLANS.
A. PRELIMINARY PLANS AND SPECIFICATIONS. Promptly after execution of
the Lease, Tenant shall retain a licensed and insured architect ("Architect") to
prepare preliminary working architectural and engineering plans and
specifications ("Preliminary Plans and Specifications") for the Tenant
Improvements. Tenant shall deliver the Preliminary Plans and Specifications to
Landlord. The Preliminary Plans and Specifications shall be in sufficient detail
to show locations, types and requirements for all heat loads, people loads,
floor loads, power and plumbing, regular and special HVAC needs, telephone
communications, telephone and electrical outlets, lighting, lighting fixtures
and related power, and electrical and telephone switches. Landlord shall
reasonably approve or disapprove (with specific reasons therefor) the
Preliminary Plans and Specifications within five (5) business days after
Landlord receives the Preliminary Plans and Specifications and, if disapproved,
Landlord shall return the Preliminary Plans and Specifications to Tenant, who
shall make all necessary revisions within ten (10) days after Tenant's receipt
thereof. If Landlord has not approved or disapproved the Preliminary Plans and
Specifications within said five (5) day period, then after having given Landlord
a five (5) day written notification, the Preliminary Plans and Specifications
shall be deemed to have been approved. This procedure shall be repeated until
<PAGE> 43
Landlord approves the Preliminary Plans and Specifications. The approved
Preliminary Plans and Specifications, as modified, shall be deemed the "Final
Preliminary Plans and Specifications".
B. FINAL PLANS AND SPECIFICATIONS. After the Final Preliminary Plans
and Specifications are approved by Landlord and are deemed to be the Final
Preliminary Plans and Specifications, Tenant shall cause the Architect to
prepare in twenty (20) days following Landlord's approval of the Final
Preliminary Plans and Specifications any final working architectural and
engineering plans, specifications and drawings, ("Final Plans and
Specifications") that are required for the Tenant Improvements. Tenant shall
then deliver the Final Plans and Specifications to Landlord. Landlord shall
reasonably approve or disapprove the Final Plans and Specifications within five
(5) days after Landlord receives the Final Plans and Specifications and, if
disapproved, Landlord shall return the Final Plans and Specifications to Tenant
who shall make all necessary revisions within ten (10) days after Tenant's
receipt thereof. If Landlord has not approved or disapproved the Preliminary
Plans and Specifications within said five (5) day period, then after having
given Landlord a five (5) day written notification, the Preliminary Plans and
Specifications shall be deemed to have been approved. This procedure shall be
repeated until Landlord approves, in writing, the Final Plans and
Specifications. The approved Final Plans and Specifications, as modified, shall
be deemed the "Construction Documents".
C. MISCELLANEOUS. All deliveries of the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents shall be delivered by
messenger service, by personal hand delivery or by overnight parcel service.
While Landlord has the right to approve the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents, Landlord's interest in doing
so is to protect the Premises, the Building and Landlord's interest.
Accordingly, Tenant shall not rely upon Landlord's approvals and Landlord shall
not be the guarantor of, nor responsible for, the adequacy and correctness or
accuracy of the Preliminary Plans and Specifications, the Final Preliminary
Plans and Specifications, the Final Plans and Specifications, and the
Construction Documents, or the compliance thereof with applicable laws, and
Landlord shall incur no liability of any kind by reason of granting such
approvals.
D. CONSTRUCTION AGREEMENTS. Tenant hereby covenants and agrees that a
provision shall be included in each and every agreement made with the Architect
and the Contractor with respect to the Tenant Improvements specifying that
Landlord shall be a third party beneficiary thereof, including without
limitation, a third party beneficiary of all covenants, representations,
indemnities and warranties made by the Architect and/or Contractor.
3. PERMITS. Tenant at its sole cost and expense (subject to the provisions of
Paragraph 5 below) shall obtain all governmental approvals of the Construction
Documents to the full extent necessary for the issuance of a building permit for
the Tenant Improvements based upon such Construction Documents. Tenant at its
sole cost and expense shall also cause to be obtained all other necessary
approvals and permits from all governmental agencies having jurisdiction or
authority for the construction and installation of the Tenant Improvements in
accordance with the approved Construction Documents. Tenant at its sole cost and
expense (subject to the provisions of Paragraph 5 below) shall undertake all
steps necessary to insure that the construction of the Tenant Improvements is
accomplished in strict compliance with all statutes, laws, ordinances, codes,
rules, and regulations applicable to the construction of the Tenant Improvements
and the requirements and standards of any insurance underwriting board,
inspection bureau or insurance carrier insuring the Premises and/or the
Building.
4. CONSTRUCTION.
A. Tenant shall be solely responsible for the construction,
installation and completion of the Tenant Improvements in accordance with the
Construction Documents approved by Landlord and is solely responsible for the
payment of all amounts when payable in connection therewith without any cost or
expense to Landlord, except for Landlord's obligation to contribute the Tenant
Improvement Allowance in accordance with the provisions of Paragraph 5 below.
Tenant shall diligently proceed with the construction, installation and
completion of the Tenant Improvements in accordance with the Construction
<PAGE> 44
Documents and the completion schedule reasonably approved by Landlord. No
material changes shall be made to the Construction Documents and the completion
schedule approved by Landlord without Landlord's prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.
B. Tenant at its sole cost and expense (subject to the provisions of
Paragraph 5 below) shall employ a licensed, insured and bonded, if required by
California law, general contractor ("Contractor") to construct the Tenant
Improvements in accordance with the Construction Documents. Proof that the
Contractor is licensed in California, is bonded if required under California
law, and has the insurance specified in Exhibit B-1, attached hereto and
incorporated herein by this reference, shall be provided to Landlord prior to
commencement by Tenant of the construction of the Tenant Improvements. Tenant
shall comply with or cause the Contractor to comply with all other terms and
provisions of Exhibit B-1.
C. Prior to the commencement of the construction and installation of
the Tenant Improvements, Tenant shall provide the following to Landlord, all of
which shall be to Landlord's reasonable satisfaction:
(i) An estimated budget and cost breakdown for the Tenant
Improvements.
(ii) Estimated completion schedule for the Tenant Improvements.
(iii) Copies of all required approvals and permits from governmental
agencies having jurisdiction or authority for the construction and installation
of the Tenant Improvements; provided, however, if prior to commencement of the
construction and installation of Tenant Improvements Tenant has not received any
required electrical, plumbing or mechanical permits, Tenant shall only be
required to provide Landlord with evidence that Tenant has made application
therefor, and, upon receipt by Tenant of such permits, Tenant shall promptly
provide Landlord with copies thereof.
(iv) Evidence of Tenant's procurement of insurance required to
be obtained pursuant to the provisions of Paragraphs 4.B and 4.G.
D. Landlord shall at all reasonable times have a right to inspect the
Tenant Improvements with at least twenty-four (24) hours prior written or verbal
notice, unless in an emergency, in which event no prior notice shall be required
(provided Landlord does not interfere with the work being performed by the
Contractor or its subcontractors) and Tenant shall immediately cease work upon
written notice from Landlord if the Tenant Improvements are not in compliance
with the Construction Documents approved by Landlord. If Landlord shall give
notice of faulty construction or any other deviation from the Construction
Documents, Tenant shall cause the Contractor to make corrections promptly.
However, neither the privilege herein granted to Landlord to make such
inspections, nor the making of such inspections by Landlord, shall operate as a
waiver of any rights of Landlord to require good and workmanlike construction
and improvements constructed in accordance with the Construction Documents.
E. Subject to Landlord complying with its obligations in Paragraph 5
below, Tenant shall pay and discharge promptly and fully all claims for labor
done and materials and services furnished in connection with the Tenant
Improvements. The Tenant Improvements shall not be commenced until five (5)
business days after Landlord has received notice from Tenant stating the date
the construction of the Tenant Improvements is to commence so that Landlord can
post and record any appropriate Notice of Non-Responsibility.
F. Tenant acknowledges and agrees that the agreements and covenants of
Tenant in Sections 11 and 38 of the Lease shall be fully applicable to Tenant's
construction of the Tenant Improvements.
G. Tenant shall maintain, and cause to be maintained, during the
construction of the Tenant Improvements, at its sole cost and expense, insurance
of the types and in the amounts specified in Exhibit B-1 and in Section 13 of
the Lease, together with builders' risk insurance for the amount of the
completed value of the Tenant Improvements on an all-risk non-reporting form
covering all improvements under
<PAGE> 45
construction, including building materials.
H. With respect to the Tenant Improvements only, no materials,
equipment or fixtures shall be delivered to or installed upon the Premises
pursuant to any agreement by which another party has a security interest or
rights to remove or repossess such items, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed.
I. In the event that Tenant has not established and is enforcing
reasonable rules and regulations for the use of the Building during the course
of construction of the Tenant Improvements, including, but not limited to,
construction parking, storage of materials, hours of work, and clean-up of
construction related debris, then Landlord reserves the right to establish such
reasonable rules and regulations for the use of the Building during the course
of construction of the Tenant Improvements, including, but not limited to,
construction parking, storage of materials, hours of work, and clean-up of
construction related debris.
J. Tenant shall use its best efforts after completion of the Tenant
Improvements to deliver to Landlord the following, all of which shall be to
Landlord's reasonable satisfaction:
(i) Any certificates required for occupancy, including a permanent
and complete Certificate of Occupancy issued by the City of Oakland, California.
(ii) A Certificate of Completion signed by the Architect who
prepared the Construction Documents, reasonably acceptable to Landlord.
(iii) A cost breakdown itemizing all expenses for the Tenant
Improvements, together with invoices and receipts for the same or other evidence
of payment.
(iv) Final and unconditional mechanic's lien waivers for all the
Tenant Improvements.
(v) A Notice of Completion for execution by Landlord, which
certificate once executed by Landlord shall be recorded by Tenant in the
official records of the county of Alameda, and Tenant shall then deliver to
Landlord a true and correct copy of the recorded Notice of Completion.
(vi) A true and complete copy of all as-built plans and drawings for
the Tenant Improvements.
5. TENANT IMPROVEMENT ALLOWANCE AND ADA ALLOWANCE.
A. Subject to Tenant's compliance with the provisions of this Exhibit
B, Landlord shall provide to Tenant the ADA Allowance and an additional
allowance in the amount of One Hundred Sixty Eight Thousand Three Hundred Forty
and 00/100 Dollars ($168,340.00) (the "Tenant Improvement Allowance") to
construct and install only the Tenant Improvements. The Tenant Improvement
Allowance shall be used to design, prepare, plan, obtain the approval of,
construct and install the Tenant Improvements and for no other purpose. Except
as otherwise expressly provided herein, Landlord shall have no obligation to
contribute the Tenant Improvement Allowance unless and until the Construction
Documents have been approved by Landlord and Tenant has complied with all
requirements set forth in Paragraph 4.C. of this Exhibit B. The costs to be paid
out of the Tenant Improvement Allowance shall include all reasonable costs and
expenses associated with the design, preparation, approval, planning,
construction and installation of the Tenant Improvements (the "Tenant
Improvement Costs"), including all of the following:
(i) All costs of the Preliminary Plans and Specifications, the Final
Plans and Specifications, and the Construction Documents, and engineering costs
associated with completion of the State of California energy utilization
calculations under Title 24 legislation:
(ii) All costs of obtaining building permits and other necessary
authorizations from
<PAGE> 46
local governmental authorities;
(iii) All costs of interior design and finish schedule plans and
specifications including as-built drawings, if applicable;
(iv) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit and the cost of all on-site
supervisory and administrative staff, office, equipment and temporary services
rendered by the Contractor in connection with the construction of the Tenant
Improvements; provided, however, that the construction fee for overhead and
profit, the cost of all on-site supervisory and administrative staff, office,
equipment and temporary services shall not exceed amounts which are reasonable
and customary for such items in the local construction industry;
(v) All fees payable to the Architect and any engineer if they are
required to redesign any portion of the Tenant Improvements following Tenant's
and Landlord's approval of the Construction Documents;
(vi) Utility connection fees;
(vii) Inspection fees and filing fees payable to local governmental
authorities, if any; and
(viii) All costs of all permanently affixed equipment and non-trade
fixtures provided for in the Construction Documents, including the cost of
installation.
The Tenant Improvement Allowance shall be the maximum contribution by Landlord
for the Tenant Improvement Costs, and the disbursement of the Tenant Improvement
Allowance is subject to the terms contained hereinbelow.
Landlord will make payments to Tenant from the Tenant Improvement Allowance to
reimburse Tenant for Tenant Improvement Costs paid or incurred by Tenant. All
payments of the Tenant Improvement Allowance shall be by progress payments not
more frequently than once per month and only after satisfaction of the following
conditions precedent: (a) receipt by Landlord of conditional mechanics' lien
releases for the work completed and to be paid by said progress payment,
conditioned only on the payment of the sums set forth in the mechanics' lien
release, executed by the Contractor and all subcontractors, labor suppliers and
materialmen; (b) receipt by Landlord of unconditional mechanics' lien releases
from the Contractor and all subcontractors, labor suppliers and materialmen for
all work other than that being paid by the current progress payment previously
completed by the Contractor, subcontractors, labor suppliers and materialmen and
for which Tenant has received funds from the Tenant Improvement Allowance to pay
for such work; (c) receipt by Landlord of any and all reasonable documentation
detailing the work that has been completed and the materials and supplies used
as of the date of Tenant's request for the progress payment, including, without
limitation, invoices, bills, or statements for the work completed and the
materials and supplies used; and (d) completion by Landlord or Landlord's agents
of any inspections of the work completed and materials and supplies used as
deemed reasonably necessary by Landlord. Tenant Improvement Allowance progress
payments shall be paid to Tenant within fourteen (14) days from the satisfaction
of the conditions set forth in the immediately preceding sentence. The preceding
notwithstanding, all Tenant Improvement Costs paid or incurred by Tenant prior
to Landlord's approval of the Construction Documents in connection with the
design and planning of the Tenant Improvements by Architect shall be paid from
the Tenant Improvement Allowance, without any retention, within fourteen (14)
days following Landlord's receipt of invoices, bills or statements from
Architect evidencing such costs. Notwithstanding the foregoing to the contrary,
Landlord shall be entitled to withhold and retain ten percent (10%) of the
Tenant Improvement Allowance or of any Tenant Improvement Allowance progress
payment until the lien-free expiration of the statutory time for filing of any
mechanics' liens claimed or which might be filed on account of any work ordered
by Tenant or the Contractor or any subcontractor in connection with the
construction and installation of the Tenant Improvements.
<PAGE> 47
B. Landlord shall not be obligated to pay any Tenant Improvement
Allowance progress payment or the Tenant Improvement Allowance retention if on
the date Tenant is entitled to receive the Tenant Improvement Allowance progress
payment or the Tenant Improvement Allowance retention Tenant is in default of
this Lease. Such payments shall resume upon Tenant curing any such default
within the time periods which may be provided for in the Lease.
C. Should the total cost of constructing the Tenant Improvements be
less than the Tenant Improvement Allowance, the Tenant Improvement Allowance
shall be automatically reduced to the amount equal to said actual cost.
D. The term "Excess Tenant Improvement Costs" as used herein shall mean
and refer to the aggregate of the amount by which the actual Tenant Improvement
Costs exceed the Tenant Improvement Allowance. The Excess Tenant Improvement
Costs up to a maximum amount of One Hundred Sixty Eight Thousand Three Hundred
Forty and 00/100 Dollars ($168,340.00) shall be paid by Landlord in the same
manner as the Tenant Improvement Allowance and such portion of the Excess Tenant
Improvement Costs will then be amortized over the first five (5) years of the
initial term of the Lease at the rate of ten percent (10%) per annum and such
amortized amount (including interest charges) shall be paid by Tenant to
Landlord with, and as part of, the Base Rent for the Premises in accordance with
the provisions and requirements of Section 3 of the Lease (the "Amortized Excess
TI Costs"). Within two (2) weeks after the Tenant Improvements have been
substantially completed and the actual Tenant Improvement Costs are known, the
parties shall execute and deliver a written amendment to the Lease, in the form
acceptable to the parties, wherein there shall be specified, inter alia, the
amount of the Base Rent payable by Tenant during the first five (5) years of the
initial term of the Lease after taking into account the amount of the Amortized
Excess TI Costs. Tenant shall promptly pay any and all Excess Tenant Improvement
Costs in excess of the principal amount of the Amortized Excess TI Costs.
6. Termination. If the Lease is terminated prior to the date on which the Tenant
Improvements are completed, for any reason due to the default of Tenant
hereunder, in addition to any other remedies available to Landlord under the
Lease, Tenant shall pay to Landlord as Additional Rent under the Lease, within
five (5) days of receipt of a statement therefor, any and all costs incurred by
Landlord and not reimbursed or otherwise paid by Tenant through the date of
termination in connection with the Tenant Improvements to the extent planned,
installed and/or constructed as of such date of termination, including, but not
limited to, any costs related to the removal of all or any portion of the Tenant
Improvements and restoration costs related thereto. Subject to the provisions of
Section 11.2 of the Lease, upon the expiration or earlier termination of the
Lease, Tenant shall not be required to remove the Tenant Improvements it being
the intention of the parties that the Tenant Improvements are to be considered
incorporated into the Building.
7. Lease Provisions; Conflict. The terms and provisions of the Lease, insofar as
they are applicable, in whole or in part, to this EXHIBIT B, are hereby
incorporated herein by reference, and specifically including all of the
provisions of Sections 21, 24 and 32 of the Lease. In the event of any conflict
between the terms of the Lease and this EXHIBIT B, the terms of this EXHIBIT B
shall prevail. Any amounts payable by Tenant to Landlord hereunder shall be
deemed to be Additional Rent under the Lease and, upon any default in the
payment of same, Landlord shall have all rights and remedies available to it as
provided for in the Lease.
<PAGE> 48
EXHIBIT B-1
CONSTRUCTION INSURANCE REQUIREMENTS
Before commencing work, the contractor shall procure and maintain at its sole
cost and expense until completion and final acceptance of the work, the
following minimum levels of insurance.
A. Workers' Compensation in statutory amounts and Employers Liability
Insurance in minimum amounts of $100,000 each accident for bodily
injury by accident and $100,000 each employee for bodily injury by
disease with a $500,000 policy limit, covering each and every worker
used in connection with the contract work.
B. Comprehensive General Liability Insurance on an occurrence basis
including, but not limited to, protection for Premises/Operations
Liability, Broad Form Contractual Liability, Owner's and Contractor's
Protective, and Products/Completed Operations Liability*, in the
following minimum limits of liability.
<TABLE>
<S> <C>
Bodily Injury, Property Damage,
and Personal Injury Liability $2,000,000/each occurrence
$3,000,000/aggregate
</TABLE>
* Products/Completed Operations Liability Insurance is to be
provided for a period of at least one (1) year after
completion of work.
Coverage should include protection for Explosion, Collapse and
Underground Damage.
C. Comprehensive Automobile Liability Insurance with the following minimum
limits of liability.
<TABLE>
<S> <C>
Bodily Injury and Property $1,000,000/each occurrence
Damage Liability $2,000,000/aggregate
</TABLE>
This insurance will apply to all owned, non-owned or hired automobiles
to be used by the Contractor in the completion of the work.
D. Umbrella Liability Insurance in a minimum amount of five million
dollars ($5,000,000), providing excess coverage on a following-form
basis over the Employer's Liability limit in Paragraph A and the
liability coverages outlined in Paragraphs B and C.
E. Equipment and Installation coverages in the broadest form available
covering Contractor's tools and equipment and material not accepted by
Tenant. Tenant will provide Builders Risk Insurance on all accepted and
installed materials.
All policies of insurance, duplicates thereof or certificates evidencing
coverage shall be delivered to Landlord prior to commencement of any work and
shall name Landlord, and its partners and lenders as additional insureds as
their interests may appear. All insurance policies shall (1) be issued by a
company or companies licensed to be business in the state of California, (2)
provide that no cancellation, non-renewal or material modification shall be
effective without thirty (30) days prior written notice provided to Landlord,
(3) provide no deductible greater than $15,000 per occurrence, (4) contain a
waiver to subrogation clause in favor of Landlord, and its property management
company and lenders, and (5) comply with the requirements of Sections 13.2, 13.3
and 13.4 of the Lease to the extent such requirements are applicable.
<PAGE> 49
EXHIBIT C TO LEASE AGREEMENT
RULES & REGULATIONS
This exhibit, entitled "Rules & Regulations", is and shall constitute EXHIBIT C
to that certain Lease Agreement, dated for reference purposes as of April 1,
1998 (the "Lease"), by and between LINCOLN COLISEUM DISTRIBUTION CENTER, A
California Limited Partnership ("Landlord"), and Intelligent Systems for Retail,
a California corporation, dba ISR ("Tenant"), for the leasing of certain
premises located at 5800 Coliseum Way, Oakland, California (the "Premises"). The
terms, conditions and provisions of this EXHIBIT B are hereby incorporated into
and are made a part of the Lease. Any capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms as set
forth in the Lease.
1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Building without the prior written consent of Landlord,
which consent shall not be unreasonably withheld. Landlord shall have
the right to remove any such unapproved item without notice and at
Tenant's expense.
2. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord without the prior written consent of
Landlord.
3. No person shall go on the roof without Landlord's permission unless to
perform Tenant's obligations as set forth in this Lease, or in the
event of an emergency.
4. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood blocks
under the dolly wheels to prevent damage to the asphalt paving
surfaces. No parking or storing of such trailers will be permitted on
streets adjacent to the Premises.
5. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
6. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations reasonably
approved by Landlord.
7. Tenant shall not store or permit debris, pallets or equipment of any
sort in or around the Lot unless such material is stored in an orderly
fashion behind screened enclosures, unless otherwise expressly agreed
by Landlord. No displays or sales of merchandise shall be allowed in
the parking area of the Lot.
8. Tenant shall not permit any live animals, including, but not limited
to, any household pets, to be brought or kept in or about the Premises.
9. Unless permitted by the appropriate governmental body or agency, Tenant
shall not permit any motor vehicles to be washed on any portion of the
Premises or in the Lot.
10. Tenant shall not permit mechanical work or maintenance of motor
vehicles to be performed on any portion of the Premises or in the Lot.
<PAGE> 50
EXHIBIT E
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE - EXAMPLE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord (identified below) to evaluate and finalize a lease agreement
with you as tenant. After a lease agreement is signed by you and the Landlord
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Section 30 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Landlord to defend itself or its lenders, partners
or representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Landlord: LINCOLN COLISEUM DISTRIBUTION CENTER,
c/o LPC MS, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn: Senior Vice President, Operations
Phone: (415) 571-2200
Name of (Prospective) Tenant: Intelligent Systems for Retail, a California
corporation
Mailing Address: 1241 E. Hillsdale Boulevard, Suite 210, Foster City, CA 94404
Contact Person, Title and Telephone Number(s):
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
Address of (Prospective) Premises:
Length of (Prospective) initial Term:
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing tenants should describe any
proposed changes to on-going operations.
<PAGE> 51
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing tenants
should describe any Hazardous Materials which continue to be
used, generated, stored or disposed of in, on or about the
Premises.
<TABLE>
<S> <C> <C>
Wastes Yes No
Chemical Products Yes No
Other Yes No
</TABLE>
If Yes is marked, please explain:
2.2 If Yes is marked in Section 2.1, attach a list of any
Hazardous Materials to be used, generated, stored or disposed
of in, on or about the Premises, including the applicable
hazard class and an estimate of the quantities of such
Hazardous Materials at any given time; estimated annual
throughput; the proposed location(s) and method of storage
(excluding nominal amounts of ordinary household cleaners and
janitorial supplies which are not regulated by any
Environmental Laws); and the proposed location(s) and method
of disposal for each Hazardous Material, including, the
estimated frequency, and the proposed contractors or
subcontractors. Existing tenants should attach a list setting
forth the information requested above and such list should
include actual data from on-going operations and the
identification of any variations in such information from the
prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants should
describe any such actual or proposed activities.
Yes No
If yes, please explain:
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing tenants should describe any additional
identification numbers issued since
<PAGE> 52
the previous certificate.
Yes No
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe
any new reports filed.
Yes No
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
storm drain? sewer?
surface water? no wastewater or other wastes
discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
5.2 Will any such wastewater or waste be treated before discharge?
Yes No
If yes, describe the type of treatment proposed to be
conducted. Existing tenants should describe the actual
treatment conducted.
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be
used in your company's operations in, on or about the Premises
that will discharge into the air; and will such air emissions
be monitored? Existing tenants should indicate whether or not
there are any such air filtration systems or stacks in use in,
on or about the Premises which discharge into the air and
whether such air emissions are being monitored.
Yes No
If yes, please describe:
<PAGE> 53
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing tenants should specify any such equipment
being operated in, on or about the Premises.
<TABLE>
<S> <C>
Spray booth(s) Incinerator(s)
Dip tank(s) Other (Please describe)
Drying oven(s) No Equipment Requiring Air Permits
</TABLE>
If yes, please describe:
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan")
pursuant to Fire Department or other governmental or
regulatory agencies' requirements? Existing tenants should
indicate whether or not a Management Plan is required and has
been prepared.
Yes No
If yes, attach a copy of the Management Plan. Existing tenants
should attach a copy of any required updates to the Management
Plan.
7.2 Are any of the Hazardous Materials, and in particular
chemicals, proposed to be used in your operations in, on or
about the Premises regulated under Proposition 65? Existing
tenants should indicate whether or not there are any new
Hazardous Materials being so used which are regulated under
Proposition 65.
Yes No
If yes, please explain:
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has
your company ever been subject to any agency enforcement
actions, administrative orders, or consent decrees or has your
company received requests for information, notice or demand
letters, or any other inquiries regarding its operations?
Existing tenants should indicate whether or not any such
actions, orders or decrees have been, or are in the process of
being, undertaken or if any such requests have been received.
Yes No
<PAGE> 54
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of these
actions, orders or decrees and also describe any requests,
notices or demands, and attach a copy of all such documents.
Existing tenants should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not
already delivered to Landlord pursuant to the provisions of
Section 30 of the signed Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health and
safety concerns?
Yes No
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Landlord. Existing
tenants should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Landlord pursuant to the
provisions of Section 30 of the signed Lease Agreement.
8.3 Have there been any problems or complaints from adjacent
tenants, owners or other neighbors at your company's current
facility with regard to environmental or health and safety
concerns? Existing tenants should indicate whether or not
there have been any such problems or complaints from adjacent
tenants, owners or other neighbors at, about or near the
Premises.
Yes No
If yes, please describe. Existing tenants should describe any
such problems or complaints not already disclosed to Landlord
under the provisions of the signed Lease Agreement.
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company
with respect to its proposed operations in, on or about the
Premises, including, without limitation, any wastewater
discharge permits, air emissions permits, and use permits or
approvals. Existing tenants should
<PAGE> 55
attach copies of any new permits and licenses as well as any
renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Landlord in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Section 30 of the Lease Agreement; and (C) that
Tenant shall have and retain full and complete responsibility and liability with
respect to any of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such certificate.
Tenant further agrees that none of the following described acts or events shall
be construed or otherwise interpreted as either (a) excusing, diminishing or
otherwise limiting Tenant from the requirement to fully and faithfully perform
its obligations under the Lease with respect to Hazardous Materials, including,
without limitation, Tenant's indemnification of the Indemnitees and compliance
with all Environmental Laws, or (b) imposing upon Landlord, directly or
indirectly, any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or to
ensure that Tenant is in compliance with all Environmental Laws; (i) the
delivery of such certificate to Landlord and/or Landlord's acceptance of such
certificate, (ii) Landlord's review and approval of such certificate, (iii)
Landlord's failure to obtain such certificate from Tenant at any time, or (iv)
Landlord's actual or constructive knowledge of the types and quantities of
Hazardous Materials being used, stored, generated, disposed of or transported on
or about the Premises by Tenant or Tenant's Representatives. Notwithstanding the
foregoing or anything to the contrary contained herein, the undersigned
acknowledges and agrees that Landlord and its partners, lenders and
representatives may, and will, rely upon the statements, representations,
warranties, and certifications made herein and the truthfulness thereof in
entering into the Lease Agreement and the continuance thereof throughout the
term, and any renewals thereof, of the Lease Agreement.
I (print name) DAVID S. ROCK, acting with full authority to bind the (proposed)
Tenant and on behalf of the (proposed) Tenant, certify, represent and warrant
that the information contained in this certificate is true and correct.
(PROSPECTIVE) TENANT:
By: /S/ DAVID S. ROCK
-----------------------------------
Title: VICE PRESIDENT, RETAIL
--------------------------------
Date: FEBRUARY 3, 1998
---------------------------------
INITIALS:
LESSEE: DSR
LESSOR:
<PAGE> 56
EXHIBIT F
FIRST AMENDMENT TO LEASE AGREEMENT
CHANGE OF COMMENCEMENT DATE
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into to be effective as of _________, by and between LINCOLN COLISEUM
DISTRIBUTION CENTER, A California Limited Partnership ("Landlord"), and
Intelligent Systems for Retail, a California corporation, dba ISR ("Tenant"),
with reference to the following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement,
dated ___________ (the "Lease"), for the leasing of certain premises
containing approximately __________ rentable square feet of space
located at ____________________________, California (the "Premises") as
such Premises are more fully described in the Lease.
B. Landlord and Tenant now wish to modify the Commencement Date of the
Lease.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. Recitals: Landlord and Tenant agree that the above recitals
are true and correct.
2. The Commencement Date of the Lease shall be
________________________.
3. The last day of the Term of the Lease (the "Expiration Date")
shall be ______________.
4. The dates on which the Base Rent will be adjusted are:
for the period _________ to ________ the monthly Base Rent
shall be $_____________;
for the period _________ to ________ the monthly Base Rent
shall be $_____________; and
for the period _________ to ________ the monthly Base Rent
shall be $_____________.
5. Effect of Amendment: Except as modified herein, the terms and
conditions of the Lease shall remain unmodified and continue
in full force and effect. In the event of any conflict between
the terms and conditions of the Lease and this Amendment, the
terms and conditions of this Amendment shall prevail.
6. Definitions: Unless otherwise defined in this Amendment, all
terms not defined in this Amendment shall have the meaning set
forth in the Lease.
7. Authority: Subject to the provisions of the Lease, this
Amendment shall be binding upon and inure to the benefit of
the parties hereto, their respective heirs, legal
representatives, successors and assigns. Each party hereto and
the persons signing below warrant that the person signing
below on such party's behalf is authorized to do so and to
bind such party to the terms of this Amendment.
<PAGE> 57
8. The terms and provisions of the Lease are hereby incorporated
in this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
TENANT:
Intelligent Systems for Retail, Inc.,
a California corporation,
dba ISR
By: __________________________
Its: __________________________
By: __________________________
Its: __________________________
LANDLORD:
LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
By: LINCOLN COLISEUM, A California Limited Partnership
By: LPC MS, Inc.,
as agent for LINCOLN COLISEUM,
A California Limited Partnership
By:
Senior Vice President
By: PATRICIAN ASSOCIATES, INC.,
a California corporation
By: __________________________
Its: __________________________
By: __________________________
Its: __________________________
<PAGE> 58
EXHIBIT G
TENANT'S INITIAL HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
SEE ATTACHED EXHIBIT I TO LEASE AGREEMENT
LETTER OF CREDIT
NAME OF BANK
BANK LETTERHEAD
Date:
Irrevocable Letter
of Credit Number:
Beneficiary: LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
c/o LPC MS, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
Applicant: Intelligent Systems for Retail,
a California corporation, dba ISR
Stated Amount:
USD $1,000,000.00 (one million and no/100 US dollars).
Expiration Date:
This Letter of Credit expires at our counters on July 31, 2008.
We hereby issue in Beneficiary's favor this Irrevocable Standby Letter of Credit
No. ____. Available by Beneficiary's draft(s) at sight drawn on us and
accompanied by the following documents: This Irrevocable Letter of Credit is
available by your clean sight draft only drawn on us.
Drafts drawn on us must bear the clause: "Drawn under ________________ (Bank
Name) Credit No. ______, dated ___, 199_.
The amount of this Letter of Credit shall be automatically reduced upon our
honoring of a sight draft.
Partial drawings are allowed.
Please note: Documents will be honored only when accompanied by this Irrevocable
Letter of Credit.
<PAGE> 59
We hereby engage with you that drafts drawn strictly in compliance with the
terms of this Irrevocable Letter of Credit and amendments shall meet with honor
upon presentation of the original of this Irrevocable Letter of Credit on or
before the expiration of this Irrevocable Letter of Credit.
This credit is subject to the Uniform Customs and Practices for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication Number
400.
-----------------------------------------
Authorized Signature
<PAGE> 60
EXHIBIT J
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of April, 1998, by and
between PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation with its principal
office at 711 High Street, Des Moines, Iowa 50392 (hereinafter called
"Mortgagee"), LINCOLN COLISEUM DISTRIBUTION CENTER, A California Limited
Partnership (hereinafter called "Landlord"), c/o Legacy Partners Commercial,
Inc., as agent for Landlord with its principal office at 101 Lincoln Centre
Drive, Foster City, California 94404, and Intelligent Systems for Retail, a
California corporation, dba ISR, having its principal office at 1241 East
Hillsdale Boulevard, Suite 210, Foster City, California 94404 (hereinafter
called "Tenant");
W I T N E S S E T H
WHEREAS, Tenant has by a written lease, dated for reference purposes as of April
1, 1998, as amended all future amendments and extensions approved by Mortgagee
(hereinafter called the "Lease") leased from Landlord all or part of certain
real estate and improvements thereon located in the City of Oakland, California,
as more particularly described in Exhibit A attached hereto (the "Demised
Premises"); and
WHEREAS, Landlord is encumbering the Demised Premises as security for a loan
from Mortgagee to Landlord (the "Mortgage"); and
WHEREAS, Landlord has previously encumbered the Demised Premises as security for
a loan from Lender to Landlord in the form of a Deed of Trust, Security
Agreement and Assignment of Rents (hereinafter called the "Mortgage"); and
WHEREAS, Tenant, Landlord and Mortgagee have agreed to the following with
respect to their mutual rights and obligations pursuant to the Lease and the
Mortgage;
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by each
party to the other and the mutual covenants and agreements herein contained and
other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto do hereby covenant and agree as follows:
(1) Tenant's interest in the Lease and all rights of Tenant thereunder,
including any purchase option, if any, shall be and are hereby declared subject
and subordinate to the Mortgage upon the Demised Premises and its terms, and the
term "Mortgage" as used herein shall also include any amendment, supplement,
modification, renewal or replacement thereof.
(2) In the event of any foreclosure of the Mortgage or any conveyance
in lieu of foreclosure, provided that the Tenant shall not then be in default
beyond any grace period under the Lease and that the Lease shall then be in full
force and effect, then Mortgagee shall neither terminate the Lease nor join
Tenant in foreclosure proceedings, nor disturb Tenant's possession, and the
Lease shall continue in full force and effect as a direct lease between Tenant
and Mortgagee.
(3) After the receipt by Tenant of notice from Mortgagee of any
foreclosure of the Mortgage or any conveyance of the Demised Premises in lieu of
foreclosure, Tenant will thereafter attorn to and recognize Mortgagee or any
purchaser from Mortgagee at any foreclosure sale or otherwise as its substitute
landlord on the terms and conditions set forth in the Lease.
(4) Tenant shall not prepay any of the rents under the Lease more than
one month in advance except with the prior written consent of Mortgagee.
(5) In no event shall Mortgagee be liable for the return of any
security deposit, any act or omission of the
<PAGE> 61
Landlord, nor shall Mortgagee be subject to any offsets or deficiencies which
Tenant may be entitled to assert against the Landlord as a result of any act or
omission of Landlord occurring prior to Mortgagee's obtaining possession of the
premises.
(6) Tenant will give Mortgagee the same notices, including, without
limitation, notices of default, which Tenant has delivered to Landlord, and
thereafter the same right to cure any defaults or take any action as the
Landlord may be entitled under the Lease, without the obligation to cure such
defaults or take such action, and such time in addition to that which landlord
is entitled as may be reasonably necessary to cure such defaults or take such
action, provided Mortgagee has indicated its intention to cure or take action
and pursues the same with diligence. Notwithstanding the foregoing, Mortgagee's
rights contained herein shall in no way impair nor otherwise adversely affect
Tenant's right and remedies under Sections 24 and 42 of the Lease.
(7) Mortgagee and Landlord have represented to Tenant, and Tenant
therefore acknowledges, that pursuant to an assignment of leases and rents,
Mortgagee is presently entitled to collect and receive all rents to be paid
under the Lease directly from Tenant. Based upon such representations, Tenant
agrees to pay all rent and installment of rents, and installments as they become
due, directly to Mortgagee in the manner and at such address as Mortgagee may
hereinafter direct by written notice to Tenant.
(8) So long as the Loan is outstanding, mortgagee or its designee may
enter upon the Demised Premises at all reasonable times to visit or inspect the
Demised Premises.
(9) There shall be no merger of the Lease or the leasehold estate
created thereby with any other estate in the Demised Premises, including without
limitation, the fee estate, by reason of the same person or entity acquiring or
holding, directly or indirectly, the Lease and said leasehold estate and any
such other estate.
(10) All information, notices or requests provided for or permitted to
be given or made pursuant to this Agreement shall be deemed to be an adequate
and sufficient notice if given in writing and service is made by either (i)
registered or certified mail, postage prepaid, in which case notice shall be
deemed to have been received three (3) business days following deposit to U.S.
mail; or (ii) nationally recognized overnight air courier, next day delivery,
prepaid, in which case such notice shall be deemed to have been received one (1)
business day following delivery to such nationally recognized overnight air
courier. All notices shall be addressed to the addresses set forth above, or to
such other addresses as may from time to time be specified in writing by Lessee,
Lessor or Mortgagee to the other parties hereto.
(11) The Lease may not be amended, altered, or terminated without the
prior written consent of Mortgagee.
(12) This Agreement and its terms shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
including without limitation, any purchaser at any foreclosure sale.
(13) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, and such counterparts when taken together
shall constitute but one agreement.
IN WITNESS WHEREOF, this Agreement has been fully executed under seal on the day
and year first above written.
MORTGAGEE:
PRINCIPAL LIFE INSURANCE COMPANY,
an Iowa Corporation
By: /S/ JOHN URBAN
--------------------------------------
Its: VICE PRESIDENT, COMMERCIAL REAL ESTATE
--------------------------------------
<PAGE> 62
By: /S/ MICHAEL S. DUFFY
--------------------------------------
Its: VICE PRESIDENT
--------------------------------------
TENANT:
Intelligent Systems for Retail, Inc.,
a California corporation,
dba ISR
By: /S/ LOUIS H. BORDERS
--------------------------------------
Its: PRESIDENT
--------------------------------------
By: /S/ DAVID S. ROCK
--------------------------------------
Its: SECRETARY/VICE PRESIDENT, RETAIL
--------------------------------------
LANDLORD:
LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
By: LINCOLN COLISEUM, A California Limited Partnership
By: Legacy Partners Commercial, Inc.,
as agent for LINCOLN COLISEUM,
A California Limited Partnership
By: /S/
--------------------------------------
Senior Vice President
By: PATRICIAN ASSOCIATES, INC.,
a California corporation
By: /S/ JOHN URBAN
--------------------------------------
Its: VICE PRESIDENT, COMMERCIAL REAL ESTATE
By: /S/ MICHAEL S. DUFFY
--------------------------------------
Its: VICE PRESIDENT
<PAGE> 63
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 6TH day of APRIL, 1998 before me, a Notary Public in and for
said County, personally appeared MICHAEL S. DUFFY and JOHN N. URBAN, to me
personally known to be the identical persons whose names are subscribed to the
instrument as officers for the Mortgagee herein named, who being each by me duly
sworn did say that they are the VICE PRESIDENT and VICE PRESIDENT respectively
of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, a corporation, and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and the aforesaid officers each acknowledged the execution of said
instrument to be the duly authorized act and deed of said corporation, by it and
by each of them voluntarily executed.
/S/ KATIE M. MICHAEL
- ---------------------------------------
Notary Public in and for Polk Co., Iowa
<PAGE> 64
EXHIBIT K TO LEASE AGREEMENT
LANDLORD'S WAIVER AND AGREEMENT
WHEREAS, LINCOLN COLISEUM DISTRIBUTION CENTER, A California Limited
Partnership (hereinafter "Landlord"), is the landlord, and Intelligent Systems
for Retail, a California corporation, dba ISR (hereinafter "Tenant"), is the
tenant, in a lease, dated for reference purposes as of April 1, 1998
(hereinafter "Lease"), covering approximately 336,680 square feet of space
located at 5800 Coliseum Way, Oakland, California, as described in Exhibit A to
the Lease (the "Premises"); and
WHEREAS, __________________________________, a _________________
(hereinafter "Lender") has made or will make a certain loan to be secured by a
security interest in the personal property or equipment described in Schedule 1
hereto (hereinafter "Personal Property") which is now or about to be located on
the Premises.
NOW, THEREFORE, so long as the aforementioned Lease exists on the
Premises and the loan secured by Lender's security interest in the Personal
Property remain outstanding and in consideration of the mutual covenants and
agreement herein contained, Landlord, Tenant and Lender hereby covenant and
agree as follows:
1. Except as limited in this waiver and agreement, Landlord waives any
interest in the Personal Property and agrees that the Personal Property shall
not become part of the Premises regardless of the manner in which the Personal
Property may be attached or affixed to the Premises provided that the Premises
is not materially damaged or altered thereby. Full payment of the principal
indebtedness owed to the Lender shall render this waiver and agreement void and
ineffective and not subject to renewal without a written agreement of the
parties hereto.
2. Landlord and Tenant agree they will not prevent Lender or its
designee from entering upon the Premises at all reasonable times to inspect or
remove the Personal Property and Lender agrees to promptly and fully repair any
resulting damage to the Premises. Within sixty (60) days after written request
and notification by Landlord of the termination of the Lease or the exercise of
its rights to possession of the Premises by virtue thereof, Lender agrees to
cause the Personal Property to be removed from the Premises and any resulting
damage to the Premises to be promptly repaired. Lender further agrees to pay
Landlord a per diem fee based upon the average monthly rental provided for in
the Lease for each day that Lender is in possession of the Premises after
termination of the Lease for purposes of removing the Personal Property. Within
sixty (60) days after written request and notice to Lender, if the Personal
Property has not been removed and Lender is not prohibited from removing it
because of bankruptcy or other legal proceedings; Landlord may remove the
Personal Property and repair any resulting damage to the Premises at Lender's
expense wholly without liability to Lender for any damage to the Personal
Property or any impairment of Lender's security interest.
3. All requests, notices or service provided for or permitted to be
given or made pursuant to this waiver and
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agreement shall be deemed to have been properly given or made by depositing the
same in the United States Mail, postage prepaid and registered or certified
return receipt requested and addressed to the addresses set forth below, or to
such other addresses as may from time to time be specified in writing by either
party to the other:
If to Landlord: LINCOLN COLISEUM DISTRIBUTION CENTER
c/o LPC MS, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
Attention: Senior Vice President,
Operations
and PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
an Iowa corporation
711 High Street
Des Moines, Iowa 50392-1370
Attention: Commercial Real Estate Equities
If to Lender:
------------------------------------------
------------------------------------------
------------------------------------------
Attention:
--------------------------------
4. In no event shall Lender cause to be recorded any financing
statements, Uniform Commercial Code filings or their equivalents in connection
with this Agreement which affect or otherwise impair title to Landlord's
fixtures and real or Personal Property located on the Premises.
5. This waiver and agreement is binding upon and inures to the benefit
of Landlord, Tenant and Lender and their respective successors and assigns, and
to no other person or entities, and shall become effective on the date it is
fully executed by Landlord. Tenant, Lender and Landlord have been served with a
fully executed and acknowledged copy.
LENDER:
,
- ------------------------------------------
a
----------------------------------------
By:
--------------------------------------
Its:
--------------------------------------
By:
--------------------------------------
Its:
--------------------------------------
<PAGE> 66
LANDLORD:
LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
By: LINCOLN COLISEUM, A California Limited Partnership
By: LPC MS, Inc.,
as agent for LINCOLN COLISEUM,
A California Limited Partnership
By:
--------------------------------------
Senior Vice President
By: PATRICIAN ASSOCIATES, INC.,
a California corporation
By:
--------------------------------------
Its:
-------------------------------------
By:
--------------------------------------
Its:
-------------------------------------
<PAGE> 67
SCHEDULE 1
PERSONAL PROPERTY
TO BE ATTACHED AT TIME OF EXECUTION OF EXHIBIT K
EXHIBIT L
TENANT'S INITIAL ALTERATIONS
This exhibit, entitled "Tenant's Initial Alterations" is and shall constitute
Exhibit L to that certain Lease Agreement, dated for reference purposes as of
April 1, 1998 (the "Lease"), by and between LINCOLN COLISEUM DISTRIBUTION
CENTER, a California Limited Partnership ("Landlord"), and Intelligent Systems
for Retail, Inc., a California corporation, dba ISR ("Tenant"), for the leasing
of certain premises located at 5800 Coliseum Way, Oakland, California (the
"Premises"). The terms, conditions and provisions of this Exhibit L are hereby
incorporated into and are made a part of the Lease. Any capitalized terms used
herein and not otherwise defined herein shall have the meaning ascribed to such
terms as set forth in the Lease.
1. TENANT'S INITIAL ALTERATIONS. Subject to and in accordance with the
provisions set forth below in this Exhibit L, Tenant shall be solely
responsible, at Tenant's sole cost and expense and in a good and workmanlike
manner, for the planning, construction, installation and completion of Tenant's
Initial Alterations. Upon execution of the Lease by Landlord, Landlord shall be
deemed to have approved the scope and preliminary schematic design of Tenant's
Initial Alterations as described in Section 3 of this Exhibit L and as shown on
the Floor Plan and the Development Drawings attached to this Exhibit L and made
a part hereof by this reference. Tenant represents and agrees that Tenant's
Initial Alterations shall not compromise, nor in any way impair, the structural
integrity of the Building or necessitate the obtaining of any variances for the
Premises and/or the Building.
2. FINAL PLANS AND SPECIFICATIONS. Tenant shall deliver to Landlord its final
working architectural and engineering plans, specifications and drawings ("Final
Plans and Specifications") for Tenant's Initial Alterations. Landlord shall have
the right to reasonably approve or disapprove (with specific reasons therefor)
Tenant's Final Plans and Specifications but only if, and to the extent that,
such Final Plans and Specifications in Landlord's reasonable opinion (i) do not
materially conform to the scope and preliminary design of Tenant's Initial
Alterations, as set forth in Section 3 below and as shown on the attached Floor
Plan and Development Drawings; or (ii) include modifications that compromise or
otherwise impair the structural integrity of the Building; or (iii) do not
conform to any requirements set forth in Section 3 herein; or (iv) negatively
affect the exterior appearance of the Premises; or (v) do not conform to
industry-standard quality of construction for comparable Class A warehouse
buildings in the Oakland, San Leandro, San Lorenzo, Hayward, Union City market;
or (vi) are not in strict compliance with Sections 10, 30 and 38 of the Lease.
With respect to any such items for which Landlord has approval rights as set
forth hereinabove, Landlord shall reasonably approve or disapprove (with
specific reasons therefor) Tenant's first submission of the Final Plans and
Specifications within five (5) business days after Landlord receives same. If
disapproved, Landlord shall return the first submission of the Final Plans and
Specifications to Tenant, who shall make all necessary revisions and re-submit
the revised Final Plans and Specification to Landlord within five (5) business
days after Tenant's receipt thereof. This procedure shall be repeated until
Landlord approves, in
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writing, the Final Plans and Specifications. If Landlord has not approved or
disapproved such Final Plans and Specifications within the five (5) business
days, Tenant shall provide written notice to Landlord. If Landlord has not
approved or disapproved the first submission or any subsequent revised Final
Plans and Specifications within five (5) days of receipt of Tenant's notice,
Landlord shall be deemed conclusively to have approved the Final Plans and
Specifications. Notwithstanding anything herein to the contrary, Landlord and
Tenant agree to exercise good faith and due diligence to cause any disputes
regarding the Final Plans and Specifications to be resolved promptly. The
approved Final Plans and Specifications, as modified (if applicable), shall be
deemed the "Construction Documents" for Tenant's Initial Alterations.
Delivery of any Final Plans and Specifications and/or Construction Documents
and/or any Notices required under this Exhibit L shall be delivered by messenger
service, by personal hand delivery or by overnight parcel service to Landlord's
and Tenant's Addresses, both as set forth on page 1 of this Lease. To the extent
Landlord has the right to approve the Final Plans and Specifications and/or the
Construction Documents as hereinabove set forth, Landlord's interest in doing so
is to protect the Premises, the Building and Landlord's interest therein.
Accordingly, Tenant shall not rely upon Landlord's approvals, and Landlord shall
not be the guarantor of, nor responsible for, the adequacy and correctness or
accuracy of the Final Plans and Specifications, and the Construction Documents,
or the compliance thereof with applicable laws, and Landlord shall incur no
liability of any kind by reason of granting such approvals.
3. SCOPE OF TENANT'S INITIAL ALTERATIONS. The following constitutes the general
scope of Tenant's Initial Alterations:
A. BUILDING EXTERIOR AND SITE MODIFICATIONS (GENERAL
DESCRIPTION):
(i) Construct a new exterior enclosure, with a finish
compatible aesthetically with the Building, to house the Main
Electrical Distribution & Motor Control Center/Refrigeration
Equipment. This new building to be located: either mid way down the
west side of the Building in the area of the existing electrical
transformers, or mid-way down the south side of the Building.
(ii) Construct a new exterior concrete pad with canopy and
security fencing for new boiler to be located next to exterior wall of
building at south east corner.
(iii) Modify existing parking lot striping to accommodate
employees of Tenant.
(iv) New domestic water, sanitary sewer shall be tied into the
existing site systems.
(v) Increase the existing main electrical service to the
Building as required.
B. BUILDING INTERIOR MODIFICATIONS (GENERAL DESCRIPTION):
(i) Installation of an automated material handling storage and
retrieval system for both dry and perishable merchandise.
(ii) Renovation of existing satellite office and welfare
support facilities, adding drywall partitions and appropriate finishes
as needed.
(iii) Construction of new food preparation, assembly, and
refrigerated food storage rooms. Rooms to be constructed using modular
pre-fabricated USDA approved portable metal panel system with partition
walls on concrete curbs, and suspended insulated metal panel ceilings
from
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existing roof structure above, provided that said roof structure can
adequately support the system, as represented by Tenant's Architect
(hereinafter defined) and Tenant's Contractor.
C. DEMOLITION WORK:
(i) Remove existing concrete floor slabs at new freezer and
replace with new heated and insulated concrete slab, finished flush
with existing slabs.
(ii) Remove and replace existing concrete floors at required
Food Preparation and USDA areas, as delineated on the Floor Plan
attached to this Exhibit L, to achieve proper slope for drainage and
provide 1/4" thick troweled on epoxy coating.
(iii) Remove and trench for interior floor drains and new
utility and plumbing lines.
(iv) Saw cut new door openings in exterior and interior walls
as needed for exiting and access requirements.
(v) Saw cut new door openings and conveyor openings at
concrete wall between interior building areas (not to exceed 25% of
total wall area).
D. INTERIOR FINISHES:
(i) The ceiling in the preparation and refrigerated storage
rooms to be USDA accepted insulated metal panel or insulated T-bar
ceiling system, and shall be suspended from the structure above
provided that said roof structure can adequately support the system as
represented by Tenant's Architect (hereinafter defined) and Tenant's
Contractor.
(ii) The floor finish in the process area shall be a USDA
accepted 1/4" inch thick troweled on epoxy coating.
(iii) A suspended acoustical ceiling system, and vinyl floor
tile and vinyl cove base shall be installed throughout the support
office areas.
(iv) The floors in the toilets shall have thin set, unglazed
ceramic floor tile installed, complete with a ceramic tile cove base.
E. ROOFING:
(i) Installation of additional roof framing supports as needed
for roof mounted equipment and interior roof suspended air-handling
units.
(ii) Provide new roof curbs and tie into existing roof system
for HVAC, piping, and ventilation systems.
(iii) All roof penetrations or alterations to the roof to be
in strict compliance with Landlord's specifications and/or
requirements, which Landlord has provided to Tenant, and of which
Tenant hereby acknowledges receipt.
(iv) All roofing work to be approved by Landlord's roofing
consultant, and Tenant shall
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reimburse Landlord for the cost of any roof inspections, provided that
the total cost of such inspections shall not exceed $2,000.00.
(v) No electrical wiring or conduit or equipment, except that
which services the HVAC and ventilation systems, shall be located above
the roof deck.
F. SHIPPING/RECEIVING DOCKS:
(i) Fill in oversize existing dock doors and provide new dock
seals and levelers at all refrigerated shipping doors.
(ii) Fill in oversize existing dock doors and provide new dock
levelers at non-refrigerated dry merchandise dock doors.
(iii) Provide new dock lighting at all dock doors.
G. PLUMBING:
(i) A complete sanitary waste and vent system from plumbing
fixtures and floor drains with piping connection to the sanitary system
shall be installed. Heavy-duty floor drains shall be provided
throughout the process areas with the waste stream routed separately
through an interceptor to the sanitary system.
(ii) A high-pressure hot water sanitation system including a
booster pump and piping to serve the sanitation hose bibs will be
provided.
(iii) A hot and cold water system including a water meter and
back flow preventer with piping to serve plumbing fixtures.
(iv) A compressed air system including compressors and piping
to serve food preparation equipment will be provided.
(v) All new plumbing fixtures to be American Standard or
equal. Water closets urinals, and lavatories to be wall-hung.
H. INTERIOR FIRE PROTECTION:
(i) The entire facility will be reviewed, hydraulically
calculated, and modified in areas of suspended ceilings and various
satellite offices and welfare facilities as required to meet local
building codes and regulations.
I. ELECTRICAL:
(i) New electrical service to be added to existing as
required.
(ii) Main power distribution panels and process and equipment
motor control center to be provided in new exterior electrical
/equipment room.
(iii) Existing overhead lighting to be utilized in its present
position, but may be relocated
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to suit Tenant's equipment, conveyor, and aisle layouts.
(iv) All new lighting in storage areas to be surface mounted,
metal halide fixtures.
(v) All new lighting in order assembly areas to be high Kelvin
metal halide, surface mounted fixtures.
(vi) All new satellite offices and welfare facilities to have
fluorescent light fixtures.
J. REFRIGERATION:
(i) The refrigeration system shall be comprised of a Freon
Refrigerant Gas system.
(ii) All compressors to be located within the new
refrigeration equipment/electrical room being constructed on the
exterior of the building and piped to remote evaporative fan coils
located in the various refrigerated spaces.
(iii) The refrigeration evaporative condensers to be located
on top of the new Building.
K. HVAC:
(i) The overall warehouse is not to be heated or
air-conditioned.
(ii) The renovated office areas to be serviced with roof-mount
HVAC equipment as needed. The Kitchen areas will be provided with
conditioned make up air, exhaust hoods, and proper ventilation.
4. CONSTRUCTION.
A. Tenant shall be solely responsible for the construction,
installation and completion of Tenant's Initial Alterations in accordance with
the Construction Documents approved by Landlord and is solely responsible for
the payment of all amounts when payable in connection therewith without any cost
or expense to Landlord. Tenant shall proceed with the construction, installation
and completion of Tenant's Initial Alterations in accordance with the
Construction Documents. No material changes shall be made to the Construction
Documents approved by Landlord without Landlord's prior written consent, which
consent shall not be unreasonably withheld, conditioned, or delayed.
B. Tenant at its sole cost and expense has employed a licensed, insured
and, if so required by California law, bonded general contractor, Tri-Com
Refrigeration, Inc. ("Contractor") to construct Tenant's Initial Alterations in
accordance with the Construction Documents. Proof that the Contractor is
licensed in California, is bonded (if required under California law), and has
the insurance specified in Exhibit B-1, attached hereto and incorporated herein
by this reference, shall be provided to Landlord prior to commencement of
construction of Tenant's Initial Alterations. Tenant shall comply with, or cause
the Contractor to comply with, all other terms and provisions of Exhibit B-1.
C. Prior to commencement of the construction and installation of
Tenant's Initial Alterations, Tenant shall provide to Landlord an estimated
completion schedule for Tenant's Initial Alterations.
D. Landlord shall at all reasonable times have a right to inspect
Tenant's Initial Alterations
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(provided Landlord does not materially interfere with the work being performed
by the Contractor or its subcontractors). If Landlord shall give notice of
faulty construction or any other deviation from the Construction Documents,
Tenant shall cause the Contractor to make corrections promptly. However, neither
the privilege herein granted to the Landlord to make such inspections, nor the
making of such inspections by Landlord, shall operate as a waiver of any rights
of Landlord to require good and workmanlike construction and improvements
constructed in accordance with the Construction Documents.
E. Tenant shall provide to Landlord prior to construction of Tenant's
Initial Alterations a schedule of values, which schedule sets forth a list of
all contractors, subcontractors and suppliers for Tenant's Initial Alterations.
5. CONSTRUCTION AGREEMENTS. Landlord acknowledges and agrees that it has
approved Tri-Com Refrigeration, Inc. as the general contractor for the
performance of Tenant's Initial Alterations. Tenant hereby covenants and agrees
that a provision shall be included in its agreement made with Tri-Com
Refrigeration, Inc., and/or such other contractor(s) as are designated by Tenant
and reasonably approved by Landlord, for the construction of any of Tenant's
Initial Alterations, specifying that Landlord shall be a third party beneficiary
thereof, including without limitation, a third party beneficiary of all
covenants, representations, indemnities and warranties made by Contractor or
such other contractor(s). Tenant shall provide a copy of such contract to
Landlord prior to the construction of Tenant's Initial Alterations.
6. PERMITS/INSURANCE. Tenant, at its sole cost and expense, shall obtain all
governmental approvals if, and to the full extent, necessary for the issuance of
any building permit that may be required for Tenant's Initial Alterations.
Tenant, at its sole cost and expense, shall also cause to be obtained all other
necessary approvals and permits, if any, from all governmental agencies having
jurisdiction or authority for the construction and installation of Tenant's
Initial Alterations. Prior to the commencement of any of Tenant's Initial
Alterations for which approvals and/or permits are required, Tenant, shall
provide to Landlord copies of all such required approvals and permits from
governmental agencies having jurisdiction or authority for the construction and
installation of Tenant's Initial Alterations.
Tenant, at its sole cost and expense, shall undertake all steps necessary to
insure that the construction of Tenant's Initial Alterations is accomplished in
strict compliance with all statutes, laws, ordinances, codes, rules, and
regulations applicable to the construction of Tenant's Initial Alterations and
the requirements and standards of any insurance underwriting board, inspection
bureau or insurance carrier insuring the Premises.
Tenant shall also provide evidence of Tenant's procurement of the following
insurance, which insurance shall be maintained at Tenant's sole cost and expense
during the period of performance of Tenant's Initial Alterations:
A. Insurance of the types and in the amounts specified in Exhibit B-1
and in Section 13 of the Lease.
B. Builders' risk insurance for the amount of the completed value of
Tenant's Initial Alterations on an all-risk non-reporting form covering all
improvements under construction, including building materials.
7. LIENS/NOTICE OF NON-RESPONSIBILITY. Tenant shall pay and discharge promptly
and fully all claims for labor done and materials and services furnished in
connection with Tenant's Initial Alterations. Tenant's Initial Alterations shall
not be commenced until five (5) business days after Landlord has received
advance notice from Tenant stating the date the construction of Tenant's Initial
Alterations is scheduled to commence
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so that Landlord can post and record any appropriate Notice of
Non-Responsibility.
Upon completion of Tenant's Initial Alterations, Tenant shall provide to
Landlord all of the following, as previously specified in Exhibit B:
A. Any certificates required for occupancy, including a complete
Certificate of Occupancy issued by the City of Oakland, California.
B. Final and unconditional mechanic's lien waivers for all of Tenant's
Initial Alterations.
C. A Certificate of Completion signed by Edward A. Bonelli &
Associates, (herein defined as the "Architect").
D. A Notice of Completion for execution by Landlord, which certificate
once executed by Landlord shall be recorded by Tenant in the official records of
the county of Alameda, and Tenant shall then deliver to Landlord a true and
correct copy of the recorded Notice of Completion.
E. A true and complete copy of all as-built plans and drawings for
Tenant's Initial Alterations.
Any or all of those items listed in subsections A through E above may
incorporate both Tenant's Initial Alterations and Tenant Improvements (as
described in Exhibit B hereto).
8. TENANT'S INDEMNIFICATION. Tenant agrees to defend (with counsel reasonably
acceptable to Landlord), indemnify and hold Landlord and/or its partners,
employees, agents, and contractors, lenders, members, property management
company, directors, officers, successors and assigns ("Landlord's Indemnitees")
harmless from any and all costs, expenses, liabilities, judgments, damages,
claims, mechanic's liens or any other monetary liabilities threatened against,
or incurred by, any of them, which may arise from, or in any way be connected
with, the construction and/or installation of Tenant's Initial Alterations,
except to the extent caused by sole, active, gross negligence or willful
misconduct of Landlord and/or Landlord's Indemnitees.
9. LEASE PROVISIONS; CONFLICT. The terms and provisions of the Lease, insofar as
they are applicable, in whole or in part, to this Exhibit L, are incorporated
herein by reference. In the event of any conflict between the terms of the Lease
and this Exhibit L, the terms of this Exhibit L shall prevail.
<PAGE> 74
EXHIBIT M
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF LEASE ("Agreement") is made and
entered into to be effective as of __________, 199 _______("Assignment Date"),
by and between _______________, a ______________ ("Assignor") and
______________("Assignee"), with reference to the following facts.
RECITALS
A. Assignor is the existing tenant under that certain Lease Agreement
dated _____________ by and between _______________, a _______________, as
landlord ("Landlord") and Assignor, as tenant, as subsequently amended pursuant
to that certain Amendment _____________, dated (the "Lease") pursuant to which
Landlord leased to Assignor, and Assignor leased from Landlord, those certain
premises located at _______________________, California, as more particularly
described in the Lease ("Premises").
B. Assignor desires to assign all of its right, title and interest in,
and obligations under, the Lease to Assignee, and Assignee desires to accept
such assignment and assume such obligations, all on the terms and conditions set
forth below.
C. Landlord agrees to consent to the proposed assignment on the
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Recitals. Assignor and Assignee hereby agree that each of such
parties are informed and believe that the recitals set forth hereinabove are
true and correct and are incorporated into this Agreement.
2. Assignment and Assumption. Effective as of the Assignment Date,
Assignor hereby grants, transfers, assigns and delegates to Assignee all of its
right, title and interest and obligations of Assignor under the Lease, and
Assignee accepts such assignment and delegation above, assumes the Lease, agrees
to pay all rent and other charges accruing under the Lease from and after the
date hereof and agrees to observe and perform directly to Landlord, all of the
other covenants, agreements and obligations to be observed and/or performed by
the lessee under the Lease from and after the date hereof. Assignee has
inspected the Premises and knows the present condition thereof and confirms that
neither Landlord nor any officer, director, employee, agent or beneficiary of
Landlord has made any representation or warranty to Assignee concerning the
Premises, or otherwise, expressed or implied, and that Assignee does not accept
the Premises in reliance upon any such representation or warranty.
3. Representations and Warranties. Assignor and Assignee represent and
warrant to Landlord that:
a. Attached hereto as Exhibit A is a true, correct and complete copy
of the Lease and all amendments and assignments thereto and there are no further
modifications, amendments, supplements or understandings, oral or written,
amending, supplementing or changing the terms of the Lease;
<PAGE> 75
b. The Lease is in full force and effect, has been duly executed and
delivered by Assignor and is a valid, legal and binding obligation of Assignor
and Assignee, as assignee of Assignor, enforceable in accordance with its
express terms;
c. Assignor represents and warrants that no default, breach, failure
of condition or event of default under the Lease, nor any event or condition
which, with notice or the passage of time or both, would constitute a default,
breach, failure of condition or event of default thereunder, and Assignor has,
as of the date hereof, complied with all of the terms and conditions of the
Lease;
d. There exists no liability or obligation of Assignor or Assignee
or any other person which Assignor or Assignee could offset against or otherwise
use to reduce the rental payments due thereunder; and
e. Neither Assignor nor Assignee has entered into any sublease,
assignment or other agreement transferring any of its interest in the Lease
except as provided herein.
4. Damage Deposit. The parties acknowledge that Landlord now holds the
sum of Fifty Thousand Dollars ($50,000.00), to be applied subject to the
provisions of the Lease. Assignor releases all claims to that sum, and agrees
that the sum shall be held by Landlord for the benefit of Assignee, subject to
the provisions of the Lease.
5. Release and Indemnification by Assignor. Assignor agrees to protect,
hold harmless, defend and indemnify Assignee from and against any and all
claims, judgments, damages, liabilities, costs and expenses, including, without
limitation, reasonable attorney's fees and costs, accruing under the Lease prior
to the Assignment Date in connection with the obligations of Assignor
thereunder.
6. Indemnification by Assignee. Assignee agrees to protect, hold
harmless, defend and indemnify Assignor from and against any and all claims,
judgments, damages, liabilities, costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, accruing under the Lease on or
after the Assignment Date in connection with the obligations of Assignee
thereunder.
7. Assignor's and Assignee's Continuing Obligations to Landlord.
Assignor hereby covenants, warrants and agrees for the benefit of Landlord that
notwithstanding the assignment made herein, Assignor shall in all events and
circumstances remain primarily liable to Landlord for and not be released or
discharged from the performance of the lessee's obligations under the Lease
(whether past, present or future), all of which liabilities and obligations
Assignor agrees to pay and perform in accordance with the terms and provisions
of the Lease, and Assignor and Assignee hereby covenant and warrant to Landlord
that after the Assignment Date Assignor and Assignee shall be jointly and
severally liable under the Lease for all of the lessee's obligations under the
Lease. Assignor and Assignee hereby further covenant and warrant that Landlord's
consent to this assignment shall not in any manner affect Landlord's ability to
proceed against Assignor and Assignee, both jointly and severally, for any
failure by Assignee or Assignor to perform any of its obligations under the
Lease, nor shall any such consent be construed as a waiver by Landlord of any of
its rights or remedies under the Lease. In the event of any conflict or dispute
between Assignor and Assignee with respect to each of their obligations under
the Lease, Landlord shall not be affected, impaired or otherwise adversely
affected thereby, and Assignor and Assignee, jointly and severally, shall
protect, hold harmless, defend and indemnify Landlord from and against any and
all claims, damages, judgments, liabilities, losses, costs and expenses,
including, without limitation, reasonable attorneys' fees and costs, arising
from or related to this Agreement, any brokerage commissions or fees asserted
against or incurred by Assignor and/or Assignee, and any disputes or conflicts
between Assignor and Assignee with respect to
<PAGE> 76
the Lease, this Agreement or the Premises.
8. Attorney's Fees; Counterparts. If Assignor or Assignee bring any
action against the other for the enforcement or interpretation of this
Agreement, the losing party shall pay to the prevailing party a reasonable sum
for attorneys' fees and costs. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which shall together be
deemed one document.
9. General Provisions .
a. Time is of the essence in the performance of the parties'
respective obligations set forth in this Agreement.
b. Assignee's address for notices shall be as follows unless changed
in accordance with the Lease:
-----------------------------
-----------------------------
-----------------------------
c. Assignor and Assignee hereby ratify and affirm the terms and
provisions of the Lease and further agree that the Lease is in full force and
effect, and that the terms and provisions of the Lease shall remain unchanged
except as specifically set forth in this Agreement. Assignor and Assignee intend
that Landlord shall benefit as a third party from the terms of this Agreement
and that Landlord shall be a third party beneficiary of this Agreement.
d. In the event of any conflict or inconsistency between the terms
and provisions of the Lease and the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall prevail.
e. This Agreement shall inure to the benefit of and be binding upon
the parties to this Agreement and their respective successors and assigns.
f. If for any reason, any provision of this Agreement shall be held
to be unenforceable, it shall not affect the validity or enforceability of any
other provision of this Agreement and to the extent any provision of this
Agreement is not determined to be unenforceable, such provision, or portion
thereof, shall be, and remain, in full force and effect.
g. This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
h. This Agreement, including addenda, if any, expresses the entire
agreement of the parties and supersedes any and all previous agreements between
the parties with regard to the subject matter discussed herein, and there are no
warranties or representations of any kind or nature whatsoever, either expressed
or implied, except as may be set forth herein. Any and all future modifications
of this Agreement or the Lease will be effective only if they are in writing and
signed by the parties, Assignor, Assignee and Landlord. The terms and conditions
of any and all future modifications of this Agreement shall supersede and
replace any inconsistent provisions of this Agreement.
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Assignment Date.
ASSIGNOR:
,
- ----------------------------------
a
---------------------------------
By:
-----------------------------
Its:
-----------------------------
ASSIGNEE:
,
- ----------------------------------
a
---------------------------------
By:
-----------------------------
Its:
-----------------------------
<PAGE> 78
CONSENT OF LANDLORD TO ASSIGNMENT AND ASSUMPTION AGREEMENT:
Landlord hereby consents to the Agreement and assignment, acceptance
and assumption made therein; provided, that notwithstanding such consent:
(i) Assignor is not and shall not be released or discharged from any
liability or obligation of the tenant under the Lease, whether past, present or
future (including liabilities and obligations arising or accruing during any
renewal term of the Lease or with respect to any expansion space hereafter
included in the Premises);
(ii) Landlord does not waive any claims, rights, suits or actions
against Assignor under the Lease;
(iii) No addition, alteration or improvement shall be made to the
Premises by Assignor or Assignee without the prior written consent of Landlord
(unless otherwise set forth in Section 11 of the Lease) and any such addition,
alteration or improvement shall be made subject to Section 11 of the Lease; and
(iv) Such consent is limited to the assignment and assumption herein
made and shall not relieve Assignor and Assignee from their obligation to obtain
the consent of Landlord to (x) any future assignment, in whole or in part, of
the interest of the tenant under the Lease, (y) any future sublease of the
Premises, or any part thereof, or (z) any amendment, modification or change to
the Agreement.
LANDLORD:
,
- ----------------------------------
a
---------------------------------
By:
By:
-----------------------------
Its:
----------------------------
Date:
--------------------------
<PAGE> 79
ADDENDUM 1
OPTION TO EXTEND THE LEASE TERM
This Addendum 1 (the "Addendum") is incorporated as part of that certain Lease
Agreement, dated for reference purposes as of April 1, 1998 (the "Lease"), by
and between Intelligent Systems for Retail, a California corporation, dba ISR
("Tenant"), and LINCOLN COLISEUM DISTRIBUTION CENTER, A California Limited
Partnership ("Landlord"), for the leasing of those certain premises located at
5800 Coliseum Way, Oakland, California as more particularly described in Exhibit
A to the Lease (the "Premises"). Any capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms as set
forth in the Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions, limitations and
conditions set forth in Paragraph 5 below, Tenant shall have an option
("Option") to extend the initial term of the Lease for an additional five (5)
year period (the "Extended Term").
2. TENANT'S OPTION NOTICE. If Landlord does not receive written notice from
Tenant of its exercise of this Option on a date which is not more than three
hundred sixty (360) days nor less than two hundred seventy (270) days prior to
the end of the initial term of the Lease (the "Option Notice"), all rights under
this Option shall automatically terminate and shall be of no further force or
effect.
3. ESTABLISHING THE MONTHLY BASE RENT FOR THE EXTENDED TERM. The schedule of
Base Rent for the Extended Term shall be the then current market rent for
similar warehouse space within the competitive market area of the Premises (the
"Fair Rental Value"). The term "Fair Rental Value" of the Premises means the
current market rental value of the Premises as of the commencement of the
Extended Term, taking into consideration all relevant factors, including, but
not limited to, length of term; the uses permitted under the Lease; the quality,
size, design and location of the Premises; the condition and value of existing
tenant improvements, (excluding Tenant's trade fixtures, personal property,
equipment and improvements installed and paid solely by Tenant); the monthly
base rent, beginning base rent and escalations paid by tenants for premises
comparable to the Premises, and located within the competitive market area of
the Premises. The competitive market area shall not extend beyond the cities of
Oakland, San Leandro, San Lorenzo, Hayward and Union City. If Landlord and
Tenant are unable to agree on the Fair Rental Value for the Extended Term within
sixty (60) days of receipt by Landlord of the Option Notice for the Extended
Term, Landlord and Tenant each, at its cost and by giving written notice to the
other party, shall appoint a competent and impartial commercial real estate
broker (hereinafter "broker") with at least five (5) years' full-time commercial
real estate brokerage experience in the area of the Premises to establish their
opinion of the Fair Rental Value for the Extended Term. If either Landlord or
Tenant does not appoint a broker within ten (10) business days after the other
party has given written notice of the name of its broker, the single broker
appointed shall be the sole broker and shall set the Fair Rental Value for the
Extended Term. If two (2) brokers are appointed by Landlord and Tenant as stated
in this paragraph, they shall meet promptly and attempt to set the Fair Rental
Value. If the two (2) brokers are unable to agree within thirty (30) days after
the second broker has been appointed, Landlord and Tenant shall attempt to
jointly select a third broker with the same qualifications within ten (10) days
after the last day of the time period the two (2) brokers agree upon the Fair
Rental Value. If Landlord and Tenant are unable to agree on the third broker,
either Landlord or Tenant by giving ten (10) days' notice to the other party,
can apply to the judicial arbitration and mediation system of the county in
which the
<PAGE> 80
Premises is located for the selection of a third broker who meets the
qualifications stated in this paragraph. Landlord and Tenant each shall bear
one-half (2) of the cost of appointing the third broker and of paying the third
broker's fee. The third broker, however selected, shall be a person who has not
previously acted in any capacity for either Landlord or Tenant. Within thirty
(30) days after the selection of the third broker, the third broker shall select
one of the two Fair Rental Values submitted by the first two brokers as the Fair
Rental Value for the Extended Term, or shall consider (but not necessarily
average) the first two opinions and render a third opinion which shall be
binding on Landlord and Tenant. If either of the first two brokers fails to
submit their opinion of the Fair Rental Value within the time frames set forth
above, then the single Fair Rental Value submitted shall automatically be the
Fair Rental Value for the Extended Term.
Upon determination of the Fair Rental Value for the Extended Term pursuant to
the terms outlined above, Landlord and Tenant shall immediately execute an
amendment to the Lease solely to set forth the Fair Rental Value of the Premises
as hereinabove defined. Such amendment shall set forth among other things, the
Fair Rental Value for the Extended Term and the actual commencement date and
expiration date of the Extended Term. All other terms and conditions shall
remain unchanged including, without limitation, the Damage Deposit of Fifty
Thousand Dollars ($50,000.00) and the Letter of Credit in the face amount of One
Hundred Eighty Thousand Dollars ($180,000.00), which Letter of Credit shall be
extended to and including September 1, 2013. Tenant shall have no other right to
further extend the term of the Lease under this Addendum unless Landlord and
Tenant otherwise agree in writing.
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE EXTENDED TERMS. If
Tenant timely and properly exercises this Option, in strict accordance with the
terms contained herein: (1) Tenant shall accept the Premises in its then "As-Is"
condition and, accordingly, Landlord shall not be required to perform any
additional improvements to the Premises; and (2) except as set forth above in
Section 3 of this Addendum 1 in connection with the joint compensation of the
third broker, if necessary, Tenant hereby agrees that it will solely be
responsible for any and all brokerage commissions and finder's fees payable to
any broker now or hereafter procured or hired by Tenant or who claims a
commission based on any act or statement of Tenant ("Tenant's Broker") in
connection with the Option; and Tenant hereby further agrees that Landlord shall
in no event or circumstance be responsible for the payment of any such
commissions and fees to Tenant's Broker.
5. LIMITATIONS ON, AND CONDITIONS TO, EXTENSION OPTION. Except for an assignment
to a Related Entity or to a non-related entity having a net worth of at least
Twenty Five Million Dollars ($25,000,000.00) and a net income of at least Four
Million Dollars ($4,000,000.00) for the most recent fiscal year, both in
accordance with the provisions of Section 16 of the Lease, this Option is
personal to Tenant. Otherwise this Option may not be assigned, voluntarily or
involuntarily, separate from or as part of the Lease. Should the Lease be
assigned to a Related Entity or a non-related entity (which has met the
above-stated financial criterion) both in accordance with the provisions of
Section 16 of the Lease and this Addendum 1, and should the Option be exercised,
then Tenant shall in all events and circumstances remain primarily liable to
Landlord, and shall not be released or discharged from the performance of
Tenant's obligations under the Lease. After the effective date of any
assignment, Tenant shall be jointly and severally liable under the Lease for all
of Tenant's obligations under the Lease. At Landlord's option, all rights to
exercise this Option shall terminate and be of no force or effect if any of the
following individual events occur or any combination thereof occur: (1) Tenant
has been in default beyond any applicable cure period at any time during the
initial term of the Lease, or is currently in default beyond any applicable cure
period of any provision of the Lease; and/or (2) Tenant, the Related Entity, or
a non-related entity which has met the above-stated financial criterion (as the
case may be) has failed to exercise properly this Option in a timely manner in
strict accordance with the provisions of this Addendum; and/or (3) except for a
permitted assignment or sublease as set forth in Section 16 herein, Tenant no
longer has possession of all or any part
<PAGE> 81
of the Premises under the Lease; and/or (4) if the Lease has been terminated
earlier, pursuant to the terms of the Lease.
6. TIME IS OF THE ESSENCE. Time is of the essence with respect to each and every
time period set forth in this Addendum.
<PAGE> 82
ADDENDUM 2
AGREEMENT TO INSTALL SATELLITE
ANTENNA RECEIVING DISH
This Addendum 2 is made this 1st day of April, 1998, by and between
LINCOLN COLISEUM DISTRIBUTION CENTER, A California Limited Partnership
("Landlord"), and Intelligent Systems for Retail, a California corporation, dba
ISR ("Tenant"), and is incorporated as part of that certain Lease Agreement,
dated for reference purposes as of April 1, 1998 (the "Lease"), for the leasing
of those certain premises located at 5800 Coliseum Way, Oakland, California as
more particularly described in Exhibit A to the Lease.
WHEREAS, Tenant has requested that Landlord consent to Tenant at its
own expense, install and operate a satellite antenna receiving dish ( the
"Antenna") from the roof of the Building; and
WHEREAS, the Landlord desires to consent to the installation and
operation of the Antenna subject to certain conditions, a copy of the plans and
specifications for the installation and operation of the Antenna which are
attached hereto as Exhibit A;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and in consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt of which is mutually and respectively acknowledged by
the parties, the parties contract and further agree as follows:
1. Landlord hereby consents to the Tenant installing and operating a
satellite antenna receiving dish (the "Antenna") on the roof of the Building at
its sole cost and expense and subject to the conditions herein. This consent of
Landlord shall not constitute any representation or warranty by Landlord that
such alterations are feasible or advisable, or that they will be granted permits
for construction by appropriate governmental authorities, or that the resulting
Premises shall be safe, habitable or tenantable, or fit for tenant's purposes.
2. The construction work on the Antenna shall be done by a reputable,
licensed contractor reasonably approved by Landlord, and shall be done in a good
and workmanlike manner and in compliance with all applicable laws, orders and
regulations of federal, state, county and municipal authorities, with any
direction by any public officer pursuant to laws and with all regulations of any
board of fire underwriters having jurisdiction.
3. Tenant shall, before installing the Antenna, at its sole cost and
expense, obtain all permits, approvals and certificates, if any, required by any
governmental or quasi-governmental bodies required for the installation or
operation of the Antenna (the "Permits") and shall delivery promptly duplicates
of all such permits, approvals and certificates to the Landlord as well as a
copy of the executed installation contract, if applicable. Tenant further agrees
to obtain and maintain the permits during the term hereof and that if it fails
to do so, Landlord may require Tenant to remove the Antenna. If Tenant fails to
so remove the Antenna, Landlord may do the same and charge Tenant for the cost
of removal.
<PAGE> 83
4. Tenant shall keep the Premises and the Lot on which the Premises are
located free from any liens arising out of any work performed, material
furnished or obligations incurred by or on behalf of Tenant. Notwithstanding the
foregoing, if by reason of any construction performed, or material furnished to
the Premises for or on behalf of Tenant, any mechanic's or other lien shall be
filed, claimed, perfected or otherwise established, Tenant shall discharge or
remove the lien by bonding or otherwise within fifteen (15) days after Tenant
receives notice of filing of same.
5. Tenant covenants and agrees that neither Tenant nor its Agents will
cause any damage to the roof, Building or its contents during the installation,
operation, maintenance or removal of the Antenna, and Tenant agrees to promptly
pay directly for the actual cost of any such repairs occasioned by Tenant's
installation, operation, maintenance and removal of the same, and Tenant agrees
to indemnify and hold Landlord harmless from the same.
6. Tenant covenants and agrees that the installation, operation,
maintenance and removal of the Antenna will be at its sole risk. Tenant agrees
to indemnify and defend Landlord against all claims, actions, damages, liability
and expenses in connection with the loss of life, personal injury, damage to
property or business or any other loss or injury arising out of the
installation, operation, maintenance or removal of the Antenna.
7. Tenant's right to operate an Antenna is limited to uses consistent
with Tenant's Use as set forth in the Lease and for no other commercial use.
Tenant shall not be permitted to assign or sublet its Antenna installation and
operation rights to any other party other than to an assignee or sublessee of
Tenant's interest in the Lease in accordance with Section 16 thereof and the
right to operate an Antenna shall expire upon the expiration or earlier
termination of Tenant's Lease, or as such Lease may be extended as provided in
the Lease.
8. Tenant will at all times, at its own cost maintain the Antenna in
good condition and make all needed repairs to the Antenna in a timely manner,
including but not limited to repairing and maintaining the Antenna as required
by any governmental agency having jurisdiction thereof. Tenant shall initiate
and carry out a program of regular inspection, maintenance and repair to the
Antenna. Tenant shall present said program to Landlord within fifteen (15) days
of installation of the Antenna and agrees to coordinate the program with
Landlord's property manager and roofing contractor.
9. Landlord shall not charge Tenant additional rent for the
installation and use of the roof area for the Antenna. If, however, Landlord's
insurance premium or real estate tax assessment increases solely and
demonstrably as a result of the installation and operation of the Antenna,
Tenant shall pay all such increases each year as Additional Rent upon receipt of
a bill from Landlord. Tenant will have no right to an abatement or reduction in
the amount of rent if for any reason Tenant is unable to use the Antenna.
<PAGE> 84
10. Landlord, at its sole option, may require Tenant, at any time prior
to the expiration of this Lease, to terminate the operation of the Antenna if it
is causing physical damage to the structural integrity of the Building or
interfering with any other service provided by the Building. If, however, Tenant
can correct the damage caused by the Antenna to Landlord's satisfaction within
thirty (30) days, Tenant may restore its operation. If the damage is not
corrected and the Antenna restored to operation within thirty (30) days,
Landlord, at its sole option, may required that Tenant remove the Antenna at
Tenant's own expense.
11. At its sole cost and expense, Tenant shall remove and dispose of
the Antenna on or before the expiration or earlier termination of this Lease.
Tenant shall leave the portion of the roof where the Antenna was located in good
order and repair. If Tenant does not remove the Antenna when so required, Tenant
hereby authorizes Landlord to remove and dispose of the Antenna and charge
Tenant for all costs and expenses incurred. Tenant agrees that Landlord shall
not be liable for any property disposed of or removed by Landlord.
12. The review or approval by Landlord of any plans and specifications
under this Addendum 2 shall not constitute the assumption of any responsibility
by Landlord for either the accuracy or the sufficiency of such plans and
specifications or the quality or suitability of such plans and specifications or
the equipment and systems therein depicted for the intended use. Any such review
or approval by Landlord is for the sole purpose of protecting its interest in
the Building and under the Lease; and no third party, including, without
limitation, any person or entity claiming through or under Tenant or its
contractors, agents, servants, employees, visitors or licensees, shall have any
rights under this Lease or any rights against Landlord by reason of the Lease.
13. Upon completion of the installation of the Antenna, Tenant shall
within ten (10) days notify Landlord, when the last of the following conditions
occurs:
(a) Landlord and/or its representative has inspected the
premises after construction is complete and has determined that such
construction has been completed in a good and workmanlike manner in
accordance with Landlord's building standard roof-mount detail;
(b) Tenant shall provide Landlord with the final certificates
and other permits required by law, together with copies of final lien
waivers from its contractor, as well as any significant subcontractors
and suppliers as requested by Landlord, in a form acceptable to
Landlord; and
(c) Tenant certifies to Landlord that Tenant has paid the
installation cost in full.
IN WITNESS WHEREOF, the undersigned authorities have hereunto executed
this Addendum 2, effective on the day and year first above-written.
<PAGE> 85
LANDLORD:
LINCOLN COLISEUM DISTRIBUTION CENTER,
A California Limited Partnership
By: LINCOLN COLISEUM, A California Limited Partnership
By: LPC MS, Inc.,
as agent for LINCOLN COLISEUM,
A California Limited Partnership
By: /S/
-------------------------------------
Senior Vice President
By: PATRICIAN ASSOCIATES, INC.,
a California corporation
By: /S/ JOHN URBAN
--------------------------------------
Its: VICE PRESIDENT, COMMERCIAL REAL ESTATE
--------------------------------------
By: /S/ MICHAEL S. DUFFY
--------------------------------------
Its: VICE PRESIDENT
--------------------------------------
TENANT:
Intelligent Systems for Retail, Inc.,
a California corporation,
dba ISR
By: /S/ LOUIS H. BORDERS
--------------------------------------
Its: PRESIDENT
--------------------------------------
By: /S/ DAVID S. ROCK
--------------------------------------
Its: SECRETARY/VICE PRESIDENT, RETAIL
--------------------------------------
<PAGE> 1
EXHIBIT 10.5
AMB PROPERTY, L.P.
INDUSTRIAL SINGLE TENANT LEASE
DATED
MARCH 4, 1999
BETWEEN
AMB PROPERTY, L.P.,
A DELAWARE LIMITED PARTNERSHIP
AND
INTELLIGENT SYSTEMS FOR RETAIL, INC.
A CALIFORNIA CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
1. Basic Provisions............................................................................1
1.1 Parties............................................................................1
1.2 Premises...........................................................................1
1.3 Term...............................................................................1
1.4 Base Rent..........................................................................1
1.5 Tenant's Share of Operating Expenses...............................................1
1.6 Tenant's Estimated Monthly Rent Payment............................................1
1.7 Security Deposit...................................................................1
1.8 Permitted Use......................................................................1
1.9 Guarantor..........................................................................1
1.10 Addenda and Exhibits...............................................................1
1.11 Address for Rent Payments..........................................................1
2. Premises....................................................................................2
2.1 Letting............................................................................2
2.2 CC&R's.............................................................................2
2.3 Construction of Tenant Improvements................................................2
2.4 Landlord Warranty..................................................................2
3. Term........................................................................................2
3.1 Term...............................................................................2
3.2 Commencement Date Certificate......................................................2
4. Rent........................................................................................3
4.1 Base Rent..........................................................................3
4.2 Operating Expenses.................................................................3
5. Security Deposit............................................................................3
6. Use.........................................................................................3
6.1 Permitted Use......................................................................3
6.2 Hazardous Substances...............................................................4
(a) Definition; Reportable Uses Require Consent...............................4
(b) Duty to Inform Landlord...................................................4
(c) Tenant Indemnification....................................................4
(d) Landlord Indemnity........................................................4
6.3 Tenant's Compliance with Requirements..............................................5
6.4 Inspection; Compliance with Law....................................................5
7. Maintenance, Repairs, Trade Fixtures and Alterations........................................5
7.1 Tenant's Obligations...............................................................5
7.2 Landlord's Obligations.............................................................6
7.3 Alterations........................................................................6
7.4 Surrender/Restoration..............................................................6
8. Insurance; Indemnity........................................................................7
8.1 Payment of Premiums................................................................7
8.2 Tenant's Insurance.................................................................7
8.3 Landlord's Insurance...............................................................7
8.4 Waiver of Subrogation..............................................................8
8.5 Indemnity..........................................................................8
8.6 Exemption of Landlord from Liability...............................................8
9. Damage or Destruction.......................................................................9
9.1 Termination Right..................................................................9
9.2 Damage Caused by Tenant...........................................................9
10. Real Property Taxes.........................................................................9
10.1 Payment of Real Property Taxes.....................................................9
10.2 Real Property Tax Definition.......................................................9
10.3 Additional Improvements............................................................9
10.4 Joint Assessment...................................................................9
10.5 Tenant's Property Taxes............................................................9
11. Utilities...................................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
12. Assignment and Subletting...................................................................9
12.1 Landlord's Consent Required........................................................9
12.2 Rent Sharing.......................................................................10
13. Default; Remedies...........................................................................10
13.1 Default of Tenant..................................................................10
13.2 Remedies of Landlord...............................................................10
13.3 Late Charges.......................................................................10
14. Condemnation................................................................................11
15. Estoppel Certificate and Financial Statements...............................................11
15.1 Estoppel Certificate...............................................................11
15.2 Financial Statement................................................................11
16. Additional Covenants and Provisions.........................................................11
16.1 Severability.......................................................................11
16.2 Interest on Past-Due Obligations...................................................11
16.3 Time of Essence....................................................................11
16.4 Landlord Liability.................................................................11
16.5 No Prior or Other Agreements.......................................................11
16.6 Notice Requirements................................................................11
16.7 Date of Notice.....................................................................12
16.8 Waivers............................................................................12
16.9 Holdover...........................................................................12
16.10 Cumulative Remedies................................................................12
16.11 Binding Effect; Choice of Law......................................................12
16.12 Landlord...........................................................................12
16.13 Attorneys' Fees and Other Costs....................................................12
16.14 Landlord's Access; Showing Premises; Repairs.......................................12
16.15 Signs..............................................................................12
16.16 Termination: Merger................................................................13
16.17 Quiet Possession...................................................................13
16.18 Subordination; Attornment; Non-Disturbance.........................................13
16.19 Rules and Regulations..............................................................13
16.20 Security Measures..................................................................13
16.21 Intentionally Deleted..............................................................13
16.22 Conflict...........................................................................14
16.23 Offer..............................................................................14
16.24 Amendments.........................................................................14
16.25 Multiple Parties...................................................................14
16.26 Authority..........................................................................14
16.27 Counterparts.......................................................................14
16.28 Memorandum of Lease................................................................14
</TABLE>
3
<PAGE> 4
GLOSSARY
The following terms in the Lease are defined in the paragraphs opposite
the terms.
<TABLE>
<CAPTION>
TERM DEFINED IN PARAGRAPH
- ---- --------------------
<S> <C>
Additional Rent 4.1
Applicable Requirements 6.3
Assign 12.1
Base Rent 1.4
Basic Provisions 1.1
Building 1.2
Building Operating Expenses 4.2(b)
Building Systems 7.1
CC&Rs 2.1
Code 12.1(a)
Commencement Date 1.3
Condemnation 14
Confirmation Certificate 3.3
Default 13.1
Expiration Date 1.3
Equipment 7.2
Hazardous Substances 6.2(a)
Indemnity 8.5
Industrial Center 1.2
Industrial Park Operating Expenses 4.2(c)
Landlord 1.1
Landlord Entities 6.2(c)
Landlord Responsible Parties 6.2(d)
Lease 1.1
Lenders 6.4
Mortgage 16.18
Operating Expenses 4.2
Party/Parties 1.1
Permitted Use 1.8
Premises 1.2
Premises Operating Expenses 4.2(b)
Prevailing Party 16.13
Real Property Taxes 10.2
Rent 4.1
Rent Commencement Date 4.1
Reportable Use 6.2(a)
Requesting Party 15.1
Responding Party 15.1
Rules and Regulations 16.19
Security Deposit 1.7, 5
Taxes 10.2
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
Tenant 1.1
Tenant Acts 9.2
Tenant Entities 6.2(d)
Tenant Improvements 2.2
Tenant Responsible Parties 6.2(c)
Tenant's Share 1.5
Term 1.3
</TABLE>
5
<PAGE> 6
AMB PROPERTY, L.P.
INDUSTRIAL SINGLE TENANT LEASE
1. BASIC PROVISIONS ("Basic Provisions").
1.1 Parties: This Lease ("Lease") dated as of March 4, 1999, is made by and
between AMB Property, L.P., a Delaware limited partnership, ("Landlord") and
Intelligent Systems for Retail, Inc., a California corporation ("Tenant")
(collectively, the "Parties," or individually a "Party").
1.2 Premises: The Premises are the real property described on Exhibit A
attached hereto together with a building ("Building") containing approximately
350,000 square feet. The Premises are located at 2935 Shawnee Industrial Way in
Gwinnett County, State of Georgia. The Premises are located in the industrial
center commonly known as Shawnee Ridge (the "Industrial Center"). Tenant shall
have exclusive rights to the Premises.
1.3 Term: This Lease is for a term ("Term") commencing on the day following
the date Landlord acquires title to the Premises ("Commencement Date") and
ending ("Expiration Date") ten years and three months after the last day of the
month in which the Landlord acquired title to the Premises. Tenant shall have
two options to extend the Term pursuant to the Option Addendum attached hereto.
1.4 Base Rent: Base Rent shall be $111,635.17 per month.
1.5 Tenant's Share of Operating Expenses ("Tenant's Share"):
(a) Industrial Park Operating Expenses 5.85%
(b) Premises Operating Expenses 100%
1.6 Tenant's Estimated Monthly Rent Payment: Following is the estimated
monthly Rent payment to Landlord pursuant to the provisions of this Lease. This
estimate is made at the inception of the Lease and is subject to adjustment
pursuant to the provisions of this Lease:
--------------------------------------------------------------------------
(a) Base Rent (Paragraph 4.1) $ 111,635.17
--------------------------------------------------------------------------
(b) Industrial Park Operating 945.17
Expenses (Paragraph 4.2(c))
--------------------------------------------------------------------------
(c) Landlord's Environmental
Monitoring and Insurance
Program Fee $ -0-
--------------------------------------------------------------------------
(d) Landlord Insurance (Paragraph 8.3) $ 1,167.00
--------------------------------------------------------------------------
(e) Real Property Taxes (Paragraph 10) $ 10,208.00
--------------------------------------------------------------------------
(f) Property Management Reimbursement $ 893.00
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Estimated Monthly Payment $ 124,848.34
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1.7 Security Deposit: $84,335 ("Security Deposit").
1.8 Permitted Use ("Permitted Use"): The Premises may be used for offices,
central commissary (food preparation/processing center, including but not
limited to kitchen facilities, baking, cooking, meat and seafood cutting and
product preparation); general warehousing, both ambient and cold storage, and
sale and distribution of any and all consumer goods and products, including
prepackaged beer, wine and alcohol for off-premises consumption only; and all
other legal uses.
1.9 Guarantor: Not Applicable
1.10 Addenda and Exhibits: Attached hereto are the following Addenda and
Exhibits, all of which constitute a part of this Lease and which are
incorporated herein by this reference, including:
(a) Addenda: Remedies Addendum
Option Addendum
(b) Exhibits: Exhibit A: Diagram of Premises
Exhibit B: Commencement Date Certificate
Exhibit C-1 and C-2: Agreement of General
Contractor/Subcontractor
Exhibit D: Consent to Installation and Removal of
Personal Property
<PAGE> 7
Exhibit E: Subordination, Nondisturbance and
Attornment Agreement
Exhibit F: Estoppel Certificate
Exhibit G: Short Form Memorandum of Lease
1.11 Address for Rent Payments: All amounts payable by Tenant to Landlord
shall until further notice from Landlord be paid to AMB Property, L.P. at the
following address:
c/o IDI Services Group, Inc.
3424 Peachtree Road, N.E., Suite 1500
Atlanta, Georgia 30326
2. PREMISES.
2.1 Letting. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises upon all of the terms, covenants and conditions set forth
in this Lease. Any statement of square footage set forth in this Lease or that
may have been used in calculating Base Rent and/or Operating Expenses is an
approximation which Landlord and Tenant agree is reasonable and the Base Rent
and Tenant's Share based thereon is not subject to revision whether or not the
actual square footage is more or less.
2.2 CC&R's. The Premises are subject to the terms and conditions of a
"Declaration of Easements and Covenants for Shawnee Ridge" (CC&Rs"). Tenant
shall abide by the CC&R's as amended from time to time. Without the consent of
Tenant, Landlord shall not consent to any amendment to the CC&R's that
materially affects the use of the Premises or Tenant's business operations.
2.3 Construction of Tenant Improvements. Following the Commencement Date,
Tenant at its cost may install such improvements ("Tenant Improvements") as may
be required by Tenant for the conduct of its business. On the Rent Commencement
Date, Landlord shall pay $2,000,000 to Tenant as partial reimbursement for the
Tenant Improvements. Landlord shall have no further obligations to pay for or
reimburse Tenant for the cost of the Tenant Improvements. Prior to commencing
construction of the Tenant Improvements, Tenant shall (i) prepare and furnish to
Landlord copies of the plans and specifications for the Tenant Improvements and
(ii) deliver to Landlord agreements, substantially in the forms attached hereto
as Exhibits C-1 and C-2, executed by each general contractor and each general
contractor's principal subcontractors and suppliers. Landlord shall have the
right to approve, which approval will not be unreasonably withheld, (1) any
improvement which impairs the structural integrity of the Building and (2) the
configuration and location of offices. With respect to the offices, Landlord
will not be considered unreasonable in withholding its consent if the location
and configuration of the offices and the utilities serving those offices would
not, without substantial modifications, be suitable for another tenant. The
Tenant Improvements shall be constructed in a good and workmanlike manner, pest,
vermin and rodent free, in accordance with the standards of the construction
industry in which the Premises are located for first class industrial warehouse
space and in accordance with the CC&Rs and all applicable laws, ordinances,
statutes, codes, regulations, rules or orders of any federal, state or local
governmental or quasi-governmental agency, authority, instrumentality or
regulatory body having jurisdiction over all or any portion of the Premises
including, without limitation, the Americans With Disabilities Act, as amended
("ADA") and all Applicable Requirements. Tenant shall be responsible for
supervision of the work and materials provided and its subcontractors,
materialmen, laborers and employees and shall indemnify, defend, protect, and
save Landlord harmless from any liens or other claims relating to costs of
construction, or any claims for personal injury or property damage arising from
construction of the Tenant Improvements. For purposes of financing the Tenant
Improvements, upon the request of Tenant, Landlord shall execute a "Consent to
Installation and Removal of Personal Property" substantially in the form
attached hereto as Exhibit D.
2.4 Landlord Warranty. Landlord warrants that as of the date of this Lease,
the Building was constructed in accordance with the Gwinnett County Building
Codes The Premises are zoned M-1. Landlord shall pay the cost of any structural
modification to the Building which is required by any law or ordinance unless
the requirement for the structural modification is required as a result of (i)
the Tenant Improvements, (ii) any alterations to the Building or Premises or
(iii) Tenant's unique use of the Premises as opposed to uses of Property in
general. Landlord shall assign to Tenant all Building and equipment warranties
assigned to Landlord upon Landlord's acquisition of the Premises.
3. TERM.
3.1 Term. The Commencement Date, Expiration Date and Term of this Lease are
as specified in Paragraph 1.3. If Landlord is unable to acquire title to the
Premises by close of business on March 31, 1999, either party may terminate this
Lease by written notice delivered to the other party no later than April 1,
1999; provided, however, that if Tenant reasonably
<PAGE> 8
concludes that the matter impeding the closing is of such a nature that it can
reasonably be expected to be resolved in the immediate future without an
expenditure of funds in addition to those funds already budgeted by Landlord for
the acquisition of the Premises, then Tenant may require Landlord to proceed
diligently to cure such impediment and Landlord shall not have the unilateral
right to terminate this Lease. Landlord will use all commercially reasonable
efforts to acquire title by March 31, 1999, and to promptly cure, subject to the
foregoing limitation relating to expenditure of funds, any impediment to close
of escrow at the election of Tenant. Landlord shall not be required to acquire
title to the Premises if as a result of its "due diligence" it believes or has
reason to believe (a) the Premises are or may be affected by Hazardous
Substances or (b) the improvements are not free of defects, constructed in a
good and workman like manner, and in accordance with Gwinnett County Code and
Americans With Disabilities Act. In the event of termination pursuant to this
Section, the Security Deposit shall forthwith be restored to Tenant and the
parties shall be discharged of all liabilities and obligations hereunder.
3.2 Commencement Date Certificate. At the request of Landlord, Tenant shall
execute and deliver to Landlord a completed certificate ("Commencement Date
Certificate") in the form attached hereto as Exhibit B.
4. RENT.
4.1 Base Rent. Tenant shall pay to Landlord Base Rent and other monetary
obligations of Tenant to Landlord under the terms of this Lease (such other
monetary obligations are herein referred to as "Additional Rent") in lawful
money of the United States, without offset or deduction, except as otherwise
expressly provided herein, in advance on or before the first day of each month.
Tenant shall commence paying Base Rent on the ninety-first day following the
Commencement Date. ("Rent Commencement Date") Base Rent and Additional Rent for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and Additional Rent shall be made to Landlord at its address stated
herein or to such other persons or at such other addresses as Landlord may from
time to time designate in writing to Tenant. Base Rent and Additional Rent are
collectively referred to as "Rent." All monetary obligations of Tenant to
Landlord under the terms of this Lease are deemed to be Rent.
4.2 Operating Expenses.
(a) Tenant shall pay to Landlord on the first day of each month during the
term hereof, in addition to the Base Rent, Tenant's Share of the Industrial Park
Operating Expenses and Tenant's share of Premises Operating Expenses.
(b) "Premises Operating Expenses" are:
(i) Real Property Taxes.
(ii) Premiums for insurance policies maintained by Landlord under
Paragraph 8 hereof.
(iii) Landlord's Environmental Monitoring and Insurance Program Fee.
(iv) Property management fees in an amount equal to .8% of Base Rent.
(v) If Tenant fails to maintain the Premises, any expense incurred by
Landlord for such maintenance.
(c) Industrial Park Operating Expenses are that portion of the amounts
payable by Landlord pursuant to the CC&Rs that are applicable to the Premises.
(d) Tenant's share of Industrial Park Operating Expenses and Premises
Operating Expenses is set forth in Paragraph 1.5.
(e) Tenant shall pay monthly in advance on the same day as the Base Rent is
due Tenant's Share of estimated Industrial Park and Premises Operating Expenses
in the amount set forth in Paragraph 1.6. Landlord shall deliver to Tenant
within 90 days after the expiration of each calendar year a reasonably detailed
statement showing Tenant's Share of the actual Industrial Park and Premises
Operating Expenses incurred during the preceding year. If Tenant's estimated
payments under this Paragraph 4.2(e) during the preceding year exceed Tenant's
Share as indicated on said statement, Tenant shall be credited the amount of
such overpayment against Tenant's Share of Industrial Park and Premises
Operating Expenses next becoming due. If Tenant's estimated payments under this
Paragraph 4.2(e) during said preceding year were less than Tenant's Share as
indicated on said statement, Tenant shall pay to Landlord the amount of the
deficiency within 45 days after delivery by Landlord to Tenant of said
statement. At any time Landlord may adjust the amount of the estimated Tenant's
Share of Industrial Park and Premises Operating Expenses to reflect Landlord's
estimate of such expenses for the year.
<PAGE> 9
5. SECURITY DEPOSIT.
Tenant shall deposit with Landlord upon Tenant's execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for Tenant's faithful
performance of Tenant's obligations under this Lease. If Tenant fails to pay
Base Rent or Additional Rent or otherwise defaults under this Lease (as defined
in Paragraph 13.1), Landlord may use the Security Deposit for the payment of any
amount due Landlord or to reimburse or compensate Landlord for any liability,
cost, expense, loss, or damage (including attorneys' fees) which Landlord may
suffer or incur by reason thereof. Tenant shall on demand pay Landlord the
amount so used or applied so as to restore the Security Deposit to the amount
set forth in Paragraph 1.7. Landlord shall not be required to keep all or any
part of the Security Deposit separate from its general accounts. Landlord shall,
at the expiration or earlier termination of the term hereof and after Tenant has
vacated the Premises, return to Tenant that portion of the Security Deposit not
used or applied by Landlord. 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 Tenant under this Lease.
6. USE.
6.1 Permitted Use. Tenant shall use and occupy the Premises only for the
Permitted Uses set forth in Paragraph 1.8. Tenant shall not commit any nuisance,
permit the emission of any objectionable noise or (subject to the last sentence
of this Paragraph 6.1) odor, suffer any waste, make any use of the Premises
which is contrary to any law or ordinance or which will invalidate or increase
the premiums for any of Landlord's insurance. Tenant shall obtain and keep in
full force and effect all licenses, including alcoholic beverage licenses that
may be required by any public agency in connection with Tenant's proposed use of
the Premises. Tenant may wash and wax its delivery vehicles on the Premises and
store foods, pallets, drums or any other materials outside the Building,
provided all such vehicle maintenance and storage shall be in compliance with
the CC&Rs and all materials stored outside the Building shall be screened from
the view of the public and other tenants of the Industrial Park. Tenant may emit
food preparation aromas, provided the aromas would not commonly be considered
noxious and such emissions are not in violation of the CC&Rs or Applicable
Requirements.
6.2 Hazardous Substances.
(a) Definition; Reportable Uses Require Consent. The term, "Hazardous
Substance," as used in this Lease, shall mean any product, substance, chemical,
material, or waste whose presence, nature, quantity, and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release, or
effect, either by itself or in combination with other materials expected to be
on the Premises, is either: (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
Landlord to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil, or any products or by-products
thereof. Tenant shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Landlord and compliance in a timely
manner (at Tenant's sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration, or
business plan is required to be filed with, any governmental authority, and
(iii) the presence in, on, or about the Premises of a Hazardous Substance with
respect to which any Applicable Requirements require that a notice be given to
persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Tenant may, without Landlord's prior consent, but
upon notice to Landlord and in compliance with all Applicable Requirements, use
any ordinary and customary materials reasonably required to be used by Tenant in
the normal course of the Permitted Use, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring properties to any meaningful
risk of contamination or damage, or expose Landlord to any liability therefor.
In addition, Landlord may (but without any obligation to do so) condition its
consent to any Reportable Use of any Hazardous Substance by Tenant upon Tenant's
giving Landlord such additional assurances as Landlord, in its reasonable
discretion, deems necessary to protect itself, the public, the Premises, and the
environment against damage, contamination, injury, and/or liability therefor,
including but not limited to the
4
<PAGE> 10
installation (and, at Landlord's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit.
Irrespective of the fact that the materials identified in this sentence may
constitute Hazardous Substances, Tenant may use and store (a) nominal amounts of
ordinary household cleaners and janitorial supplies which are not regulated by
any environmental laws, and (b) consumer sized closed containers of retail
products, including but not limited to cleaning agents, garden supplies, pest
products, hardware supplies, all available for sale in the ordinary course of
Tenant's business, all of which will be contained inside of closed plastic
transport totes.
(b) Duty to Inform Landlord. If Tenant knows, or has reasonable cause to
believe, that a Hazardous Substance is located in, under, or about the Premises
or the Building, Tenant shall immediately give Landlord written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to such Hazardous Substance.
Tenant shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under, or about the Premises (including, without limitation,
through the plumbing or sanitary sewer system).
(c) Tenant Indemnification. Unless caused by or contributed to by Landlord
or Landlord Entities, Tenant shall indemnify, protect, defend and hold Landlord,
Landlord's affiliates, Lenders, and the officers, directors, shareholders,
partners, employees, managers, independent contractors, attorneys and agents of
the foregoing ("Landlord Entities") and the Premises harmless from and against
any and all damages, liabilities, judgments, costs, claims, liens, expenses,
penalties, loss of permits and reasonable attorneys' and reasonable consultants'
fees arising out of or involving any Hazardous Substances (i) brought onto the
Premises by Tenant or by any of Tenant's employees, agents, contractors,
servants, visitors, suppliers or invitees (such employees, agents, contractors,
servants, visitors, suppliers and invitees are herein collectively referred to
as "Tenant Responsible Parties") or at Tenant's direction, or (ii) released on
any other property by Tenant or Tenant Responsible Parties. Tenant's obligations
under this Paragraph 6.2(c) shall include, but not be limited to, the effects of
any contamination or injury to person, property or the environment created or
suffered by Tenant or Tenant Responsible Parties, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved.
Tenant's obligations under this Paragraph 6.2(c) shall survive the expiration or
earlier termination of this Lease.
(d) Landlord Indemnity. Unless caused by or contributed to by Tenant or
Tenant Responsible Parties, Landlord shall indemnify, protect, defend and hold
Tenant, Tenant's affiliates, and the officers, invitees, directors,
shareholders, partners, employees, managers, independent contractors, attorneys
and agents of the foregoing ("Tenant Entities") and the Premises harmless from
and against any and all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties, loss of permits and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance (i) brought onto the
Premises by the Landlord or by any of Landlord's employees, agents, contractors
or invitees (collectively "Landlord Responsible Parties") unless at the
direction of Tenant or (ii) present on the Premises as of the Commencement Date
and not caused or contributed to by Tenant. Landlord's obligations under this
Paragraph 6.2(d) shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Landlord, and the cost of investigation (including consultants' and
attorneys' fees and testing), removal, remediation, restoration and/or abatement
thereof, or of any contamination therein involved. Landlord's obligations under
this Paragraph 6.2(d) shall survive the expiration or earlier termination of
this Lease.
6.3 Tenant's Compliance with Requirements. Tenant shall, at Tenant's sole
cost and expense, fully, diligently, and in a timely manner comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements, and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Landlord's
engineers and/or consultants, relating to (a) industrial hygiene, (b)
environmental conditions on, in, under, or about the Premises, including soil
and groundwater conditions, and (c) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage, spill,
or release of any Hazardous Substance, now in effect or which may hereafter come
into effect.
<PAGE> 11
Tenant shall, within 5 days after receipt of Landlord's written request, provide
Landlord with copies of all documents and information evidencing Tenant's
compliance with any Applicable Requirements, and shall immediately upon receipt
notify Landlord in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint, or report
pertaining to or involving failure by Tenant or the Premises to comply with any
Applicable Requirements.
6.4 Inspection; Compliance with Law. In addition to Landlord's
environmental monitoring and insurance program, the cost of which is included in
Operating Expenses, Landlord and the holders of any mortgages, deeds of trust,
or ground leases on the Premises ("Lenders") shall have the right to enter the
Premises at any time in the case of an emergency, and otherwise at reasonable
times and on 24 hours' notice, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Tenant with this Lease and all
Applicable Requirements. Landlord shall be entitled to employ experts and/or
consultants in connection therewith to advise Landlord with respect to Tenant's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The cost and expenses of any such
inspections shall be paid by the party requesting same unless a violation of
Applicable Requirements exists or is imminent, or the inspection is requested or
ordered by a governmental authority. Tenant shall upon request reimburse
Landlord or Landlord's Lender, as the case may be, for the costs and expenses of
such inspections.
7. MAINTENANCE, REPAIRS, TRADE FIXTURES AND ALTERATIONS.
7.1 Tenant's Obligations. Subject to the provisions of Paragraph 7.2
(Landlord's Obligations), Paragraph 9 (Damage or Destruction) and Paragraph 14
(Condemnation), Tenant shall, at Tenant's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Tenant and
whether or not the need for such repairs occurs as a result of Tenant's use, the
elements or the age of such portion of the Premises). Subject to Landlord's
warranty obligations under Paragraph 7.2, Tenant's repair obligations under this
Paragraph 7.1 include, without limiting the generality of the foregoing, all
equipment or facilities specifically serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire hose connectors if within the
Premises, fixtures, interior walls, ceilings, floors, windows, doors, plate
glass, and skylights ("Building Systems"). Tenant's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair. Without relieving Tenant of its obligation to perform regular preventive
maintenance on such Building Systems, if a single repair, or replacement of a
Building System which is not also a Tenant Improvement is required during the
last two (2) years of this Lease, and the cost of such repair exceeds six (6)
months' Base Rent, Tenant may instead terminate this Lease unless Landlord
notifies Tenant, in writing, within ten (10) days after receipt of Tenant's
termination notice that Landlord has elected to pay the difference between the
actual cost thereof and the amount equal to six (6) months' Base Rent. If Tenant
elects termination, Tenant shall deliver to Landlord 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 Tenant could use
the Premises without commencing such repairs. Landlord may on an annual basis
inspect the roof and require Tenant to make any repairs and to conduct any
preventive maintenance that a qualified roof inspector may reasonably recommend
in order to maximize the useful life of the roof.
7.2 Landlord's Obligations. Subject to the provisions of Paragraph 6 (Use),
Paragraph 7.1 (Tenant's Obligations), this Paragraph 7.2, Paragraph 9 (Damage or
Destruction) and Paragraph 14 (Condemnation), Landlord at its expense and not
subject to reimbursement pursuant to Paragraph 4.2 or other Paragraph hereunder,
shall keep in good order, condition and structural repair the roof structure,
foundations, and exterior walls of the Building unless the reason for repairs is
due to damage caused by Tenant or Tenant Responsible Parties.
Landlord warrants, for a period of ninety (90) days following the
Commencement Date, that all equipment or facilities serving the Premises
("Equipment") shall operate and perform in their intended manner and be
defect-free. Landlord shall during such 90-day period repair or replace any
Equipment which is not free of defects or does not operate in the manner for
which it was designed; provided, Landlord shall not be required to repair or
replace Equipment which
<PAGE> 12
is not so operating if the failure to operate is due to damage caused by Tenant
or Tenant Responsible Parties.
7.3 Alterations. Upon completion of the Tenant Improvements, Tenant agrees
not to make or allow to be made any structural alterations or physical additions
in or to the Premises without first obtaining the written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. After completion of
Tenant's initial Tenant Improvements, Tenant shall be allowed to make
nonstructural alterations or modifications in or to the Premises without
obtaining Landlord's prior consent provided that such alterations or
modifications are purely decorative or: (i) such alterations or modifications do
not cost more than $50,000 in any one instance; (ii) that taken together with
any other such alterations or modifications made by Tenant, the aggregate cost
of the same does not exceed $500,000 over the Term of this Lease; (iii) Tenant
provides Landlord with prior written notice of its intention to make such
alterations or additions stating in reasonable detail the nature and extent of
the same and the estimated cost of the same and (iv) Tenant delivers to Landlord
agreements, substantially in the forms attached hereto as Exhibits C-1 and C-2,
executed by each general contractor and each general contractor's principal
subcontractors and suppliers. In the event that Tenant desires to make
nonstructural alterations or modifications costing more than $50,000 in any one
instance or which in the aggregate over the Term of this Lease taken together
with other alterations or modifications made by Tenant will cause all of
Tenant's alterations or modifications within the Term of this Lease to exceed
$500,000, Tenant first must obtain the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, but may be made upon such
reasonable terms and conditions as Landlord deems necessary, taking into
consideration the nature and extent of such alterations or modifications and the
Term remaining in this Lease. Whether or not Landlord's consent is required for
any alterations or modifications made by Tenant to the Premises, Tenant shall,
within thirty (30) days following completion of such work, notify Landlord of
the cost of such alterations or modifications so that Landlord can, and Landlord
shall at Tenant's cost, increase the property insurance coverage on the Premises
and/or Building, as the case may be, to include such alterations or
modifications. Tenant shall also increase property damage insurance on the
contents of the Premises as required above.
In making any alterations, decorations, additions, installations or
improvements to or in the Premises, Tenant shall employ only such contractors as
are qualified to perform the same in a good workmanlike and professional manner.
All such work done by Tenant shall be performed and installed in such a manner
that the same shall comply with the CC&Rs and all provisions of law, ordinances
and all rules and regulations of any and all agencies and authorities having
jurisdiction over the Premises. Notwithstanding the foregoing, in no event shall
Tenant have the right to create or permit there to be established any lien or
encumbrance of any nature against the Premises or the Building for said
improvement or improvements by Tenant. Tenant shall fully pay the cost of any
improvement or improvements made or contracted for by Tenant. Tenant shall keep
the Property and the Premises free of any and all mechanics and materialmen's
liens. If Tenant shall contest the validity of any such lien, claim or demand,
then Tenant shall, at its sole expense defend and protect itself, Landlord 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
Landlord shall require, Tenant 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 Landlord against liability for the same. If Landlord elects to
participate in any such action, Tenant shall pay Landlord's attorneys' fees and
costs. Any improvements, decorations, fixtures, equipment, hardware or other
similar matters which have been made to the Premises by Tenant shall at
Landlord's option and Tenant's cost and expense be removed at the end of the
Lease Term. Tenant shall repair any damage to the Premises occasioned by such
removal. With respect to the Tenant Improvements and any other alterations or
improvements for which Landlord's consent is required, Landlord shall notify
Tenant after its review of the plans and specifications for the Tenant
Improvements and when it gives consent whether Tenant will be required to remove
such Tenant Improvements and alterations or modifications at the end of the
Lease Term. To the extent that Landlord does not request the removal, all such
items shall become the property of Landlord and shall remain upon the Premises
at the termination of this Lease by lapse of time, or otherwise, without
compensation or allowance or credit to Tenant.
7.4 Surrender/Restoration. Tenant shall surrender the Premises by 11:59
P.M. on the end of the last day of the Lease term or any earlier termination
date, clean and free of debris and in good operating order, condition and state
of repair ordinary wear and tear, and damage or
<PAGE> 13
destruction covered by insurance or caused by or contributed to by Landlord, its
agents, contractors or employees excepted. Without limiting the generality of
the above, Tenant shall remove those items Landlord has notified Tenant,
pursuant to Paragraph 7.3, to remove and all personal property, trade fixtures
and remove or cut flush floor bolts, patch all floors and cause all lights to be
in operating condition.
8. INSURANCE; INDEMNITY.
8.1 Payment of Premiums. The cost of the premiums for insurance policies
maintained by Landlord under this Paragraph 8 shall be a Premises Operating
Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement Date or Expiration Date.
8.2 Tenant's Insurance.
(i) At its sole cost and expense, Tenant shall maintain in full force
and effect during the Term of the Lease the following insurance coverages
insuring against claims which may arise from or in connection with the Tenant's
operation and use of the Premises.
(a) Commercial General Liability with minimum limits of
$1,000,000 per occurrence and $3,000,000 general aggregate for bodily injury,
personal injury and property damage and, if Tenant has (or is required under
applicable law to have) a liquor license and is selling or distributing
alcoholic beverages on the Premises, then Tenant shall maintain liquor liability
coverage in appropriate amounts. If such Commercial General Liability insurance
contains a general aggregate limit, it shall apply separately to the Premises.
(b) Workers' Compensation insurance with statutory limits and
Employers Liability with a $1,000,000 per accident limit for bodily injury or
disease.
(c) Automobile Liability covering all owned, non-owned and hired
vehicles with a $1,000,000 per accident limit for bodily injury and property
damage.
(d) Property insurance on a full replacement cost basis with no
coinsurance penalty provision against all risks of loss to (1) any improvements
to the Premises, excluding the interior offices, the electrical distribution
system and the fire suppression system, (2) trade fixtures, and (3) business
personal property.
(e) Business interruption insurance against all risks of loss,
including off premises power failure covering a period of not less than one
year.
(f) Boiler and machinery insurance covering damage to or
destruction of machinery and equipment located on the Premises or in the
Improvements that is used for heating, refrigerating, ventilating,
air-conditioning power generation and similar purposes, in an amount not less
than one hundred percent (100%) of the actual replacement value of such
machinery and equipment.
(ii) Tenant shall deliver to Landlord certificates including copies of
all required additional insured endorsements of all insurance reflecting
evidence of required coverages prior to initial occupancy and 30 days prior to
expiration of any policy.
(iii) If, in the reasonable opinion of Landlord's insurance advisor,
the amount or scope of such coverage is deemed inadequate at any time during the
Term, Tenant shall increase such coverage to such commercially reasonable
amounts or scope as Landlord's advisor deems adequate; provided, that in no
circumstance shall the amount or scope of such coverage be increased more
frequently than every three years.
(iv) All insurance required under Paragraph 8.2 (a) shall be available
as primary and non-contributory, (b) shall provide for severability of
interests, (c) shall be issued by insurers, licensed to do business in the state
in which the Premises are located and which are rated A-: VII or better by
Best's Key Rating Guide, (d) shall be endorsed to include Landlord, Landlord
entities and Landlord's lenders, as additional insureds (Commercial General
Liability only), and (e) shall be endorsed to provide at least 30 days' prior
notification of cancellation or material change in coverage to said additional
insureds.
8.3 Landlord's Insurance.
(i) Landlord shall maintain in full force and effect during the term
of the Lease the following insurance coverages insuring Landlord against claims
which may arise from or in connection with the Landlord's ownership,
maintenance, and use of the Premises. Premiums for any such insurance shall,
pursuant to Paragraph 8, be a Premises Operating Expense.
(a) Commercial General Liability with minimum limits of
$1,000,000 per occurrence and $3,000,000 general aggregate for bodily injury,
personal injury, and property damage;
<PAGE> 14
(b) Pollution Legal Liability Insurance including contractual
liability, cleanup costs and defense all in connection with any loss arising
from the Premises. Coverage shall be maintained in an amount of at least
$1,000,000 per loss with an aggregate limit applicable to the Premises of
$3,000,000. Coverage shall apply to sudden and non-sudden pollution.
(c) Worker's Compensation Insurance with statutory limits and
employer's liability with a $1,000,000-per-accident limit for bodily injury or
disease;
(d) Automobile liability covering all owned, nonowned, and hired
vehicles with a $1,000,000-per-accident limit for bodily injury and property
damage;
(e) Risk of direct physical loss, including flood, insurance
covering the Building shell and the offices, electrical distribution system and
fire suppression system of the Premises and improvements other than Tenant
Improvements on a full-replacement-cost basis with no co-insurance provision and
business interruption insurance with a limit of liability representing loss of
at least six months of income.
(ii) Landlord shall deliver to Tenant certificates of all
insurance reflecting evidence of required coverages prior to initial occupancy,
and 30 days prior to expiration of any policy, Landlord shall furnish a
certificate evidencing that such expired policy has been replaced.
(iii) All insurance required under Paragraph 8.3(i)(b), (c),
and (d) shall: (a) be available as primary and non-contributory insurance
coverage, (b) provide for severability of interests, (c) be issued by insurers,
licensed to do business in the state in which the Premises are located and which
are rated A: VII or better by Best's Key Rating Guide, and (d) be endorsed to
include Tenant and Tenant's officers, directors and employees as additional
insureds under the commercial general liability policy to the extent of the
indemnities provided in Paragraph 8.5 hereof.
8.4 Waiver of Subrogation. To the extent permitted by law and without
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
on account of any and all claims Landlord or Tenant may have against the other
with respect to property insurance actually carried, or required to be carried
hereunder, to the extent of the proceeds realized from such insurance coverage.
8.5 Indemnity.
(a). Tenant shall protect, indemnify, defend and hold Landlord and
Landlord Entities harmless from and against any and all loss, claims, liability
or costs (including court costs and attorney's fees) incurred by reason of:
(i) any damage to any property (including but not limited to
property of any Landlord Entity) or death or injury to any person occurring in
or about the Premises, the Building or the Industrial Center to the extent that
such injury or damage shall be caused by or arise from any actual or alleged
act, fault or omission by or of Tenant or Tenant Responsible Parties.
(ii) the conduct or management of any work or anything whatsoever
done by the Tenant on or about the Premises or from transactions of the Tenant
concerning the Premises;
(iii) Tenant's failure to comply with any and all governmental
laws, ordinances and regulations applicable to the condition or use of the
Premises or its occupancy the compliance with which are the responsibility of
Tenant hereunder or under such laws; or
(iv) any breach or default of the part of Tenant in the
performance of any covenant or agreement on the part of the Tenant to be
performed pursuant to this Lease.
(b). Landlord shall protect, indemnify, defend and hold the Tenant and
Tenant Entities harmless from and against any and all loss, claims, liability or
costs (including court costs and attorney's fees) incurred by reason of:
(i) any damage to any property (including but not limited to
property of any Tenant Entity) or death or injury to any person occurring in or
about the Premises, the Building or the Industrial Center to the extent that
such injury or damage shall be caused by or arise from any actual or alleged act
or omission by or of Landlord or Landlord Entities;
(ii) the negligent conduct or management of any work or anything
whatsoever done by the Landlord on or about the Premises or from Landlord's
negligence in the transactions of the Landlord concerning the Premises;
(iii) Landlord's failure to comply with any and all governmental
laws, ordinances and regulations applicable to the condition or use of the
Premises or its occupancy which are the responsibility of Landlord hereunder or
under such laws; or
<PAGE> 15
(iv) any breach or default of the part of Landlord in the
performance of any covenant or agreement on the part of the Landlord to be
performed pursuant to this Lease.
The provisions of this Paragraph 8.5 shall survive the termination of this
Lease with respect to any claims or liability accruing prior to such
termination.
8.6 Exemption of Landlord from Liability. Except to the extent caused by
the negligence or willful misconduct of Landlord and without waiving Landlord's
obligation to maintain the insurance it is required to maintain under this
Article 8, or Tenant's rights to seek recovery therefrom, Landlord and Landlord
Entities shall not be liable for and Tenant waives any claims against Landlord
Entities for injury or damage to the person or the property of Tenant, Tenant's
employees, contractors, invitees, customers or any other person in or about the
Premises, Building or Industrial Center from any cause whatsoever, including,
but not limited to, damage or injury which is caused by or results from (i)
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures or (ii) from the condition of
the Premises, other portions of the Building or Industrial Center. Landlord
shall not be liable for any damages arising from any act or neglect of any other
tenant of Landlord nor from the failure by Landlord to enforce the provisions of
any other lease in the Industrial Center. Notwithstanding Landlord's negligence
or breach of this Lease, Landlord shall under no circumstances be liable for
injury to Tenant's business, for any loss of income or profit therefrom or any
indirect, consequential or punitive damages. The foregoing exemption from
Landlord liability shall in no event relieve Landlord from any of its
obligations hereunder.
9. DAMAGE OR DESTRUCTION.
9.1 Termination Right. Tenant shall give Landlord immediate written notice
of any damage to the Premises. Subject to the provisions of Paragraph 9.2,
Landlord shall in a timely fashion and in no event later than 60 days from the
date on which Landlord receives notice of the damage, commence repairs and
thereafter diligently pursue completion of the repairs. If the extent of the
damage is such that there is or will be substantial and material interference
with the conduct by Tenant of its business at the Premises and the anticipated
time for completion of the repairs which will permit Tenant to resume normal
business operations exceeds 365 days from the date on which Landlord received
notice of the damage, Tenant may on notice to Landlord delivered prior to
commencement of repairs terminate this Lease effective 30 days after delivery of
such notice to Landlord. Such termination shall not excuse the performance by
Tenant of those covenants which under the terms hereof survive termination. Rent
shall be abated in proportion to the degree of interference during the period
that there is such substantial interference with the conduct of Tenant's
business at the Premises. Abatement of rent and Tenant's right of termination
pursuant to this provision shall be Tenant's sole remedy for failure of Landlord
to keep in good order, condition, and repair the foundations and exterior walls
of the Building, and roof structure. Landlord shall promptly deliver to Tenant
all reports and other materials related to the repairs. Tenant may also consult
with and obtain bids from other contractors for the repair of the damages.
9.2 Damage Caused by Tenant. Tenant's termination rights under Paragraph
9.1 shall not apply if the damage to the Premises or Building is the result of
any negligent act or omission of Tenant or of any of Tenant Responsible Parties
("Tenant Acts"). Any damage resulting from a Tenant Act shall be promptly
repaired by Tenant, except to the extent covered by Landlord's insurance.
Landlord at its option may at Tenant's expense repair any damage caused by
Tenant Acts. Except to the extent Landlord receives proceeds from rent
interruption insurance, Tenant shall continue to pay all rent and other sums due
hereunder and shall be liable to Landlord for all damages that Landlord may
sustain resulting from a Tenant Act.
10. REAL PROPERTY TAXES.
10.1 Payment of Real Property Taxes. Landlord shall pay the Real Property
Taxes due and payable during the term of this Lease and, except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Premises Operating Expenses in accordance with the provisions of
Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real Property
Taxes" is any form of tax or assessment, general, special, ordinary, or
extraordinary, imposed or levied upon (a) the Premises, (b) any interest of
Landlord in the Premises or Building, (c) Landlord's right to rent or other
income from the Premises or Building, and/or (d) Landlord's business of
<PAGE> 16
leasing the Premises. Real Property Taxes include (i) any license fee,
commercial rental tax, excise tax, improvement bond or bonds, levy, or tax; and
(ii) any tax or charge which replaces or is in addition to any of such
above-described "Real Property Taxes." Real Property Taxes for tax years
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date and Expiration
Date. Real Property Taxes shall exclude inheritance and gift taxes.
10.3 Additional Improvements. Operating Expenses shall not include Real
Property Taxes attributable to improvements placed upon the Industrial Center by
other tenants or by Landlord for the exclusive enjoyment of such other tenants.
Notwithstanding Paragraph 10.1 hereof, Tenant shall, however, pay to Landlord at
the time Operating Expenses are payable under Paragraph 4.2, the entirety of any
increase in Real Property Taxes if assessed by reason of improvements placed
upon the Premises by Tenant or at Tenant's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed.
10.5 Tenant's Property Taxes. Tenant shall pay prior to delinquency all
taxes assessed against and levied upon Tenant's improvements, fixtures,
furnishings, equipment and all personal property of Tenant contained in the
Premises or stored within the Industrial Center.
11. UTILITIES. Tenant shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and cleaning of the Premises, together with any taxes thereon. All such
utilities and services shall be separately metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 Landlord's Consent Required.
(a) Except as expressly provided hereunder, Tenant shall not assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent which consent shall not be unreasonably
withheld, conditioned or delayed. Relevant criteria in determining reasonability
of consent include, but are not limited to, credit history of a proposed
assignee or sublessee, negative references from prior landlords, any change or
intensification of use of the Premises and any limitations imposed by the
Internal Revenue Code and the Regulations promulgated thereunder relating to
Real Estate Investment Trusts. Assignment or subletting shall not release Tenant
from its obligations hereunder. Tenant shall not (i) sublet or assign or enter
into other arrangements such that the amounts to be paid by the sublessee or
assignee thereunder would be based, in whole or in part, on the income or
profits derived by the business activities of the sublessee or assignee; (ii)
sublet the Premises or assign this Lease to any person in which Landlord owns an
interest, directly or indirectly (by applying constructive ownership rules set
forth in Section 856(d)(5) of the Internal Revenue Code (the "Code"); or (iii)
sublet the Premises or assign this Lease in any other manner which could cause
any portion of the amounts received by Landlord pursuant to this Lease or any
sublease to fail to qualify as "rents from real property" within the meaning of
Section 856(d) of the Code, or which could cause any other income received by
Landlord to fail to qualify as income described in Section 856(c)(2) of the
Code. The requirements of this Paragraph 12.1 shall apply to any further
subleasing by any subtenant.
(b) Tenant shall have the right without consent of Landlord but with
prior written notice to Landlord to assign this Lease or sublet all or a portion
of the Premises to an entity which is controlled by Tenant (i.e., an entity of
which Tenant owns more than 50% of the outstanding shares), which controls
Tenant (i.e. an entity which owns more than 50% of the Tenant's shares, such as
a parent relationship) or which is under common control with Tenant (such as a
brother-sister or affiliate relationship), whether through operation of law or
otherwise, provided such entity, in the case of an assignment, assumes all the
obligations of Tenant under the Lease. Irrespective of any such assignment,
Tenant shall remain liable for the full and faithful performance of each and
every covenant to be performed by Tenant hereunder.
(c) A change in the control of Tenant shall constitute an assignment
requiring Landlord's consent. The transfer, on a cumulative basis, of 50% or
more of the voting or management control of Tenant shall constitute a change in
control for this purpose.
12.2 Rent Sharing. Fifty percent of any Base Rent received by Tenant from
an assignee or sublessee which is in excess of the Base Rent payable under this
Lease shall be paid by Tenant to Landlord.
<PAGE> 17
13. DEFAULT; REMEDIES.
13.1 Default of Tenant. The occurrence of any one of the following events
shall constitute an event of default on the part of Tenant ("Default"):
(a) The abandonment of the Premises by Tenant for a period of five (5)
consecutive business days, provided, so long as Tenant continues to pay rent and
perform all its other obligations hereunder, a cessation of operation shall not
constitute a Default;
(b) Failure to pay any installment of Base Rent, Additional Rent or
any other monies due and payable hereunder, said failure continuing for a period
of five (5) days after the same is past due;
(c) A general assignment by Tenant for the benefit of creditors;
(d) The filing of a voluntary petition in bankruptcy by Tenant, the
filing of a voluntary petition for an arrangement, the filing of a petition,
voluntary or involuntary, for reorganization, or the filing of an involuntary
petition by Tenant's creditors, which is not dismissed within thirty (30) days;
(e) Receivership, attachment, of other judicial seizure of the
Premises or all or substantially all of Tenant's assets on the Premises, which
is not dismissed within thirty (30) days;
(f) Failure of Tenant to maintain insurance as required by Paragraph
8.2 for a period of ten (10) days after Tenant receives written notice from
Landlord of such failure;
(g) Any breach by Tenant of its covenants under Paragraph 6.2;
(h) Failure in the performance of any of Tenant's covenants,
agreements or obligations hereunder (except those failures specified as events
of Default in other Paragraphs of this Paragraph 13.1 which shall be governed by
such other Paragraphs), which failure continues for 30 days after written notice
thereof from Landlord to Tenant provided that, if Tenant has exercised
reasonable diligence to cure such failure and such failure cannot be cured
within such 30-day period despite reasonable diligence, Tenant shall not be in
default under this subparagraph unless Tenant fails thereafter diligently and
continuously to prosecute the cure to completion; and
(i) Any transfer of a substantial portion of the assets of Tenant, or
any incurrence of a material obligation by Tenant, unless such transfer or
obligation is undertaken or incurred in the ordinary course of Tenant's business
or in good faith for equivalent consideration, or with Landlord's consent.
13.2 Remedies of Landlord. In the event of any Default by Tenant, Landlord
shall have the remedies set forth in the Addendum attached hereto entitled
"Landlord's Remedies in Event of Tenant Default."
13.3 Late Charges. Tenant hereby acknowledges that late payment by Tenant
to Landlord of Rent and other sums due hereunder will cause Landlord 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. Accordingly, if any installment of Rent or
other sum due from Tenant shall not be received by Landlord or Landlord's
designee within 10 business days after such amount shall be due, then, without
any requirement for notice to Tenant, Tenant shall pay to Landlord a late charge
equal to 5% of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's Default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of exercise of said power (all
of which are herein called "condemnation"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If the portion of the Premises taken results in a
substantial and material interference with the operation of Tenant's business,
Tenant may, at Tenant's option, to be exercised in writing within 30 days after
Landlord shall have given Tenant written notice of such taking (or in the
absence of such notice, within 30 days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Tenant 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 and Additional Rent
shall be
<PAGE> 18
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent or Additional Rent shall occur if the condemnation does not apply to any
portion of the Premises. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be allocated between Landlord and Tenant in
accordance with the law of the State of Georgia. In the event that this Lease is
not terminated by reason of such condemnation, Landlord shall to the extent of
its net severance damages in the condemnation matter, repair any damage to the
Premises caused by such condemnation authority. Landlord, at its sole cost and
expense, shall be responsible for the payment of any amount in excess of such
net severance damages required to complete such repair.
15. ESTOPPEL CERTIFICATE AND FINANCIAL STATEMENTS.
15.1 Estoppel Certificate. Each party (herein referred to as "Responding
Party") shall within 10 business days after written notice from the other Party
(the "Requesting Party") execute, acknowledge and deliver to the Requesting
Party, to the extent it can truthfully do so, an estoppel certificate in the
form attached hereto as Exhibit F, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party. In no event shall any such document requested pursuant to this Paragraph
15.1 obligate Tenant to any additional responsibilities or obligations, nor
waive or limit any rights of Tenant, under this Lease.
15.2 Financial Statement. If Landlord desires to finance, refinance, or
sell the Premises, Tenant shall deliver to any potential lender or purchaser
designated by Landlord such financial statements of Tenant as may be reasonably
required by such lender or purchaser, including but not limited to Tenant's
financial statements for the past 3 years. All such financial statements shall
be received by Landlord and such lender or purchaser upon receipt by Tenant of
an executed confidentiality agreement and shall be used only for the purposes
herein set forth.
16. ADDITIONAL COVENANTS AND PROVISIONS.
16.1 Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall not affect the validity
of any other provision hereof.
16.2 Interest on Past-Due Obligations. Any monetary payment due Landlord
hereunder not received by Landlord within 10 days following the date on which it
was due shall bear interest from the date due at 10% per annum, but not
exceeding the maximum rate allowed by law in addition to the late charge
provided for in Paragraph 13.3.
16.3 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.
16.4 Landlord Liability. Tenant, its successors and assigns, shall not
assert nor seek to enforce any claim for breach of this Lease against any of
Landlord's assets other than Landlord's interest in the Premises. Tenant agrees
to look solely to such interest for the satisfaction of any liability or claim
against Landlord under this Lease. In no event whatsoever shall Landlord (which
term shall include, without limitation, any general or limited partner,
trustees, beneficiaries, officers, directors, or stockholders of Landlord) ever
be personally liable for any such liability.
16.5 No Prior or Other Agreements. This Lease contains all the agreements
between the Parties with respect to any matter mentioned herein, and supersedes
all oral, written prior or contemporaneous agreements or understandings.
16.6 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and sent by certified or registered mail or U.S. Postal
Service Express Mail (or by nationally recognized overnight courier provider
with signed receipts), with postage prepaid, or by facsimile transmission during
normal business hours, and shall be deemed sufficiently given if served in a
manner specified in this Paragraph 16.6. 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 purposes. A copy of all notices required or
permitted to be given to Landlord hereunder shall be concurrently transmitted to
such party or parties at such addresses as Landlord may from time to time
hereafter designate by written notice to Tenant.
16.7 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. Notices
delivered by United States Express Mail
<PAGE> 19
or nationally recognized overnight courier that guarantees next day delivery
shall be deemed given 24 hours after delivery of the same to the United States
Postal Service or courier. If any notice is transmitted by facsimile
transmission or similar means, the same shall be deemed served or delivered upon
telephone or facsimile confirmation of receipt of the transmission thereof,
provided a copy is also delivered via overnight delivery or certified mail. If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be
deemed received on the next business day.
16.8 Waivers. No waiver by Landlord of a Default by Tenant shall be deemed
a waiver of any other term, covenant or condition hereof, or of any subsequent
Default by Tenant of the same or any other term, covenant or condition hereof.
No waiver by Tenant of a Default by Landlord shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default by
Landlord of the same or any other term, covenant or condition hereof.
16.9 Holdover. Tenant has no right to retain possession of the Premises or
any part thereof beyond the expiration or earlier termination of this Lease. If
Tenant holds over with the consent of Landlord: (i) the Base Rent payable shall
be increased to 150% of the Base Rent applicable during the month immediately
preceding such expiration or earlier termination; (ii) Tenant's right to
possession shall terminate on 30 days' notice from Landlord or Tenant and (iii)
all other terms and conditions of this Lease shall continue to apply. Nothing
contained herein shall be construed as a consent by Landlord to any holding over
by Tenant.
16.10 Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies in
law or in equity.
16.11 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.
16.12 Landlord. The covenants and obligations contained in this Lease on
the part of Landlord are binding on Landlord, its successors and assigns, only
during and in respect of their respective period of ownership of such interest
in the Premises. In the event of any transfer or transfers of such title to the
Premises, Landlord (and in case of any subsequent transfers or conveyances, the
then grantor) shall, provided the grantee assumes all of the executory
obligations of Landlord under this Lease, be concurrently freed and relieved
from and after the date of such transfer or conveyance, without any further
instrument or agreement, of all liability with respect to the performance of any
future covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed. So long as an AMB-affiliated entity retains an
ownership interest in the Premises, AMB Property Corporation or an entity owned
or controlled by AMB Property Corporation shall remain the managing party of
such affiliated entity.
16.13 Attorneys' Fees and Other Costs. If any Party brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding shall be entitled
to reasonable attorneys' fees. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought. Tenant shall reimburse Landlord on demand for all reasonable legal,
engineering and other professional services expenses actually incurred by
Landlord in connection with all requests by Tenant for consent or approval
hereunder, provided that Tenant shall have first approved their respective
costs. Unless the request for consent to an assignment or sublease involves a
change of use or substantial changes to the Building, legal fees of Landlord to
review a consent to assignment or sublease shall not exceed $350.00.
16.14 Landlord's Access; Showing Premises; Repairs. Subject to the
restrictions set forth hereinabove, Landlord and Landlord's agents shall have
the right to enter the Premises at any time, in the case of an emergency, and
otherwise at reasonable times upon 24 hours' notice for the purpose of showing
the same to prospective purchasers, lenders, or tenants, and making such
alterations, repairs, improvements or additions to the Premises or to the
Building, as Landlord may reasonably deem necessary. Landlord may at any time
place on or about the Premises or Building any ordinary "For Sale" signs and
Landlord may at any time during the last 180 days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. Provided that Tenant's use,
occupancy and enjoyment is not disturbed hereunder, all such activities of
Landlord shall be without abatement of rent or liability to Tenant.
16.15 Signs. Tenant shall not place any signs at or upon the exterior of
the Premises or the Building, except that Tenant may, with Landlord's prior
written consent (not to be unreasonably withheld, conditioned or delayed),
install (but not on the roof) such signs as are
<PAGE> 20
reasonably required to advertise Tenant's own business so long as such signs are
in a location designated by Landlord and comply with sign ordinances and the
CC&Rs signage criteria. Subject to the same criteria, Landlord may place a sign
on the Building stating that the Building is owned and managed by Landlord.
16.16 Termination: Merger. Unless specifically stated otherwise in writing
by Landlord, the voluntary or other surrender of this Lease by Tenant, the
mutual termination or cancellation hereof, or a termination hereof by Landlord
for Default by Tenant, shall automatically terminate any sublease or lesser
estate in the Premises; provided, however, Landlord shall, in the event of any
such surrender, termination or cancellation, have the option to continue any one
or all of any existing subtenancies. In the event Landlord elects to continue
any one or all of any existing subtenancies, Tenant shall be released from any
and all future liabilities. Landlord's failure within 10 days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest shall constitute Landlord's election to have such
event constitute the termination of such interest.
16.17 Quiet Possession. Upon payment by Tenant of the Base Rent and
Additional Rent for the Premises and the performance of all of the covenants,
conditions and provisions on Tenant's part to be observed and performed under
this Lease, Tenant shall have quiet possession of the Premises for the entire
term hereof subject to all of the provisions of this Lease.
16.18 Subordination; Attornment; Non-Disturbance.
(a) Subordination. Subject to the non-disturbance provisions of
Paragraph 16.18(c) below, this Lease shall be subject and subordinate to any
ground lease, mortgage, deed of trust, or other hypothecation or mortgage
(collectively, "Mortgage") now or hereafter placed by Landlord upon the real
property of which the Premises are a part, to any and all advances made on the
security thereof, and to all renewals, modifications, consolidations,
replacements, and extensions thereof. Tenant agrees that any person holding any
Mortgage shall have no duty, liability, or obligation to perform any of the
obligations of Landlord under this Lease. In the event of Landlord's default
with respect to any such obligation, Tenant will give any Lender, whose name and
address have previously been furnished in writing to Tenant, notice of a default
by Landlord. Tenant may not exercise any remedies for default by Landlord unless
and until Landlord and the Lender shall have received written notice of such
default and a reasonable time (not less than 90 days) shall thereafter have
elapsed without the default having been cured. If any Lender shall elect to have
this Lease superior to the lien of its Mortgage and shall give written notice
thereof to Tenant, this Lease shall be deemed prior to such Mortgage. The
provisions of a Mortgage relating to the disposition of condemnation and
insurance proceeds shall prevail over any contrary provisions contained in this
Lease.
(b) Attornment. Subject to the nondisturbance provisions of
subparagraph (c) of this Paragraph 16.18, Tenant agrees to attorn to a Lender or
any other party who acquires ownership of the Premises by reason of a
foreclosure of a Mortgage. In the event of such foreclosure, such new owner
shall not: (i) be liable for any act or omission of any prior landlord or with
respect to events occurring prior to acquisition of ownership, (ii) be subject
to any offsets or defenses which Tenant might have against any prior Landlord,
or (iii) be liable for security deposits or be bound by prepayment of more than
one month's rent.
(c) Non-Disturbance. With respect to a Mortgage entered into by
Landlord after the execution of this Lease, Tenant's subordination of this Lease
shall be subject to receiving assurance (a "nondisturbance agreement") from the
Mortgage holder that Tenant's possession and this Lease will not be disturbed so
long as Tenant is not in default and attorns to the record owner of the
Premises. Attached as Exhibit E is a form of Nondisturbance Agreement which is
acceptable to Tenant. Tenant shall agree to any reasonable amendments to this
form which may be required by Lender, provided that Tenant's rights shall not be
diminished nor its obligations increased by reason of such modifications.
(d) Self-Executing. The agreements contained in this Paragraph 16.18
shall be effective without the execution of any further documents; provided,
however, that upon written request from Landlord or a Lender in connection with
a sale, financing, or refinancing of Premises, Tenant and Landlord shall execute
such further writings as may be reasonably required to separately document any
such subordination or nonsubordination, attornment, and/or nondisturbance
agreement, as is provided for herein. Subject to the non-disturbance provisions
of Paragraph 16.18(c), Landlord is hereby irrevocably vested with full power to
subordinate this Lease to a Mortgage.
16.19 Rules and Regulations. Tenant agrees that it will abide by and to
cause Tenant Responsible Parties to abide by all reasonable rules and
regulations ("Rules and Regulations")
<PAGE> 21
which Declarant or its successors under the CC&Rs may make from time to time for
the management, safety, care, and cleanliness of the Industrial Park, the
parking and unloading of vehicles and the preservation of good order, as well as
for the convenience of other occupants or tenants of the Industrial Center and
their invitees.
16.20 Security Measures. Tenant acknowledges that the rental payable to
Landlord hereunder does not include the cost of guard service or other security
measures. Landlord has no obligations to provide same. Tenant assumes all
responsibility for the protection of the Premises, Tenant, its agents and
invitees and their property from the acts of third parties.
16.21 Intentionally Deleted
16.22 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, so long as initialed by both parties.
16.23 Offer. Preparation of this Lease by either Landlord or Tenant or
Landlord's agent or Tenant's agent and submission of same to Tenant or Landlord
shall not be deemed an offer to lease. This Lease is not intended to be binding
until executed and delivered by all Parties hereto.
16.24 Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification.
16.25 Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as Tenant, the obligations of
such persons shall be the joint and several responsibility of all persons or
entities named herein as such Tenant.
16.26 Authority. Each person signing on behalf of Landlord or Tenant
warrants and represents that she or he is authorized to execute and deliver this
Lease and to make it a binding obligation of Landlord or Tenant.
16.27 Counterparts. This Lease may be executed in counterparts, each of
which shall be deemed to be an original, but such counterparts when taken
together shall constitute but one agreement.
16.28 Memorandum of Lease. Either party may, at its expense, record a Short
Form Memorandum of Lease in the form attached hereto as Exhibit G. At the time
Landlord delivers to Tenant an executed Short Form Memorandum of Lease, Tenant
shall deliver to Landlord an executed quitclaim deed, in recordable form,
quitclaiming Tenant's interest in the Premises. Landlord shall not record such
quitclaim deed until this Lease has terminated.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
LANDLORD: TENANT:
AMB PROPERTY, L.P. INTELLIGENT SYSTEMS FOR RETAIL, INC.
a Delaware limited partnership a California corporation
By: AMB Property Corporation,
a Maryland corporation
By: /S/ LUIS A. BELMONTE By: /S/ LOUIS H. BORDERS
-------------------------------- ------------------------------
Luis A. Belmonte Louis H. Borders
Title: Vice President Title: President and CEO
Telephone: (617) 531-9000 Telephone: (650) 524-2200
Facsimile: (617) 531-9001 Facsimile: (650) 524-4801
Executed at: San Francisco, California Executed at: _____________, California
on: on:
------------------------------------ ----------------------------------------
Witness: Witness:
------------------------------ -----------------------------------
Address for Notices: Address for Notices:
AMB Property Corporation 1241 E. Hillsdale, Suite 210
60 State Street, Suite 3700 Foster City, California 94404
Boston, Massachusetts 02109 Attention: David S. Rock
Attention: Kent Greenawalt
</TABLE>
<PAGE> 22
REMEDIES ADDENDUM
<PAGE> 23
OPTIONS ADDENDUM
<PAGE> 24
EXHIBIT A
Diagram of Premises
<PAGE> 25
EXHIBIT B
Commencement Date Certificate
<PAGE> 26
ADDENDUM
LANDLORD'S REMEDIES IN THE EVENT OF TENANT DEFAULT
(STATE OF GEORGIA)
Notwithstanding anything to the contrary contained within the foregoing
document, the following shall apply:
(a) In the event of any Default by Tenant, Landlord may, at
Landlord's option, without any demand or notice whatsoever (except as expressly
required in Paragraph 13 of the Lease):
(i) Terminate this Lease by giving Tenant notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination and all rights of Tenant under this
Lease and in and to the Premises shall terminate. Tenant shall remain liable
for all obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Premises to Landlord on the date
specified in such notice; or
(ii) Terminate this Lease as provided in subparagraph (a)(i)
above and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, an amount which, at the date
of such termination, is calculated as follows: (1) the value of the excess, if
any, of (A) the Base Rent, Additional Rent and all other sums which would have
been payable hereunder by Tenant for the period commencing with the day
following the date of such termination and ending with the Expiration Date had
this Lease not been terminated (the "Remaining Term"), over (B) the aggregate
reasonable rental value of the Premises for the Remaining Term (which excess,
if any shall be discounted to present value at the "Treasury Yield" as defined
below for the Remaining Term); plus (2) the cost of recovering possession of
the Premises and all other expenses incurred by Landlord due to Tenant's
default, including, without limitation, reasonable attorney's fees; plus (3)
the unpaid Base Rent and Additional Rent earned as of the date of termination
plus any interest and late fees due hereunder, plus other sums of money and
damages owing on the date of termination by Tenant to Landlord under this Lease
or in connection with the Premises. The amount as calculated above shall be
deemed immediately due and payable. The payment of the amount calculated in
subparagraph (ii)(1) shall not be deemed a penalty but shall merely constitute
payment of liquidated damages, it being understood and acknowledged by Landlord
and Tenant that actual damages to Landlord are extremely difficult, if not
impossible, to ascertain. "Treasury Yield" shall mean the rate of return in
percent per annum of Treasury Constant Maturities for the length of time
specified as published in document H.15(519) (presently published by the Board
of Governors of the U.S. Federal Reserve System titled "Federal Reserve
Statistical Release") for the calendar week immediately preceding the calendar
week in which the termination occurs. If the rate of return of Treasury
Constant Maturities for the calendar week in question is not published on or
before the business day preceding the date of the Treasury Yield in question is
to become effective, then the Treasury Yield shall be based upon the rate of
return of Treasury Constant Maturities for the length of time specified for the
most recent calendar week for which such publication has occurred. If no rate of
return for Treasury Constant Maturities is published for the specific length of
time specified, the Treasury Yield for such length of time shall be the weighted
average of the rates of return of Treasury Constant Maturities most nearly
corresponding to the length of the applicable period specified. If the
publishing of the rate of return of Treasury Constant Maturities is ever
discontinued, then the Treasury Yield shall be based upon the index which is
published by the Board of Governors of the U.S. Federal Reserve System in
replacement thereof or, if no such replacement index is published, the index
which, in Landlord's reasonable determination, most nearly corresponds to the
rate of return of Treasury Constant Maturities. In determining the aggregate
reasonable rental value pursuant to subparagraph+ (ii)(1)(B) above, the parties
hereby agree that, at the time Landlord seeks to enforce this remedy, all
relevant factors should be considered, including, but not limited to, (a)+ the
length of time remaining in the Term, (b)+ the then current market conditions in
the general area in which the Building is located, (c)+ the likelihood of
reletting the Premises for a period of time equal to the remainder of the Term,
(d)+ the net effective rental rates then being obtained by landlords for similar
type space of similar size in similar type buildings in the general area in
which the Building is located, (e)+ the vacancy levels in the general area in
which the Building is located, (f)+ current levels of new
<PAGE> 27
construction that will be completed during the remainder of the Term and how
this construction will likely affect vacancy rates and rental rates and (g)
inflation; or
(iii) Without terminating this Lease declare immediately due and
payable the sum of the following: (1) the present value (calculated using the
"Treasury Yield") of all Base Rent and Additional Rent due and coming due under
this Lease for the entire Remaining Term (as if by the terms of this Lease they
were payable in advance), plus (2) the cost of recovering and reletting the
Premises and all other expenses incurred by Landlord in connection with
Tenant's default, plus (3) any unpaid Base Rent. Additional Rent and other
rentals, charges, assessments and other sums owing by Tenant to Landlord under
this Lease or in connection with the Premises as of the date this provision is
invoked by Landlord, plus (4) interested in all such amounts from the date at
the Interest Rate, and Landlord may immediately proceed to distrain, collect,
or bring action for such sum, or may file a proof of claim in any bankruptcy of
insolvency proceedings to enforce payment thereof; provide, however, that such
payment shall not be deemed a penalty or liquidated damages, but shall merely
constitute payment in advance of all Base Rent and Additional Rent payable
hereunder throughout the Term, and provided further, however, that upon
Landlord receiving such payment, Tenant shall be entitled to receive from
Landlord all rents received by Landlord from other assignees, tenants and
subtenants on account of said Premises during the remainder of the Term
(provided that the monies to which Tenant shall so become entitled shall in no
event exceed the entire amount actually paid by Tenant to Landlord pursuant to
this subparagraph (iii), less all costs, expenses and attorneys' fees of
Landlord incurred but not yet reimbursed by Tenant in connection with
recovering and reletting the Premises; or
(iv) Without terminating this Lease, in its own name but as agent for
Tenant, enter into and upon and take possession of the Premises or any part
thereof. Any property remaining in the Premises may be removed and stored in a
warehouse or elsewhere at the cost of, and for the account of, Tenant without
Landlord being deemed guilty of trespass or becoming liable for any loss or
damage which may be occasioned thereby unless caused by Landlord's negligence.
Thereafter, Landlord may, but shall not be obligated to, lease to a third party
the Premises or any portion thereof as the agent of Tenant upon such terms and
conditions as Landlord may deem necessary or desirable in order to relet the
Premises. The remainder of any rentals received by Landlord from such reletting,
after the payment of any indebtedness due hereunder from Tenant to Landlord, and
the payment of any costs and expenses of such reletting, shall be held by
Landlord to the extent of and for application in payment of future rent owed by
Tenant, if any, as the same may become due and payable hereunder. If such
rentals received from such reletting shall at any time or from time to time be
less than sufficient to pay to Landlord the entire sums then due from Tenant
hereunder. Tenant shall pay any such deficiency to Landlord. Notwithstanding any
such reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for any such previous default provided same has not been
cured; or
(v) Without terminating this Lease, and with or without notice to
Tenant, enter into and upon the Premises and, without being liable for
prosecution or any claim for damages therefor, maintain the Premises and repair
or replace any damage thereto or do anything or make any payment for which
Tenant is responsible hereunder. Tenant shall reimburse Landlord immediately
upon demand for any expenses which Landlord incurs in thus effecting Tenant's
compliance under this Lease and Landlord shall not be liable to Tenant for any
damages with respect thereto; or
(vi) Without liability to Tenant or any other party and without
constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant or property, material, labor, utilities or
other service, wherever Landlord is obligated to furnish or render the same so
long as a Default exists under this Lease; or
(vii) With or without terminating this Lease, allow the Premises to
remain unoccupied and collect rent from Tenant as it come due; or
(viii) Pursue such other remedies as are available at law or equity.
<PAGE> 28
(b) If this Lease shall terminate as a result of or while there exists a
Default hereunder, any funds of Tenant held by Landlord may be applied by
Landlord to any damages payable by Tenant (whether provided for herein or by
law) as a result of such termination or default.
(c) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be a
bar to the maintenance of any subsequent actions or proceedings for the
recovery of such sum or sums so omitted.
(d) No agreement to accept a surrender of the Premises and no act or
omission by Landlord or Landlord's agents during the Term shall constitute an
acceptance or surrender of the Premises unless made in writing and signed by
Landlord. No re-entry or taking possession of the Premises by Landlord shall
constitute an election by Landlord to terminate this Lease unless a written
notice of such intention is given to Tenant. No provision of this Lease shall
be deemed to have been waived by either party unless such waiver is in writing
and signed by the party making such waiver. Landlord's acceptance of Base Rent
or Additional Rent in full or in part following a Default hereunder shall not
be construed as a waiver of such Default. No custom or practice which may grow
up between the parties in connection with the terms of this Lease shall be
construed to waive or lessen either party's right to insist upon strict
performance of the terms of this Lease, without a written notice thereof to the
other party.
(e) If a Default shall occur, Tenant shall pay to Landlord, on demand,
all expenses incurred by Landlord as a result thereof, including reasonable
attorneys' fees, court costs and expenses actually incurred.
<PAGE> 29
OPTIONS ADDENDUM
Lease dated as of March 4, 1999, by and between
AMB Property, L.P., and Intelligent Systems for Retail, Inc.
A. Tenant shall have the option to extend the term hereof for two (2)
additional five (5) year periods (the "Option Terms") following the expiration
of the initial term (the "Initial Term"), by giving written notice of exercise
of such option as provided in Paragraph 16.6 of the Lease. The terms and
conditions of this Lease shall apply during each Option Term except for (i)
Base Rent which will be adjusted as provided in this Options Addendum and (ii)
the Property Management Reimbursement which shall be 1% of the Base Rent as
adjusted by this Option Addendum.
B. To exercise each Option, Tenant shall provide written notice to Landlord
not earlier than 270 days prior to the end of the Initial Term or First Option
Term, whichever is applicable, nor later than 180 days prior to the end of the
Initial Term or First Option Term, whichever is applicable. Failure of Tenant
to timely exercise its first Option shall terminate its second Option.
C. The monthly Base Rent for the First Option Term shall be adjusted by
multiplying $84,335 times the change, if any, in the Consumer Price Index of
the Bureau of Labor Statistics of the U.S. Department of Labor for All Urban
Consumers, U.S. City Average, all items (1982-1984 = 100), herein referred to
as the "CPI." The rent shall be adjusted by multiplying $84,335 times a
fraction, the denominator of which shall be the CPI of the calendar month most
recently published prior to adjustment, and the numerator of which shall be the
CPI published for the month of March 1999. The sum so calculated shall
constitute the new monthly Base Rent hereunder for each year of the First
Option Term, but in no event shall such new monthly Base Rent increase by less
than $8433.50 nor more than $16,867 as a result of such calculation.
D. The new Base Rent for each year of the Second Option Term shall be fixed
at the commencement of that Option Term and shall be ninety-five (95%) percent
of the fair market rental ("Fair Market Rental" as hereinafter defined) of the
Premises at the commencement date of the Second Option Term (the "Adjustment
Date"). Under no circumstances shall the monthly Base Rent for the Second
Option Term be less than the last month's Base Rent payable in the First Option
Term.
E. "Fair Market Rental" shall mean the rate being charged to similarly
situated tenants for comparable space in similar buildings in, and in the
immediate vicinity of the Northeast Metropolitan Atlanta area, with similar
amenities excluding from consideration the Tenant Improvements. Fair Market
Rental as of the Adjustment Date shall be determined by Landlord with written
notice (the "Notice of Option Term Rent") given to Tenant not later than thirty
(30) days following receipt of the Option Notice, subject to Tenant's right to
arbitration as hereinafter provided.
F. If Tenant disputes the amount claimed by Landlord as Fair Market Rental,
Tenant may require that Landlord submit the dispute to arbitration. Tenant
shall notify Landlord of its demand for arbitration in writing within fifteen
(15) days after service of the Notice of Option Term Rent. Tenant's demand for
arbitration shall include the designation by Tenant of its appointed
arbitrator, who shall be commercial real estate agent or broker with at least
five (5) years full-time experience who is familiar with the Fair Market Rental
of similar space in comparable buildings in the above-specified area.
G. Within ten (10) days of receipt of Tenant's demand for arbitration,
Landlord shall designate in writing its appointed arbitrator, who shall be
similarly qualified. Within ten (10) days thereafter, the two arbitrators shall
select a third, neutral arbitrator, who shall be similarly qualified and shall
have had no prior business or social relationship of any kind with either party.
H. Within thirty (30) days after the appointment of the neutral arbitrator,
each party arbitrator shall simultaneously submit to the neutral arbitrator its
proposed Fair Market Rent. The neutral arbitrator shall select the one proposal
which most closely approximates the neutral arbitrator's independent assessment
of the Fair Market Rental of the Premises. The arbitrator's authority is
limited to selecting one of the parties' proposed Fair Market Rental figures,
and s/he shall have no authority to set a compromise rental figure. The
decision of the arbitrator shall be final and binding on the parties. Each
party shall pay the costs and fees of its arbitrator, and shall share in the
costs and fees of the neutral arbitrator.
I. Failure on the part of Tenant to demand arbitration within fifteen (15)
days following receipt of the Notice of Option Term Rent from Landlord shall
bind Tenant to the Fair Market Rental as determined by Landlord. Should Tenant
elect to arbitrate and should the arbitration not have been concluded prior to
the Adjustment Date, Tenant shall pay the monthly rent to Landlord after the
Adjustment Date, adjusted to reflect the Fair Market Rental as Landlord has so
determined. If the amount of the Fair Market Rental as determined by
arbitration is greater than or less than Landlord's determination, then any
adjustment required to adjust the amount previously paid shall be made by the
appropriate party within ten (10) days after such determination of Fair Market
Rental.
<PAGE> 30
EXHIBIT A
[2935 SHAWNEE INDUSTRIAL WAY, SUWANEE, GA FLOOR PLAN]
<PAGE> 31
EXHIBIT B
MEMORANDUM OF LEASE TERM DATES
To: AMB PROPERTY, L.P.
c/o IDI Services Group, Inc.
3424 Peachtree Road, N.E., Suite 1500
Atlanta, Georgia 30326
Re: Lease dated March __, 1999 ("Lease") between AMB Property, L.P. a Delaware
Limited Partnership ("Landlord") and Intelligent Systems for Retail, Inc.,
a California corporation ("Tenant") concerning the Property described as
2935 Shawnee Industrial Way, in Gwinnett County, Georgia:
In accordance with the terms of the Lease, we wish to advise and/or confirm as
follows:
1) That the Premises have been accepted herewith by the Tenant as being
substantially complete in accordance with the Lease and that there is no
known deficiency in construction.
2) That the Tenant has possession of the Premises and acknowledges that under
the provisions of the Lease the Term of said Lease commenced on
____________, 1999 and ends on ______________, 2009, subject to the options
to extend contained in the Lease.
3) That in accordance with the subject Lease, Rent shall commence to accrue on
___________, 1999.
TENANT:
INTELLIGENT SYSTEMS FOR RETAIL, INC.
A California Corporation
By
-----------------------------------
Named Printed:
-----------------------
Title:
-------------------------------
Dated:
-------------------------------
Landlord: Tenant:
[SIG] [SIG]
<PAGE> 32
EXHIBIT C-1
AGREEMENT OF GENERAL CONTRACTOR
AMB Property, L.P., a Delaware limited partnership ("Landlord") has
entered into a lease with Intelligent Systems for Retail, Inc., a California
corporation ("Tenant"). As a material inducement to Landlord to allow Tenant to
construct tenant improvements in the Premises subject to the Lease,
__________________, the general contractor for Tenant, hereby certifies to and
agrees for the benefit of Landlord as follows: The general contractor is
working solely for and is the agent of the Tenant. The Landlord's contract and
agreement, i.e., the lease, is with the Tenant and not with the general
contractor. The Landlord has agreed to pay to Tenant a certain allowance in
accordance with the terms of the Lease but such allowance represents only a
portion of the estimated total cost of the improvements to be constructed for
Tenant by the general contractor. The general contractor will look solely to
the Tenant for payment under the contract between the Tenant and the general
contractor. The general contractor acknowledges that the Tenant is not the
agent of the Landlord for purposes of obtaining completion of the work
described in the contract between the Tenant and the general contractor and
that the general contractor has no claim against all or any portion of the
Tenant's allowance or any other funds or assets of Landlord unless and until
they are paid over to Tenant. Without limitation, the general contractor
acknowledges and agrees that the general contractor has no contract, express or
implied, with Landlord for the performance of the work that is subject to its
contract with Tenant and general contractor has no claim of lien against the
property of Landlord that will be improved by the work it will perform for
Tenant.
Executed this ____ day of ______________, 1999.
GENERAL CONTRACTOR:
------------------------------
Name of General Contractor
By:
---------------------------
Name:
----------------------
Title:
---------------------
<PAGE> 33
EXHIBIT C-2
AGREEMENT OF SUBCONTRACTOR
AMB Property, L.P., a Delaware limited partnership ("Landlord"), has
entered into a lease with Intelligent Systems for Retail, Inc., a California
corporation ("Tenant"). As a material inducement to Landlord to allow Tenant to
construct tenant improvements in the Premises subject to the Lease, __________
_______________, ("Subcontractor") hereby certifies to and agrees for the
benefit of Landlord as follows: The Subcontractor is working for and is the
agent of either ___________________ ("General Contractor") or the Tenant. The
Landlord's contract and agreement, i.e., the lease, is with the Tenant and not
with the General Contractor or Subcontractor. The Landlord has agreed to pay to
Tenant a certain allowance in accordance with the terms of the Lease but such
allowance represents only a portion of the estimated total cost of the
improvements to be constructed for Tenant by the General Contractor. The
Subcontractor will look to the Tenant or General Contractor for payment under
the contract between the General Contractor and Subcontractor. The
Subcontractor acknowledges that the Tenant is not the agent of the Landlord for
purposes of obtaining completion of the work described in the contract between
the Tenant and the General Contractor and that the Subcontractor has no claim
against all or any portion of the Tenant's allowance or any other funds or
assets of Landlord unless and until they are paid over to Tenant. Without
limitation, the Subcontractor acknowledges and agrees that the Subcontractor
has no contract, express or implied, with Landlord for the performance of the
work that is subject to its contract with General Contractor and has not claim
of lien against the property of Landlord that will be improved by the work it
will perform for Tenant.
Executed this _____ day of ____________, 1999.
CONTRACTOR:
------------------------------------
Name of Contractor
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 34
EXHIBIT D
COUNTY RECORDER: )
RECORDING REQUESTED BY )
AND WHEN RECORDED RETURN TO: )
)
Lender )
Address 1 )
Address 2 )
)
)
LENDER: )
)
________________________________________________________________________________
CONSENT TO INSTALLATION AND REMOVAL OF PERSONAL PROPERTY
(LANDLORD)
THIS CONSENT TO INSTALLATION AND REMOVAL OF PERSONAL PROPERTY (this
"Consent"), dated _______________, is given by AMB Property, L.P., a Delaware
Limited Partnership ("Landlord") to ________________________, a California
corporation ("Lender"), to permit Lender to finance the acquisition of certain
personal property (the "Equipment") described in a Loan Agreement dated
_______________, by and between Lender and Intelligent Systems for Retail,
Inc., ("Borrower"). The Equipment includes all tenant improvements made to or
in the premises by Borrower as permitted by that certain "Industrial Single
Tenant Lease" dated as of March __, 1999 (the "Lease"), between Landlord and
Borrower respecting real property commonly known as 2935 Shawnee Industrial
Way, in Gwinnett County, Georgia, and more particularly described in ANNEX A
hereto (the "Premises"), whether or not said tenant improvements are installed
pursuant to or described as "Personal Property" in the Lease or otherwise, and
whether or not said tenant improvements are affixed to the Premises. The
Equipment does not include and Lender shall have no rights as to the interior
offices, electrical distribution system, HVAC, dock levelers and fire
suppression system ("Excluded Property"). The Excluded Property is not subject
to this Consent.
Landlord, Lender and Borrower hereby agree as follows:
1. The Equipment may (but shall not be required to) be affixed to the
Premises and is and shall remain personal property, and not be a fixture,
notwithstanding the manner is which it is attached or affixed to the Premises.
2. The title to the Equipment shall remain solely in Borrower, subject
to the first priority security interest of Lender. Landlord agrees, regardless
of the time, place or manner of any filings, that Lenders' interests, security
interests, and liens in the Equipment are superior to that of Landlord.
3. Lender may at any time prior to the termination of the Lease enter
upon the Premises, upon at least 10 days written notice to Landlord, to remove
the Equipment at any time whenever it is necessary to protect its interest.
Lender shall promptly repair any damage to the Premises caused by said removal,
except painting and redecorating. Lender shall indemnify, protect, defined and
hold Landlord harmless from any liability or claims by Borrower or third
parties against Landlord arising out of said removal.
If Landlord's elects to terminate the Lease because of a default by Borrower in
the performance by Borrower of its obligations under the Lease, Lender shall
have a period ("Removal Period") of 90 days from the date Lender receives a
notice of Landlord's termination election ("Default Notice") to cause the
Equipment to be removed from the Premises. During such 15-day period, Lender
shall not be obligated to pay rent. Lender shall have a period of 15 days from
receipt of a Default Notice to deliver irrevocable written notification to
Landlord ("Removal Notice") of whether or not Lender shall exercise its rights,
but not the obligation, exercisable in its sole discretion, to cause the
Equipment to be removed from the Premises. Lender shall cause any damage to the
Premises caused by removal (except painting and redecorating) to be repaired on
or before the last day of the Removal Period. If Lender elects to remove the
Equipment it shall pay to Landlord with the Removal Notice an amount equal to
one month's rent payable under the Lease. Thereafter, until Lender has removed
all the Equipment and repaired all damages caused by such removal, Lender shall
pay on the same day each month thereafter an amount equal to one month's rent
payable under the Lease. If Lender does not timely deliver a Removal Notice to
Landlord with the rent required by this paragraph 3 or, if having delivered
such Renewal Notice and rent, fails to complete the removal within the Removal
Period or pay each month the rent as herein required (unless prohibited from
doing so by order of a court of competent jurisdiction, whether as a result of
a bankruptcy proceeding or otherwise), Landlord may remove and dispose of the
Equipment in any manner it deems appropriate, wholly without liability to
Lender for any damage to the Equipment or any impairment of Lender's security
interest. Landlord shall be under no obligation to store the Equipment.
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<PAGE> 35
4. Landlord agrees to send Lender a copy of any written notice of
default sent Borrower concerning Borrower's obligations to Landlord with
respect to the Premises. Lender shall have the right, but not the obligation,
to cure any defaults of Borrower. Landlord agrees that so long as such defaults
are cured within the time periods set forth in the Lease, the Lease will remain
in full force and effect against Borrower; provided that if the Borrower's
default includes a failure to pay rent. Lender shall have a period of 10 days
from delivery of a Default Notice to cure a monetary default. Landlord agrees
that Borrower may, upon notice to Landlord, assign the Lease to Lender without
Landlord's consent provided that Lender assumes in writing the obligations of
Borrower under the Lease. Lender may thereafter assign or sublease the Premises
with Landlord's consent (which will not be unreasonably withheld), provided
that (i) any subsequent assignee shall assume in writing the obligations of
Borrower under the Lease; (ii) the use of the Premises by the assignee or
sublessee is permitted by use provisions in the Lease and does not violate any
applicable government rule, ordinance or regulation; (iii) the assignee or
sublessee is in Lender's reasonable business judgment of reputable business
character and, after taking into consideration the security for transferee's
performance, prospectively capable of performing its financial obligations
under the Lease and (iv) the assignee assumes the obligations of the Borrower
under the Lease. Landlord acknowledges that any transferee with a financial
condition not materially worse than that of Borrower on the date hereof
satisfies (iii) above. Any assignment or subletting by Lender shall not be
subject to the bonus rent or Landlord rent sharing provisions of Article 12 of
the Lease; provided, however, that such bonus rent provisions will apply once
Lender has received an amount equal to the aggregate accelerated total of all
amounts due it from Borrower, net of costs and expenses.
5. Landlord waives any present or future right, title, lien, interest,
or right of levy or distraint for rent in and to the Equipment for as long as
Lender shall own or have a security interest in it, notwithstanding the manner
in which it is attached or affixed to the Premises or other real property.
6. Landlord agrees that any note secured now or hereafter by a deed of
trust on, or mortgage of, the Premises will be endorsed to indicate that the
mortgage securing said note does not extend to the Equipment.
7. Landlord warrants and represents that (i) the Lease is its only
agreement with Borrower relating to the Premises; (ii) has all requisite power
and authority to execute and perform this Consent; (iii) it is the sole owner
of the Landlord's interest under the Lease; (iv) it has no knowledge that any
default has occurred under the Lease; (v) it is not aware of any litigation,
adverse claim, or condemnation proceeding respecting the Premises; (vi) the
Lease is in full force and effect; (vii) the Premises are not subject to any
mortgage or other security interest in favor of any person which has not
executed a consent to installation and removal acceptable to Lender and (viii)
Landlord has all necessary power and authority to enter hereinto and perform
its obligations hereunder, and no consents of others are required that have not
been obtained.
8. Lender shall have a claim to any eminent domain award attributable to
the Equipment, whether or not paid to Landlord.
9. Landlord, shall during the Removal Period and subject to the payment
of rent as provided in Paragraph 3 hereof permit Lender to conduct an ordinary
liquidation auction of the Equipment on the Premises. Such auction shall be
subject to Landlord's reasonable requirements.
10. Landlord acknowledges that it has reviewed Borrower's plan of
business and operations and is satisfied that operation of said business and
operations as stated therein shall not be a violation of the Lease.
11. This agreement is binding upon the undersigned's heirs, devises,
legatees, successors and assigns and inures to the benefit of Lender, its
successors and assigns.
12. Except to the extent expressly set forth herein, nothing herein shall
be construed as compromising any of Landlords rights under the Lease, including
without limitation, its rights and remedies in the event of a default by
Borrower in the performance of its covenants under the Lease.
13. Upon satisfaction of Borrower's obligations to Lender or expiration
of the Removal Period, Lender shall execute, in recordable form, and deliver to
Landlord any document, including a quit claim deed to the Premises, reasonably
required by Landlord to remove from the public records the lien of this Consent
on the Premises.
14. All notices required or permitted by this Consent shall be in writing
and sent by certified or registered mail or U.S. Postal Service Express Mail
(or by nationally recognized overnight courier provider with signed receipts),
with postage prepaid, or by facsimile transmission during normal business
hours, and shall be deemed sufficiently given if served in a manner specified
in this Paragraph 14. The addresses noted adjacent to a Party's signature on
this Consent shall be that Party's address for delivery or mailing of notices.
Any Party may be written
2
<PAGE> 36
notice to the others specify a different address for notice purposes. A copy of
all notices required or permitted to be given to Landlord hereunder shall be
concurrently transmitted to such party or parties at such addresses as Landlord
may from time to time hereafter designate by written notice to the other
Parties.
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. Notices delivered by United
States Express Mail or nationally recognized overnight courier that guarantees
next day delivery shall be deemed given 24 hours after delivery of the same to
the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone or facsimile confirmation of receipt of the
transmission thereof, provided a copy is also delivered via hand or overnight
delivery or certified mail. If notice is received on a Saturday or a Sunday or
a legal holiday, it shall be deemed received on the next business day.
IN WITNESS WHEREOF, Landlord, Lender and Borrower have executed this
Consent as of the date and year first written above.
LANDLORD LENDER
By: _______________________ By: _______________________
Name: _____________________ Name: _____________________
Title: ____________________ Title: ____________________
Telephone number: Telephone number:
Facsimile number: Facsimile number:
Address: Address:
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
BORROWER
By: _______________________
Name: _____________________
Title: ____________________
Telephone number:
Facsimile number:
Address:
___________________________
___________________________
___________________________
CONSENT OF MORTGAGEE:
The undersigned ____________, being the mortgage of the Premises, does hereby
consent to all of the foregoing:
[PUT IN SIGNATURE BLOCK]
NOTARY ACKNOWLEDGMENTS REQUIRED
3
<PAGE> 37
ANNEX A
LEGAL DESCRIPTION OF PREMISES
4
<PAGE> 38
EXHIBIT E
COUNTY RECORDER: )
RECORDING REQUESTED BY )
AND WHEN RECORDED RETURN TO: )
)
)
Address 1 )
Address 2 )
)
)
)
)
________________________________________________________________________________
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS NONDISTURBANCE AGREEMENT (the "Agreement") is made and entered into
this ______ day of _______________, 1999, by and between INTELLIGENT SYSTEMS
FOR RETAIL, INC., a California Corporation ("Tenant") and _____________________,
a ____________________ ("Lender") and AMB PROPERTY L.P., a Delaware limited
partnership, ("Landlord").
RECITALS
WHEREAS, Landlord executed a lease dated as of March __, 1999 in favor of
Tenant (the "Lease"), a memorandum of which may be recorded simultaneously
herewith covering a certain Demised Premises therein described located on a
parcel of real estate, a legal description of which is attached hereto and
incorporated herein by this reference as Exhibit "A," (said parcel of real
estate and the Demised Premises being sometimes collectively referred to herein
as the "Property"), and
WHEREAS, Landlord has executed a _________________________________ (the
"Mortgage") dated _________________, and recorded on ____________________ at
Volume ___, page ___, of the _________________ Records of ____________________
County, State of _______________, in favor of Lender, payable upon the terms and
conditions described therein; and
WHEREAS, it is a condition of said loan that said Mortgage shall
unconditionally be and remain at all times a lien or charge upon the Property,
prior and superior to the Lease and to the leasehold estate created thereby; and
WHEREAS, the parties hereto desire to assure Tenant's possession and
control of the Property under the Lease upon the terms and conditions therein
contained;
NOW, THEREFORE, for and in consideration of the mutual covenants and
premises herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed by the parties
hereto, the parties hereto do hereby agree as follows:
AGREEMENT:
1 The Lease is and shall be subject and subordinate to the Mortgage,
and to all renewals, modifications, consolidations, replacements and
extensions thereof, and to all future advances made thereunder.
2 Should Lender become the owner of the Property, or should the
Property be sold by reason of foreclosure or other proceedings
brought to enforce the Mortgage which encumbers the Property, or
should the Property be transferred by deed in lieu of foreclosure, or
should any portion of the Property be sold under a trustee's sale,
the Lease shall continue in full force and effect as a direct lease
between the then owner of the Property covered by the Mortgage and
Tenant, upon, and subject to, all of the terms, covenants and
conditions of the Lease for the balance of the term thereof
remaining, including any extensions therein provided. Tenant does
hereby agree to attorn to Lender or to any such owner as its
landlord, and Lender hereby agrees that it will accept such
attornment.
3 Notwithstanding any other provision of this Agreement, Lender shall
not be (a) liable for any default of any landlord under the Lease
(including Landlord), except that Lender agrees to cure any default
of Landlord that is continuing as of the date Lender forecloses the
Property within thirty (30) days from the date Tenant delivers
written notice to Lender of such continuing default, unless such
default is of such a nature to reasonably require more than thirty
(30) days to cure, and then Lender shall be permitted such additional
time as is reasonably necessary to effect such cure, provided
Landlord diligently and continuously proceeds to cure such default;
(b) subject to any offsets or defenses which have accrued prior to
the date of foreclosure, unless Tenant shall have delivered to Lender
written notice of the default which gave rise to such offset or
defense and permitted Lender the same right to cure such default as
permitted
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<PAGE> 39
Landlord under the Lease; (c) bound by any Rent that Tenant may have paid
under the Lease more than one (1) month in advance; (d) bound by any
amendment or modification of the Lease hereafter made without Lender's
prior written consent; (e) responsible for the return of any security
deposit delivered to Landlord under the Lease and not subsequently
received by Lender.
4 If Lender sends written notice to Tenant to direct its Rent payments under
the Lease to Lender instead of Landlord, then Tenant agrees to follow the
instructions set forth in such written instructions and to deliver Rent
payments to Lender; however, Landlord and Lender agree that Tenant shall
be credited under the Lease for any Rent payments sent to Lender pursuant
to such written notice.
5 All notices which may or are required to be sent under this Agreement
shall be in writing and shall be sent by first-class certified U.S. Mail,
postage prepaid return receipt requested, and sent to the party at the
address appearing below or such other address as any party shall hereafter
inform the other party by written notice given as set forth above.
TENANT:
Intelligent Systems for Retail, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404
ATTENTION: David S. Rock
WITH A COPY TO:
Judith J. Rentschler
Rentschler & Trust
989 E. Hillsdale Blvd., Suite 160
Foster City, CA 94404
All notices delivered as set forth above shall be deemed effective three (3)
days from the date deposited in the U.S. mail.
6 Said Mortgage shall not cover or encumber and shall not be construed as
subjecting in any manner to the lien thereof any of Tenant's Improvements
(other then interior office, electrical distribution system, file
suppression system and HVAC) or trade fixtures, furniture, equipment or
other personal property at any time placed or installed in the Demised
Premises. In the event the Property or any part thereof shall be taken
for public purposes by condemnation or transfer in lieu thereof or the
same are damaged or destroyed, the rights of the parties to any
condemnation award or insurance proceeds shall be determined and
controlled by the applicable provisions of the Lease.
7 This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors in interest, heirs and assigns and any
subsequent owner of the Property secured by the Mortgage.
8 Should any action or proceeding be commenced to enforce any of the
provisions of this Agreement or in connection with its meaning, the
prevailing party in such action shall be awarded, in addition to any other
relief it may obtain, its reasonable costs and expenses, not limited to
taxable costs, and reasonable attorneys' fees.
9 Tenant shall not be joined as a party/defendant in any action which may be
instituted or taken by reason or under the default of the performance of
the terms, covenants, conditions or agreements set forth in the Mortgage.
(SIGNATURES ON NEXT PAGE)
2
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
LENDER: _________________________
By ______________________________
Name Printed: ___________________
Title: __________________________
TENANT: INTELLIGENT SYSTEMS FOR
RETAIL, INC., a California Corporation
By ______________________________
Name Printed: ___________________
Title: __________________________
LANDLORD:
AMB PROPERTY, L.P.,
a Delaware limited partnership
By ______________________________
Name Printed: ___________________
Title: __________________________
3
<PAGE> 41
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
4
<PAGE> 42
EXHIBIT F
ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE ("CERTIFICATE"), dated as of _________,
19__, is executed by INTELLIGENT SYSTEMS FOR RETAIL, INC. ("TENANT") to confirm
the status of the Lease described below.
RECITALS
A. The real property subject hereto is known and described as ___________
___________, located in the City of ___________________, County of___________,
State of California (the "PROPERTY").
B. Tenant and Landlord have entered into that certain Lease Agreement,
dated as of ___________ (together with all amendments, modifications,
supplements, guarantees and restatements thereof, the "LEASE"), for a portion
of the Property.
C. Pursuant to the Lease, Tenant has agreed that upon the request of
Landlord, Tenant would execute and deliver an estoppel certificate certifying
the status of the Lease.
NOW, THEREFORE, Tenant certifies and represents as follows:
I. LEASE.
Attached hereto as Exhibit 1 is a true, correct and complete copy of the Lease,
including the following amendments, modifications, supplements, guarantees and
restatements thereof, which together represent all of the amendments,
modifications, supplements, guarantees and restatements thereof: _______________
________________________________________________________________________________
_________________. (If none, please state "None.")
II. LEASED PREMISES.
Pursuant to the Lease, Tenant leases those certain premises (the "LEASED
PREMISES") consisting of approximately _______________ (_________) rentable
square feet within the Property, as more particularly described in the Lease.
In addition, pursuant to the terms of the Lease, Tenant has the [non-exclusive]
right to use [____ parking spaces/the parking area] located on the Property
during the term of the Lease. [Cross out any inapplicable portions of the
preceding sentence.]
III. LEASE IN FULL FORCE AND EFFECT.
The Lease has been duly authorized, executed and delivered by Tenant, is in
full force and effect, has not been terminated, and constitutes a legally valid
instrument, binding and enforceable against Tenant in accordance with its
terms, subject only to applicable limitations imposed by laws relating to
bankruptcy and creditor's rights. Tenant has accepted possession and is
currently occupying the Leased Premises.
IV. COMPLETE AGREEMENT.
The Lease constitutes the complete agreement between Landlord and Tenant for
the Leased Premises and the Property, except as modified by the Lease
amendments noted above (if any), has not been modified, altered or amended.
V. LEASE TERM.
The term of the Lease commenced on ________________ and ends on _____________,
subject to the following options to extend: ____________________________________
____________________________________________ (If none, please state "None.")
VI. PURCHASE RIGHTS.
Tenant has no option, right of first refusal, right of first offer, or other
right to acquire or purchase all or any portion of the Leased Premises or all
or any portion of, or interest in, the Property, except as follows: ____________
___________________________________________________________________________. (If
none, please state "None.")
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<PAGE> 43
VII. RIGHTS OF TENANT.
Except as expressly stated in this Certificate, Tenant:
(a) has no right to renew or extend the term of the Lease;
(b) has no option or other right to purchase all or any part of the
Leased Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased Premises, other than
as Tenant under the Lease.
VIII. RENT AND OTHER CHARGES.
(a) The obligation to pay rent under the Lease commenced on
__________. The rent under the Lease is current, and Tenant is not in default
in the performance of any of its obligations under the Lease.
(b) Tenant is currently paying base rent under the Lease in the amount
of ______________________ Dollars ($_______) per month. Tenant has not received
and is not, presently, entitled to any abatement, refunds, rebates, concessions
or forgiveness of rent or other charges, free rent, partial rent, or credits,
offsets or reductions in rent, except as follows:
- --------------------------------------------------------------------------------
- ------------------------------------------------------------. (If none, please
state "None").
(c) Tenant's estimated share of Building operating expenses (insurance,
real estate taxes and administrative and overhead expenses) is ___________
percent (___%) and of Project operating expenses is _________________ percent
(___%), and together these operating expenses are currently being paid at the
rate of __________________ Dollars ($________) per month, payable
to:___________________.
(d) There are no existing defenses or offsets against rent due or to
become due under the terms of the Lease, and there presently is no default or
other wrongful act or omission by Landlord under the Lease or otherwise in
connection with Tenant's occupancy of the Leased Premises, nor is there a state
of facts which with the passage of time or the giving of notice or both could
ripen into a default on the part of Tenant, or to the best knowledge of Tenant,
could ripen into a default on the part of Landlord under the Lease, except as
follows:
- --------------------------------------------------------------------------------
- ---------------------------------------------------------. (If none, please
state "None.")
IX. SECURITY DEPOSIT.
The amount of Tenant's security deposit presently held by Landlord under the
Lease is ____________________ Dollars ($_________). No portion of the security
deposit has been applied to rent or other charges.
X. PREPAID RENT.
The amount of prepaid rent, separate from the security deposit, is
_________________ Dollars ($________), covering the period from _____________
to ________________.
XI. INSURANCE.
All insurance, if any, required to be maintained by Tenant under the Lease is
presently in effect.
XII. PENDING ACTIONS.
There is not pending or, to the knowledge of Tenant, threatened against or
contemplated by the Tenant, any petition in bankruptcy, whether voluntary or
otherwise, any assignment for the benefit of creditors, or any petition seeking
reorganization or arrangement under the federal bankruptcy laws or those of any
state.
XIII. TENANT IMPROVEMENTS.
As of the date of this Certificate, to the best of Tenant's knowledge, Landlord
has performed all obligations required of Landlord pursuant to the Lease; no
offsets, counterclaims, or defenses of Tenant under the Lease exist against
Landlord; and no events have occurred that, with the passage of time or the
giving of notice, would constitute a basis for offsets, counterclaims, or
defenses against Landlord, except as follows: __________________________
- --------------------------------------------------------------------------------
- --------------------------------------------. (If none, please state "None.")
XIV. ASSIGNMENTS BY LANDLORD.
Tenant has received no notice of any assignment, hypothecation or pledge of the
Lease or rentals under the Lease by Landlord. Tenant hereby consents to an
assignment of the lease and rents to be executed by Landlord to Buyer and
acknowledges that said assignment does not violate the provisions of the Lease.
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<PAGE> 44
XV. ASSIGNMENTS BY TENANT.
Tenant has not sublet or assigned the Leased Premises or the Lease or any
portion thereof to any sublessee or assignee. No one except Tenant and its
employees will occupy the Leased Premises. The address for notices to be sent
to Tenant is as set forth in the Lease.
The statements in this Estoppel Certificate may be relied on by the landlord,
buyer, and any lender who extends credit in connection with the purchase of the
building.
Tenant has executed this Certificate as of the date first written above by the
person named below, who is duly authorized to do so.
TENANT: INTELLIGENT SYSTEMS FOR RETAIL, INC.
a California Corporation
By ______________________________
Name Printed: ___________________
Its: ____________________________
3
<PAGE> 45
EXHIBIT G
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Judith J. Rentschler, Esq.
Rentschler & Tursi
989 E. Hillsdale Boulevard
Suite 160
Foster City, California 94404
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is made and entered into as of March ___, 1999,
by and between AMB PROPERTY, L.P., a Delaware Limited Partnership ("Landlord")
and INTELLIGENT SYSTEMS FOR RETAIL, INC., a California Corporation ("Tenant").
Landlord hereby leases to Tenant, and Tenant leases to Landlord, on the
terms and conditions set forth in that certain Industrial Single Tenant Lease
as amended (the "Lease") by and between Landlord and Tenant, all terms and
conditions of which are hereby incorporated into this Memorandum of Lease by
reference as though fully set forth herein, of that property commonly known and
described as 2935 Shawnee Industrial Way, in Gwinnett County, Georgia, and more
particularly described on Annex A attached hereto and incorporated herein by
this reference.
This Memorandum of Lease shall in no way modify the terms and/or
conditions of the Lease.
Dated: March __, 1999 LESSOR:
AMB PROPERTY, L.P.,
A Delaware Limited Partnership
By: AMB PROPERTY
CORPORATION,
A Maryland Corporation
By: /s/ LUIS A. BELMONTE
---------------------------
Luis A. Belmonte
Vice President
Dated: March __, 1999 LESSEE:
INTELLIGENT SYSTEMS FOR
RETAIL, INC.,
A California Corporation
By: /s/ LOUIS H. BORDERS
---------------------------
Louis H. Borders
President and CEO
<PAGE> 46
ANNEX A
[Insert Legal Description of Property]
<PAGE> 1
EXHIBIT 10.6
[CB COMMERCIAL LOGO]
This Lease between Dove Holdings, Inc., a California Corporation ("Landlord"),
and Intelligent Systems For Retail, Inc., a California Corporation, ("Tenant"),
is dated January 21, 1997.
1. LEASE OF PREMISES.
In consideration of the Rent (as defined at Section 5.4) and the provisions of
this Lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises shown by diagonal lines on the floor plan attached hereto as Exhibit
"A," and further described at Section 21. The Premises are located within the
Building and Project described in Section 2m. Tenant shall have the
non-exclusive right (unless otherwise provided herein) in common with Landlord,
other tenants, subtenants and invitees, to use of the Common Areas (as defined
at Section 2e).
2. DEFINITIONS
As used in this LEASE, the following terms shall have the following meanings:
a. Base Rent (initial): $2.00 per month fully serviced/$24.00 per year fully
serviced per year,
b. Base Year: The calendar year of 1997.
c. Broker(s)
Landlord's: CB Commercial.
Tenant's: CB Commercial.
In the event that CB Commercial Real Estate Group, Inc. represents both
Landlord and Tenant, Landlord and Tenant hereby confirm that they were timely
advised of the dual representation and that they consent to the same, and that
they do not expect said broker to disclose to either of them the confidential
information of the other party.
d. Commencement Date: April 1, 1997.
e. Common Areas: the building lobbies, common corridors and hallways,
restrooms, garage and parking areas, stairways, elevators and other
generally understood public or common areas. Landlord shall have the right
to regulate or restrict the use of the Common Areas.
f. Expense Stop: (fill in if applicable: $ N/A.
g. Expiration Date: May 31, 2002, unless otherwise sooner terminated in
accordance with the provisions of this Lease.
h. Index (Section 5.2): United States Department of Labor, Bureau of Labor
Statistics Consumer Price Index for All Urban Consumers, San
Francisco-Oakland, San Jose Metropolitan Average, Subgroup "All Items"
(1982/84 - 100).
i. Landlord's Mailing Address: 1241 E. Hillsdale Boulevard, Foster City, CA
94404.
Tenant's Mailing Address: 1241 E. Hillsdale Boulevard, Suite 203, 204,
Foster City, CA 94404
j. Monthly Installments of Base Rent (initial): $2.00 fully serviced per
month.
k. Parking: Tenant shall be permitted, free of charge to park 30 cars on a
non-exclusive basis in the area(s) designated by Landlord for parking.
Tenant shall abide by any and all parking regulations and rules established
from time to time by Landlord or Landlord's parking operator.
l. Premises: that portion of the Building containing approximately 6,162
square feet of Rentable Area, shown by diagonal lines on Exhibit "A,"
located on the 2nd floor of the Building and known as Suite 203, 204.
m. Project: the building of which the Premises are a part (the "Building") and
any other buildings or improvements on the real property (the "Property")
located at 1241 E. Hillsdale Boulevard, Foster City. The Project is known
as Koll-Dove Building.
n. Rentable Area: as to both the Premises and the Project, the respective
measurements of floor area as may from time to time be subject to lease by
Tenant and all tenants of the Project, respectively, as determined by
Landlord and applied on a consistent basis throughout the Project.
(1)
<PAGE> 2
(1) The term "Project Operating Costs" shall include all those items described
in the following subparagraphs (a) and (b).
(a) All taxes, assessments, water and sewer charges and other similar
governmental charges levied on or attributable to the Building or Project
or their operation, including without limitation, (i) real property taxes
or assessments levied or assessed against the Building or Project, (ii)
assessments or charges levied or assessed against the Building or Project
by any redevelopment agency, (iii) any tax measured by gross rentals
received from the leasing of the Premises, Building or Project, excluding
any net income, franchise, capital stock, estate or inheritance taxes
imposed by the State or federal government or their agencies, branches or
departments; provided that if at any time during the Term any governmental
entity levies, assesses or imposes on Landlord any (1) general or special,
ad valorem or specific, excise, capital levy or other tax, assessment, levy
or charge directly on the Rent received under this Lease or on the rent
received under any other leases of space in the Building or Project or (2)
any license fee, excise or franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rent, or (3) any
transfer, transaction, or similar tax, assessment, levy or charge based
directly or indirectly upon the transaction represented by this Lease or
such other leases, or (4) any occupancy, use, per capita or other tax,
assessment, levy or charge based directly or indirectly upon the use or
occupancy of the Premises or other premises within the Building or Project,
then any such taxes, assessments, levies and charges shall be deemed to be
included in the term Project Operating Costs. If at any time during the
Term the assessed valuation of, or taxes on, the Project are not based on a
completed Project having at least eighty-five percent (85%) of the Rentable
Area occupied, then the "taxes" component of Project Operating Costs shall
be adjusted by Landlord to reasonably approximate the taxes which would
have been payable if the Project were completed and at least eighty-five
percent (85%) occupied.
(b) Operating costs incurred by Landlord in maintaining and operating the
Building and Project, including without limitation the following: costs of
(1) utilities; (2) supplies; (3) insurance (including public liability;
property damage, earthquake, and fire and extended coverage insurance for
the full replacement cost of the Building and Project as required by
Landlord or its lenders for the Project; (4) services of independent
contractors; (5) compensation (including employment taxes and fringe
benefits) of all persons who perform duties connected with the operation,
maintenance, repair or overhaul of the Building or Project, and equipment,
improvements and facilities located within the Project, including without
limitation engineers, janitors, painters, floor waxers, window washers,
security and parking personnel and gardeners (but excluding persons
performing services not uniformly available to or performed for
substantially all Building or Project tenants); (6) operation and
maintenance of a room for delivery and distribution of mail to tenants of
the Building or Project as required by the U.S. Postal Service (including,
without limitation, an amount equal to the fair market rental value of the
mail room premises); (7) management of the Building or Project, whether
managed by Landlord or an independent contractor (including, without
limitation, an amount equal to the fair market value of any on-site
manager's office); (8) rental expenses for (or a reasonable depreciation
allowance on) personal property used in the maintenance, operation or
repair of the Building or Project; (9) costs, expenditures or charges
(whether capitalized or not) required by any governmental or
quasi-governmental authority; (10) amortization of capital expenses
(including financing costs) (i) required by a governmental entity for
energy conservation or life safety purposes, or (ii) made by Landlord to
reduce Project Operating Costs; and (11) any other costs or expenses
incurred by Landlord under this Lease and not otherwise reimbursed by
tenants of the Project. If at any time during the Term, less than
eighty-five percent (85%) of the Rentable Area of the Project is occupied,
the "operating costs" component of Project Operating Costs shall be
adjusted by Landlord to reasonably approximate the operating costs which
would have been incurred if the Project had been at least eight-five
percent (85%) occupied.
(2) Tenant's Proportionate Share of Project Operating Costs shall be payable
by Tenant to Landlord as follows:
(a) Beginning with the calendar year following the Base Year and for each
calendar year thereafter ("Comparison Year"), Tenant shall pay Landlord an
amount equal to Tenant's Proportionate Share of the Project Operating Costs
incurred by Landlord in the Comparison Year which exceeds the total amount
of Project Operating Costs payable by Landlord for the Base Year. This
excess is referred to as the "Excess Expenses."
(b) To provide for current payments of Excess Expenses, Tenant shall, at
Landlord's request, pay as additional rent during each Comparison Year, an
amount equal to Tenant's Proportionate Share of the Excess Expenses payable
during such Comparison Year, as estimated by Landlord from time to time.
Such payments shall be made in monthly installments, commencing on the
first day of the month following the month in which Landlord notifies
Tenant of the amount it is to pay hereunder and continuing until the first
day of the month following the month in which Landlord gives Tenant a new
notice of estimated Excess Expenses. It is the intention hereunder to
estimate from time to time the amount of the Excess Expenses for each
Comparison Year and Tenant's Proportionate share thereof, and then to
make an adjustment in the following year based on the actual Excess
Expenses incurred for that Comparison Year.
(c) On or before April 1 of each Comparison Year after the first Comparison
Year (or as soon thereafter as is practical), Landlord shall deliver to
Tenant a statement setting forth Tenant's Proportionate Share of the Excess
Expenses for the preceding Comparison Year. If Tenant's Proportionate Share
of the actual Excess Expenses for the previous Comparison Year exceeds the
total of the estimated monthly payments made by Tenant for such year,
Tenant shall pay Landlord the amount of the deficiency within ten (10) days
of the receipt of the statement. If such total exceeds Tenant's
Proportionate Share of the actual Excess Expenses for such Comparison Year,
then Landlord shall credit against Tenant's next ensuing monthly
installment(s) of additional rent an amount equal to the difference until
the credit is exhausted. If a credit is due from Landlord on the Expiration
Date, Landlord shall pay Tenant the amount of the credit. The obligations
of Tenant and Landlord to make payments required under this Section 5.3
shall survive the Expiration Date.
(d) Tenant's Proportionate Share of Excess Expenses in any Comparison Year
having less than 365 days shall be appropriately prorated.
(e) If any dispute arises as to the amount of any additional rent due
hereunder, Tenant shall have the right after reasonable notice and at
reasonable times to inspect Landlord's accounting records at Landlord's
accounting office and, if after such inspection Tenant still disputes the
amount of additional rent owed, a certification as to the proper amount
shall be made by Landlord's certified public accountant, which
certification shall be final and conclusive. Tenant agrees to pay the cost
of such certification unless it is determined that Landlord's original
statement overstated Project Operating Costs by more than five percent
(5%).
(3)
<PAGE> 3
promptly upon demand reimbursing Landlord for any additional premium charged
for such ???? by reason of Tenant's failure to comply with the provisions of
this Article. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or Project, or injure or annoy them, or use
or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises.
9. SERVICES AND UTILITIES.
Provided that Tenant is not in default hereunder, Landlord agrees to furnish to
the Premises during the hours of 8:00 A.M. to 6:00 p.m., Monday through Friday,
and subject to the Rules and Regulations of the Building or Project, electricity
for normal desk top office equipment and normal copying equipment, and heating,
ventilation and air conditioning ("HVAC") as required for the comfortable use
and occupancy of the Premises. If Tenant desires HVAC at any other time,
Landlord shall use reasonable efforts to furnish such service upon reasonable
notice from Tenant and Tenant shall pay Landlord's actual costs therefor on
demand. Landlord shall also maintain and keep lighted the common stairs, common
entries and restrooms in the Building. Landlord shall not be in default
hereunder or be liable for any damages directly or indirectly resulting from,
nor shall the Rent be abated by reason of (i) the installation, use or
interruption of use of any equipment in connection with the furnishing of any of
the foregoing services, (ii) failure to furnish or delay in furnishing any such
services where such failure or delay is caused by accident or any condition or
event beyond the reasonable control of Landlord, or by the making of necessary
repairs or improvements to the Premises, Building or Project, or (iii) the
limitation, curtailment or rationing of, or restrictions on, use of water,
electricity, gas or any other form of energy serving the Premises, Building or
Project. Landlord shall not be liable under any circumstances for a loss of or
injury to property or business, however occurring, through or in connection with
or incidental to failure to furnish any such services. If Tenant uses heat
generating machines or equipment in the Premises which affect the temperature
otherwise maintained by the HVAC system, Landlord reserves the right to install
supplementary air conditioning units in the Premises and the cost thereof,
including the cost of installation, operation and maintenance thereof, shall be
paid by Tenant to Landlord upon demand by Landlord.
Tenant shall not, without the written consent of Landlord, use any apparatus or
device in the Premises, which consumes more electricity than is usually
furnished or supplied for the use of premises as general office space. Tenant
shall not connect any apparatus with electric current except through existing
electrical outlets in the Premises. Tenant shall not consume water or electric
current in excess of that usually furnished or supplied for the use of premises
as general office space, without first procuring the written consent of
Landlord, which Landlord may refuse, and in the event of consent, Landlord may
have installed a water meter or electrical current meter in the Premises to
measure the amount of water or electric current consumed. The cost of any such
meter and of its installation, maintenance and repair shall be paid for by the
Tenant and Tenant agrees to pay to Landlord promptly upon demand for all such
water and electric current consumed as shown by said meters at the rates
charged for such services by the local public utility plus any additional
expense incurred in keeping account of the water and electric current so
consumed. If a separate meter is not installed, the excess cost for such water
and electric current shall be established by an estimate made by a utility
company or electrical engineer hired by Landlord at Tenant's expense.
Nothing contained in this Article shall restrict Landlord's right to require at
any time separate metering of utilities furnished to the Premises. In the event
utilities are separately metered, Tenant shall pay promptly upon demand for all
utilities consumed at utility rates charged by the local public utility plus
any additional expense incurred by Landlord in keeping account of the utilities
so consumed. Landlord shall be responsible for the maintenance and repair of
any such meters at its sole cost.
Landlord shall furnish elevator service, lighting replacement for building
standard lights, restroom supplies, window washing and five (5) days per week
janitor services in a manner that such services are customarily furnished to
comparable office building in the area.
10. CONDITION OF THE PREMISES.
Tenant's taking possession of the Premises shall be deemed conclusive evidence
that as of the date of taking possession the Premises are in good order and
satisfactory condition latent defects excepted except for such matters as to
which Tenant gave Landlord notice on or before the Commencement Date. No
promise of Landlord to alter, remodel, repair or improve the Premises, the
Building or the Project and no representation, express or implied, respecting
any matter or thing relating to the Premises, Building, Project or this Lease
(including, without limitation, the conditio of the Premises, the Building or
the Project) have been made to Tenant by Landlord or its Broker or Sales Agent,
other than as may be contained herein or in a separate exhibit or addendum
signed by Landlord and Tenant.
11. CONSTRUCTION, REPAIRS AND MAINTENANCE.
a. Landlord's Obligations. Landlord shall perform Landlord's Work to the
Premises. Landlord shall maintain in good order, condition and repair the
Building and all other portions of the Premises not the obligation of Tenant
or of any other tenant in the Building.
b. Tenant's Obligations.
(1) Tenant shall perform Tenant's Work to the Premises as described in
Exhibit "C".
(2) Tenant at Tenant's sole expense shall, except for services furnished
by Landlord pursuant to Article 9 hereof, maintain the Premises in good
order, condition and repair, including the interior surfaces of the
ceilings, walls and floors, all doors, all interior windows, all
electrical wiring, switches and fixtures, Building Standard furnishings
and special items and equipment installed by or at the expense of Tenant.
(3) Tenant shall be responsible for all repairs and alterations in and to
the Premises, Building and Project and the facilities and systems
thereof, the need for which arises out of (i) Tenant's use or occupancy
of the Premises, (ii) the installation, removal, use or operation of
Tenant's Property (as defined in Article 13) in the Premises, (iii) the
moving of Tenant's Property into or out of the Building or (iv) the act,
omission, misuse or negligence of Tenant, its agents, contractors,
employees or invitees.
(5)
<PAGE> 4
b. All movable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment located on the
Premises and acquired by or for the account of Tenant, without expense to
Landlord, which can be removed without structural damage to the Building,
and all furniture, furnishings and other articles of movable personal
property owned by Tenant and located in the Premises (collectively
"Tenant's Property") shall be and shall remain the property of Tenant and
may be removed by Tenant at any time during the Term; provided that if any
of Tenant's Property is removed, Tenant shall promptly repair any damage to
the Premises or to the Building resulting from such removal.
14. RULES AND REGULATIONS.
Tenant agrees to comply with (and cause its agents, contractors, employees and
invitees to comply with) the rules and regulations attached hereto and with such
reasonable modifications thereof and additions thereto as Landlord may from time
to time make. Landlord shall not be responsible for any violation of said rules
and regulations by other tenants or occupants of the Building or Project.
15. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights, exercisable without liability to Tenant
for (a) damage or injury to property, person or business, (b) causing an actual
or constructive eviction from the Premises, or (c) disturbing Tenant's use or
possession of the Premises:
a. To name the Building and Project and to change the name or street
address of the Building or Project;
b. To install and maintain all signs on the exterior and interior of the
Building and Project;
c. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's vaults and safes;
d. At any time during the Term, and on reasonable prior notice to Tenant,
to inspect the Premises, and to show the Premises to any prospective
purchaser or mortgagee of the Project, or to any assignee of any mortgage
on the Project, or to others having an interest in the Project or Landlord,
and during the last six months of the Term, to show the Premises to
prospective tenants thereof; and
e. To enter the Premises for the purpose of making inspections, repairs,
alterations or improvements to the Premises or the Building (including,
without limitation, checking, calibrating, adjusting or balancing controls
and other parts of the HVAC system), and to take all steps as may be
necessary or desirable for the safety, protection, maintenance or
preservation of the Premises or the Building or Landlord's interest
therein, or as may be necessary or desirable for the operation or
improvement of the Building or in order to comply with laws, orders or
requirements of governmental or other authority. Landlord agrees to use its
best efforts (except in an emergency) to minimize interference with
Tenant's business in the Premises in the course of any such entry.
16. ASSIGNMENT AND SUBLETTING.
No assignment of this Lease or sublease of all or any part of the Premises
shall be permitted, except as provided in this Article 16.
a. Tenant shall not, without the prior written consent of Landlord, assign
or hypothecate this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other than
Tenant. Any of the foregoing acts without such consent shall be void and
shall, at the option of Landlord, terminate this Lease. This Lease shall
not, nor shall any interest of Tenant herein, be assignable by operation of
law without the written consent of Landlord.
b. If at any time or from time to time during the Term Tenant desires to
assign this Lease or sublet all or any part of the Premises, Tenant shall
give notice to Landlord setting forth the terms and provisions of the
proposed assignment or sublease, and the identity of the proposed assignee
or subtenant. Tenant shall promptly supply Landlord with such information
concerning the business background and financial condition of such proposed
assignee or subtenant as Landlord may reasonably request. Landlord shall
have the option, exercisable by notice given to Tenant within twenty (20)
days after Tenant's notice is given, either to sublet such space from
Tenant at the rental and on the other terms set forth in this Lease for the
term set forth in Tenant's notice, or, in the case of an assignment, to
terminate this Lease. If Landlord does not exercise such option, Tenant may
assign the Lease or sublet such space to such proposed assignee or
subtenant on the following further conditions:
(1) Landlord shall have the right to approve such proposed assignee
or subtenant, which approval shall not be unreasonably withheld;
(2) The assignment or sublease shall be on the same terms set forth
in the notice given to Landlord;
(3) No assignment or sublease shall be valid and no assignee or
sublessee shall take possession of the Premises until an executed
counterpart of such assignment or sublease has been delivered to
Landlord;
(4) No assignee or sublessee shall have a further right to assign or
sublet except on the terms herein contained; and
(5) Any sums or other economic consideration received by Tenant as a
result of such assignment or subletting, however denominated under the
assignment or sublease, which exceed, in the aggregate, (i) the total
sums which Tenant is obligated to pay Landlord under this Lease
(prorated to reflect obligations allocable to any portion of the
Premises subleased), plus (ii) any real estate brokerage commissions
or fees payable in connection with such assignment or subletting,
shall be paid to Landlord as additional rent under this Lease without
affecting or reducing any other obligations of Tenant hereunder.
c. Notwithstanding the provisions of paragraphs a and b above, Tenant may
assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent and without extending any recapture or termination
option to Landlord, to any corporation which controls, is controlled by or
is under common control with Tenant, or to any corporation resulting from a
merger or consolidation with Tenant, or to any person or entity which
acquires all the assets of Tenant's business as a going concern, provided
that (i) the assignee or sublessee assumes, in full, the obligations of
Tenant under this Lease, (ii) Tenant remains fully liable under this Lease,
and (iii) the use of the Premises under Article 8 remains unchanged.
(7)
<PAGE> 5
b. In the event of any taking, partial or whole, all of the proceeds of any
award, judgment or settlement payable by the condemning authority shall be
the exclusive property of Landlord, and Tenant hereby assigns to Landlord
all of its right, title and interest in any award, judgment or settlement
from the condemning authority. Tenant, however, shall have the right, to
the extent that Landlord's award is not reduced or prejudiced, to claim
from the condemning authority (but not from Landlord) such compensation as
may be recoverable by Tenant in its own right for relocation expenses and
damage to Tenant's personal property.
c. In the event of a partial taking of the Premises which does not result
in a termination of this Lease, Landlord shall restore the remaining
portion of the Premises as nearly as practicable to its condition prior to
the condemnation or taking, but only to the extent of Building Standard
Work. Tenant shall be responsible at its sole cost and expense for the
repair, restoration and replacement of any other Leasehold Improvements
and Tenant's Property.
21. INDEMNIFICATION.
a. Tenant shall indemnify and hold Landlord harmless against and from
liability and claims of any kind or loss or damage to property of Tenant or
any other person, or for any injury to or death of any person, arising out
of: (1) Tenant's use and occupancy of the Premises, or any work, activity
or other things allowed or suffered by Tenant to be done in, on or about
the Premises; (2) any breach or default by Tenant of any of Tenant's
obligations under this Lease; or (3) any negligent or otherwise tortious
act or omission of Tenant, its agents, employees, invitees or contractors
provided that this indemnification shall not apply if Landlord or
Landlord's agents, employees, invitees, or contractors contribute to such
liability and claims. Tenant shall at Tenant's expense, and by counsel
satisfactory to Landlord, defend Landlord in any action or proceeding
arising from any such claim and shall indemnify Landlord against all costs,
attorneys' fees, expert witness fees and any other expenses incurred in
such action or proceeding. As a material part of the consideration for
Landlord's execution of this Lease, Tenant hereby assumes the risk of
damage or injury to any person or property in, on or about the Premises
from any cause, as set forth in this paragraph.
b. Landlord shall not be liable for injury or damage which may be sustained
by the person or property of Tenant, its employees, invitees or customers,
or any other person in or about the Premises, caused by or resulting from
fire, steam, electricity, gas, water or rain which may leak or flow from or
into any part of the Premises, or from the breakage, leakage, obstruction
or other defect of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, whether such damage or injury results
from conditions arising upon the Premises or upon other portions of the
Building or Project or from other sources. Landlord shall not be liable for
any damages arising from any act or omission of any other tenant of the
Building or Project.
22. TENANT'S INSURANCE.
a. All insurance required to be carried by Tenant hereunder shall be issued
by responsible insurance companies acceptable to Landlord and Landlord's
lender and qualified to do business in the State. Each policy shall name
Landlord, and at Landlord's request any mortgagee of Landlord, as an
additional insured, as their respective interests may appear. Each policy
shall contain (i) a cross-liability endorsement, and (ii) a waiver by the
insurer of any right of subrogation against Landlord, its agents, employees
and representatives, which arises or might arise by reason of any payment
under such policy or by reason of any act or omission of Landlord, its
agents, employees or representatives. A copy of each paid up policy
(authenticated by the insurer) or certificate of the insurer evidencing the
existence and amount of each insurance policy required hereunder shall be
delivered to Landlord before the date Tenant is first given the right of
possession of the Premises, and thereafter within thirty (30) days after
any demand by Landlord therefor, Landlord may, at any time and from time to
time, inspect and/or copy any insurance policies required to be maintained
by Tenant hereunder. No such policy shall be cancellable except after
twenty (20) days written notice to Landlord and Landlord's lender. Tenant
shall furnish Landlord with renewals or "binders" or any such policy at
least ten (10) days prior to the expiration thereof. Tenant agrees that if
Tenant does not take out and maintain such insurance, Landlord may (but
shall not be required to) procure said insurance on Tenant's behalf and
charge the Tenant the premiums together with a twenty-five percent (25%)
handling charge, payable upon demand. Tenant shall have the right to
provide such insurance coverage pursuant to blanket policies obtained by
the Tenant, provided such blanket policies expressly afford coverage to the
Premises, Landlord, Landlord's mortgagee and Tenant as required by this
Lease.
b. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect policies or casualty insurance covering (i)
all Leasehold Improvements (including any alterations, additions or
improvements as may be made by Tenant pursuant to the provisions of
Article 12 hereof), and (ii) trade fixtures, merchandise and other
personal property from time to time in, on or about the Premises, in an
amount not less than one hundred percent (100%) of their actual
replacement cost from time to time, providing protection against any peril
included within the classification "Fire and Extended Coverage" together
with insurance against sprinkler damage, vandalism and malicious mischief.
The proceeds of such insurance shall be used for the repair or replacement
of the property so insured. Upon termination of this Lease following a
casualty as set forth herein, the proceeds under (i) shall be paid to
Landlord, and the proceeds under (ii) above shall be paid to Tenant.
c. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect workers' compensation insurance as required
by law and comprehensive public liability and property damage insurance
with respect to the construction of improvements on the Premises, the use,
operation or condition of the Premises and the operations of Tenant in, on
or about the Premises, providing personal injury and broad form property
damage coverage for not less than One Million Dollars ($1,000,000.00)
combined single limit for bodily injury, death and property damage
liability.
d. Not less than every three (3) years during the Term, Landlord and
Tenant shall mutually agree to increases in all of Tenant's insurance
policy limits for all insurance to be carried by Tenant as set forth in
this Article. In the event Landlord and Tenant cannot mutually agree upon
the amounts of said increases, then Tenant agrees that all insurance
policy limits as set froth in this Article shall be adjusted for increases
in the cost of living in the same manner as is set forth in Section 5.2
hereof for the adjustment of the Base Rent.
(9)
<PAGE> 6
If Landlord reenters the Premises under the provisions of subparagraphs b or c
above, Landlord shall not be deemed to have terminated this Lease or the
condition of Tenant to pay any Rent or other charges thereafter accruing, unless
Landlord notifies Tenant in writing of Landlord's election to terminate this
Lease. In the event of any reentry or retaking of possession by Landlord,
Landlord shall have the right, but not the obligation, to remove all or any part
of Tenant's Property in the Premises and to place such property in storage at a
public warehouse at the expense and risk of Tenant. If Landlord elects to relet
the Premises for the account of Tenant, the rent received by Landlord from such
reletting shall be applied as follows: first, to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the payment of
any cost of such reletting; third, to the payment of the cost of any alterations
or repairs to the Premises; fourth to the payment of Rent due and unpaid
hereunder; and the balance, if any, shall be held by Landlord and applied in
payment of future Rent as it becomes due. If that portion of rent received from
the reletting which is applied against the Rent due hereunder is less than the
amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly
upon demand by Landlord. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as determined, any costs and expenses
incurred by Landlord in connection with such reletting or in making alterations
and repairs to the Premises, which are not covered by the rent received from the
reletting.
Should Landlord elect to terminate this Lease under the provisions of
subparagraph a or c above, Landlord may recover as damages from Tenant the
following:
1. Past Rent. The worth at the time of the award of any unpaid Rent which
had been earned at the time of termination; plus
2. Rent Prior to Award. The worth at the time of the award of the amount
by which the unpaid Rent which would have been earned after
termination until the time of award exceeds the amount of such rental
loss that Tenant proves could have been reasonably avoided; plus
3. Rent After Award. The worth at the time of the award of the amount by
which the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of the rental loss that Tenant proves could
be reasonably avoided; plus
4. Proximately Caused Damages. Any other amount necessary to compensate
Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses (including attorneys' fees),
incurred by Landlord in (a) retaking possession of the Premises, (b)
maintaining the Premises after Tenant's default, (c) preparing the
Premises for reletting to a new tenant, including any repairs or
alterations, and (d) reletting the Premises, including broker's
commissions.
"The worth at the time of the award" as used in subparagraphs 1 and 2 above, is
to be computed by allowing interest at the rate of ten percent (10%) per annum.
"The worth at the time of the award" as used in subparagraph 3 above, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank situated nearest to the Premises at the time of the award plus one percent
(1%).
The waiver by Landlord of any breach of any term, covenant or condition of this
Lease shall not be deemed a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition.
Acceptance of Rent by Landlord subsequent to any breach hereof shall not be
deemed a waiver of any preceding breach other than the failure to pay the
particular Rent so accepted, regardless of Landlord's knowledge of any breach at
the time of such acceptance of Rent. Landlord shall not be deemed to have waived
any term, covenant or condition unless Landlord gives Tenant written notice of
such waiver.
27.3 Landlord's Default. If Landlord fails to perform any covenant, condition or
agreement contained in this Lease within thirty (30) days after receipt of
written notice from Tenant specifying such default, or if such default cannot
reasonably be cured within thirty (30) days, if Landlord fails to commence to
cure within that thirty (30) day period, then Landlord shall be liable to Tenant
for any damages sustained by Tenant as a result of Landlord's breach; provided,
however, it is expressly understood and agreed that if Tenant obtains a money
judgment against Landlord resulting from any default or other claim arising
under this Lease, that judgment shall be satisfied only out of the rents,
issues, profits, and other income actually received on account of Landlord's
right, title and interest in the Premises, Building or Project, and no other
real, personal or mixed property of Landlord (or of any of the partners which
comprise Landlord, if any) wherever situated, shall be subject to levy to
satisfy such judgment. If, after notice to Landlord of default, Landlord (or any
first mortgagee or first deed of trust beneficiary of Landlord) fails to cure
the default as provided herein, then Tenant shall have the right to cure that
default at Landlord's expense. Tenant shall not have the right to terminate this
Lease or to withhold, reduce or offset any amount against any payments of Rent
or any other charges due and payable under this Lease except as otherwise
specifically provided herein.
28. BROKERAGE FEES.
Tenant warrants and represents that it has not dealt with any real estate broker
or agent in connection with this Lease or its negotiation except those noted in
Section 2.c. Tenant shall indemnify and hold Landlord harmless from any cost,
expense or liability (including costs of suit and reasonable attorneys' fees)
for any compensation, commission or fees claimed by any other real estate broker
or agent in connection with this Lease or its negotiation by reason of any act
of Tenant.
29. NOTICES.
All notices, approvals and demands permitted or required to be given under this
Lease shall be in writing and deemed duly served or given if personally
delivered or sent by certified or registered U.S. mail, postage prepaid, and
addressed as follows: (a) if to Landlord, to Landlord's Mailing Address and to
the Building manager, and (b) if to Tenant, to Tenant's Mailing Address;
provided, however, notices to Tenant shall be deemed duly served or given if
delivered or mailed to Tenant at the Premises. Landlord and Tenant may from time
to time by notice to the other designate another place for receipt of future
notices.
30. GOVERNMENT ENERGY OR UTILITY CONTROLS.
In the event of imposition of federal, state or local government controls,
rules, regulations, or restrictions on the use or consumption of energy or other
utilities during the Term, both Landlord and Tenant shall be bound thereby. In
the event of a difference in interpretation by Landlord and Tenant of any such
controls, the interpretation of Landlord shall prevail, and Landlord shall have
the right to enforce compliance therewith, including the right of entry into the
Premises to effect compliance.
(11)
<PAGE> 7
h. Corporate Authority. If Tenant is a corporation, each individual signing
this Lease on behalf of Tenant represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the corporation, and
that this Lease is binding on Tenant in accordance with its terms. Tenant
shall, at Landlord's request, deliver a certified copy of a resolution of its
board of directors authorizing such execution.
i. Counterparts. This Lease may be executed in multiple counterparts, all of
which shall constitute one and the same Lease.
j. Execution of Lease; No Option. The submission of this Lease to Tenant shall
be for examination purposes only, and does not and shall not constitute a
reservation of or option for Tenant to lease, or otherwise create any interest
of Tenant in the Premises or any other premises within the Building or Project.
Execution of this Lease by Tenant and its return to Landlord shall not be
binding on Landlord notwithstanding any time interval, until Landlord has in
fact signed and delivered this Lease to Tenant.
k. Furnishing of Financial Statements; Tenant's Representations. In order to
induce Landlord to enter into this Lease Tenant agrees that it shall promptly
furnish Landlord, from time to time, upon Landlord's written request, with
financial statements reflecting Tenant's current financial condition. Tenant
represents and warrants that all financial statements, records and information
furnished by Tenant to Landlord in connection with this Lease are true, correct
and complete in all respects.
l. Further Assurances. The parties agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Lease.
m. Mortgagee Protection. Tenant agrees to send by certified or registered mail
to any first mortgagee or first deed of trust beneficiary of Landlord whose
address has been furnished to Tenant, a copy of any notice of default served by
Tenant on Landlord. If Landlord fails to cure such default within the time
provided for in this Lease, such mortgagee or beneficiary shall have an
additional thirty (30) days to cure such default; provided that if such default
cannot reasonably be cured within that thirty (30) day period, then such
mortgagee or beneficiary shall have such additional time to cure the default as
is reasonably necessary under the circumstances.
n. Prior Agreements; Amendments. This Lease contains all of the agreements of
the parties with respect to any matter covered or mentioned in this Lease, and
no prior agreement or understanding pertaining to any such matter shall be
effective for any purpose. No provisions of this Lease may be amended or added
to except by an agreement in writing signed by the parties or their respective
successors in interest.
o. Recording. Tenant shall not record this Lease without the prior written
consent of Landlord. Tenant, upon the request of Landlord, shall execute and
acknowledge a "short form" memorandum of this Lease for recording purposes.
p. Severability. A final determination by a court of competent jurisdiction
that any provision of this Lease is invalid shall not affect the validity of
any other provision, and any provision so determined to be invalid shall, to
the extent possible, be construed to accomplish its intended effect.
q. Successors and Assigns. This Lease shall apply to and bind the heirs,
personal representatives, and permitted successors and assigns of the parties.
r. Time of the Essence. Time is of the essence of this Lease.
s. Waiver. No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be
construed as a waiver of such default.
1. Compliance. The parties hereto agree to comply with all applicable federal,
state and local laws, regulations, codes, ordinances and administrative orders
having jurisdiction over the parties, property or the subject matter of this
Agreement, including, but not limited to, the 1964 Civil Rights Act and all
amendments thereto, the Foreign Investment in Real Property Tax Act, the
Comprehensive Environmental Response Compensation and Liability Act, and The
Americans With Disabilities Act.
The receipt and acceptance by Landlord of delinquent Rent shall not constitute
a waiver of any other default; it shall constitute only a waiver of timely
payment for the particular Rent payment involved.
No act or conduct of Landlord, including, without limitation, the acceptance of
keys to the Premises, shall constitute an acceptance of the surrender of the
Premises by Tenant before the expiration of the Term. Only a written notice
from Landlord to Tenant shall constitute acceptance of the surrender of the
Premises and accomplish a termination of the Lease.
Landlord's consent or approval of any act by Tenant requiring Landlord's consent
or approval shall not be deemed to waive or render unnecessary Landlord's
consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of the
Lease.
The parties hereto have executed this Lease as of the dates set forth below.
Date: Date:
----------------------------- -----------------------------
Landlord: Dove Holdings Tenant: Intelligent Systems for Retail, Inc.
------------------------- ---------------------------
By: /s/ ROSS DOVE By: /s/ LOUIS H. BORDERS
------------------------------- -------------------------------
Ross Dove Louis H. Borders
Title: Title: CEO
---------------------------- ----------------------------
By: /s/ KIRK DOVE By: /s/ DAVID S. ROCK
------------------------------- -------------------------------
Kirk Dove David S. Rock
Title: President Title: Vice President
---------------------------- ----------------------------
________________________________________________________________________________
CONSULT YOUR ADVISORS--This document has been prepared for approval by
your attorney. No representation or recommendation is made by CB
Commercial as to the legal sufficiency or tax consequences of this
document or the transaction to which it relates. These questions are for
your attorney.
In any real estate transaction, it is recommended that you consult with a
professional, such as a civil engineer, industrial hygienist or other
person, with experience in evaluating the condition of the property,
including the possible presence of asbestos, hazardous materials and
underground storage tanks.
________________________________________________________________________________
(13)
<PAGE> 8
[CB COMMERCIAL LOGO] ADDITIONAL TERMS LEASE RIDER
This Addendum shall constitute part of that certain lease dated January 21,
1997, between Dove Holdings, Inc. (Landlord) and Intelligent Systems For
Retail, Inc. (Tenant) and the terms hereof shall for purposes be deemed
incorporated in the lease.
<TABLE>
<CAPTION>
BASE RENT MONTHS
<S> <C>
Months 0-1: Free Rent
Months 2-12: $2.00 per rentable square foot, fully serviced
Months 13-61 $2.00 per rentable square foot, fully serviced, plus an
annual CPI increase minimum 3%, maximum 6% per year.
</TABLE>
Tenant shall pre pay months 2-5 of the lease term ($49,296.00).
OPTION
Tenant shall have one (1) five-year option to extend the lease term at the then
fair market value. Tenant shall provide Landlord with at least nine (9) month's
advance written notice of its intent to exercise said option.
EXPANSION SPACE
Landlord will use best effort to notify Tenant of all future available space in
the premises.
TENANT IMPROVEMENTS
Landlord to deliver premises in broom clean condition. Tenant accepts premises
in "as is" condition. Landlord warrants that the HVAC, electrical, and all
building systems are in good working condition prior to occupancy.
POSSESSION
Tenant may occupy the premises when a fully executed lease agreement is signed
by both parties and Softbank has completely vacated the premises.
LUNCH ROOM
Tenant shall have the right to share the use of the lunch room with other
tenants in the building at $150 per month.
DIRECTORY SIGNAGE
Landlord shall install directory signage in the building lobby at Landlord's
sole expense.
TENANT'S ACCESS
Tenant shall have access to the premises 24 hours a day, seven (7) days per
week.
HVAC
It is understood by Landlord and Tenant that Tenant will be able to control the
operation of the HVAC system that serves only the premises. Tenant shall pay
Landlord's actual cost for the Tenant's operation of this HVAC system outside
of the hours of 8:00 P.M. to 6:00 P.M., Monday through Friday.
CABLING
Tenant reserves the right to use or remove the existing cabling system from
suites 203, 204.
<PAGE> 9
ADDENDUM TWO
This Addendum Two shall constitute part of that certain Lease dated January 21,
1997, between Dove Holdings, Inc. ("Landlord") and Intelligent Systems for
Retail, Inc. ("Tenant") and the terms hereof shall for purposes be deemed
incorporated in the Lease.
EARLY POSSESSION
Tenant may occupy Suite 204 ((plus or minus) 1,700 square feet):
February 10, 1997 - March 31, 1997: $2.00 per rentable sq. ft.
fully serviced
February 10-28, 1997: $2,307.14
March 1-31, 1997: $3,400.00
All terms and conditions of Master lease are in full effect during early
possession period.
DOVE HOLDINGS INTELLIGENT SYSTEMS FOR RETAIL, INC.
By: /s/ LEE COCHRAN By: /s/ LOUIS H. BORDERS
------------------------------- ---------------------------------
Lee Cochran Louis H. Borders
Its: CFO Its: President & CEO
------------------------------ --------------------------------
Date: 2/10/97 Date: 2/11/97
----------------------------- -------------------------------
<PAGE> 10
EXHIBIT A
[MAP OF BUILDING LAYOUT}
1241 EAST HILLSDALE BOULEVARD
FOSTER CITY, CALIFORNIA
<PAGE> 1
EXHIBIT 10.7
LOAN AND SECURITY AGREEMENT
Agreement No. 20701 Dated as of November 18, 1998
by and among
LIGHTHOUSE CAPITAL PARTNERS II, L.P.,
as agent and a lender
THE LENDERS NAMED HEREIN,
as lenders
and
WEBVAN-BAY AREA, INC.
a California corporation,
1241 E. Hillsdale Boulevard, Suite 210
Foster City, California 94404
as borrower
TOTAL COMMITMENT: $17,000,000
Repayment Period: 42 months
Final Payment Percentage: 15%
Initial Loan Factor: 2.79%
Warrant:
Number of shares: 372,263
Class of stock: Series B Preferred Stock.
The terms and information set forth on this cover page are a part of the
attached Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and among Lighthouse Capital Partners II,
L.P., in its individual capacity ("Lighthouse"), each other lender whose name is
set forth on the signature pages hereof or which may hereafter become a party to
this Agreement (any of Lighthouse or such other lenders being referred to
individually as, a "Lender", and collectively as, "Lenders"), Lighthouse, as
agent on behalf of the Lenders (not in its individual capacity but solely as
agent, "Agent"), and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
1
<PAGE> 2
THIS LOAN AND SECURITY AGREEMENT is entered into as of November 18,
1998, by and among LIGHTHOUSE CAPITAL PARTNERS II, L.P. in its individual
capacity ("Lighthouse"), each other lender whose name is set forth on the
signature pages hereof or which may hereafter become a party to this Agreement
(any of Lighthouse or such other lenders being referred to individually as, a
"Lender", and collectively as, "Lenders"), Lighthouse, as agent on behalf of the
Lenders (not in its individual capacity but solely as agent, "Agent"), and
WEBVAN-BAY AREA, INC., a California corporation ("Borrower").
RECITALS
Borrower wishes to borrow money from time to time from Lenders and
Lenders desire to lend money to Borrower. This Agreement sets forth the terms on
which Lenders will lend to Borrower and Borrower will repay the loan to Lenders.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"Affiliate" means any Person that owns or controls directly or
indirectly five percent or more of the stock of another entity, any Person that
controls or is controlled by or is under common control with such Persons or any
Affiliate of such Persons or each of such Person's officers, directors, joint
venturers or partners.
"Agent" means Lighthouse, not in its individual capacity, but
solely in its capacity as agent on behalf of and for the benefit of Lenders and
any successor agent.
"Agent's Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Agent's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding)
whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Request" shall have the meaning given to such term in
SECTION 2.3(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Code" means the Uniform Commercial Code as adopted and in
effect in the State of California, as amended from time to time.
"Collateral" means the Property described on EXHIBIT A attached
hereto.
"Commitment" or "Commitment Amount" means, with respect to each
Lender, the amounts set forth in SCHEDULE 1 under the column titled Commitment
Amount and "Commitments" means, with respect to all Lenders, all such amounts
collectively, as each may be amended from time to time.
"Commitment Percentage" means the amounts set forth in SCHEDULE
1 under the column titled Commitment Percentage, which for any Lender is the
percentage equivalent of such Lender's Commitment divided by the aggregate
amount of all Commitments.
2
<PAGE> 3
"Commitment Termination Date" means December 31, 1998.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend, letter of credit or other
obligation of another, including any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported.
"Default" means any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.
"Default Rate" means the per annum rate of interest equal to the
Interest Rate plus 2%, but such rate shall in no event be more than the highest
rate permitted by applicable law to be charged on commercial loans.
"Eligible Equipment" means a warehouse conveyor system and
related equipment, subject to Requisite Lenders' approval prior to funding, in
Requisite Lenders' sole discretion.
"Event of Default" has the meaning given to such term in SECTION
8.
"Event of Loss" has the meaning given to that term in SECTION
6.10(b).
"Federal Funds Rate" means, for any period, the rate set forth
in the weekly statistical release designated as H.15 (519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15 (519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in H.15
(519), the rate for such day will be the rate set forth in the daily statistical
release designated as the Composite 3:30 p.m. Quotations for U.S. Government
Securities, or any successor publication, published by the Federal Reserve Bank
of New York (including any such successor, the "Composite 3:30 p.m. Quotation")
for such day under the caption "Federal Funds Effective Rate". If on any
relevant day the appropriate rate for such previous day is not yet published in
either H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m., New York Time, on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Final Payment" means, with respect to the Loan, a payment (in
addition to and not in substitution for the regular monthly payments of
principal and accrued interest) due on the Maturity Date, equal to the Loan
Amount multiplied by the Final Payment Percentage.
"Final Payment Percentage" means the percentage set forth
following such term on the cover page of this Agreement.
"Financed Equipment" means and equipment, fixtures, or other
personal property financed with the proceeds of a Loan.
"Funding Date" means the date on which the Loan is made to or on
account of Borrower under this Agreement.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Guarantor" means any present or future guarantor of the
Obligations, including, without limitation, INTELLIGENT SYSTEMS FOR RETAIL,
INC., a California corporation ("ISR").
3
<PAGE> 4
"Guaranty" means a guaranty in substantially the form of EXHIBIT
E hereto.
"Guaranty Security Agreement" means a security agreement
substantially in the form of EXHIBIT J hereto.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of Property or services, including reimbursement and
other obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all capital lease obligations, and (d) all Contingent Obligations.
"Intellectual Property Security Agreement" means an intellectual
property security agreement in substantially the form of EXHIBIT G hereto.
"Interest Rate" means a per annum rate of interest (based on a
year of 360 days and actual days elapsed) equal to the Prime Rate as quoted in
the western edition of the Wall Street Journal seven (7) days prior to the Loan
Commencement Date plus seven hundred and thirty-three (733) basis points.
"Landlord Consent" means a consent in the form of EXHIBIT C or
such other form as Requisite Lenders may agree to accept.
"Lien" means any pledge, bailment, lease, mortgage,
hypothecation, conditional sales and title retention agreement, charge, claim,
encumbrance or other lien in favor of any Person.
"Loan" means the advance of credit by Lenders to Borrower under
this Agreement.
"Loan Agreement Supplement" means a supplement to this Agreement
in substantially the form of EXHIBIT D.
"Loan Amount" means, with respect to the Loan, as of any date,
the original principal amount of the Loan less the aggregate of all Prepayment
Amounts relating to prepayments of such Loan paid prior to such date.
"Loan Commencement Date" means, with respect to the Loan, the
first Business Day of the calendar month following the Funding Date of such
Loan.
"Loan Documents" means, collectively, this Agreement, any
Intellectual Property Security Agreement, any Guaranty, any Guaranty Security
Agreement, any Stock Pledge, the Deed of Trust, the Warrants, the Landlord
Consent(s) and all other documents, instruments and agreements entered into
between Borrower, Agent and Lenders in connection with this Agreement, all as
amended or extended from time to time.
"Loan Factor" means, with respect to the Loan, the amount set
forth as a percentage in the Loan Terms Schedule with respect to such Loan
calculated using the Interest Rate applicable to such Loan.
"Lockbox Account" means that certain deposit account with
Imperial Bank, account number _______________, in the name of Agent.
"Loan Terms Schedule" means, with respect to the Loan, the "Loan
Terms Schedule" attached to the Loan Agreement Supplement prepared by Agent in
connection with the Loan.
"Maturity Date" means, with respect to the Loan, the last day of
the Repayment Period for such Loan, or if earlier, the date of acceleration of
such Loan by Agent, on behalf of Lenders, following an Event of Default, in any
event, no later than June 30, 2002.
"Obligations" means all debt, principal, interest, fees,
charges, expenses and attorneys' fees and costs and other amounts, obligations,
covenants, and duties owing by Borrower to Lenders or Agent of any kind and
description (whether pursuant to or evidenced by the Loan Documents, or by any
other agreement among Agent,
4
<PAGE> 5
Lenders and Borrower, and whether or not for the payment of
money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including the principal, interest and
Final Payment due with respect to the Loans, and including any debt, liability,
or obligation owing from Borrower to others that Lenders may have obtained by
assignment or otherwise, and further including all interest not paid when due
and all Agent's Expenses that Borrower is required to pay or reimburse by the
Loan Documents, by law, or otherwise.
"Payment Date" has the meaning given to that term in SECTION
2.4(A).
"Permitted Investments" means the following:
(a) Investments disclosed in SCHEDULE 5 and existing as of
the date hereof;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any State
maturing within 1 year from its acquisition, (ii) commercial paper maturing no
more than 1 year after its creation and having the highest rating from either
Standard & Poor's Corporation or Moody's Investor Services, Inc., and (iii) bank
certificates of deposit issued maturing no more than 1 year after issue;
(c) investments consisting of the endorsement of negotiable
instrument for deposit or collection or similar transactions in the ordinary
course of Borrower's or Guarantor's business;
(d) investments accepted in connection with transfers
permitted by SECTION 7.2 hereof (other than SECTION 7.2 (VIII)) or Section 11 of
the Guaranty (other than Section 11(viii);
(e) investments consisting of (i) travel advances and
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (ii) loans to employees, officers or directors relating
to the purchase of equity securities of Borrower or Guarantor pursuant to
employee stock purchase plans or agreements approved by Borrower's or
Guarantor's respective Board of Directors in the ordinary course of business;
(f) investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with customers or
suppliers arising in the ordinary course of business;
(g) investments consisting of notes receivable of, or
prepaid royalties and other credit extensions, to customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
CLAUSE (g) shall not apply to investments of Borrower or Guarantor in any
Subsidiary;
(h) investments in joint ventures consisting of the
licensing of technology or the providing of technical support; and
(i) other investments not otherwise permitted by SECTION 7.2
hereof or Section 11 of the Guaranty not exceeding One Hundred Thousand Dollars
($100,000) in the aggregate outstanding at any time.
"Permitted Liens" means the following:
(a) The Lien created by this Agreement;
(b) The Liens disclosed in SCHEDULE 2, provided, however,
that such Liens shall constitute Permitted Liens only until April 30, 1999;
(c) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no superior priority over
Agent's Lien in the Collateral;
5
<PAGE> 6
(d) Liens upon or in any equipment, other than Financed
Equipment, acquired by the Borrower or any of its subsidiaries after the date of
this Agreement (i) to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the Property so
acquired and improvements thereon, and the proceeds of such equipment; and
further provided that such liens are the subject of financings within the scope
of SECTION 7.5.
(e) Liens to secure payment of worker's compensation,
employment insurance, old age pensions or other social security obligations of
Borrower in the ordinary course of business of Borrower;
(f) Liens on equipment leased by Borrower pursuant to an
operating lease in the ordinary course of business (including proceeds thereof
and accessions thereto) incurred solely for the purpose of financing the lease
of such equipment and which lease is permitted under SECTION 7.5;
(g) Leases or subleases, permitted under SECTION 7.5, of
assets other than Financed Equipment and licenses or sublicenses granted in the
ordinary course of Borrower's business and any interest or title of a lessor,
licensor or under any lease or license in the ordinary course of Borrower's
business, not interfering in any material respect with the business of Borrower;
(h) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property that could not reasonably be expected to
have a material adverse effect;
(i) Liens in favor of customers and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods;
(j) Liens that are not prior to the Lien of Lenders which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangements entered into with banks in the
ordinary course of business;
(k) Liens of materialmen, mechanics, warehousemen, carriers,
or other similar liens arising after the date hereof and in the ordinary course
of business or by operation of law or regulation and securing obligations not
yet due;
(l) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clause (d) above, provided that any extension, renewal or replacement Lien shall
be limited to the Property encumbered by the existing Lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not
increase.
"Person" means and includes any individual, any partnership, any
corporation, any business trust, any joint stock company, any limited liability
company, any unincorporated association or any other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prepayment Amount" means in the case of a mandatory prepayment
pursuant to SECTIONS 2.6(A) and 6.10, the original Stated Cost of the item of
Collateral with respect to which such prepayment relates.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, whether tangible or intangible.
"Repayment Period" means the period beginning on the first
Payment Date and continuing for the number of calendar months set forth
following such term on the cover page of this Agreement.
"Requisite Lenders" means at any time, Lenders then holding at
least sixty-six and two-thirds percent (66.67%) of the then aggregate unpaid
principal amount of the Loan then outstanding or, if no Loan is then
6
<PAGE> 7
outstanding, Lenders then having at least sixty-six and two-thirds percent
(66.67%)of the aggregate Commitments; provided, however, that in the event there
shall be only two (2) Lenders, Requisite Lenders shall mean both of such
Lenders.
"Responsible Officer" means each of the President and the Chief
Financial Officer of Borrower.
"Scheduled Payments" has the meaning given to such term in
SECTION 2.4(A).
"Stated Cost" means with respect to an item of Collateral, the
original cost to Borrower of the item of Collateral, inclusive of any sales tax
and shipping costs.
"Stipulated Loan Value" means, with respect to the Loan, the
percentage set forth with respect to the Loan in the Loan Terms Schedule for the
Loan, determined as of the Payment Date on which payment of such amount is to be
made, or if such date is not a Payment Date, on the Payment Date immediately
succeeding such date.
"Subsidiary" means any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Term" means the period from and after the date hereof until the
payment in full of all amounts and liabilities payable under this Agreement and
the other Loan Documents, including principal and interest on the Loans and the
Final Payment with respect to each Loan.
"Total Commitment" has the meaning set forth on the cover page
of this Agreement.
"Warrant" means a warrant in favor of each Lender to purchase
that dollar amount of Borrower's Series B Preferred Stock as set forth in
SCHEDULE I under the column titled Warrant Coverage, substantially in the form
of EXHIBIT B.
1.2 OTHER INTERPRETIVE PROVISIONS. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other Loan
Documents to any document, instrument or agreement shall include (a) all
exhibits, schedules, annexes and other attachments thereto, (b) all documents,
instruments or agreements issued or executed in replacement thereof, and (c)
such document, instrument or agreement, or replacement or predecessor thereto,
as amended, modified and supplemented from time to time and in effect at any
given time. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any other Loan Document shall refer to
this Agreement or such other Loan Document, as the case may be, as a whole and
not to any particular provision of this Agreement or such other Loan Document,
as the case may be. The words "include" and "including" and words or similar
import when used in this Agreement or any other Loan Document shall not be
construed to be limiting or exclusive. Unless otherwise indicated in this
Agreement or any other Loan Document, all accounting terms used in this
Agreement or any other Loan Document shall be construed, and all accounting and
financial computations hereunder or thereunder shall be computed, in accordance
with generally accepted accounting principles as in effect in the United States
of America from time to time.
2. LOAN AND TERMS OF PAYMENT
2.1 COMMITMENT. Subject to the terms and conditions of this
Agreement and relying upon the representations and warranties herein set forth
as and when made or deemed to be made, each Lender severally agrees to lend up
to its Commitment Amount to Borrower, in a single advance at any time prior to
the Commitment Termination Date; provided, that the aggregate principal amount
of the Loans shall not exceed the Total Commitment at such time; provided
further, that the aggregate principal amount of any Loan shall not exceed the
aggregate Stated Cost of the Eligible Equipment financed with the proceeds of
the Loan and any fees permitted under SECTION 2.2(A). If prepaid, the principal
of the Loan may not be re-borrowed.
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2.2 USE OF PROCEEDS; THE LOAN.
(a) USE OF PROCEEDS. The proceeds of the Loan shall be used
solely for the acquisition of Eligible Equipment and the payment of fees and
expenses in connection with the transactions contemplated by this Agreement.
(b) THE LOAN. The Loan shall be repayable in consecutive
monthly installments in accordance with the terms of SECTION 2.4. Agent may, and
is hereby authorized by Borrower to, endorse in its books and records
appropriate notations regarding Lenders' interest in the Loan; provided,
however, that the failure to make, or an error in making, any such notation
shall not limit or otherwise affect the Obligations of Borrower hereunder.
(c) NOTES. The obligation of Borrower to repay the Loan made
by the Lenders, together with interest thereon, shall be evidenced by separate
promissory notes in favor of each Lender in the amount of each such Lender's
Commitment Percentage of the Loan, in the form attached hereto as EXHIBIT I
("Notes").
2.3 PROCEDURE FOR MAKING LOAN.
(a) NOTICE. Whenever Borrower desires that Lenders make the
Loan, Borrower shall so notify Agent in writing (or by telephone with prompt
confirmation in writing) at least seven (7) Business Days in advance of the
desired Funding Date, which notice shall be irrevocable and shall be in
substantially the form of EXHIBIT F ("Borrowing Request"). Within one (1)
business day following receipt of the Borrowing Request as provided in this
SECTION 2.3, Agent shall notify each Lender by telephone or facsimile of the
principal amount (including such Lender's Commitment Percentage thereof) and
Funding Date of the Loan being requested by Borrower. Borrower's request for a
Loan shall be deemed to be a representation and warranty by Borrower that no
Default or Event of Default has occurred and is continuing, and that the
representations and warranties set forth in SECTION 5 are true and correct as of
the time of such notice as if made at such time. Subject to the terms and
conditions of this Agreement, as soon as practicable prior to 11:00 am PST on
the Funding Date specified in the Borrowing Request, each Lender shall transfer
an amount equal to its Commitment Percentage multiplied by the amount of the
Loan to an account specified by Agent in immediately available funds. Agent
shall advance such funds on the Funding Date to the account of Borrower, all as
specified in the Borrowing Request. Each Lender's obligation to make its
Commitment Percentage of the Loan shall be expressly subject to the satisfaction
of the conditions set forth in SECTIONS 3.1 and 3.2. Agent shall have the right,
exercisable at any time, to request that Borrower furnish Agent and Lenders with
such additional information with respect to the Loan and the Eligible Equipment
as Agent shall reasonably request.
(b) LOAN INTEREST RATE. Borrower shall pay interest on the
unpaid principal amount of each Loan from the Loan Commencement Date until such
Loan has been paid in full, at a per annum rate of interest equal to the
Interest Rate. The Interest Rate applicable to each Loan shall be fixed for the
Repayment Period and shall not be subject to change in the absence of a manifest
error. All computations of interest on each Loan shall be based on a year of 360
days (assuming 30 days in each month). Notwithstanding any other provision
hereof, the amount of interest payable hereunder shall not in any event exceed
the maximum amount permitted by the law applicable to interest charged on
commercial loans.
(c) LOAN FACTOR AND STIPULATED LOAN VALUE CALCULATION. On
the Loan Commencement Date, Agent, on behalf of Lenders, shall establish the
Loan Factor and a schedule of Stipulated Loan Values with respect to the Loan.
The Loan Factor shall be calculated in a manner to fully amortize the Loan over
the Repayment Period applicable to such Loan in equal periodic installments of
principal and interest, taking into account the Final Payment. The Loan Factor
and schedule of Stipulated Loan Values applicable to the Loan shall be set forth
in the Loan Agreement Supplement prepared by Agent with respect to the Loan and
shall be conclusive in the absence of a manifest error.
(d) DISBURSEMENT. Subject to the satisfaction of the
conditions set forth in SECTIONS 3.1 and 3.2 Lenders shall disburse the Loan in
accordance with SECTION 2.3(a).
(e) TERMINATION OF COMMITMENT TO LEND. Notwithstanding
anything in the Loan Documents, each Lender's obligation to lend the undisbursed
portion of such Lender's Commitment Percentage to Borrower
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hereunder shall terminate on the earlier of (i) at Requisite Lenders' election,
the occurrence and continuance of any Default or Event of Default hereunder, and
(ii) the Commitment Termination Date. Notwithstanding the foregoing, each
Lender's obligation to lend the undisbursed portion of the Commitment to
Borrower shall terminate if, in the sole judgment of four of the five Lenders
(counting Venture Lending & Leasing, Inc. and Venture Lending & Leasing II,
Inc., as a single lender), there has been a material adverse change in the
general affairs, management, results of operations, condition (financial or
otherwise) or prospects of Borrower, whether or not arising from transactions in
the ordinary course of business, or there has been any material adverse
deviation by Borrower from the business plan of Borrower presented to and not
disapproved by four of the five Lenders (counting Venture Lending & Leasing,
Inc. and Venture Lending & Leasing II, Inc., as a single lender), since the date
of this Agreement.
2.4 AMORTIZATION OF PRINCIPAL AND INTEREST; INTERIM PAYMENT; FINAL
PAYMENT.
(a) PRINCIPAL AND INTEREST PAYMENTS ON PAYMENT DATES.
Borrower shall make payments of principal and accrued interest in advance for
the Loan (collectively, "Scheduled Payments"), commencing on the Loan
Commencement Date (or commencing on the Funding Date if the Funding Date is the
first Business Day of the month) with respect to the Loan and continuing
thereafter during the Repayment Period on the first Business Day of each
calendar month (each a "Payment Date"), in an amount equal to the Loan Factor
multiplied by the Loan Amount for the Loan as of such Payment Date. In any
event, all unpaid principal and accrued interest shall be due and payable in
full on the last Payment Date with respect to the Loan.
(b) INTERIM PAYMENT. In addition to the Scheduled Payments,
on the Loan Commencement Date for the Loan (unless the Funding Date is the first
Business Day of the month) Borrower shall pay to Lenders an amount (the "Interim
Payment") equal to the initial Loan Amount multiplied by the product of (i) the
Interest Rate applicable to the Loan (expressed as a decimal) divided by three
hundred and sixty (360), and (ii) the number of days from the Funding Date of
the Loan until the first Payment Date with respect to the Loan.
(c) FINAL PAYMENT. Unless the Loan is prepaid in full, on
the Maturity Date Borrower shall pay, in addition to the unpaid principal and
accrued interest and all other amounts due on such date with respect to the
Loan, an amount equal to the Final Payment.
2.5 FEES. Borrower shall pay to Lenders the following:
(a) LATE FEE. A late charge on any Scheduled Payments or
other sums due hereunder which are past due more than five (5) business days
after the applicable Payment Date, in an amount equal to 2% of the past due
amount, payable on demand.
2.6 PREPAYMENTS.
(a) PREPAYMENT UPON AN EVENT OF LOSS. If any Financed
Equipment is subject to an Event of Loss and Borrower is required to or elects
to prepay the Loans with respect to such Financed Equipment pursuant to SECTION
6.10, then the Loans shall be prepaid to the extent and in the manner provided
in such section.
(b) MANDATORY PREPAYMENT UPON AN ACCELERATION. If the Loan
is accelerated following the occurrence of an Event of Default or otherwise
(other than following an Event of Loss), then Borrower shall immediately pay to
Lenders (i) all unpaid Scheduled Payments with respect to the Loan due prior to
the date of prepayment, (ii) the Stipulated Loan Value with respect to the Loan
multiplied by the Loan Amount, and (iii) all other sums, if any, that shall have
become due and payable hereunder.
(c) NO OTHER PREPAYMENT. Borrower may not prepay the Loan
except upon the occurrence of an event described in SECTION 2.6(a) or (b) above
in which event the prepayment shall be made as described in such sections.
2.7 OTHER PAYMENT TERMS.
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(a) PLACE AND MANNER. Borrower shall make all payments due
to Agent or Lenders by making payments to the Lockbox Account at the address
specified in SECTION 12 hereof, in lawful money of the United States and in same
day or immediately available funds.
(b) DATE. Whenever any payment due hereunder shall fall due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
(c) DEFAULT RATE. If either (i) any amounts required to be
paid by Borrower under this Agreement or the other Loan Documents (including
principal, interest, the Final Payment payable with respect to any Loan, and any
fees or other amounts) remain unpaid after such amounts are due, or (ii) an
Event of Default has occurred and is continuing, Borrower shall pay interest on
the aggregate, outstanding balance hereunder from the date due or from the date
of the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured, as applicable, at a per annum
rate equal to the Default Rate. All computations of such interest shall be based
on a year of 360 days for actual days elapsed.
2.8 CREDITING PAYMENTS. The receipt by Agent of any wire transfer of
funds, check, or other item of payment shall be immediately applied
conditionally to reduce Obligations, but shall not be considered a payment on
account unless such wire transfer is of immediately available federal funds and
is made to the appropriate Lockbox Account of Agent or unless and until such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Agent after 1:00 p.m. California time shall be deemed to
have been received by Agent as of the opening of business on the immediately
following Business Day.
2.9 DISTRIBUTION OF PAYMENTS. Agent shall immediately distribute
from the Lockbox Account or from the proceeds of Collateral under SECTION 9.7,
as the case may be, to each Lender, at such address or account as each Lender
shall designate, its Commitment Percentage of all repayments and prepayments of
principal and all payments of interest, fees, expenses and costs received by
Agent on the day after and in the same type of funds as payment was received
provided, however, that each Lender agrees, severally but not jointly, to pay
Agent an agent's fee ("Agent's Fee") equal to 0.25% of the amount of each
payment made by or on behalf of, or collected from, Borrower under this
Agreement and the other Loan Documents, including, without limitation each
Scheduled Payment, but excluding the Final Payment. Agent may withhold the
Agent's Fee from the amounts distributed to each Lender pursuant to this SECTION
2.9.
2.10 AGENT'S RIGHT TO ASSUME FUNDS AVAILABLE FOR THE LOAN. Unless
Agent shall have been notified by any Lender no later than the business day
prior to the Funding Date of the Loan that such Lender does not intend to make
available to Agent immediately available funds equal to such Lender's Commitment
Percentage of the total principal amount of the Loan, Agent may assume that such
Lender has made its Commitment Percentage of the Loan to Agent on the date of
the Loan and Agent may, in reliance upon such assumption, make available to
Borrower a corresponding amount of the Loan. If Agent has made funds available
to Borrower based on such assumption and such Commitment Percentage of the Loan
is not in fact made to Agent by such Lender, Agent shall be entitled to recover
the corresponding amount of the Loan on demand from such Lender. If such Lender
(the "Defaulting Lender") does not promptly pay such corresponding amount upon
Agent's demand, Agent shall (a) to the extent that there is availability under
the Total Commitment of the Lenders other than the Defaulting Lender, notify
such Lenders and each such Lender severally shall make immediately available
funds available to Agent at the account designated by Agent in writing in an
amount equal to the lesser of such Lender's Commitment Percentage of such
corresponding amount and such Lender's remaining Commitment, which amounts
advanced shall be deemed to be a Loan under this Agreement; provided, that for
purposes of this Section, the Commitment Percentage of each Lender shall be
calculated without regard to the Commitment of the Defaulting Lender; provided
further, that nothing herein shall be deemed to increase the Commitment of any
Lender; and (b) to the extent that (i) there is no further availability under
the Commitments or (ii) Agent is not promptly reimbursed under SECTION 2.10(a),
Agent shall notify Borrower and Borrower shall repay such amount of the Loan to
Agent. Agent also shall be entitled to recover from the Defaulting Lender
interest on the amount of the Loan in respect of each day from the date the
amount of the Loan was made by Agent to Borrower to the date such corresponding
amount is recovered by Agent at the Federal Funds Rate. Nothing in this SECTION
2.10 shall be deemed to relieve any Lender from its
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obligation to fulfill its Commitment or to prejudice any rights which Agent, any
other Lender or Borrower may have against such Defaulting Lender as a result of
any default by such Defaulting Lender under this Agreement.
2.11 AGENT'S RIGHT TO ASSUME PAYMENTS WILL BE MADE BY BORROWER.
Unless Agent shall have been notified by Borrower prior to the date on which any
payment to be made by Borrower hereunder is due that Borrower does not intend to
remit such payment, Agent may, in its discretion, assume that Borrower has
remitted such payment when so due and Agent may, in its discretion and in
reliance upon such assumption, make available to each Lender on such payment
date an amount equal to such Lender's Commitment Percentage of such assumed
payment. If Borrower has not in fact remitted such payment to Agent, each Lender
shall forthwith on demand repay to Agent the amount of such assumed payment made
available to such Lender, together with interest thereon in respect of each date
from and including the date such amount was made available by Agent to such
Lender to the date such amount is repaid to Agent at the Federal Funds Rate.
2.12 SHARING OF PAYMENTS, ETC. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Commitment Percentage of payments on
account of the Loans obtained by all the Lenders, such Lender shall forthwith
(a) notify Agent of such fact, and (b) purchase from the other Lenders such
participations in the Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Lender, such purchase shall to that
extent be rescinded and each other Lender shall repay to the purchasing Lender
the purchase price paid therefor, together with an amount equal to such paying
Lender's Commitment Percentage (according to the proportion of (i) the amount of
such paying Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this SECTION 2.12 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of
Borrower in the amount of such participation. Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased pursuant to this SECTION 2.12 and will in each case
notify Lenders following any such purchases or repayments.
2.13 TERM. This Agreement shall become effective upon acceptance by
Agent and Lenders and shall continue in full force and effect for a term ending
on the Maturity Date. Notwithstanding the foregoing, Agent, on behalf of
Lenders, or Requisite Lenders shall have the right to terminate this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default.
3. CONDITIONS OF LOAN
3.1 CONDITIONS PRECEDENT TO THE LOAN. The obligation of Lenders to
make the Loan is subject to the condition precedent that Agent shall have
received, in form and substance satisfactory to Requisite Lenders, all of the
following:
(a) This Agreement and the Notes duly executed by Borrower.
(b) The Warrant to be issued to each Lender duly executed by
Borrower.
(c) The Intellectual Property Security Agreements duly
executed by each of Borrower and ISR, together with any other documents required
under such agreement.
(d) A Guaranty and Guaranty Security Agreement duly executed
by ISR.
(e) Evidence that Borrower shall have received gross
proceeds of at least Twenty-Five Million Dollars ($25,000,000) from the sale of
Preferred Series B Preferred Stock.
(f) A Landlord Consent from the owner of the building in
which Collateral is to be located.
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(g) A certificate of the secretary or assistant secretary of
Borrower with copies of the following documents attached: (i) the articles of
incorporation and bylaws of Borrower certified by Borrower as being in full
force and effect on the Funding Date, (ii) incumbency and representative
signatures, and (iii) resolutions authorizing the execution and delivery of this
Agreement and each of the other Loan Documents.
(h) A good standing certificate from Borrower's state of
incorporation and the state in which Borrower's principal place of business is
located, together with certificates of the applicable governmental authorities
stating that Borrower is in compliance with the franchise tax laws of each such
state, each dated as of a recent date.
(i) Evidence of the insurance coverage required by SECTION
6.9 of this Agreement.
(j) An opinion of Borrower's counsel in substantially the
form of EXHIBIT H.
(k) All necessary consents of shareholders and other third
parties with respect to the execution, delivery and performance of this
Agreement, the Warrants and the other Loan Documents.
(l) Payment of any unreimbursed Agent's Expenses incurred on
or prior to the Funding Date, limited to $20,000.00.
(m) Such other documents, and completion of such other
matters, as Agent or Lenders reasonably may deem necessary or appropriate.
3.2 ADDITIONAL CONDITIONS PRECEDENT TO THE LOAN. The obligation of
Lenders to make the Loan, is further subject to the following conditions:
(a) No Default or Event of Default shall have occurred and
be continuing.
(b) Borrower shall have provided to Agent with respect to
the proposed Financed Equipment, such invoices, purchase orders, bills of sale,
receipts, agreements, canceled checks, and other documents as Agent shall
reasonably request to evidence the ownership by Borrower of, the payment in full
of the purchase price of, and the fair market value of, such Collateral, each in
form and substance reasonably satisfactory to Agent.
(c) Borrower, Agent, and Lenders shall have executed a Loan
Agreement Supplement with respect to the proposed Loan.
(d) Agent shall have received such documents, instruments
and agreements, including UCC financing statements or amendments to UCC
financing statements, as Agent shall reasonably request to evidence the
perfection and priority of the security interests granted to Agent, on behalf
and for the benefit of Lenders, pursuant to SECTION 4.
(e) Borrower shall have delivered to Agent, on behalf and
for the benefit of Lenders, a subordination agreement, release, or estoppel
letter, as appropriate, from any Person having an existing Lien, other than a
Permitted Lien, superior to the Lien of Agent on any item of Collateral.
(f) Such other documents, and completion of such other
matters, as Agent may deem necessary or appropriate.
3.3 COVENANT TO DELIVER. Borrower agrees (not as a condition but as
a covenant) to deliver to Agent each item required to be delivered to Agent
and/or Lenders as a condition to the Loan, if such Loan is advanced. Borrower
expressly agrees that the extension of such Loan prior to the receipt by Agent
or Lenders, if applicable, of any such item shall not constitute a waiver by
Agent or Lenders of Borrower's obligation to deliver such item.
4. CREATION OF SECURITY INTEREST
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4.1 GRANT OF SECURITY INTEREST. Borrower grants to Agent on behalf
and for the benefit of Lenders, a valid, first priority, continuing security
interest in all presently existing and hereafter acquired or arising Collateral
in order to secure prompt, full and complete payment of any and all Obligations
and in order to secure prompt, full and complete performance by Borrower of each
of its covenants and duties under each of the Loan Documents. Notwithstanding
the foregoing, Agent and Lenders agree to release their security interest in any
vehicles (including forklifts, pallet jacks and similar warehouse vehicles)
subject to leases. Notwithstanding the foregoing, the security interest granted
herein shall not extend to and the term "Collateral" shall not include (a) any
vehicles (including forklifts, pallet jacks and similar warehouse vehicles)
subject to leases where the Borrower is the Lessee and (b) any licenses to the
extent the granting of a security interest therein (i) would be contrary to
applicable law or (ii) is prohibited by or would constitute a default under any
agreement or document governing such licenses (but only to the extent such
prohibition is enforceable under applicable law).
4.2 DURATION OF SECURITY INTEREST. Agent's security interest in the
Collateral shall continue until the payment in full and the satisfaction of all
Obligations, whereupon such security interest shall terminate; provided,
however, if any item of Collateral is subject to an Event of Loss, then
following the prepayment of the Loan with respect to such item pursuant to
SECTION 2.6, Agent shall release its security interest in such item of
Collateral. Agent shall, at Borrower's sole cost and expense, execute such
further documents and take such further actions as may be necessary to effect
the release contemplated by this SECTION 4.2, including duly executing and
delivering termination statements for filing in all relevant jurisdictions under
the Code.
4.3 POSSESSION OF COLLATERAL. So long as no Event of Default has
occurred and is continuing, Borrower shall remain in full possession, enjoyment
and control of the Collateral (except only as may be otherwise required by Agent
for perfection of their security interest therein) and shall be entitled to
manage, operate and use the same and each part thereof with the rights and
franchises appertaining thereto; provided, however, that the possession,
enjoyment, control and use of the Collateral shall at all times be subject to
the observance and performance of the terms of this Agreement.
4.4 MARKINGS ON THE COLLATERAL. At Agent's request at any time
during the Term of the Loan (including any extension thereof), Borrower shall
place in a conspicuous location on each item of Financed Equipment a plaque or
other marking to be supplied by Agent which reads substantially as follows:
Lighthouse Capital Partners II, L.P., as agent on behalf and for
the benefit of a group of lenders has a first priority security
interest in this item of equipment.
Such plaque or other marking shall not be removed (or if removed or damaged such
plaque or other marking shall be replaced) until the security interest in favor
of Agent, on behalf and for the benefit of Lenders, in such item of Collateral
is terminated pursuant to this Agreement.
4.5 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
from time to time execute and deliver to Agent, all financing statements and
other documents Agent may reasonably request, in form satisfactory to Agent, to
perfect and continue Agent's perfected security interests in the Collateral and
in order to consummate fully all of the transactions contemplated under the Loan
Documents.
4.6 RIGHT TO INSPECT. Agent and any Lender (through any of its
officers, employees, or agents) shall have the right, upon reasonable prior
notice, from time to time during Borrower's usual business hours, to inspect
Borrower's Books and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower is a corporation
duly existing and in good standing under the laws of its state of incorporation
and qualified and licensed to do business in, and is in good standing in, any
state in which the conduct of its business or its ownership of Property requires
that it be so qualified or in which
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the Collateral is located, except for such states as to which any failure so to
qualify would not reasonably be expected to have a material adverse effect on
Borrower's ability to perform its obligations under this Agreement.
5.2 AUTHORITY. Borrower has all necessary power and authority to
execute, deliver, and perform in accordance with the terms thereof, the Loan
Documents to which it is a party. Borrower has all requisite power and authority
to own and operate its properties and to carry on its businesses as now
conducted.
5.3 SUBSIDIARIES. Borrower has no Subsidiaries, except those listed
in SCHEDULE 3 hereto.
5.4 CONFLICT WITH OTHER INSTRUMENTS, ETC. Neither the execution and
delivery of any Loan Document to which Borrower is a party nor the consummation
of the transactions therein contemplated nor compliance with the terms,
conditions and provisions thereof will conflict with or result in a breach of
(i) any of the terms, conditions or provisions of the articles of incorporation
and the by-laws, or other organizational documents of Borrower or (ii) any law
or any regulation, order, writ, injunction or decree of any court or
governmental instrumentality or (iii) any material agreement or instrument to
which Borrower is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject, or constitute a default
thereunder, except to the extent that such conflict, breach or default could not
reasonably be expected to have a material adverse effect on the ability of the
Borrower to perform its obligations under this Agreement, or the value of the
Collateral or the priority of Agent's security interest therein, or result in
the creation or imposition of any Lien, other than Permitted Liens.
5.5 AUTHORIZATION; ENFORCEABILITY. The execution and delivery of
this Agreement, the granting of the security interest in the Collateral, the
incurring of the Loans, the execution and delivery of the other Loan Documents
to which Borrower is a party and the consummation of the transactions herein and
therein contemplated have each been duly authorized by all necessary action on
the part of Borrower. The Loan Documents have been duly executed and delivered
and constitute legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights or by
general principles of equity.
5.6 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for the first priority lien held by the Agent and except
for other Permitted Liens. Except as disclosed in SCHEDULE 2, Borrower has not
acquired any part of the Collateral from an assignor outside the ordinary course
of such assignor's business.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
BUSINESS AND COLLATERAL. Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office,
principal place of business, and the place where Borrower maintains its records
concerning the Collateral are presently located at the address set forth on the
cover page. The Collateral will be located at the addresses set forth on the
SCHEDULE 4.
5.8 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency in which an adverse
decision could have a material adverse effect on Borrower or the aggregate value
of the Collateral. Borrower does not have knowledge of any such pending or
threatened actions or proceedings. Borrower will promptly notify Agent in
writing if any action, proceeding or governmental investigation involving
Borrower is commenced that may result in damages or costs to Borrower of Fifty
Thousand Dollars ($50,000) or more.
5.9 FINANCIAL STATEMENTS. All financial statements relating to
Borrower or any Affiliate that have been or may hereafter be delivered by
Borrower to Agent or any Lender present fairly in all material respects
Borrower's financial condition as of the date thereof and Borrower's results of
operations for the period then ended.
5.10 SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.11 TAXES. Borrower has filed or caused to be filed all tax returns
required to be filed, and has paid, or has made adequate provision for the
payment of, all taxes that are due and payable.
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5.12 CONSENTS AND APPROVALS. No approval, authorization or consent of
any trustee or holder of any indebtedness or obligation of Borrower or of any
other Person under any such material agreement, contract, lease or license or
similar document or instrument to which Borrower is a party or by which Borrower
is bound, is required to be obtained by Borrower in order to make or consummate
the transactions contemplated under the Loan Documents. All consents and
approvals of, filings and registrations with, and other actions in respect of,
all Governmental Authorities required to be obtained by Borrower in order to
make or consummate the transactions contemplated under the Loan Documents have
been, or prior to the time when required will have been, obtained, given, filed
or taken and are or will be in full force and effect.
5.13 TRADEMARKS, PATENTS, COPYRIGHTS, FRANCHISES AND LICENSES.
Borrower possesses and owns all necessary trademarks, trade names, copyrights,
patents, patent rights, franchises and licenses which are material to the
conduct of its business as now operated.
5.14 MATERIAL CONTRACTS. Borrower has disclosed to Agent and Lenders
in writing all currently effective material contracts and agreements (whether
written or oral) to which Borrower is a party. There are no material defaults
under any such contract or agreement by Borrower that could reasonably be
expected to have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement, or the value of the Collateral or
the priority of Agent's security interest therein. Borrower has delivered to
Agent true and correct copies of all such contracts or agreements (or, with
respect to oral contracts or agreements, written descriptions of the material
terms thereof).
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any Loan Document, certificate or written statement
furnished to Agent or any Lender contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained in such certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until the full and complete payment
of the Obligations and the termination of the Commitments, Borrower shall do all
of the following:
6.1 GOOD STANDING. Borrower shall maintain its corporate existence
and its good standing in its jurisdiction of incorporation and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to have a material adverse effect on the financial
condition, operations or business of Borrower. Borrower shall maintain in force
all licenses, approvals and agreements, the loss of which could have a material
adverse effect on its ability to perform its obligations under this Agreement,
or the value of the Collateral or the priority of Agent's security interest
therein.
6.2 GOVERNMENT COMPLIANCE. Borrower shall comply with all statutes,
laws, ordinances and government rules and regulations to which it is subject,
noncompliance with which could reasonably be expected to materially adversely
affect its ability to perform its obligations under this Agreement, or the value
of the Collateral or the priority of the Agent's security interest therein.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to each Lender: (a) as soon as available, but in any event within thirty
(30) days after the end of each month, a company prepared balance sheet, income
statement and cash flow statement covering Borrower's operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited financial statements of Borrower prepared in accordance with
generally accepted accounting principles, consistently applied, together with an
unqualified opinion on such financial statements of a nationally recognized or
other independent public accounting firm reasonably acceptable to Agent; (c)
promptly upon becoming available, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders; (d)
immediately upon receipt of notice thereof, a report of any material legal
actions pending or threatened against Borrower; and (e) such other financial
information as Agent may reasonably request from time to time.
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6.4 CERTIFICATES OF COMPLIANCE. Each time financial statements are
furnished pursuant to SECTION 6.3 above, there shall be delivered to each Lender
a certificate signed by a Responsible Officer (each an "Officer's Certificate")
with respect to such financial reports to the effect that: (i) no Event of
Default or Default has occurred and is continuing hereunder since the date of
this Agreement or, if later, since the date of the prior Officer's Certificate
or, if such an event or condition has occurred and is continuing, the nature and
extent thereof and the action Borrower proposes to take with respect thereto,
and (ii) Borrower is in compliance with the provisions of SECTIONS 6 and 7.
6.5 NOTICE OF EVENT OF LOSS. As soon as possible, and in any event
within ten (10) days thereafter, Borrower shall notify Agent in writing in
reasonable detail of any Event of Loss.
6.6 NOTICE OF DEFAULTS. As soon as possible, and in any event within
five (5) days after the discovery of a Default or an Event of Default provide
Agent with an Officer's Certificate of Borrower setting forth the facts relating
to or giving rise to such Default or Event of Default and the action which
Borrower proposes to take with respect thereto.
6.7 TAXES. Borrower shall make due and timely payment or deposit of
all federal, state, and local taxes, assessments, or contributions required of
it by law or imposed upon any properties belonging to it, and will execute and
deliver to Agent, on demand, appropriate certificates attesting to the payment
or deposit thereof; and Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Agent with proof
satisfactory to Agent and Requisite Lenders indicating that Borrower has made
such payments or deposits; provided that Borrower need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is adequately reserved against by Borrower.
6.8 USE; MAINTENANCE.
(a) Borrower, at its expense, shall make all necessary site
preparations and cause the Collateral to be operated in accordance with any
applicable manufacturer's manuals or instructions. So long as no Default or
Event of Default has occurred and is continuing, Borrower shall have the right
to quietly possess and use the Collateral as provided herein without
interference by Agent or Lenders.
(b) Borrower, at its expense, shall maintain the Collateral
in good condition, reasonable wear and tear excepted, and will comply in all
material respects with all laws, rules and regulations to which the use and
operation of the Collateral may be or become subject. Such obligation shall
extend to repair and replacement of any partial loss or damage to the
Collateral, regardless of the cause. If maintenance is mandated by manufacturer
of Financed Equipment, Borrower shall obtain and keep in effect, at all times
during the Term maintenance service contracts relating to such Financed
Equipment with suppliers approved by Agent and Requisite Lenders, such approval
not to be unreasonably withheld. All parts furnished in connection with such
maintenance or repair shall immediately become part of the Collateral. All such
maintenance, repair and replacement services shall be immediately paid for and
discharged by Borrower with the result that no Lien will attach to the
Collateral.
6.9 INSURANCE.
Borrower shall obtain and maintain for the Term, at its own
expense, (a) "all risk" insurance against loss or damage to the Collateral, and
(b) commercial general public liability insurance (including contractual
liability, products liability and completed operations coverages), reasonably
satisfactory to Agent and Requisite Lenders and such other insurance against
such other risks of loss and with such terms, as shall in each case be
reasonably satisfactory to or reasonably required by Agent and Requisite Lenders
(as to carriers, amounts, deductibles and otherwise). The amount of the "all
risk" insurance shall be the greater of (i) the replacement value of the
Collateral (as new) or (ii) the Stipulated Loan Value of the Loan Amount
applicable to the Loan and all other then outstanding amounts payable under the
Loan Documents. Such amounts shall be determined to Agent and Requisite Lenders'
reasonable satisfaction as of each anniversary date of this Agreement and the
appropriate amount of coverage shall be put in effect on the next succeeding
renewal or inception date of such insurance.
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The amount of such commercial general public liability insurance
(other than products liability coverage and completed operations insurance)
shall be at least $5,000,000 per occurrence. The amount of such products
liability and completed operations insurance shall be at least $5,000,000 per
occurrence. The deductible with respect to the "all-risk" and product liability
insurance shall not exceed $25,000; otherwise there shall be no deductible with
respect to any insurance required to be maintained hereunder without the prior
written approval of Agent and Requisite Lenders. Such "all risk" insurance
shall: (a) name Agent, on behalf of Lenders, as sole loss payee with respect to
the Collateral, (b) provide each insurer's waiver of its right of subrogation
against Agent, on behalf of Lenders, and Borrower, and (c) provide that such
insurance (i) shall not be invalidated by any action of, or breach of warranty
by, Borrower of a provision of any of its insurance policies, and (ii) shall
waive set-off, counterclaim or offset against Agent, on behalf of Lenders. Each
liability policy shall (A) name Agent, on behalf of Lenders, as an additional
insured and (B) provide that such insurance shall have cross-liability and
severability of interest endorsements (which shall not increase the aggregate
policy limits of Borrower's insurance). All insurance policies (C) shall provide
that Borrower's insurance shall be primary without a right of contribution of
Agent's insurance, if any, or any obligation on the part of Agent to pay
premiums of Borrower, and (D) shall contain a clause requiring the insurer to
give Agent, on behalf of Lenders, at least thirty (30) days prior written notice
of its cancellation (other than cancellation for non-payment for which ten (10)
days notice shall be sufficient). Borrower shall, on or prior to the date of and
prior to each policy renewal, furnish to Agent certificates of insurance or
other evidence satisfactory to Agent that such insurance coverage is in effect.
6.10 LOSS; DAMAGE; DESTRUCTION AND SEIZURE.
(a) Borrower shall bear the risk of the Collateral being
lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit for
use, or seized by a governmental authority for any reason whatsoever at any time
until the expiration or termination of the Term.
(b) If during the Term any item of Financed Equipment is
lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit for
use, or seized by a governmental authority for any reason whatsoever for a
period equal to at least the remainder of the Term (an "Event of Loss"), then in
each case Agent, on behalf of Lenders, shall receive from the proceeds of
insurance maintained pursuant to SECTION 6.9, from any award paid by the seizing
governmental authority or, to the extent not received from the proceeds of
insurance or award or both, from Borrower, on or before the Payment Date next
succeeding such Event of Loss, an amount equal to the sum of: (i) all accrued
and unpaid Scheduled Payments with respect to such Loan due prior to the next
such Payment Date, (ii) a prepayment in an amount equal to the Stipulated Loan
Value with respect to such Loan multiplied by the Prepayment Amount of each
affected item of Financed Equipment, and (iii) all other sums, if any, that
shall have become due and payable hereunder with respect to such Loan, including
interest at the Default Rate with respect to any past due amounts. On the date
of receipt by Agent of the amount specified above with respect to each such item
of Financed Equipment subject to an Event of Loss, this Agreement shall
terminate as to such Financed Equipment. Except as provided in SECTION 6.10(c),
any proceeds of insurance maintained by Borrower pursuant to SECTION 6.9 and
received by Borrower shall be paid to Agent promptly upon their receipt by
Borrower. If any proceeds of insurance or awards received from governmental
authorities are in excess of the amount owed under this SECTION 6.10, Agent
shall promptly remit to Borrower the amount in excess of the amount owed to
Lenders.
(c) So long as no Event of Default has occurred and is
continuing, any proceeds of insurance maintained pursuant to SECTION 6.9
received by Lender or Borrower with respect to an item of Collateral, the repair
of which is practicable, shall, at the election of Borrower, be applied either
to the repair or replacement of such Collateral or, upon Agent's receipt of
evidence of the repair or replacement of the Collateral reasonably satisfactory
to Agent and Requisite Lenders, to the reimbursement of Borrower for the cost of
such repair or replacement. All replacement parts and equipment acquired by
Borrower in replacement of Collateral pursuant to this SECTION 6.10(c) shall
immediately become part of the Collateral upon acquisition by Borrower. Borrower
shall take such actions and provide such documentation as may be reasonably
requested by Agent, on behalf of Lenders, to protect and preserve their first
priority security interest and otherwise to avoid any impairment of Agent's and
Lenders' rights under the Loan Documents in connection with such repair or
replacement.
6.11 RELEASE OF CERTAIN PERMITTED LIENS. On or prior to April 30,
1999, Borrower shall cause the Permitted Liens listed in SCHEDULE 2 to be
released or removed from Borrower's property.
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6.12 FURTHER ASSURANCES. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Agent or any Lender to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that until the full and complete payment of the
Obligations and termination of the Commitments, Borrower will not do any of the
following without the prior written consent of Requisite Lenders:
7.1 CHIEF EXECUTIVE OFFICE; LOCATION OF COLLATERAL. During the
continuance of this Agreement, change the chief executive office or principal
place of business or remove or cause to be removed, except in the ordinary
course of Borrower's business, the Collateral or the records concerning the
Collateral from the premises listed in SCHEDULE 4 without thirty (30) days prior
written notice to Agent and Lenders.
7.2 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into
any transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, license or other disposition of, moving, relocation,
or transfer, whether by sale or otherwise, of Borrower's assets, other than (i)
sales of inventory in the ordinary and usual course of Borrower's business as
presently conducted and (ii) sales or other dispositions in the ordinary course
of business of assets, other than Collateral, that have become worn out or
obsolete or that are promptly being replaced.
Notwithstanding anything contained in this SECTION 7.2, the Borrower may do any
of the following: (i) transfer non-exclusive licenses and similar arrangements
for use of its intellectual property, in arm's length transactions, in the
ordinary course of its business for adequate consideration (ii) declare and make
any dividend payment payable in its equity securities, (iii) convert any of its
convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange therefor, (iv) repurchase stock
from former employees of Borrower in accordance with the terms of repurchase,
vesting or similar agreements between Borrower and such employees in its
ordinary course of business, (v) repurchase equity securities with the proceeds
from the issuance of equity securities, (vi) repurchase, redeem, retire, defease
or otherwise acquire for value equity securities in connection with or pursuant
to any employees benefit plan or stock option plan of the Borrower, (vii)
provided no Event of Default has occurred and is continuing or is not caused
thereby, mergers, consolidations or acquisitions, which after giving effect
thereto, Borrower is the surviving entity, and (viii) enter into Permitted
Investments.
7.3 RESTRUCTURE. Change Borrower's name; make or suffer any material
adverse change in Borrower's financial condition or any material adverse change
in Borrower's operations; cause, permit, or suffer any material change in
Borrower's ownership; engage in any business other than the business currently
engaged in by Borrower or reasonably related thereto; or suspend operation of
Borrower's business.
Notwithstanding the foregoing, Borrower may suffer a material change in
Borrower's ownership with Requisite Lenders' prior written consent, which
consent will not be unreasonably withheld if each of the following conditions
precedent is satisfied: (i) ISR executes a reaffirmation of guaranty and
security agreement in form and substance satisfactory to Requisite Lenders and
(ii) no Event of Default has occurred and is continuing or will otherwise result
from such change in ownership.
7.4 LIENS. Create, incur, assume or suffer to exist any Lien or any
other encumbrance of any kind with respect to any of its Property, whether now
owned or hereafter acquired, except for Permitted Liens.
7.5 LIMITATION ON DEBT AND LEASE FINANCINGS. Create, incur, assume
or suffer to exist (i) any Indebtedness for the purpose of financing specific
equipment and software (other than office equipment in an amount not to exceed
$50,000), or (ii) any equipment lease obligations, in aggregate amount in excess
of $3,000,000, provided Borrower may create, incur, assume or suffer to exist
any lease of vehicles (including forklifts, pallet jacks and similar warehouse
vehicles).
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7.6 LIMITATION ON DIVIDENDS. Declare or pay any dividend or make any
other distribution on any of its capital stock now outstanding or hereafter
issued or purchase, redeem or retire any of such stock other than in dividends
or distributions payable in Borrower's capital stock.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay within five (5)
Business Days of when due and payable or when declared due and payable in
accordance with the Loan Documents, any portion of the Obligations.
8.2 CERTAIN COVENANT DEFAULTS. (i) If Borrower fails to perform any
obligation under SECTIONS 6.9, 6.10, 6.11 or 6.12, or violates any of the
covenants contained in SECTION 7 of this Agreement or (ii) if Guarantor violates
any of the covenants contained in Section 11 of the Guaranty or Section 5 of the
Guaranty Security Agreement.
8.3 OTHER COVENANT DEFAULTS. If Borrower or any Guarantor fails or
neglects to perform, keep, or observe any other material term, provision,
condition, covenant, or agreement contained in this Agreement, in any of the
other Loan Documents, or in any other present or future agreement among
Borrower, any Guarantor, Agent and Lenders and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within fifteen (15) Business Days after written
notice by Agent of the occurrence of such default.
8.4 MATERIAL ADVERSE CHANGE. If there occurs a material adverse
change in Borrower's or any Guarantor's business, that could reasonably be
expected to have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement, or the value of the Collateral or
the priority of Agent's security interest therein, or Guarantor's ability to
perform its obligations under the Guaranty.
8.5 ATTACHMENT. If any material portion of Borrower's or any
Guarantor's assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any trustee, receiver or
Person acting in a similar capacity and such attachment, seizure, writ or
distress warrant or levy has not been removed, discharged or rescinded within
ten (10) days, or if Borrower or any Guarantor is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's or any Guarantor's assets,
or if a notice of lien, levy, or assessment is filed of record with respect to
any of Borrower's or any Guarantor's assets by the United States Government, or
any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower or any Guarantor receives notice thereof, provided that none of
the foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contesting by
Borrower.
8.6 OTHER AGREEMENTS. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in excess of $100,000 individually or in the
aggregate.
8.7 JUDGMENTS. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower or any Guarantor and shall
remain unsatisfied and unstayed for a period of thirty (30) days.
8.8 REDEMPTION OR REPURCHASE. ISR shall, after the date of this
Agreement, redeem or repurchase (a) any shares of any class or series of its
preferred stock or (b) without Agent's prior written consent more than One
Hundred Thousand Dollars ($100,000) in the aggregate of common stock, in each
case whether pursuant to a mandatory redemption or otherwise other than a
redemption or repurchase, at cost, of unvested common stock pursuant to
Borrower's stock purchase plan, stock option plan, or similar employee benefit
plan.
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8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty, representation,
statement, or report made to Agent or any Lender by Borrower or any Guarantor or
any officer, employee, agent, or director of Borrower or any Guarantor.
8.10 BREACH OF WARRANT. If ISR shall breach the terms of any Warrant
in favor of any Lender.
8.11 ENFORCEABILITY. If any Loan Document shall in any material
respect cease to be, or Borrower shall assert that any Loan Document is not, a
legal, valid and binding obligation of Borrower or any such Guarantor
enforceable in accordance with its terms.
8.12 INVOLUNTARY BANKRUPTCY OR INSOLVENCY. If a proceeding shall have
been instituted in a court having jurisdiction in the premises seeking a decree
or order for relief in respect of Borrower or any Guarantor in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee (or similar official) of Borrower or any Guarantor or for any
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of forty-five (45) consecutive days or such court shall enter a
decree or order granting the relief sought in such proceeding.
8.13 VOLUNTARY BANKRUPTCY OR INSOLVENCY. If Borrower or any Guarantor
shall commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian (or other similar official) of Borrower or any Guarantor or
for any substantial part of its property, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of the
foregoing.
9. AGENT'S AND LENDERS' RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and continuance of any
Default or Event of Default, neither Agent nor any Lender shall have any further
obligation to advance money or extend credit to or for the benefit of Borrower.
In addition, upon the occurrence and during the continuance of an Event of
Default, Lenders or Agent, on behalf of Lenders, shall have the rights, options,
duties and remedies of a secured party as permitted by law and, in addition to
and without limitation of the foregoing, Lenders may, at the election of
Requisite Lenders, without notice of election and without demand, do any one or
more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, including the
Stipulated Loan Value of the Loan Amount of each Loan, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
SECTION 8.12 or 8.13 all Obligations shall become immediately due and payable
without any action by Agent or any Lender);
(b) Without notice to or demand upon Borrower, make such
payments and do such acts as Agent or Lenders consider necessary or reasonable
to protect Agent's security interest in the Collateral. Borrower agrees to
assemble the Collateral if Agent, on behalf of Lenders, so requires, and to make
the Collateral available to Agent in such a manner as Agent or any or all
Lenders may designate. Borrower authorizes Agent to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Requisite Lenders' determination appears to be prior or
superior to its security interest and to pay all expenses incurred in connection
therewith. With respect to any of Borrower's owned premises, Borrower hereby
grants Agent, on behalf of Lenders, a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Agent's or Lenders' rights or remedies
provided herein, at law, in equity, or otherwise;
(c) Without notice to Borrower, set off and apply to the
Obligations any and all indebtedness at any time owing to or for the credit or
the account of Borrower;
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(d) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Agent, on behalf of Lenders, is hereby granted a license
or other right, solely pursuant to the provisions of this SECTION 9.1, to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any Property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Agent's or Requisite Lenders' exercise of their rights
under this SECTION 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Agent's and Requisite Lenders' benefit;
(e) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Requisite
Lenders determine are commercially reasonable;
(f) Agent or any Lender may credit bid and purchase at any
public sale; and
(g) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 WAIVER BY BORROWER. Upon the occurrence of an Event of Default,
to the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the Property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of this
Agreement, all benefit and advantage of any such law or laws, and covenants that
it will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to Agent or any
Lender, but will suffer and permit the execution of every such power as though
no such power, law or laws had been made or enacted.
9.3 EFFECT OF SALE. Any sale, whether under any power of sale hereby
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
Borrower in and to the Property sold, and shall be a perpetual bar, both at law
and in equity, against Borrower, its successors and assigns, and against any and
all Persons claiming the Property sold or any part thereof under, by or through
Borrower, its successors or assigns.
9.4 POWER OF ATTORNEY IN RESPECT OF THE COLLATERAL. Borrower does
hereby irrevocably appoint Agent, on behalf of Lenders, (which appointment is
coupled with an interest) on the occurrence and continuance of a Default or an
Event of Default, the true and lawful attorney in fact of Borrower with full
power of substitution, for it and in its name: (a) to ask, demand, collect,
receive, receipt for, sue for, compound and give acquittance for any and all
rents, issues, profits, avails, distributions, income, payment draws and other
sums in which a security interest is granted under SECTION 4 with full power to
settle, adjust or compromise any claim thereunder as fully as if Agent were a
Borrower itself, (b) to receive payment of and to endorse the name of Borrower
to any items of Collateral (including checks, drafts and other orders for the
payment of money) that come into Agent's possession or under Agent's control,
(c) to make all demands, consents and waivers, or take any other action with
respect to, the Collateral, (d) in Agent's discretion to file any claim or take
any other action or proceedings, either in its own name or in the name of
Borrower or otherwise, which Agent or Requisite Lenders may reasonably deem
necessary or appropriate to protect and preserve the right, title and interest
of Agent, on behalf of Lenders, in and to the Collateral, or (e) to otherwise
act with respect thereto as though Agent, on behalf of Lenders, were the
outright owner of the Collateral.
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9.5 AGENT'S EXPENSES. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Agent may do any or all of the
following: (a) make payment of the same or any part thereof; or (b) obtain and
maintain insurance policies of the type discussed in SECTION 6.9 of this
Agreement, and take any action with respect to such policies as Agent deems
prudent. Any amounts paid or deposited by Agent shall constitute Agent's
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Agent shall not constitute an agreement by
Agent to make similar payments in the future or a waiver by Agent or any Lender
of any Event of Default under this Agreement.
9.6 REMEDIES CUMULATIVE. Agent's and Lenders' rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Agent and Lenders shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Agent or Lenders of one right or remedy shall be deemed an election,
and no waiver by Agent or Lenders of any Event of Default on Borrower's part
shall be deemed a continuing waiver. No delay by Agent or Lenders shall
constitute a waiver, election, or acquiescence by it.
9.7 APPLICATION OF COLLATERAL PROCEEDS. The proceeds and/or avails
of the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Agent, on
behalf of Lenders, at the time of or received by Agent, on behalf of Lenders,
after, the occurrence of an Event of Default hereunder) shall be paid to and
applied as follows:
(a) First, to the payment of out-of-pocket costs and
expenses, including all amounts expended to preserve the value of the
Collateral, of foreclosure or suit, if any, and of such sale and the exercise of
any other rights or remedies, and of all proper fees, expenses, liability and
advances, including reasonable legal expenses and attorneys' fees, incurred or
made hereunder by Agent or any Lender;
(b) Second, to the payment to Lenders on a pro rata basis as
contemplated by SECTION 2.12 of the amount then owing or unpaid on the Loan for
Scheduled Payments, the Stipulated Loan Value of the Loan Amount, and all other
Obligations with respect to the Loan, and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid upon the
Loan, then to the unpaid interest thereon, then to unpaid principal thereof,
then to the Stipulated Loan Value of the Loan Amount with respect to the Loan,
and then to the payment of other amounts then payable to Agent or any Lender
under any of the Loan Documents; and
(c) Third, to the payment of the surplus, if any, to
Borrower, its successors and assigns, or to whomsoever may be lawfully entitled
to receive the same.
9.8 REINSTATEMENT OF RIGHTS. If Agent or Lenders shall have
proceeded to enforce any right under this Agreement or any other Loan Document
by foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Agent and Lenders shall be restored to their former
position and rights hereunder with respect to the Property subject to the
security interest created under this Agreement.
10. THE AGENT
10.1 APPOINTMENT, POWERS AND IMMUNITIES.
(a) Each Lender hereby appoints Lighthouse as Agent
hereunder and under the other Loan Documents and each Lender hereby irrevocably
authorizes Agent to act hereunder and thereunder as Agent of such Lender. Agent
agrees to act as such upon the express conditions contained in this SECTION 10.
In performing its functions and duties under this Agreement and under the other
Loan Documents, Agent shall act solely as Agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for Borrower.
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<PAGE> 23
(b) Each Lender irrevocably authorizes Agent to take such
action on such Lender's behalf and to exercise such powers hereunder as are
specifically delegated to Agent by the terms hereof, together with such powers
as are reasonably incidental thereto. Agent shall have only those duties which
are specified in this Agreement and it may perform such duties by or through its
agents, representatives or employees. In performing its duties hereunder on
behalf of Lenders, Agent shall exercise the same care which it would exercise in
dealing with loans made for its own account, but it shall not be responsible to
any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of all or any of the Loan
Documents, or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
furnished or delivered in connection herewith or therewith by Agent to any
Lender or by or on behalf of Borrower to Agent or any Lender, or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loan. Agent shall not be responsible for
insuring the Collateral or for the payment of any taxes, assessments, charges or
any other charges or liens of any nature whatsoever upon the Collateral or
otherwise for the maintenance of the Collateral, except in the event Agent
enters into possession of a part or all of the Collateral, in which event Agent
shall preserve the part in its possession. Unless the officers of Agent acting
in their capacity as officers of Agent on Borrower's account have actual
knowledge thereof or have been notified in writing thereof by Lenders, Agent
shall not be required to ascertain or inquire as to the existence or possible
existence of any Event of Default. Neither Agent nor any of its officers,
directors, employees, representatives or agents shall be liable to Lenders for
any action taken or omitted hereunder or under any of the other Loan Documents
or in connection herewith or therewith unless caused by its or their gross
negligence or willful misconduct. No provision of this Agreement or of any other
Loan Document shall be deemed to impose any duty or obligation on Agent to
perform any act or to exercise any power in any jurisdiction in which it shall
be illegal, or shall be deemed to impose any duty or obligation on Agent to
perform any act or exercise any right or power if such performance or exercise
(i) would subject Agent to a tax in a jurisdiction where it is not then subject
to a tax or (ii) would require Agent to qualify to do business in any
jurisdiction where it presently is not so qualified. Without prejudice to the
generality of the foregoing, no Lender shall have any right of action whatsoever
against Agent as a result of Agent acting or (where so instructed) refraining
from acting under this Agreement or under any of the other Loan Documents in
accordance with the instructions of the Requisite Lenders. Agent shall be
entitled to refrain from exercising any power, discretion or authority vested in
it under this Agreement unless and until it has obtained the written
instructions of the Requisite Lenders. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon Agent in its individual capacity.
10.2 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR
INSPECTION. Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Borrower in
connection with the making of the Loan hereunder and has made and shall continue
to make its own appraisal of the creditworthiness of Borrower. Agent shall have
no duty or responsibility either initially or on a continuing basis to make any
such investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information (other than information obtained
under the provisions of this Agreement which Agent shall make available to each
Lender upon request by such Lender) with respect thereto whether coming into its
possession before the date hereof or any time or times thereafter and shall
further have no responsibility with respect to the accuracy of or the
completeness of the information provided to Lenders. With respect to its
participation in the Loan hereunder, Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same rights and powers as
though it were not performing the duties and functions delegated to it hereunder
and the term "Lender" or "Lenders" or any similar term shall unless the context
clearly indicates otherwise include Agent in its individual capacity. Agent and
each of its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with Borrower as if it were not Agent.
10.3 RELIANCE BY AGENT.
(a) Agent may consult with counsel, and any opinion or legal
advice of such counsel who are not employees of Agent or Borrower or any
Affiliate of Borrower shall be full and complete authorization and protection in
respect of any action taken or suffered by Agent hereunder or under any other
Loan Documents in accordance therewith. Agent shall have the right at any time
to seek instructions concerning the administration of the Collateral from any
court of competent jurisdiction.
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<PAGE> 24
(b) Agent may rely, and shall be fully protected in acting,
upon any resolution, statement, certificate, instrument, opinion, report,
notice, request, consent, order, bond or other paper or document that it has no
reason to believe to be other than genuine and to have been signed or presented
by the proper party or parties or, in the case of cables, telecopies and
telexes, to have been sent by the proper party or parties. In the absence of its
gross negligence or willful misconduct, Agent may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to Agent and conforming to the
requirements of this Agreement or any of the other Loan Documents.
(c) Agent shall not be under any obligation to exercise any
of the rights or powers granted to Agent by this Agreement and the other Loan
Documents at the request or direction of Lenders unless Agent shall have been
provided by Lenders adequate security and indemnity against the costs, expenses
and liabilities that may be incurred by it in compliance with such request or
direction.
10.4 DELEGATION OF DUTIES. Agent may execute any of the powers hereof
and perform any duty hereunder either directly or by or through agents or
attorneys-in-fact. Agent shall be entitled to advice of counsel concerning all
matters pertaining to such powers and duties. Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
without gross negligence or willful misconduct on the part of Agent.
10.5 RIGHT TO INDEMNITY. Each of Lenders severally, but not jointly,
agrees (a) to indemnify and hold Agent (and any Person acting on behalf of
Agent) harmless from and against and (b) promptly on receipt by each Lender of
Agent's statement, to reimburse Agent, according to such Lender's Commitment
Percentage of the Loan Commitment, to the extent Agent shall not otherwise have
been reimbursed by Borrower on account of and for, any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, the fees and disbursements of counsel
and other advisors) or disbursements of any kind of nature whatsoever with
respect to Agent's performance of its duties under this Agreement and the other
Loan Documents; provided, however, that no Lender shall be liable for the
payment to Agent of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's gross negligence or willful misconduct. Such
reimbursement shall not in any respect release Borrower from any liability or
obligation. If any indemnity furnished to Agent for any purpose shall, in the
opinion of Agent, be insufficient or become impaired, Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. Agent's right to
indemnification shall survive termination of this Agreement.
10.6 RESIGNATION AND APPOINTMENT OF SUCCESSOR AGENT. Agent may resign
at any time by giving thirty (30) days' prior written notice thereof to Lenders
and Borrower; provided, however, that the retiring Agent shall continue to serve
until a successor Agent shall have been selected and approved pursuant to this
SECTION 10.6. Upon any such notice, Agent shall have the right to appoint,
subject to the consent of Requisite Lenders, a successor Agent; provided,
however, that if such successor shall not be a signatory to this Agreement, such
appointment shall be subject to the consent of Borrower unless an Event of
Default has occurred and is continuing. At any time other than during the
existence of an Event of Default, in each case, such appointment shall be
subject to the prior consent of Borrower. Upon the acceptance of any appointment
as an Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement. Without limitation of the
foregoing, if Agent becomes insolvent or commits any act or omission
constituting gross negligence or willful misconduct of its duties as Agent
hereunder, then the Requisite Lenders shall have the right to replace the Agent.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this SECTION 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
10.7 CONFLICTS. Lighthouse and its affiliates may accept deposits
from, lend money to, act as trustee under indentures of, act as merchant banker
in any transaction for, and generally engage in any kind of business with,
Borrower and any Person who may do business with or own securities of Borrower,
all as if Lighthouse were not Agent and without any duty to account therefor to
Lenders or to disclose to Lenders confidential information which Lighthouse may
receive from Borrower in connection with such other activity or business.
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<PAGE> 25
10.8 NO OBLIGATIONS OF BORROWER. Nothing contained in this SECTION 10
shall be deemed to impose upon Borrower any obligation in respect of the due and
punctual performance by Agent of its obligations to Lenders under any provision
of this Agreement, and Borrower shall have no liability to Agent or any Lender
in respect of any failure by Agent or any Lender to perform any of their
respective obligations to each other under this Agreement. Without limiting the
generality of the foregoing sentence, where any provision of this Agreement
relating to the payment of any amounts due and owing under the Loan Documents
provides that such payments shall be made by Borrower to Agent for the account
of Lenders, Borrower's obligations to Lenders in respect of such payments shall
be deemed to be satisfied upon the making of such payments to Agent in the
manner provided by this Agreement.
11. WAIVERS; INDEMNIFICATION
11.1 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Agent or any Lender on which Borrower may in any
way be liable.
11.2 AGENT'S LIABILITY FOR COLLATERAL. So long as Agent complies with
its obligations, if any, under Section 9207 of the Code, Agent shall not in any
way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
11.3 INDEMNIFICATION. Whether or not the transactions contemplated
hereby shall be consummated:
(a) GENERAL INDEMNITY. Borrower shall pay, indemnify, and
hold Agent and Lenders and each of their respective officers, directors,
employees, counsel, partners, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, reasonable expenses or reasonable disbursements (including Agent's
Expenses and reasonable attorney's fees and the allocated cost of in-house
counsel) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents, or the transactions contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any case,
action or proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loan. or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person.
(b) SURVIVAL; DEFENSE. The obligations in this SECTION 11.3
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal
counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of Borrower. All amounts owing under
this SECTION 11.3 shall be paid within thirty (30) days after written demand.
12. NOTICE
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by certified mail, postage
prepaid, return receipt requested, or by prepaid facsimile to Borrower or to
Agent, as the case may be, at their respective addresses set forth below:
If to Borrower: WebVan-Bay Area, Inc.
1241 E. Hillsdale Boulevard, Suite 210
Foster City, California 94404
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Attention: Chief Financial Officer
Fax: (650) 524-4801
If to Agent: Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
Fax: (415) 925-3387
If to Lockbox Account: Lighthouse Capital Partners II, L.P.
P.O. Box [TBD]
San Francisco, California _____ - ____
If to any Lender, at its address specified on the signature pages hereto or at
any other address specified by such Lender.
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
13. GENERAL PROVISIONS
13.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Agent's and Requisite Lenders' prior written
consent, which consent may be granted or withheld in Agent's and Requisite
Lenders' sole discretion. Agent and any Lender shall have the right with the
prior written consent of Agent but without the consent of or notice to Borrower
to sell, transfer, negotiate, or grant participations in all or any part of, or
any interest in Agent's or such Lender's rights and benefits hereunder.
13.2 TIME OF ESSENCE. Time is of the essence for the performance of
all obligations set forth in this Agreement.
13.3 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
13.4 ENTIRE AGREEMENT; CONSTRUCTION; AMENDMENTS AND WAIVERS.
(a) This Agreement and each of the other Loan Documents
dated as of the date hereof, taken together, constitute and contain the entire
agreement between Borrower, Agent, and Lenders and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof.
(b) This Agreement is the result of negotiations between and
has been reviewed by each of Borrower, Agent, and each Lender executing this
Agreement as of the date hereof and their respective counsel; accordingly, this
Agreement shall be deemed to be the product of the parties hereto, and no
ambiguity shall be construed in favor of or against Borrower, Agent, or any
Lender. Borrower, Agent and Lenders agree that they intend the literal words of
this Agreement and the other Loan Documents and that no parol evidence shall be
necessary or appropriate to establish Borrower's, Agent's or such Lender's
actual intentions.
(c) Any and all amendments, modifications, discharges or
waivers of, or consents to any departures from any provision of this Agreement
or of any of the other Loan Documents shall not be effective without the written
consent of Agent and Requisite Lenders. Any waiver or consent with respect to
any provision of the Loan Documents shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or
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demand in similar or other circumstances. Any amendment, modification, waiver or
consent effected in accordance with this SECTION 13.4 shall be binding upon
Agent, Lenders and on Borrower. Notwithstanding the foregoing, no such
amendment, modification, discharge, waiver, or consent shall, unless in writing
and signed by all Lenders, Borrower and acknowledged by Agent, do any of the
following:
(i) increase or extend the Commitment of any Lender
or subject any Lender to any additional monetary obligations;
(ii) postpone or delay any date fixed for any payment
of principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any Loan Document;
(iii) reduce the principal of, or the rate of interest
specified herein on the Loan, or of any fees or other amounts payable hereunder
or under any Loan Document;
(iv) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Loan which shall be required for
Lenders or any of them to take any action hereunder, except as specifically
contemplated by SECTION 2.10;
(v) amend this SECTION 13.4 or SECTION 2.12 (sharing
of payments); or
(vi) release any material portion of the Collateral
except as otherwise may be provided herein or except where the consent of the
Requisite Lenders only is specifically provided for;
and, provided further, that no amendment, modification, discharge, waiver or
consent shall, unless in writing and signed by Agent in addition to the
Requisite Lenders or all Lenders, as the case may be, affect the rights or
duties of Agent under this Agreement or any other Loan Document. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
13.5 RELIANCE BY AGENT AND LENDERS. All covenants, agreements,
representations and warranties made herein by Borrower shall, notwithstanding
any investigation by Agent or any Lender, be deemed to be material to and to
have been relied upon by Agent or such Lender.
13.6 NO SET-OFFS BY BORROWER. All sums payable by Borrower pursuant
to this Agreement or any of the other Loan Documents shall be payable without
notice or demand and shall be payable in United States Dollars without set-off
or reduction of any manner whatsoever.
13.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
13.8 SURVIVAL. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Agent
and Lenders with respect to the expenses, damages, losses, costs and liabilities
described in SECTION 11.3 shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Agent
and Lenders have run.
13.9 CONFIDENTIALITY. Neither Agent nor any Lender will issue any
press release or distribute any external marketing materials referring to the
Borrower without: (a) submitting such materials to the Borrower for review; and
(b) obtaining the prior written consent of the Borrower, which consent may be
given or withheld in Borrower's sole discretion. Borrower will not issue any
press release nor distribute any external marketing materials referring to the
Agent and/or any Lender without (a) submitting such materials to the Agent
and/or the Lender(s), as applicable, and (b) obtaining the prior written consent
of the Agent and/or the Lender(s), as applicable, which consent may be given or
withheld at the Agent's and/or the applicable Lender's sole discretion.
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Neither Agent nor any Lender will make any communication to any third party
referring to the Borrower, except that the Agent or any Lender may disclose any
such information (a) to its lenders, its own directors, officers, employees,
auditors, counsel, and other professional advisors and to its affiliates if it,
in its sole discretion, determines that any such party should have access to
such information; (b) if such information is generally available to the public;
(c) if required or appropriate in any report, statement or testimony submitted
to any governmental authority; (d) if required or appropriate in response to any
summons or subpoena or in connection with any litigation, to the extent
permitted or deemed advisable by counsel; (e) to comply with any requirement or
law; (f) to the extent necessary in connection with the exercise of any right or
remedy under any Loan Document; (g) to any participant or assignee of any Lender
or any prospective participant or assignee; (h) to any successor Agent or
prospective successor Agent; or (i) otherwise with the prior consent of
Borrower, which consent shall not be unreasonably withheld, provided, however,
that any disclosure made in violation hereof shall not affect the obligations of
Borrower and Guarantor under any Loan Document.
Borrower will not make any communication to any third party referring to the
Agent and/or any Lender, except that the Borrower may disclose any such
information (a) to its lenders, its own directors, officers, employees,
auditors, counsel, and other professional advisors and to its affiliates if
Borrower, in its sole discretion, determines that any such party should have
access to such information; (b) if such information is generally available to
the public; (c) if required or appropriate in any report, statement or testimony
submitted to any governmental authority; (d) if required or appropriate in
response to any summons or subpoena or in connection with any litigation, to the
extent permitted or deemed advisable by counsel; (e) to comply with any
requirement or law; (f) to the extent necessary in connection with the exercise
of any right or remedy under any Loan Document; (g) to any permitted assignee of
Borrower or any prospective permitted assignee; or (h) otherwise with the prior
consent of the Agent and/or the Lenders(s), as applicable, which consent shall
not be unreasonably withheld.
14. RELATIONSHIP OF PARTIES. Borrower, Agent and Lenders acknowledge,
understand and agree that the relationship between the Borrower, the Agent, and
each Lender, is, and at all time shall remain solely that of a borrower, agent
and a lender. Neither Agent nor any Lender shall under any circumstances be
construed to be a partner or joint venturer of Borrower or any of its
Affiliates; nor shall the Agent or any Lender under any circumstances be deemed
to be in a relationship of confidence or trust or a fiduciary relationship with
Borrower or any of its Affiliates, or to owe any fiduciary duty to Borrower or
any of its Affiliates. Neither Agent nor any Lender undertakes or assumes any
responsibility or duty to Borrower or any of its Affiliates to select, review,
inspect, supervise, pass judgment upon or otherwise inform the Borrower or any
of its Affiliates of any matter in connection with its or their Property, any
Collateral held by Agent, on behalf of Lenders, or the operations of Borrower or
any of its Affiliates. Borrower and each of its Affiliates shall rely entirely
on their own judgment with respect to such matters, and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or assumed
by Agent or any Lender in connection with such matters is solely for the
protection of Agent or such Lender and neither Borrower nor any Affiliate is
entitled to rely thereon.
15. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF BORROWER,
AGENT AND LENDERS HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA.
BORROWER, AGENT, AND LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BORROWER: AGENT:
WEBVAN-BAY AREA, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /s/ LOUIS H. BORDERS By: LIGHTHOUSE MANAGEMENT PARTNERS II,
--------------------------------- L.P., its general partner
Name: Louis H. Borders
------------------------------- By: LIGHTHOUSE CAPITAL PARTNERS,
Title: Chief Executive Officer INC., its general partner
------------------------------
By: /s/ GWILL E. YORK
--------------------------------
Name: Gwill E. York
------------------------------
Title: Managing Director
-----------------------------
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER 18, 1998
(ADDITIONAL SIGNATURE PAGES FOLLOW)
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<PAGE> 30
LENDERS:
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS II,
L.P., its general partner
By: LIGHTHOUSE CAPITAL PARTNERS,
INC., its general partner
By: /s/ GWILL E. YORK
--------------------------------
Name: Gwill E. York
------------------------------
Title: Managing Director
-----------------------------
Address for Notices:
Lighthouse Capital Partners II,
L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
Fax: (415) 925-3387
VENTURE LENDING & LEASING, INC.
By: /s/ SALVADOR O. GUTIERREZ
-------------------------------------
Name: Salvador O. Gutierrez
-----------------------------------
Title: President
----------------------------------
VENTURE LENDING & LEASING II, INC.
By: /s/ SALVADOR O. GUTIERREZ
-------------------------------------
Name: Salvador O. Gutierrez
-----------------------------------
Title: President
----------------------------------
Address for Notices:
Western Technology Investments
2010 North First Street, Suite 310
San Jose, CA 95131
Attention: Salvador O. Gutierrez
Fax: (408) 436-8625
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER 18, 1998
(ADDITIONAL SIGNATURE PAGES FOLLOW)
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<PAGE> 31
DOMINION VENTURES INC.
By: /s/ MICHAEL K. LEE
-------------------------------------
Name: Michael K. Lee
-----------------------------------
Title: Partner
----------------------------------
Address for Notices:
3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
Attention: Renee C. Baker
Fax: (650) 854-1957
MMC/GATX PARTNERSHIP NO. I
By: MEIER MITCHELL & COMPANY, as
General Partner
By: /s/ JAMES V. MITCHELL
-------------------------------------
Name: James V. Mitchell
-----------------------------------
Title: Secretary
----------------------------------
Address for Notices:
MMC/GATX Partnership No. I
C/o GATX Capital Corporation
Four Embarcadero Center, Suite
2200
San Francisco, CA 94111
Attention: Contract
Administration
Fax: (415) 955-3288
and
MMC/GATX Partnership No. I
C/o Meier Mitchell & Company
4 Orinda Way, Suite 200B
Orinda, CA 94563
Fax (925) 254-9528
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER 18, 1998
(ADDITIONAL SIGNATURE PAGES FOLLOW)
31
<PAGE> 32
IMPERIAL BANK
By: /s/ JAMES BYRON
-------------------------------------
Name: James Byron
-----------------------------------
Title: Assistant Vice President
----------------------------------
Address for Notices:
2460 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Attention: James Byron
Fax: (650) 233-3020
Exhibit A - Collateral
Exhibit B - Form of Warrant
Exhibit C - Form of Landlord Consent
Exhibit D - Form of Loan Agreement Supplement
Exhibit E - Form of Guaranty
Exhibit F - Form of Borrowing Request
Exhibit G - Intellectual Property Security Agreement
Exhibit H - Form of Opinion of Counsel
Exhibit I - Promissory Note
Exhibit J - Guaranty Security Agreement
Schedule 1 - Commitments
Schedule 2 - Existing Liens
Schedule 3 - Subsidiaries
Schedule 4 - Equipment Locations
Schedule 5 - Investments
SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER 18, 1998
32
<PAGE> 33
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT NO. 20701
("Amendment") is made and entered into as of December 21, 1998, by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P., in its individual capacity ("Lighthouse"),
as lender, each other lender whose name is set forth on the signature pages
hereof (collectively, the "Lenders"), Lighthouse, as agent on behalf of the
Lenders (not in its individual capacity but solely as agent, "Agent"), and
WEBVAN-BAY AREA, INC., a California corporation ("Borrower").
RECITALS OF FACT
A. Borrower, the Lenders and the Agent have entered into that
certain Loan and Security Agreement No. 20701, dated as of November 18, 1998 (as
amended or supplemented from time to time, the "Loan Agreement" and collectively
with the other documents executed in connection therewith, the "Loan
Documents"). All capitalized terms not otherwise defined herein shall have the
meanings given to such terms in the Loan Agreement.
B. Borrower, the Lenders and the Agent desire to amend the Loan
Agreement to provide for the addition of certain account and address
information.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants herein set forth, and intending to be legally bound, the
parties hereto hereby amend the Loan Documents as follows:
1. AMENDMENTS TO LOAN AGREEMENT. The following amendments are
hereby made to the Loan Agreement:
A. The following definitions are amended and restated in
their entirety:
"Lockbox Account" means that certain deposit account with
Imperial Bank, account number 20-006-250, in the name of Agent.
B. SECTION 12 is amended as set forth below:
If to Lockbox Account: Lighthouse Capital Partners II, L.P.
P.O. Box 7491
San Francisco, California 94120-7491
2. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
that its representations and warranties in the Loan Documents continue to be
true and complete in all material respects as of the date hereof after giving
effect to this Amendment and that the execution, delivery and performance of
this Amendment are duly authorized, do not require the consent or approval of
any governmental body or regulatory authority and are not in contravention of or
in conflict with any law or regulation or any term or provision of any other
agreement entered into by Borrower.
3. FULL FORCE AND EFFECT; ENTIRE AGREEMENT. Except to the extent
expressly provided in this Amendment, the terms and conditions of the Loan
Agreement and the other Loan Documents shall remain in full force and effect.
This Amendment and the other Loan Documents constitute and contain the entire
agreement of the parties hereto and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof. The
parties hereto further agree that the Loan Documents, including this Amendment,
comprise the entire agreement of the parties thereto and supersede any and all
prior agreements, negotiations, correspondence, understandings and other
communications between the parties thereto, whether written or oral respecting
the extension of credit by Lender to Borrower and/or its affiliates.
1
<PAGE> 34
4. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
counterparts, each of which when so executed shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
This Amendment shall be deemed effective upon the execution of a counterpart
hereof by each of Borrower and Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
BORROWER: AGENT:
WEBVAN-BAY AREA, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /S/ LOUIS H. BORDERS By: LIGHTHOUSE MANAGEMENT PARTNERS II,
---------------------------------- L.P., its general partner
Name: Louis H. Borders
-------------------------------- By: LIGHTHOUSE CAPITAL PARTNERS,
Title: Chief Executive Officer INC., its general partner
-------------------------------
By: /S/ RICHARD D. STUBBLEFIELD
--------------------------------
Name: Richard D. Stubblefield
------------------------------
Title: Managing Director
-----------------------------
2
<PAGE> 35
LENDERS:
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS II,
L.P., its general partner
By: LIGHTHOUSE CAPITAL PARTNERS, INC.,
its general partner
By: /S/ RICHARD D. STUBBLEFIELD
----------------------------------------
Name: Richard D. Stubblefield
--------------------------------------
Title: Managing Director
-------------------------------------
Address for Notices:
Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
Fax: (415) 925-3387
VENTURE LENDING & LEASING, INC.
By: /S/ SALVADOR O. GUTIERREZ
---------------------------------------------
Name: Salvador O. Gutierrez
-------------------------------------------
Title: President
------------------------------------------
VENTURE LENDING & LEASING II, INC.
By: /S/ SALVADOR O. GUTIERREZ
---------------------------------------------
Name: Salvador O. Gutierrez
-------------------------------------------
Title: President
------------------------------------------
Address for Notices:
Western Technology Investments
2010 North First Street, Suite 310
San Jose, CA 95131
Attention: Salvador O. Gutierrez
Fax: (408) 436-8625
SIGNATURE PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER
18, 1998 (ADDITIONAL SIGNATURE PAGES FOLLOW)
3
<PAGE> 36
DOMINION VENTURES, INC.
By: /S/ MICHAEL K. LEE
---------------------------------------------
Name: Michael K. Lee
-------------------------------------------
Title: Partner
------------------------------------------
Address for Notices:
3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
Attention: Renee C. Baker
Fax: (650) 854-1957
MMC/GATX PARTNERSHIP NO. I
By: MEIER MITCHELL & COMPANY, as General
Partner
By: /S/ JAMES V. MITCHELL
----------------------------------------
Name: James V. Mitchell
--------------------------------------
Title: Secretary
-------------------------------------
Address for Notices:
MMC/GATX Partnership No. I
C/o GATX Capital Corporation
Four Embarcadero Center, Suite 2200
San Francisco, CA 94111
Attention: Contract Administration
Fax: (415) 955-3288
and
MMC/GATX Partnership No. I
C/o Meier Mitchell & Company
4 Orinda Way, Suite 200B
Orinda, CA 94563
Fax (925) 254-9528
SIGNATURE PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER
18, 1998 (ADDITIONAL SIGNATURE PAGES FOLLOW)
4
<PAGE> 37
IMPERIAL BANK
By: /S/ JAMES BYRON
---------------------------------------------
Name: James Byron
-------------------------------------------
Title: Assistant Vice President
------------------------------------------
Address for Notices:
2460 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Attention: James Byron
Fax: (650) 233-3020
SIGNATURE PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER
18, 1998
5
<PAGE> 38
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT NO. 20701
("Amendment") is made and entered into as of April 22, 1999, by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P., in its individual capacity ("Lighthouse"),
as lender, each other lender whose name is set forth on the signature pages
hereof (collectively, the "Lenders"), Lighthouse, as agent on behalf of the
Lenders (not in its individual capacity but solely as agent, "Agent"), and
WEBVAN-BAY AREA, INC., a California corporation ("Borrower").
RECITALS OF FACT
A. Borrower, the Lenders and the Agent have entered into that
certain Loan and Security Agreement No. 20701, dated as of November 18, 1998 (as
amended or supplemented from time to time, the "Loan Agreement" and collectively
with the other documents executed in connection therewith, the "Loan
Documents"). All capitalized terms not otherwise defined herein shall have the
meanings given to such terms in the Loan Agreement.
B. Borrower, the Lenders and the Agent desire to amend the Loan
Agreement to provide for the modification of certain address information.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants herein set forth, and intending to be legally bound, the
parties hereto hereby amend the Loan Documents as follows:
1. AMENDMENTS TO LOAN AGREEMENT. The following amendments are
hereby made to the Loan Agreement:
A. SECTION 12 is amended as set forth below:
If to Lockbox Account: Imperial Bank
San Francisco Central Operations
185 Berry Street, Suite 190
San Francisco, California 94107-1729
Attn.: Marc Gibson, Vice President
2. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
that its representations and warranties in the Loan Documents continue to be
true and complete in all material respects as of the date hereof after giving
effect to this Amendment and that the execution, delivery and performance of
this Amendment are duly authorized, do not require the consent or approval of
any governmental body or regulatory authority and are not in contravention of or
in conflict with any law or regulation or any term or provision of any other
agreement entered into by Borrower.
3. FULL FORCE AND EFFECT; ENTIRE AGREEMENT. Except to the extent
expressly provided in this Amendment, the terms and conditions of the Loan
Agreement and the other Loan Documents shall remain in full force and effect.
This Amendment and the other Loan Documents constitute and contain the entire
agreement of the parties hereto and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof. The
parties hereto further agree that the Loan Documents, including this Amendment,
comprise the entire agreement of the parties thereto and supersede any and all
prior agreements, negotiations, correspondence, understandings and other
communications between the parties thereto, whether written or oral respecting
the extension of credit by Lender to Borrower and/or its affiliates.
4. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
counterparts, each of which when so executed shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
This Amendment shall be deemed effective upon the execution of a counterpart
hereof by each of Borrower and Lender.
1
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
BORROWER: AGENT:
WEBVAN-BAY AREA, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /S/ LOUIS H. BORDERS By: LIGHTHOUSE MANAGEMENT PARTNERS II,
---------------------------------- L.P., its general partner
Name: Louis H. Borders
-------------------------------- By: LIGHTHOUSE CAPITAL PARTNERS,
Title: Chief Executive Officer INC., its general partner
------------------------------- By: /S/ THOMAS CONNEELY
-------------------------------------
Name: Thomas Conneely
-----------------------------------
Title: Vice President
----------------------------------
SIGNATURE PAGE FOLLOWS
2
<PAGE> 40
LENDERS:
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS II, L.P., its general partner
By: LIGHTHOUSE CAPITAL PARTNERS, INC., its general partner
By: /S/ RICHARD D. STUBBLEFIELD
---------------------------------
Name: Richard D. Stubblefield
-------------------------------
Title: Managing Director
------------------------------
VENTURE LENDING & LEASING, INC. VENTURE LENDING & LEASING II, INC.
By: /S/ SALVADOR O. GUTIERREZ By: /S/ SALVADOR O. GUTIERREZ
---------------------------------- -------------------------------------
Name: Salvador O. Gutierrez Name: Salvador O. Gutierrez
-------------------------------- -----------------------------------
Title: President Title: President
------------------------------- ----------------------------------
DOMINION VENTURES, INC. IMPERIAL BANK
By: /S/ MICHAEL K. LEE By: /S/ JAMES BYRON
---------------------------------- -------------------------------------
Name: Michael K. Lee Name: James Byron
-------------------------------- -----------------------------------
Title: Partner Title: Assistant Vice President
------------------------------- ----------------------------------
MMC/GATX PARTNERSHIP NO. I
By: MEIER MITCHELL & COMPANY, as General Partner
By: /S/ JAMES V. MITCHELL
--------------------------------------
Name: James V. Mitchell
------------------------------------
Title: Secretary
-----------------------------------
SIGNATURE PAGE TO SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT DATED NOVEMBER
18, 1998
3
<PAGE> 41
EXHIBIT E
GUARANTY
This continuing GUARANTY ("Guaranty") is entered into as of November 18,
1998, by INTELLIGENT SYSTEMS FOR RETAIL, INC., a California corporation
("Guarantor"), in favor of the lenders listed on the signature pages hereto (the
"Lenders") and LIGHTHOUSE CAPITAL PARTNERS II, L.P., a Delaware limited
partnership, as Agent ("Agent").
RECITALS
A. Concurrently herewith, WEBVAN-BAY AREA, INC., a California
corporation ("Borrower"), the Lenders and Agent are entering into that certain
Loan and Security Agreement No. 20701 dated as of November 18, 1998 (the "Loan
Agreement"), pursuant to which the Lenders have agreed to make certain advances
of money and to extend certain financial accommodations to Borrower
(collectively, the "Loans"), subject to the terms and conditions set forth
therein.
B. In consideration of the agreement of the Lenders to make the
Loans to Borrower under the Loan Agreement, Guarantor is willing to guaranty the
full payment and performance by Borrower of all of its obligations thereunder
and under the other Loan Documents, all as further set forth herein.
C. Guarantor is the sole owner of Borrower's stock.
D. Guarantor will obtain substantial direct and indirect benefit
from the Loans made by Lenders to the Borrower under the Loan Agreement.
NOW, THEREFORE, in order to induce the Lenders and Agent to execute the
Loan Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
Guarantor hereby represents, warrants, covenants and agrees as follows:
1. DEFINITIONS. All capitalized terms used but not defined herein
shall have the meanings given to them in the Loan Agreement.
2. GUARANTY.
2.1 UNCONDITIONAL GUARANTY OF PAYMENT. In consideration of
the foregoing, Guarantor hereby irrevocably, absolutely and unconditionally
guarantees to Lenders and Agent the prompt and complete payment when due
(whether at stated maturity or by acceleration) of all indebtedness of Borrower
to Lenders and Agent, or any of them, created under the Loan Agreement and the
other Loan Documents (all such indebtedness being the "Liabilities"), together
with the prompt payment of all reasonable expenses, including, without
limitation, reasonable attorneys' fees, and costs incurred incidental to the
collection of the Liabilities and the enforcement or protection of Agent's
security interest in the Collateral. The term "indebtedness" is used herein in
its most comprehensive sense and includes any and all advances, debts,
obligations and liabilities heretofore, now or hereafter made, incurred or
created, whether voluntary or involuntary and whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, and
whether recovery upon such indebtedness may be or hereafter become
unenforceable. (The Liabilities and all other obligations and covenants to be
performed by Guarantor under this Guaranty shall hereinafter be collectively
referred to as the "Guaranty Obligations.")
2.2 EXPENSES. Guarantor agrees to pay all reasonable
expenses, including, without limitation, reasonable attorney's fees, and costs
incurred in connection with the enforcement of Lenders' and Agent's rights under
this Guaranty.
1
<PAGE> 42
2.3 JOINT AND SEVERAL LIABILITY. If any other Person in
addition to Guarantor shall guarantee the payment of all or any part of the
Liabilities, all guarantors and their respective successors and assigns shall be
jointly and severally bound by the terms of this Guaranty and any other guaranty
of the Liabilities, notwithstanding any relationship or contract of
co-obligation by or among such guarantors. Agent's enforcement of the Guaranty
Obligations is not conditioned upon Lenders' or Agent's obtaining from any other
person a guaranty of all or any part of the Liabilities.
2.4 SEPARATE OBLIGATIONS. The Guaranty Obligations of
Guarantor arising hereunder are independent of and separate from any and all
obligations of Borrower to Agent or Lenders arising under the Loan Agreement and
the other Loan Documents.
3. PAYMENTS. All payments to be made by Guarantor hereunder shall
be made in lawful money of the United States of America, in immediately
available funds, addressed to Lighthouse Capital Partners II, L.P., as Agent, at
100 Drake's Landing Road, Suite 260, Greenbrae, California 94904-3121,
Attention: Contract Administrator (or such other address as Agent may hereafter
specify to the Guarantor) before 1:00 p.m., Pacific Time, on the date due and
shall be accompanied by a notice from Guarantor stating that such payments are
made under this Guaranty.
4. REPRESENTATIONS AND WARRANTIES.
Guarantor hereby represents and warrants to Agent and each
Lender that:
4.1 DUE ORGANIZATION AND QUALIFICATION. Guarantor is a
corporation duly existing and in good standing under the laws of its state of
incorporation and is qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified, except for such states as to which
any failure so to qualify would not reasonably be expected to have a material
adverse effect on Guarantor's ability to perform its obligations under this
Guaranty.
4.2 AUTHORITY. Guarantor has all necessary power and
authority to execute, deliver, and perform in accordance with the terms thereof,
this Guaranty. Guarantor has all requisite power and authority to own and
operate its properties and to carry on its businesses as now conducted.
4.3 SUBSIDIARIES. Guarantor has no subsidiaries, except
WebVan - Bay Area, Inc.
4.4 CONFLICT WITH OTHER INSTRUMENTS, ETC. Neither the
execution and delivery of this Guaranty nor the consummation of the transactions
therein contemplated nor compliance with the terms, conditions and provisions
thereof will conflict with or result in a breach of (i) any of the terms,
conditions or provisions of the articles of incorporation and the by-laws, or
other organizational documents of Guarantor or (ii) any law or any regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or (iii) any material agreement or instrument to which Guarantor is a party or
by which it or any of its properties is bound or to which it or any of its
properties is subject, or constitute a default thereunder, except to the extent
that such conflict, breach or default could not reasonably be expected to have a
material adverse effect on the ability of the Guarantor to perform its
obligations under this Guaranty.
4.5 AUTHORIZATION; ENFORCEABILITY. The execution and
delivery of this Guaranty and the consummation of the transactions herein
contemplated have each been duly authorized by all necessary action on the part
of Guarantor. This Guaranty has been duly executed and delivered and constitutes
a legal, valid and binding obligation of Guarantor, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights or by general principles of
equity.
4.6 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE, PRINCIPAL
PLACE OF BUSINESS. Guarantor has not done business under any name other than
that specified on the signature page hereof. The chief executive office,
principal place of business, and the place where Guarantor maintains its records
are presently located at the address set forth in Section 17.
2
<PAGE> 43
4.7 LITIGATION. There are no actions or proceedings pending
by or against Guarantor before any court or administrative agency in which an
adverse decision could have a material adverse effect on Guarantor. Guarantor
does not have knowledge of any such pending or threatened actions or
proceedings. Guarantor will promptly notify Agent in writing if any action,
proceeding or governmental investigation involving Guarantor is commenced that
may result in damages or costs to Guarantor of Fifty Thousand Dollars ($50,000)
or more.
4.8 FINANCIAL STATEMENTS. All financial statements relating
to Guarantor or any affiliate that have been or may hereafter be delivered by
Guarantor to Agent or any Lender present fairly in all material respects
Guarantor's financial condition as of the date thereof and Guarantor's results
of operations for the period then ended.
4.9 SOLVENCY. Guarantor is solvent and able to pay its debts
(including trade debts) as they mature.
4.10 TAXES. Guarantor has filed or caused to be filed all tax
returns required to be filed, and has paid, or has made adequate provision for
the payment of, all taxes that are due and payable.
4.11 CONSENTS AND APPROVALS. No approval, authorization or
consent of any trustee or holder of any indebtedness or obligation of Guarantor
or of any other Person under any such material agreement, contract, lease or
license or similar document or instrument to which Guarantor is a party or by
which Guarantor is bound, is required to be obtained by Guarantor in order to
make or consummate the transactions contemplated herein. All consents and
approvals of, filings and registrations with, and other actions in respect of,
all governmental authorities required to be obtained by Guarantor in order to
make or consummate the transactions contemplated herein have been, or prior to
the time when required will have been, obtained, given, filed or taken and are
or will be in full force and effect.
4.12 TRADEMARKS, PATENTS, COPYRIGHTS, FRANCHISES AND
LICENSES. Guarantor possesses and owns all necessary trademarks, trade names,
copyrights, patents, patent rights, franchises and licenses which are material
to the conduct of its business as now operated.
4.13 MATERIAL CONTRACTS. Guarantor has disclosed to Agent and
Lenders in writing all currently effective material contracts and agreements
(whether written or oral) to which Guarantor is a party. There are no material
defaults under any such contract or agreement by Guarantor that could reasonably
be expected to have a material adverse effect on the ability of the Guarantor to
perform its obligations under this Guaranty. Guarantor has delivered to Agent
true and correct copies of all such contracts or agreements (or, with respect to
oral contracts or agreements, written descriptions of the material terms
thereof).
4.14 FULL DISCLOSURE. No representation, warranty or other
statement made by Guarantor in this Guaranty, certificate or written statement
furnished to Agent or any Lender contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained in such certificates or statements not misleading.
4.15 Guarantor covenants, warrants, and represents to Lenders
and Agent that all representations and warranties contained in this Guaranty
shall be true at the time of Guarantor's execution of this Guaranty, and shall
continue to be true in all material respects until the Guaranty Obligations have
been paid and performed in full.
5. CONSENTS.
Guarantor hereby consents that any or all of the following actions may
be taken or things done without notice to Guarantor and without affecting the
liability of Guarantor under this Guaranty:
5.1 The time for Borrower's performance of or compliance
with any of the Liabilities may be accelerated or extended or such performance
or compliance may be waived by Agent or Lenders
3
<PAGE> 44
(including, without limitation, the renewal, extension, acceleration or other
change in the time of payment, or other terms of, the Liabilities, such as an
increase or decrease in the rate of interest thereon);
5.2 The terms of any of the Liabilities or any term or
condition contained in any of the Loan Documents may be amended as provided for
therein for the purpose of adding any provisions thereto or changing in any
manner the rights or obligations of Agent, Lenders or Borrower thereunder;
5.3 Any collateral for all or any part of the Liabilities
may be exchanged, surrendered or otherwise dealt with, and Agent's interests
thereunder may be released and may or may not be perfected, all as Agent in its
sole discretion may determine; and
5.4 Agent may apply any collateral for the Liabilities and
direct the order or manner of sale thereof, including, without limitation, a
nonjudicial sale, as Agent may in its sole discretion determine, all without
affecting the liability of Guarantor hereunder.
6. ABSOLUTE GUARANTY. Guarantor agrees that the liability hereunder
shall be the immediate, direct, and primary obligation of Guarantor and shall
not be contingent upon Lenders' or Agent's exercise or enforcement of any remedy
they may have against Borrower or any other Person, or against the Collateral or
any security for the Guaranty Obligations. Without limiting the generality of
the foregoing, the Guaranty Obligations shall remain in full force and effect
without regard to and shall not be impaired or affected by, nor shall Guarantor
be exonerated or discharged by, any of the following events:
6.1 Insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition, assignment for the benefit of creditors, liquidation,
winding up or dissolution of Borrower, Guarantor or any other guarantor of the
Liabilities;
6.2 Any limitation, discharge, or cessation of the liability
of Borrower, Guarantor or any other guarantor for the Liabilities due to any
statute, regulation or rule of law, or any invalidity or unenforceability in
whole or in part of the documents evidencing the Liabilities or any other
guaranty of the Liabilities;
6.3 Any merger, acquisition, consolidation or change in
structure of Borrower, Guarantor or any other guarantor of the Liabilities or
any sale, lease, transfer or other disposition of any or all of the assets or
shares of Borrower, Guarantor or any other guarantor of the Liabilities;
6.4 Any assignment or other transfer, in whole or in part,
of any Lender's or Agent's interests in and rights under this Guaranty, the Loan
Agreement or any of the other Loan Documents, including, without limitation, any
Lender's or Agent's right to receive payment of the Liabilities or the Guaranty
Obligations, as the case may be, or any assignment or other transfer, in whole
or in part, of Agent's interests in and to the Collateral or any collateral
securing the Guaranty Obligations;
6.5 Any claim, defense, counterclaim or setoff, other than
that of prior performance, that Borrower, Guarantor or any other guarantor of
the Liabilities may have or assert, including, but not limited to, any defense
of incapacity or lack of corporate or other authority to execute any documents
relating to the Liabilities, the Collateral, the Guaranty Obligations or any
collateral securing the Guaranty Obligations;
6.6 Any Lender's or Agent's amendment, modification,
renewal, extension, cancellation or surrender of any agreement, document or
instrument relating to the Loan Agreement, the Liabilities, the Collateral, the
Guaranty Obligations or any collateral securing the Guaranty Obligations, or any
Lender's or Agent's exchange, release, or waiver of any Collateral or of any
collateral securing the Guaranty Obligations;
6.7 Lenders' or Agent's exercise or nonexercise of any
power, right or remedy with respect to the Liabilities, the Collateral, the
Guaranty Obligations or any collateral securing the Guaranty Obligations,
including, but not limited to, Lenders' or Agent's compromise, release,
settlement or waiver with or of Borrower, Guarantor or any other Person;
4
<PAGE> 45
6.8 Lenders' or Agent's vote, claim, distribution, election,
acceptance, action or inaction in any bankruptcy case related to the
Liabilities, the Collateral, the Guaranty Obligations or any collateral securing
the Guaranty Obligations; and
6.9 Any impairment or invalidity of the Collateral or any
collateral securing the Guaranty Obligations or any failure to perfect any of
Agent's Liens thereon or therein.
6.10 The appointment of a successor Agent in accordance with
the terms of the Loan Agreement.
7. THE COLLATERAL. Guarantor acknowledges that it has,
independently of and without reliance on Lenders or Agent, made its own credit
analysis of Borrower and the Collateral granted to Agent under the Loan
Documents, performed its own legal review of this Guaranty, the Loan Documents
and all related filings and is not relying on Agent or Lenders with respect to
any of the aforesaid items. Guarantor has established adequate means of
obtaining from Borrower on a continuing basis financial and other information
pertaining to Borrower's financial condition and the value of the Collateral and
status of Agent's Lien on and in such Property. Guarantor agrees to keep
adequately informed from such means of any facts, events or circumstances which
might in any way affect Guarantor's risks hereunder, and Guarantor further
agrees that Agent and Lenders shall have no obligation to disclose to Guarantor
information or material with respect to Borrower or the Collateral acquired in
the course of Agent's or Lenders' relationship with Borrower. Agent and Lenders
make no representation, express or implied, with respect to the Collateral or
Agent's interest in, or the priority or perfection of its Lien on and in the
Collateral. Guarantor acknowledges that its obligation hereunder will not be
affected by (a) Agent's failure properly to create a Lien on or in the
Collateral, or any of it, (b) Agent's failure to create or maintain a priority
with respect to the Lien purported to be created in the Collateral, or any of
it, or (c) any act or omission of Agent or Lenders (whether negligent or
otherwise) which adversely affects the value of the Collateral or Agent's Lien
therein or thereon or the priority of such Lien.
8. TOLLING OF STATUTE OF LIMITATIONS. Guarantor agrees that any
payment or performance of any of the Liabilities or other acts which tolls any
statute of limitations applicable to the Liabilities shall also toll the statute
of limitations applicable to Guarantor's liability under this Guaranty.
9. WAIVERS.
9.1 GENERAL WAIVERS. Guarantor hereby expressly waives (a)
diligence, presentment, demand for payment, protest, benefit of any statute of
limitations affecting Borrower's liability under the Loan Documents or the
enforcement of this Guaranty; (b) discharge due to any disability of Borrower;
(c) all notices whatsoever, including, without limitation, notice of acceptance
of this Guaranty and the incurring of the Liabilities; and (d) any requirement
that Agent or Lenders exhaust any right, power or remedy or proceed against
Borrower or any other security for, or any other guarantor of, or any other
party liable for, any of the Liabilities, or any portion thereof. Guarantor
specifically agrees that it shall not be necessary or required, and Guarantor
shall not be entitled to require, that Agent or Lenders (i) file suit or proceed
to assert or obtain a claim for personal judgment against Borrower, for all or
any part of the Liabilities; (ii) make any effort at collection or enforcement
of all or any part of the Liabilities from the Borrower; (iii) foreclose against
or seek to realize upon the Collateral or any other security now or hereafter
existing for all or any part of the Liabilities; (iv) file suit or proceed to
obtain or assert a claim for personal judgment against Guarantor or any other
guarantor or other party liable for all or any part of the Liabilities; (v)
exercise or assert any other right or remedy to which Agent or Lenders are or
may be entitled in connection with the Liabilities or any security or guaranty
relating thereto to assert; or (vi) file any claim against assets of Borrower
before or as a condition of enforcing the liability of Guarantor under this
Guaranty. Without limiting the generality of the foregoing, Guarantor expressly
waives the benefit of California Civil Code Sections 2809, 2810, 2819, 2839,
2845, 2848, 2849, 2850, 2899 and 1432.
10. AFFIRMATIVE COVENANTS. Guarantor covenants and agrees that,
until the full and complete payment of the Guaranty Obligations, Guarantor shall
do all of the following:
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10.1 GOOD STANDING. Guarantor shall maintain its corporate
existence and its good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could reasonably be expected to have a material adverse effect on the financial
condition, operations or business of Guarantor. Guarantor shall maintain in
force all licenses, approvals and agreements, the loss of which could have a
material adverse effect on its ability to perform its obligations under this
Guaranty.
10.2 GOVERNMENT COMPLIANCE. Guarantor shall comply with all
statutes, laws, ordinances and government rules and regulations to which it is
subject, noncompliance with which could reasonably be expected to materially
adversely affect its ability to perform its obligations under this Guaranty.
10.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Guarantor
shall deliver to Agent: (a) as soon as available, but in any event within thirty
(30) days after the end of each month, a company prepared balance sheet, income
statement and cash flow statement covering Guarantor's operations during such
period, certified by a the Chief Financial Officer; (b) as soon as available,
but in any event within one hundred twenty (120) days after the end of
Guarantor's fiscal year, audited financial statements of Guarantor prepared in
accordance with generally accepted accounting principles, consistently applied,
together with an unqualified opinion on such financial statements of a
nationally recognized or other independent public accounting firm reasonably
acceptable to Agent; (c) promptly upon becoming available, copies of all
statements, reports and notices sent or made available generally by Guarantor to
its security holders; (d) immediately upon receipt of notice thereof, a report
of any material legal actions pending or threatened against Guarantor; and (e)
such other financial information as Agent may reasonably request from time to
time.
10.4 CERTIFICATES OF COMPLIANCE. Each time financial
statements are furnished pursuant to Section 10.3 above, there shall be
delivered to Agent a certificate signed by the Chief Financial Officer (each an
"Officer's Certificate") with respect to such financial reports to the effect
that: (i) no Event of Default has occurred and is continuing hereunder since the
date of this Guaranty or, if later, since the date of the prior Officer's
Certificate or, if such an event or condition has occurred and is continuing,
the nature and extent thereof and the action Guarantor proposes to take with
respect thereto, and (ii) Guarantor is in compliance with the provisions of
Sections 10 and 11.
10.5 NOTICE OF DEFAULTS. As soon as possible, and in any
event within five (5) days after the discovery of an Event of Default provide
Agent with an Officer's Certificate of Guarantor setting forth the facts
relating to or giving rise to such Event of Default and the action which
Guarantor proposes to take with respect thereto.
10.6 TAXES. Guarantor shall make due and timely payment or
deposit of all federal, state, and local taxes, assessments, or contributions
required of it by law or imposed upon any properties belonging to it, and will
execute and deliver to Agent, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Guarantor will make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish Agent
with proof satisfactory to Agent indicating that Guarantor has made such
payments or deposits; provided that Guarantor need not make any payment if the
amount or validity of such payment is contested in good faith by appropriate
proceedings and is adequately reserved against by Guarantor.
10.7 FURTHER ASSURANCES. At any time and from time to time
Guarantor shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Agent or any Lender to effect
the purposes of this Guaranty.
11. NEGATIVE COVENANTS. Guarantor covenants and agrees that until
the full and complete satisfaction of the Guaranty Obligations, Guarantor will
not, and will not permit any subsidiary, to do any of the following without the
prior written consent of Agent:
11.1 CHIEF EXECUTIVE OFFICE. During the continuance of this
Guaranty, change the chief executive office or principal place of business or
remove or cause to be removed, except in the ordinary course
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<PAGE> 47
of Guarantor's business, any of Guarantor's assets or the records concerning the
assets from the premises listed in Section 17 without thirty (30) days prior
written notice to Agent.
11.2 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter
into any transaction not in the ordinary and usual course of Guarantor's
business, including the sale, lease, license or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of Guarantor's assets,
other than (i) sales of inventory in the ordinary and usual course of
Guarantor's business as presently conducted and (ii) sales or other dispositions
in the ordinary course of business of assets, other than any assets pledged as
collateral, that have become worn out or obsolete or that are promptly being
replaced.
11.3 Notwithstanding anything contained in this SECTION 11,
the Guarantor may do any of the following: (i) transfer non-exclusive licenses
and similar arrangements for use of its intellectual property, in arm's length
transactions, in the ordinary course of its business for adequate consideration
(ii) declare and make any dividend payment payable in its equity securities,
(iii) convert any of its convertible securities into other securities pursuant
to the terms of such convertible securities or otherwise in exchange therefor,
(iv) repurchase stock from former employees of Guarantor in accordance with the
terms of repurchase, vesting or similar agreements between Guarantor and such
employees in its ordinary course of business, (v) repurchase equity securities
with the proceeds from the issuance of equity securities, (vi) repurchase,
redeem, retire, defease or otherwise acquire for value equity securities in
connection with or pursuant to any employee benefit plan or stock option plan of
the Guarantor, (vii) provided no Event of Default has occurred and is continuing
or is not caused thereby, mergers, consolidations or acquisitions, which after
giving effect thereto, Guarantor is the surviving entity and (viii) enter into
Permitted Investments.
11.4 RESTRUCTURE. Change Guarantor's or any Subsidiary's
name; make or suffer any material adverse change in Guarantor's or any
Subsidiary's financial condition or any material adverse change in Guarantor's
or any Subsidiary's operations; cause, permit, or suffer any material change in
Guarantor's ownership; engage in any business other than the business currently
engaged in by Guarantor and any of its Subsidiaries or reasonably related
thereto; or suspend operation of Guarantor's business. Notwithstanding the
foregoing, Guarantor may continue to raise capital through the issuance of
equity or unsecured convertible securities to existing or new investors.
11.5 LIENS. Create, incur, assume or suffer to exist any Lien
or any other encumbrance of any kind with respect to any of its property,
whether now owned or hereafter acquired, except for Permitted Liens.
11.6 LIMITATION ON DEBT AND LEASE FINANCINGS. Create, incur,
assume or suffer to exist (i) any indebtedness for the purpose of financing
specific equipment and software (other than office equipment in an amount not to
exceed $50,000), or (ii) any equipment lease obligations, in aggregate amount in
excess of $3,000,000, provided Guarantor may create, incur, assume or suffer to
exist any lease of vehicles (including forklifts, pallet jacks and similar
warehouse vehicles).
11.7 LIMITATION ON DIVIDENDS. Declare or pay any dividend or
make any other distribution on any of its capital stock now outstanding or
hereafter issued or purchase, redeem or retire any of such stock other than in
dividends or distributions payable in Guarantor's capital stock.
12. CONTINUING GUARANTY. This Guaranty shall be a continuing
guaranty and shall remain in effect until the Liabilities have been paid in
full. Any other guarantors of all or any part of the Liabilities may be released
without affecting the liability of Guarantor hereunder.
13. REINSTATEMENT. Notwithstanding any provision of the Loan
Agreement to the contrary, the liability of Guarantor hereunder shall be
reinstated and revived and the rights of Agent and Lenders shall continue if and
to the extent that for any reason any payment by or on behalf of Borrower is
rescinded or must be otherwise restored by Agent or Lenders, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise, all as though
such amount had not been paid. The determination as to whether any such payment
must be rescinded or restored shall be made by Agent and Lenders in their sole
discretion; provided, however, that if Agent and Lenders
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<PAGE> 48
choose to contest any such matter at the request of Guarantor, Guarantor agrees
to indemnify and hold harmless Agent and Lenders from all costs and expenses
(including, without limitation, reasonable attorneys' fees) of such litigation.
To the extent any payment is rescinded or restored, the Liabilities shall be
revived in full force and effect without reduction or discharge for that
payment.
14. EVENTS OF DEFAULT.
14.1 EVENT OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an "Event of Default":
(a) The occurrence of an Event of Default under or
as defined in the Loan Agreement or the Guaranty Security Agreement; or
(b) Any representation of warranty made by Guarantor
in this Guaranty, or in any statement, report, financial statement or
certificate delivered by Guarantor is not true and correct or is misleading, in
any material respect, when made or delivered; or
(c) Guarantor fails or neglects to perform, keep or
observe any covenant or provision of this guaranty which has not been cured
within fifteen (15) Business Days after written notice of such default;
(d) The commencement by Guarantor of a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter amended,
or any other applicable federal or state bankruptcy, insolvency or similar law;
or the consent by Guarantor to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator, agent or other similar official for
Guarantor for any substantial part of its Property; or the making by Guarantor
of any assignment for the benefit of creditors; or any case or proceeding is
commenced by Guarantor for its dissolution, liquidation or termination; or the
taking of any action by or on behalf of Guarantor in furtherance of any of the
foregoing; or
(e) The filing of a petition with a court having
jurisdiction over Guarantor to commence an involuntary case for Guarantor under
the federal bankruptcy laws, as now constituted or hereafter amended, or any
other applicable federal or state bankruptcy, insolvency or similar law; or the
appointment of a receiver, liquidator, assignee, custodian, trustee, agent,
sequestrator or other similar official for Guarantor or for any substantial part
of its Property; or any substantial part of Guarantor's Property is subject to
any levy, execution, attachment, garnishment or temporary protective order; or
the ordering of the dissolution, liquidation or winding up of Guarantor's
affairs and the failure to obtain the dismissal of such petition or appointment
or the continuance of such decree or order unstayed and in effect for or within
a period of sixty (60) days from the date of such filing, appointment, or entry
of such order or decree.
14.2 ACCELERATION OF THE LIABILITIES. Upon the occurrence of
and during the continuance of an Event of Default hereunder, then and in either
such event all or any part of the Liabilities may, at the option of Agent or
Lenders and without demand, notice, or legal process of any kind, be declared,
and immediately shall become, due and payable.
15. NO WAIVER; AMENDMENTS. No failure on the part of Agent or
Lenders to exercise, no delay in exercising and no course of dealing with
respect to, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law. This
Guaranty may not be amended or modified except by written agreement between
Guarantor, Agent, and the Requisite Lenders and no consent or waiver hereunder
shall be valid unless in writing and signed by Agent and the Requisite Lenders.
16. COMPROMISE AND SETTLEMENT. No compromise, settlement, release,
renewal, extension, indulgence, change in, waiver or modification of any of the
Liabilities or the release of Guarantor or discharge of
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<PAGE> 49
Borrower or Guarantor from the performance of any of the Liabilities shall
release or discharge Guarantor from this Guaranty.
17. NOTICE. Agent shall provide Guarantor with a copy of any notice
of default to Borrower as provided under the Loan Agreement; provided, however,
that the failure of Agent to provide such notice to Guarantor will not exonerate
Guarantor of any obligations under this Guaranty. Except as otherwise provided
herein, any notice or other communication herein required or permitted to be
given shall be in writing and may be delivered in person, with receipt
acknowledged, or sent by telex, telecopy, computer transmission or by United
States mail, registered or certified, return receipt requested, postage prepaid
and addressed as follows:
If to Guarantor: Intelligent Systems For Retail, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, California 94404
Attention: Chief Financial Officer
Telephone No: 650-524-4800
Telecopy No.: 650-524-4801
If to Agent: Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
Telephone No.: 415-925-3370
Telecopy No.: 415-925-3387
with copies to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attention: William S. Veatch
Telephone No.: 650-843-5188
Telecopy No.: 650-857-0663
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or three (3) Business Days after the same shall have
been deposited in the United States mail.
18. ENTIRE AGREEMENT. This Guaranty constitutes and contains the
entire agreement of the parties and supersedes any and all prior and
contemporaneous agreements, negotiations, correspondence, understandings and
communications between Guarantor, Agent and Lenders, whether written or oral,
respecting the subject matter hereof.
19. SEVERABILITY. If any provision of this Guaranty is held to be
unenforceable under applicable law for any reason, it shall be adjusted, if
possible, rather than voided in order to achieve the intent of Guarantor, Agent
and Lenders to the extent possible. In any event, all other provisions of this
Guaranty shall be deemed valid and enforceable to the full extent possible under
applicable law.
20. SUBORDINATION OF INDEBTEDNESS. Any indebtedness or other
obligation of Borrower now or hereafter held by or owing to Guarantor is hereby
subordinated in time and right of payment to all obligations of Borrower to
Agent and Lenders, except as such indebtedness or other obligation is permitted
to be paid under the Loan Agreement; and such indebtedness of Borrower to
Guarantor is assigned to Agent as security for this Guaranty, and if Agent so
requests shall be collected, enforced and received by Guarantor in trust for
Lenders and to be paid over to Agent on account of the Liabilities of Borrower
to Agent and Lenders, but without reducing or affecting in any manner the
liability of Guarantor under the other provisions of this Guaranty. Guarantor
shall, and
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Agent is hereby authorized to, in the name of Guarantor from time to time,
execute and file financing statements and continuation statements and execute
such other documents and take such other action as Agent deems necessary or
appropriate to perfect, preserve and enforce its rights hereunder.
21. INDEMNITY. In addition to and without limiting or impairing in
any manner whatsoever Guarantor's other obligations under this Guaranty,
Guarantor agrees to indemnify Agent and Lenders, and each of them, from and
against any and all claims, losses and liabilities growing out of or resulting
from this Guaranty (including, without limitation, enforcement of this
Guaranty), except claims, losses or liabilities resulting from such Person's
gross negligence or willful misconduct.
22. GOVERNING LAW. This Guaranty shall be binding upon and inure to
the benefit of Guarantor, Agent, Lenders and their respective successors and
assigns, except that Guarantor shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of each
Lender. This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of California.
23. COUNTERPARTS. This Guaranty may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
24. ACTIONS BY AGENT. Agent singly shall have the power to enforce
this Guaranty against Guarantor to the full extent of Guarantor's obligations to
each of the Lenders hereunder.
25. WAIVER OF SPECIFIC RIGHTS. GUARANTOR HEREBY IRREVOCABLY WAIVES
AND RELEASES:
25.1 ANY AND ALL RIGHTS IT MAY HAVE AT ANY TIME (WHETHER
ARISING DIRECTLY OR INDIRECTLY, BY OPERATION OF LAW, CONTRACT OR OTHERWISE) TO
REQUIRE THE MARSHALING OF ANY ASSETS OF BORROWER, WHICH RIGHT OF MARSHALING
MIGHT OTHERWISE ARISE FROM ANY SUCH PAYMENTS MADE OR OBLIGATIONS PERFORMED;
25.2 ANY AND ALL RIGHTS THAT WOULD RESULT IN GUARANTOR BEING
DEEMED A "CREDITOR" UNDER THE UNITED STATES BANKRUPTCY CODE OF BORROWER OR ANY
OTHER PERSON, ON ACCOUNT OF PAYMENTS MADE OR OBLIGATIONS PERFORMED BY GUARANTOR;
AND
25.3 ANY CLAIM, RIGHT OR REMEDY WHICH GUARANTOR MAY NOW HAVE
OR HEREAFTER ACQUIRE AGAINST BORROWER THAT ARISES HEREUNDER AND/OR FROM THE
PERFORMANCE BY GUARANTOR HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY CLAIM,
REMEDY OR RIGHT OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION,
INDEMNIFICATION, OR PARTICIPATION IN ANY CLAIM, RIGHT OR REMEDY OF ANY LENDER OR
AGENT AGAINST BORROWER OR ANY COLLATERAL SECURITY WHICH THE LENDERS OR AGENT NOW
HAVE OR MAY HEREAFTER ACQUIRE, WHETHER OR NOT SUCH CLAIM, RIGHT OR REMEDY ARISES
IN EQUITY, UNDER CONTRACT, BY STATUTE, UNDER COMMON LAW OR OTHERWISE.
26. WAIVER OF JURY TRIAL. GUARANTOR, AGENT AND LENDERS EACH WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE, BETWEEN GUARANTOR, AGENT AND LENDERS ARISING OUT
OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
27. PERSONAL JURISDICTION.
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27.1 EXCLUSIVE JURISDICTION. GUARANTOR, AGENT AND LENDERS
HEREBY AGREE THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
OR ANY OF THE AGREEMENTS, DOCUMENTS OR INSTRUMENTS DELIVERED IN CONNECTION
HEREWITH OR THEREWITH MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
THE UNITED STATES OF AMERICA LOCATED IN THE NORTHERN DISTRICT OF CALIFORNIA AS
AGENT MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, GUARANTOR, AGENT AND
LENDERS EACH ACCEPTS AND CONSENTS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND
AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY AGENT AND
LENDERS IN WRITING, WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY
GUARANTOR AGAINST AGENT OR LENDERS. GUARANTOR WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING
BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS.
27.2 SERVICE OF PROCESS. SERVICE OF PROCESS ON GUARANTOR,
LENDERS OR AGENT IN ANY ACTION SUBJECT TO THIS 27.2 SHALL BE EFFECTIVE IF MAILED
TO SUCH PARTY AT THE ADDRESS LISTED BY SUCH PARTY IN SECTION 17 UNLESS PRIOR
WRITTEN NOTICE OF ANY CHANGES THEREOF HAS BEEN PREVIOUSLY DELIVERED.
THIS SPACE IS INTENTIONALLY BLANK
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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
GUARANTOR: INTELLIGENT SYSTEMS FOR RETAIL, INC.
By: /S/ LOUIS H. BORDERS
-------------------------------------
Name: Louis H. Borders
-----------------------------------
Title: Chief Executive Officer
----------------------------------
Accepted and Acknowledged by:
AGENT:
LIGHTHOUSE CAPITAL PARTNERS II, L.P., as Agent
By: LIGHTHOUSE MANAGEMENT PARTNERS II, L.P., its general partner
By: LIGHTHOUSE CAPITAL PARTNERS, INC., its general partner
By: /S/ GWILL E. YORK
-----------------------------------
Name: Gwill E. York
---------------------------------
Title: Managing Director
--------------------------------
SIGNATURE PAGE TO GUARANTY DATED NOVEMBER 18, 1998
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LENDERS:
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS II, L.P., its general partner
By: LIGHTHOUSE CAPITAL PARTNERS, INC., its general partner
By: /S/ GWILL E. YORK
----------------------------------
Name: Gwill E. York
--------------------------------
Title: Managing Director
-------------------------------
VENTURE LENDING & LEASING, INC. VENTURE LENDING & LEASING II, INC.
By: /S/ SALVADOR O. GUTIERREZ By: /S/ SALVADOR O. GUTIERREZ
--------------------------------- -------------------------------------
Name: Salvador O. Gutierrez Name: Salvador O. Gutierrez
------------------------------- -----------------------------------
Title: President Title: President
------------------------------ ----------------------------------
DOMINION CAPITAL MANAGEMENT LLC.
By: /S/ RENEE C. BAKER
----------------------------------
Name: Renee C. Baker
--------------------------------
Title: Managing Director
-------------------------------
MMC/GATX PARTNERSHIP NO. I
By: MEIER MITCHELL & COMPANY, as General Partner
By: /S/ JAMES V. MITCHELL
----------------------------------
Name: James V. Mitchell
--------------------------------
Title: Secretary
-------------------------------
IMPERIAL BANK
By: /S/ JAMES BYRON
----------------------------------
Name: James Byron
--------------------------------
Title: Assistant Vice President
-------------------------------
SIGNATURE PAGE TO GUARANTY DATED NOVEMBER 18, 1998
13
<PAGE> 54
FIRST AMENDMENT TO
GUARANTY, SECURITY AGREEMENT AND COLLATERAL ASSIGNMENT, PATENT MORTGAGE AND
SECURITY AGREEMENT
This First Amendment to Guaranty, Security Agreement and Collateral
Assignment, Patent Mortgage and Security Agreement ("Amendment") is made and
entered into as of May 12, 1999, by and between Lighthouse Capital Partners II,
L.P., in its individual capacity ("Lighthouse"), as lender, each other lender
whose name is set forth on the signature pages hereof (collectively, the
"Lenders"), Lighthouse, as agent on behalf of the Lenders (not in its individual
capacity but solely as agent, "Agent"), and WebVan Group, Inc. (fka Intelligent
Systems for Retail, Inc.), a California corporation ("Grantor").
RECITALS OF FACT
A. Grantor, the Lenders and the Agent have entered into that
certain Guaranty dated as of November 18, 1998 (the "Guaranty"), pursuant to
which the Grantor agreed to guarantee all obligations of WebVan-Bay Area, Inc.,
a wholly-owned subsidiary of Grantor, to Lenders.
B. Grantor, the Lenders and the Agent have entered into that
certain Security Agreement ("Guaranty Security Agreement") in favor of Lenders
and Agent pursuant to which the Grantor pledged certain collateral as security
for its obligations under the Guaranty.
C. Grantor, the Lenders and the Agent have entered into that
certain Collateral Assignment, Patent Mortgage and Security Agreement ("IP
Security Agreement") in favor of Lenders and Agent pursuant to which the Grantor
pledged certain collateral as security for its obligations under the Guaranty
and Guaranty Security Agreement.
D. All capitalized terms not otherwise defined herein shall have
the meanings given to such terms in the Guaranty Security Agreement.
E. Grantor, the Lenders and the Agent desire to amend the Guaranty,
Guaranty Security Agreement and IP Security Agreement (collectively the
"Guaranty Documents") to provide for the name change of the Grantor.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants herein set forth, and intending to be legally bound, the
parties hereto hereby amend the Guaranty, Guaranty Security Agreement and IP
Security Agreement as follows:
1. AMENDMENT TO GUARANTY DOCUMENTS. The following amendment is
hereby made to the Guaranty Documents:
A. Intelligent Systems for Retail, Inc., a California
corporation has changed its name to WEBVAN GROUP, INC.,
a California corporation.
2. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that its representations and warranties in the Guaranty Documents continue to be
true and complete in all material respects as of the date hereof after giving
effect to this Amendment and that the execution, delivery and performance of
this Amendment are duly authorized, do not require the consent or approval of
any governmental body or regulatory authority and are not in contravention of or
in conflict with any law or regulation or any term or provision of any other
agreement entered into by Grantor.
3. FULL FORCE AND EFFECT; ENTIRE AGREEMENT. Except to the extent
expressly provided in this Amendment, the terms and conditions of the Guaranty
Documents shall remain in full force and effect. This Amendment and the Guaranty
Documents constitute and contain the entire agreement of the parties hereto and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications between the parties, whether written or oral,
respecting the subject matter hereof. The parties hereto further agree that the
Guaranty Documents, including this Amendment, comprise the entire agreement of
the parties thereto and supersede any and all prior agreements, negotiations,
correspondence, understandings and other communications between the parties
thereto, whether written or oral.
<PAGE> 55
4. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
counterparts, each of which when so executed shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.
This Amendment shall be deemed effective upon the execution of a counterpart
hereof by each of Grantor and Lenders.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
GRANTOR: AGENT:
WEBVAN GROUP, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /S/ LOUIS H. BORDERS By: LIGHTHOUSE MANAGEMENT PARTNERS II,
---------------------------------- L.P., its general partner
Name: Louis H. Borders
-------------------------------- By: LIGHTHOUSE CAPITAL PARTNERS,
Title: Chief Executive Officer INC., its general partner
-------------------------------
By: /S/ THOMAS CONNEELY
-------------------------------------
Name: Thomas Conneely
-----------------------------------
Title: Vice President
----------------------------------
SIGNATURE PAGE FOLLOWS
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<PAGE> 56
LENDERS:
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS II, L.P., its general partner
By: LIGHTHOUSE CAPITAL PARTNERS, INC., its general partner
By: /S/ THOMAS CONNEELY
-------------------------------
Name: Thomas Conneely
-----------------------------
Title: Vice President
----------------------------
VENTURE LENDING & LEASING, INC. VENTURE LENDING & LEASING II, INC.
By: /S/ SALVADOR O. GUTIERREZ By: /S/ SALVADOR O. GUTIERREZ
---------------------------------- -------------------------------------
Name: Salvador O. Gutierrez Name: Salvador O. Gutierrez
-------------------------------- -----------------------------------
Title: President Title: President
------------------------------- ----------------------------------
DOMINION VENTURES, INC. IMPERIAL BANK
By: /S/ MICHAEL K. LEE By: /S/ JAMES BYRON
---------------------------------- -------------------------------------
Name: Michael K. Lee Name: James Byron
-------------------------------- -----------------------------------
Title: Partner Title: Assistant Vice President
------------------------------- ----------------------------------
MMC/GATX PARTNERSHIP NO. I
By: MEIER MITCHELL & COMPANY, as General Partner
By: /S/ JAMES V. MITCHELL
---------------------------------------
Name: James V. Mitchell
-------------------------------------
Title: Secretary
------------------------------------
SIGNATURE PAGE TO FIRST AMENDMENT DATED MAY 12, 1999
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EXHIBIT 10.8
March 17, 1999
Kevin Czinger
21 Alden Road
Greenwich, CT 06831
Dear Kevin:
We are very pleased to extend you an offer to serve as the Chief Financial
Officer for Intelligent Systems for Retail, Inc. ("ISR").
We at ISR believe that your skills, experience, and personal attributes will
enable us to be a leader in the development of this internet commerce company.
This letter serves as an offer of employment to you from ISR. The terms of the
offer supersede all prior oral and written communications between you and ISR or
any representative thereof. If the terms below are acceptable, please sign and
return one copy of the letter on or before Friday, March 19, 1999 to accept our
offer of employment.
POSITION
Your job title will be Chief Financial Officer.
EFFECTIVE DATE
Your first date to report to work at ISR, 1241 E. Hillsdale Blvd., Suite 210,
Foster City, CA 94404, will be on or before Monday, March 22, 1999.
DUTIES
You will report to Louis H. Borders, President & CEO of ISR. Your primary
responsibility will be to lead the development of financial procedures and
manage financial operations for ISR.
You will also be a member of the Executive Team with responsibility for
determining the long term direction and goals of ISR, and for developing
strategies and tactics to meet those goals, along with all other duties as
assigned.
<PAGE> 2
SALARY
Your salary shall be $12,500.00 per month. This salary shall be paid bi-weekly.
Your salary shall be reviewed each January on an annual basis in accordance with
review procedures established by the ISR Associate Handbook.
MONTHLY ALLOWANCE
In addition, ISR will pay you $1,000.00 per month, included as part of your base
salary to help cover miscellaneous monthly expenses.
INCENTIVE PLAN
You shall be granted a stock option (the "Option") to purchase 600,000 shares of
ISR's common stock at an exercise price based on ISR's fair market value, which
will be determined by the Board of Directors as of your employment commencement
date. This Option will be an incentive stock option to the extent permitted
under the IRS rules and a nonstatutory stock option as to any remaining shares.
The Option shall be immediately exercisable but the purchased shares will be
subject to repurchase by ISR at the exercise price in the event that your
service terminates before you vest in the shares. As to 500,000 shares of the
Option, these shares shall vest at the rate of 25% of the shares subject to
Option at the end of twelve months following your employment commencement date
(the "Commencement Date") and at the rate of 6.25% of the shares subject to
Option each three months thereafter so that such 500,000 shares shall be vested
after four years, subject to your continued full-time employment with the
Company as of each vesting date. The remaining 100,000 shares of the Option
shall vest at the rate of 25,000 shares at the end of each three months
following the fourth anniversary of your Commencement Date, subject to your
continued full-time employment with the Company as of each such dates. Except as
specified herein, the Option is in all respects subject to the terms and
conditions of the 1997 Stock Plan (the "Stock Plan") and standard form of option
agreement (the "Option Agreement").
In addition, you may elect to purchase up to one million dollars worth of ISR
Series C Preferred Stock at $6.97 per share, subject to any required approvals
from ISR's stockholders that may be required to authorize such stock and waive
existing rights of first refusal with respect to such shares (collectively, the
"Stockholder Approval"). ISR agrees to use its best efforts to obtain
Stockholder Approval. You must exercise your right to purchase the ISR Series C
Preferred Stock within 60 days of your Commencement Date. ISR shall seek to
obtain the Stockholder Approval within 30 days of the date that your election to
purchase such shares is received. In the event that the Stockholder Approval is
not obtained within such 30 day period, you shall instead have the right to
purchase up to 143,472 shares (as adjusted for stock splits and like events) of
the series of ISR preferred stock which is issued in the Company's next round of
preferred stock financing or up to 143,472 shares (as adjusted for stock
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<PAGE> 3
splits and like events) of ISR common stock in the Company's initial public
offering, whichever event occurs first. These shares shall be fully vested on
the purchase date.
In addition, you may elect to purchase up to 150,000 shares (as adjusted for
stock splits and like events) of the series of ISR preferred stock which is
issued in the Company's next round of preferred stock financing or up to 150,000
shares (as adjusted for stock splits and like events) of ISR common stock in the
Company's initial public offering, whichever event occurs first.
These shares shall be fully vested on the purchase date.
Any purchase by you of shares in ISR's next round of financing or initial public
offering shall be at the same price as that paid by the other investors and
shall close at the same time as the closing for the other investors.
BENEFITS
You will receive the standard benefits for full-time Associates at ISR. These
standard benefits are listed and explained in the ISR Associate Handbook,
administered via TriNet Employer Group. A copy of the policies and benefits
section of the handbook will be provided for your information.
In addition, ISR makes available a 401(k) plan to all employees at the beginning
of the month following Employee's date of hire. Eligible Employees may elect to
contribute up to 15% of their salary to the 401(k) plan, subject to the legal
maximum per year. ISR will match 100% of the first $500 and 25% thereafter up to
a maximum employer match of $2,000 per year of qualifying Employee
contributions. Further details will be provided in the 401(k) Plan Handbook at
the time of enrollment.
RELOCATION ALLOWANCE
You will receive a relocation allowance of up to $50,000 to cover the costs of
your relocation to California. This relocation allowance shall not exceed
$50,000 and will be paid upon the presentation of actual receipts. In addition,
ISR will pay for all of your personal transportation and lodging costs up to
your first 90 days of Employment.
NON-DISCRIMINATION
ISR is an equal-opportunity employer, and will not discriminate against its
employees or applicants in any employment decision or practice because of race,
color, religion, sex, national origin, marital status, pregnancy, age, ancestry,
physical handicaps, or medical condition.
PROPRIETARY INFORMATION
You will be required, as a condition of employment, to sign a Proprietary
Information Agreement. A sample Proprietary Information Agreement is attached
hereto.
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<PAGE> 4
OUTSIDE WORK
All ISR Associates are expected to devote their full energies, efforts, and
abilities to their employment. Accordingly, full-time Associates are not
permitted to accept outside employment on a full-time or part-time basis without
first obtaining their supervisor's written approval.
AT-WILL EMPLOYMENT
The relationship between you and ISR will be for an unspecified term and will be
considered at will. No employment contract is created by the existence of any
policy, rule or procedure in the ISR Associate Handbook, any ISR document, or
any verbal statements made to you by representatives of ISR. Consequently, the
employment relationship between you and ISR can be terminated at will, either by
you or ISR, with or without Cause or advance notice.
In the event that your employment with ISR is terminated without Cause, ISR
agrees that, as severance, you will receive a lump sum payment equal to six
months of your then current salary and the benefits listed in the ISR Associate
Handbook ("Benefits") for a six-month period following your termination date. In
addition to this six month severance package, you will continue to receive full
salary and Benefits for a period of up to another six months or until subsequent
employment is obtained. In addition, in the event that you are Involuntarily
Terminated, the unvested portion of the Option shall vest and become exercisable
to an additional extent as though you had remained employed for a period of 12
months following such termination.
Cause shall mean (i) the commission of any act of fraud, embezzlement or
dishonesty, any unauthorized use or disclosure of confidential information or
trade secrets of ISR that adversely affects the business or affairs of ISR in a
material manner or (ii) any other intentional misconduct that adversely affects
the business or affairs of ISR in a material manner or (iii) your use of
narcotics, liquor or illicit drugs which has a detrimental effect on your
ability to perform your employment responsibilities as determined by ISR's Board
of directors.
Involuntary Termination shall mean a termination without Cause by ISR or a
successor company or your resignation of service by reason of:
(i) the assignment to you of any duties materially inconsistent with your
current position, duties, responsibilities or status with the Company, or a
material change or a substantial diminution in your then current authority,
reporting responsibilities, titles or offices.
(ii) a reduction by the Company in your base salary, unless such reduction is
part of and consistent with a good faith management-wide or Company-wide cost
cutting
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<PAGE> 5
program, and then only if the percentage of your reduction is not materially
different than that of other management.
(iii) a relocation of you to an office located anywhere other than within fifty
(50) miles of your primary residence or away from the Company's executive
offices, except for required travel on the business of the Company or any of its
subsidiaries to an extent substantially consistent with your then current
business travel obligations;
(iv) the failure by the Company or any of its subsidiaries to continue in effect
any compensation plan or benefit plan provided by the Company or any of its
subsidiaries in which you are then participating, unless there shall have been
instituted a replacement or substitute plan providing comparable benefits or
unless such failure is part of and consistent with a good faith benefit
discontinuance applicable to all of the management personnel of the Company.
(v) the failure of the Company to obtain (and deliver to you) an agreement from
any successor to the Company to assume and agree to perform this Agreement. The
Company shall use its best efforts to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the businesses or assets of the Company to expressly assume
and agree to perform this Agreement; or
(vi) the material breach by the Company of any material provision of this offer
of employment that remains uncured for thirty (30) days after written notice
thereof has been given by you to the Company.
PERSONNEL POLICIES
ISR has an Associate Handbook. The policies in the Associate Handbook govern the
relationship between ISR and its Associates. The policies are hereby
incorporated by reference. Acceptance of this offer binds the offeree to follow
the policies.
This offer is contingent on compliance with the Immigration Reform and Control
Act of 1986, which requires the company to verify that each employee hired is
legally entitled to work in the United States. Enclosed is a copy of the
Employment Verification form I-9, with instructions, as required by such act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
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<PAGE> 6
We look forward to your favorable consideration of this offer and to the
commencement of a long and rewarding relationship.
Sincerely,
/s/ LOUIS H. BORDERS
Louis Borders
ISR, President & CEO
I hereby acknowledge that I have reviewed the terms and conditions of this offer
of employment and have had the opportunity to consult with counsel. I hereby
accept the offer of employment upon the terms and conditions contained in this
letter.
Accepted: /s/ KEVIN R. CZINGER Date: 18 March, 1999
--------------------------------- ---------------
Kevin Czinger
6
<PAGE> 1
EXHIBIT 10.9
January 16, 1998
Arvind Peter Relan
2472 Whitney Drive
Mountain View, Ca. 94043
Dear Peter:
We are very pleased to extend you an offer to serve as the Senior Vice
President, Software Development, for Intelligent Systems for Retail, Inc.
("ISR").
We at ISR believe that your skills, experience, and personal attributes will
enable us to be a leader in the development of this internet commerce company.
This letter serves as an offer of employment to you from ISR. The terms of the
offer supersede all prior oral and written communications between you and ISR or
any representative thereof. If the terms below are acceptable, please sign and
return one copy of the letter before Friday, January 16th, 1:00 PM to accept our
offer of employment.
POSITION
Your job title will be Senior Vice President, Software Development.
EFFECTIVE DATE
Your first date to report to work at ISR, 1241 E. Hillsdale Blvd., Suite 210,
Foster City, CA 94404, will be February 16, 1998.
DUTIES
You will report to Louis Borders, President & CEO of ISR. Your primary
responsibility will be to lead ISR's software development efforts. You will also
be a member of the Executive Team with responsibility for determining the long
term direction and goals of ISR and for developing strategies and tactics to
meet those goals, along with all other duties as assigned.
<PAGE> 2
SALARY
Your salary shall be $16,667 per month. Payroll periods occur once every two
weeks. Your salary shall be reviewed each January on an annual basis in
accordance with review procedures established by the ISR Associate Handbook. In
addition, you will receive a "sign-on" bonus of $7,692.31, payable within two
weeks of your date-of-hire.
At any time prior to June 2, 1998, by written notice to ISR, you may elect to
reduce your future salary to $12,500 per month from $16,667 per month. If you
make such election, you will be granted an additional option to purchase 25,000
shares of Common Stock at an exercise price equal to the fair market value (not
to exceed 15% of the Preferred Stock price) of the Common Stock at the date of
grant. The vesting schedule and other terms of the option will be the same as
those for your 638,000 share grant.
INCENTIVE PLAN
You shall be granted an incentive stock option (the "Option") to purchase
638,000 shares (approximately 3.7% of the total of Preferred Shares outstanding,
Common Shares outstanding and stock option pool) of ISR's common stock at an
exercise price equal to $.15. The Option shall vest at the rate of 25% of the
shares subject to Option at the end of twelve months and at the rate of 6.25% of
the shares subject to Option each three months thereafter, so that 100% of the
Option shall be vested after four years, subject to your continued full-time
employment with ISR as of each vesting date. Except as specified herein, the
Option is in all respects subject to the terms and conditions of the 1997 Stock
Plan (the "Stock Plan") and standard form of option agreement (the "Option
Agreement").
In the event that your employment with ISR is terminated for any reason
following the date of your second anniversary as an employee of ISR or for 30
days after such termination, upon written notice to ISR, ISR will at ISR's
choice either (i) pay to you a lump sum amount of $3.0 million OR (ii)
accelerate the vesting of all of the options to purchase 663,000 shares
(including the 25,000 shares which may be granted to you upon the salary
reduction described herein), in which case the options shall remain exercisable
for a period of 30 days thereafter (following which they shall terminate).
Beginning on the first anniversary of your employment with ISR, you shall have
the right to cause ISR to purchase up to 159,500 shares of your Common Stock at
a price of $4.39 per share. You must exercise such right on or prior to the date
which is 30 days following the second anniversary of your employment with ISR.
In addition, beginning on the second anniversary of your employment with ISR,
you shall have the right to cause ISR to purchase up to an additional 159,500
shares of your Common Stock at a price of $4.39 per share. You must exercise
such right on or prior to the date which is 30 days following the second
anniversary of your employment with ISR.
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In the event that ISR does not purchase shares offered for purchase pursuant to
this paragraph within 30 days following written request for such purchase, then
Louis H. Borders agrees to purchase such shares on equivalent terms within 30
days (the "Personal Guarantee").
In the event that you do not exercise any of your rights to sell shares to ISR
as contemplated by the previous paragraph, ISR agrees to loan you up to
$500,000. You may exercise your right to such loan on or prior to the date which
is 30 days following the first anniversary of your employment with ISR. Any such
loan (i) shall bear interest at the minimum rate necessary to avoid imputed
interest pursuant to the Internal Revenue Code of 1986, (ii) shall have interest
payable quarterly until loan principal is due, (iii) shall be payable in full
upon the first to occur of the second anniversary of the date of the loan or 90
days following the termination of your employment for any reason, and (iv) shall
be secured by 113,929 shares of ISR Common Stock held by you.
All of the options to be granted to you hereunder shall include an "early
exercise" provision so that the options may be exercised for cash prior to the
time they are vested provided that you execute a restricted stock purchase
agreement with ISR, in a form acceptable to both parties, providing ISR with the
right to repurchase your unvested shares at their original cost upon the
termination of your employment, or upon such other price and terms as provided
in this letter.
You shall also have the right to participate in future sales of Preferred Stock
by ISR to investors up to a maximum amount of $200,000 for each round of
financing. ISR will give you notice of such future financings and you must
exercise your right to participate no later than 10 days prior to the
anticipated closing date of the financing. The per share purchase price and the
other terms of your participation in such financing shall be substantially the
same as the other investors. This right shall terminate upon the first to occur
of (i) the termination of your employment with ISR for any reason and (ii) the
day prior to the closing of the initial public offering of ISR's stock.
BENEFITS
You will receive the standard benefits for full-time Associates at ISR. These
standard benefits are listed and explained in the ISR Associate Handbook,
administered via TriNet Employer Group. A copy of the policies and benefits
section of the handbook will be provided for your information.
In lieu of the standard health benefits through October 31, 1998, ISR agrees to
reimburse you for your COBRA related expenses to purchase health insurance
through October 31, 1998.
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In addition, ISR makes available a 401(k) plan to all employees at the beginning
of the month following Employee's date of hire. Eligible Employees may elect to
contribute up to 15% of their salary to the 401(k) plan, subject to the legal
maximum per year. The company will match 100% of the first $500 and 25%
thereafter up to a maximum Employer match of $2,000 per year of qualifying
Employee contributions. Further details will be provided in the 401(k) Plan
Handbook at the time of enrollment.
NON-DISCRIMINATION
ISR is an equal-opportunity employer, and will not discriminate against its
employees or applicants in any employment decision or practice because of race,
color, religion, sex, national origin, marital status, pregnancy, age, ancestry,
physical handicaps, or medical condition.
PROPRIETARY INFORMATION
You will be required, as a condition of employment, to sign a Proprietary
Information Agreement. A sample Proprietary Information Agreement is attached
hereto.
OUTSIDE WORK
All ISR Associates are expected to devote their full energies, efforts, and
abilities to their employment. Accordingly, full-time Associates are not
permitted to accept outside employment on a full-time basis without first
obtaining their supervisor's written approval.
AT-WILL EMPLOYMENT
The relationship between you and ISR will be for an unspecified term and will be
considered at will. No employment contract is created by the existence of any
policy, rule or procedure in the ISR Associate Handbook, any ISR document, or
any verbal statements made to you by representatives of ISR. Consequently, the
employment relationship between you and ISR can be terminated at will, either by
you or ISR, with or without cause or advance notice.
In the event that your employment with ISR is terminated without cause, ISR
agrees that you will receive six months salary and benefits as severance. In
addition, ISR agrees to pay you any reduction in salary that resulted from your
election to increase your stock option plan by 25,000, to the extent that the
value of these 25,000 options do not cover the reduction in salary.
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PERSONNEL POLICIES
ISR has an Associate Handbook. Employees are expected to be familiar with and
comply with the policies set forth in the Associate Handbook.
This offer is contingent on compliance with the Immigration Reform and Control
Act of 1986, which requires the company to verify that each employee hired is
legally entitled to work in the United States. Enclosed is a copy of the
Employment Verification form I-9, with instructions, as required by such act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
We look forward to your favorable consideration of this offer and to the
commencement of a long and rewarding relationship.
Please sign this offer letter and hand deliver or return by FAX.
Sincerely,
Louis H. Borders
President & CEO
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I hereby acknowledge that I have reviewed the terms and conditions of this offer
of employment and have had the opportunity to consult with counsel. I hereby
accept the offer of employment upon the terms and conditions contained in this
letter.
Accepted: /S/ ARVIND PETER RELAN Date: February 2, 1998
---------------------------------- ----------------
Arvind Peter Relan
I, Louis H. Borders, will execute a formal agreement (in a form mutually
satisfactory to me and to Mr. Relan) to replace the Personal Guarantee, but
execution of a formal agreement is not a condition of this obligation. I
represent that I have assets available to satisfy this guarantee which have a
fair market value of not less than $10 million.
Accepted: /S/ LOUIS H. BORDERS Date: February 2, 1998
------------------------------------------- ------------------
Louis H. Borders (personally as to the
Personal Guarantee and as to the immediately
preceding paragraph.)
Page 6
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EXHIBIT 10.10
December 14, 1998
Mark Zaleski
Jan Moorkensstraat, 48
B-2600 Berchem (Antwerp) - Belgium
Dear Mark:
We are very pleased to extend you an offer to serve as the President of Webvan -
Bay Area and COO for Intelligent Systems for Retail, Inc. ("ISR").
We at ISR believe that your skills, experience, and personal attributes will
enable us to be a leader in the development of this internet commerce company.
This letter serves as an offer of employment to you from ISR. The terms of the
offer supersede all prior oral and written communications between you and ISR or
any representative thereof. If the terms below are acceptable, please sign and
return one copy of the letter to accept our offer of employment.
POSITION
Your job title will be President of Webvan - Bay Area & COO of ISR.
EFFECTIVE DATE
Your first date to report to work at ISR, 1241 E. Hillsdale Blvd., Suite 210,
Foster City, CA 94404, will be on December 14, 1998.
DUTIES
You will report to Louis H. Borders, President & CEO of ISR. You will have full
P&L responsibilities for Webvan operations.
You will also be a member of the Executive Team with responsibility for
determining the long term direction and goals of ISR, and for developing
strategies and tactics to meet those goals, along with all other duties as
assigned.
<PAGE> 2
SALARY
Your salary shall be $25,000.00 per month. This salary shall be paid bi-weekly.
Your salary shall be reviewed each January on an annual basis in accordance with
review procedures established by the ISR Associate Handbook.
Within 90 days of your Commencement Date, by written notice to ISR, you may
elect to reduce your future salary to $20,833.33 per month from $25,000.00 per
month. If you make such election, you will be granted an additional option to
purchase 50,000 shares of Common Stock at an exercise price equal to the fair
market value (not to exceed 15% of the Preferred Stock price) of the Common
Stock at the date of grant. The vesting schedule and other terms of the option
will be the same as those for your 631,560 share grant.
MONTHLY ALLOWANCE
In addition, ISR will pay you $4,000.00 per month, included as part of your base
salary to help cover miscellaneous monthly expenses.
INCENTIVE PLAN
You shall be granted an incentive stock option (the "Option") to purchase
631,560 shares of ISR's common stock (based on 42,104,000 fully deluded shares
outstanding as of September 2, 1998) at an exercise price based on the company's
fair market value, which will be determined by the Board of Directors as of your
employment commencement date. The Option shall vest at the rate of 25% of the
shares subject to Option at the end of twelve months and at the rate of 6.25% of
the shares subject to Option each three months thereafter, so that 100% of the
Option shall be vested after four years, subject to your continued full-time
employment with the Company as of each vesting date. Except as specified herein,
the Option is in all respects subject to the terms and conditions of the 1997
Stock Plan (the "Stock Plan") and standard form of option agreement (the "Option
Agreement"). ISR agrees that it will, from time to time, review in good faith
your equity ownership in ISR for the purpose of determining whether the dilutive
effect of stock awards and stock sales by ISR on your ownership position
justifies additional option grants to you.
BENEFITS
Except as provided below, you will receive the standard benefits for full-time
Associates at ISR. These standard benefits are listed and explained in the ISR
Associate Handbook, administered via TriNet Employer Group. A copy of the
policies and benefits section of the handbook will be provided for your
information. Notwithstanding the foregoing, you will be entitled to annual
vacation of four (4) weeks per year. You
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agree and acknowledge that you will not be eligible for a sabbatical under the
Company's sabbatical program.
In addition, ISR makes available a 401(k) plan to all employees at the beginning
of the month following Employee's date of hire. Eligible Employees may elect to
contribute up to 15% of their salary to the 401(k) plan, subject to the legal
maximum per year. The company will match 100% of the first $500 and 25%
thereafter up to a maximum Employer match of $2,000 per year of qualifying
Employee contributions. Further details will be provided in the 401(k) Plan
Handbook at the time of enrollment.
HOUSING LOANS
Upon accepting our offer of employment, ISR will loan you up to $200,000 to be
used as the down payment on a house in the Bay Area. In order to ensure that the
loan can be tax and interest free, you agree to sign a loan agreement which will
include such terms as necessary to qualify the loan as an "Employee-Relocation
Bridge Loan" (as that term is defined under proposed Treasury Regulation
1.7872-5(c)(1)(ii)). The loan will become due and payable on the earlier of (i)
one year after the date upon which the loan is made by the Company, or (ii) 15
days after the date of close of your current residence.
Upon the close on the sale of your current residence, ISR will loan you an
amount, up to $200,000. This loan will have a term of 36 months and have an
interest rate (compounded semi-annually) equal to the minimum applicable federal
rate (as published by the Internal Revenue Service). The principal and interest
on the loan are due and payable at the end of the loan term. However, both the
principal and interest may be prepaid by you with no penalty.
RELOCATION ALLOWANCE
You will receive a relocation allowance of up to $75,000.00. This relocation
allowance shall not exceed $75,000.00 and is based on actual expense receipts.
This allowance includes all closing costs and moving, travel (and family travel)
and lodging (prior to moving) expenses, as well as all residential deposit fees
in your current location.
NON-DISCRIMINATION
ISR is an equal-opportunity employer, and will not discriminate against its
employees or applicants in any employment decision or practice because of race,
color, religion, sex, national origin, marital status, pregnancy, age, ancestry,
physical handicaps, or medical condition.
-3-
<PAGE> 4
PROPRIETARY INFORMATION
You will be required, as a condition of employment, to sign a Proprietary
Information Agreement. A sample Proprietary Information Agreement is attached
hereto.
OUTSIDE WORK
All ISR Associates are expected to devote their full energies, efforts, and
abilities to their employment. Accordingly, full-time Associates are not
permitted to accept outside employment on a full-time or part-time basis without
first obtaining their supervisor's written approval.
AT-WILL EMPLOYMENT
The relationship between you and ISR will be for an unspecified term and will be
considered at will. No employment contract is created by the existence of any
policy, rule or procedure in the ISR Associate Handbook, any ISR document, or
any verbal statements made to you by representatives of ISR. Consequently, the
employment relationship between you and ISR can be terminated at will, either by
you or ISR, with or without cause or advance notice.
In the event that your employment with ISR is terminated (i) by the Company
without "cause" or (ii) by you for "good reason" (as such terms are defined
below), ISR agrees that you will receive six months salary and benefits as
severance. In addition to this six month severance package, you will continue to
receive full salary and benefits for a period of up to another 12 months or
until subsequent employment is obtained. In addition, in such event the unvested
portion of the Option shall vest and become exercisable to an additional extent
as though you had remained employed for a period of 12 months following such
termination.
For purposes of this offer of employment, the terms "cause" and "good reason"
shall be defined as follows:
"Cause" shall mean: (i) willful and continued failure to perform substantially
all of your duties with the Company (other than a failure resulting from your
incapacity due to physical or mental illness), which failure has continued for a
period of at least twenty (20) days after a written notice of demand for
substantial performance has been delivered to you specifying the manner in which
you have failed to substantially perform; (ii) willful engagement in conduct
with regard to the Company or its business which is demonstrably and materially
injurious to the Company, monetarily or otherwise; or (iii) your conviction of,
or pleading of nolo contendere to a felony (other than solely a traffic
violation, but not excluding other felonies resulting from such violation). No
act, nor failure to act, on your part shall be considered "willful" unless you
have acted or failed to act, with an absence of good faith and without a
reasonable belief that your
-4-
<PAGE> 5
action or failure to act was in the best interests of the Company. Any
termination for cause shall procedurally be done as follows: a termination for
cause shall be evidenced by a resolution adopted in good faith by two-thirds
(2/3) of the Board of Directors of the Company (the "Board") that you performed
one of the acts specified above; provided, however, that no termination of your
employment shall be for cause unless (x) there shall have been delivered to you
a copy of a written notice setting forth the acts (or failures to act) by you
that give rise to a finding of cause and (y) you shall have been provided an
opportunity on at least seven (7) days' notice to be heard by the Board (with
the assistance of you if you so desire). For this purpose, the term "Company"
shall include the Company and its subsidiaries.
"Good Reason" shall mean the occurrence of any of the following without your
express written consent:
(i) the assignment to you of any duties materially inconsistent with you
current position, duties, responsibilities or status with the Company,
or a material change or a substantial diminution in your then current
authority, reporting responsibilities, titles or offices.
(ii) a reduction by the Company in your base salary, unless such
reduction is part of and consistent with a good faith management-wide or
Company-wide cost cutting program, and then only if the percentage of
your reduction is no greater than that of the other management
personnel;
(iii) a relocation of you to an office located anywhere other than
within fifty (50) miles of your primary residence or away from the
Company's executive offices, except for required travel on the business
of the Company or any of its subsidiaries to an extent substantially
consistent with your then current business travel obligations;
(iv) the failure by the Company or any of its subsidiaries to continue
in effect any compensation plan or benefit plan provided by the Company
or any of its subsidiaries in which you are then participating, unless
there shall have been instituted a replacement or substitute plan
providing comparable benefits or unless such failure is part of and
consistent with a good faith benefit discontinuance applicable to all of
the management personnel of the Company and then only if the scope of
the discontinuance with respect to you is no greater than that of the
other management personnel;
(v) the failure of the Company to obtain (and deliver to you) an
agreement from any successor to the Company to assume and agree to
perform this Agreement. The Company shall use its best efforts to
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all
-5-
<PAGE> 6
or substantially all of the businesses or assets of the Company to
expressly assume and agree to perform this Agreement;
(vi) the material breach by the Company of any material provision of
this offer of employment that remains uncured for thirty (30) days after
written notice thereof has been given by you to the Company; or
Any notice of termination of employment by you for "good reason" shall
be given within one hundred eighty (180) days after the occurrence of
the "good reason."
PERSONNEL POLICIES
ISR has an Associate Handbook. The policies in the Associate Handbook govern the
relationship between ISR and its Associates. The policies are hereby
incorporated by reference. Acceptance of this offer binds the offeree to follow
the policies.
We look forward to your favorable consideration of this offer and to the
commencement of a long and rewarding relationship.
Sincerely,
/s/ LOUIS H. BORDERS
Louis Borders
ISR, President & CEO
I hereby acknowledge that I have reviewed the terms and conditions of this offer
of employment and have had the opportunity to consult with counsel. I hereby
accept the offer of employment upon the terms and conditions contained in this
letter.
Accepted: /s/ MARK X. ZALESKI Date:
--------------------------- -----------------
Mark Zaleski
-6-
<PAGE> 7
PERSONAL GUARANTEE
As an additional guarantee to this Offer Letter, I, Louis H. Borders, hereby
personally guarantee the following: all loans specified in the Housing Loans of
this Offer Letter, and the severance pay as specified in the second paragraph of
the At-Will Employment section.
/S/ LOUIS H. BORDERS
-------------------------- --------
Louis H. Borders Date
-7-
<PAGE> 1
EXHIBIT 10.11
August 4, 1999
Gary Dahl
54 E. Church Hill Drive
Salt Lake City, UT 84103
Dear Gary:
We are very pleased to extend you an offer to serve as the Vice President -
Wholesale for Intelligent Systems for Retail, Inc. ("ISR").
We at ISR believe that your skills, experience, and personal attributes will
enable us to be a leader in the development of this hybrid retail/internet
commerce company.
This letter serves as an offer of employment to you from ISR. The terms of the
offer supersede all prior oral and written communications between you and ISR or
any representative thereof. If the terms below are acceptable, please sign and
return one copy of the letter within two weeks of the above date to accept our
offer of employment.
POSITION
Your job title will be Vice President - Wholesale.
EFFECTIVE DATE
Your first date to report to work at ISR, 1241 E. Hillsdale Blvd., Suite 210,
Foster City, CA 94404, will be April 21, 1997.
DUTIES
You will report to Louis H. Borders, President of ISR and your primary
responsibility will be to direct distribution and develop logistics for ISR.
You will also be a member of the Executive Team with responsibility for
determining the long term direction and goals of ISR, and for developing
strategies and tactics to meet those goals, along with all other duties as
assigned.
<PAGE> 2
SALARY
Your salary shall be $16,666.66 per month. This salary shall be paid bi-weekly.
Your salary shall be reviewed in January on an annual basis in accordance with
review procedures established by the ISR Executive Handbook.
INCENTIVE PLAN
ISR will offer a stock option plan. You will be granted the option to purchase
187,500 shares of common stock with an exercise price of $.01 per share, vested
(using a modified Cliff Plan) over a four year period.
BENEFITS
You will receive the standard benefits for full-time Executives at ISR. These
benefits are listed and explained in the ISR Executive Handbook, administered
via TriNet Employer Group. A copy of the policies and benefits section of the
handbook will be provided for your information.
In addition, ISR makes available a 401(k) plan to all employees at the beginning
of the Quarter following three months of employment. Eligible Employees may
elect to contribute up to 15% of their salary to the 401(k) plan, subject to the
legal maximum per year. The company will match 100% of the first $500 and 25%
thereafter up to a maximum Employer match of $2,000 per year of qualifying
Employee contributions. Further details will be provided in the 401(k) Plan
Handbook at the time of enrollment.
AUTO AND MOVING ALLOWANCE
In addition to the benefits outlined in ISR' Executive Handbook, ISR shall pay
Executive a monthly allowance of Three Hundred Dollars ($300.00) , included as
part of Executive's base salary, to compensate Executive for reasonably incurred
out-of-pocket automobile and related expenses. Executive shall not be entitled
to any additional automobile expense reimbursement from the Company.
You will also be paid a one-time only moving allowance of $20,000.
PAGE 2
<PAGE> 3
NON-DISCRIMINATION
ISR is an equal-opportunity employer, and will not discriminate against its
employees or applicants in any employment decision or practice because of race,
color, religion, sex, national origin, marital status, pregnancy, age, ancestry,
physical handicaps, or medical condition.
PROPRIETARY INFORMATION
You will be required, as a condition of employment, to sign a Proprietary
Information Agreement. A sample Proprietary Information Agreement is attached
hereto.
OUTSIDE WORK
All ISR Executives are expected to devote their full energies, efforts, and
abilities to their employment. Accordingly, full-time Executives are not
permitted to accept outside employment on a full-time or part-time basis without
first obtaining their supervisor's written approval.
AT-WILL EMPLOYMENT
The relationship between you and ISR will be for an unspecified term and will be
considered at will. No employment contract is created by the existence of any
policy, rule or procedure in the ISR Executive Handbook, any ISR document, or
any verbal statements made to you by representatives of ISR. Consequently, the
employment relationship between you and ISR can be terminated at will, either by
you or ISR, with or without cause or advance notice.
PERSONNEL POLICIES
ISR will have an Executive Handbook. The policies in the Executive Handbook
govern the relationship between ISR and its Executives. The policies are hereby
incorporated by reference. Acceptance of this offer binds the offeree to follow
the policies.
This offer is contingent on compliance with the Immigration Reform and Control
Act of 1986, which requires the company to verify that each employee hired is
legally entitled to work in the United States. Enclosed is a copy of the
Employment Verification form I-9, with instructions, as required by such act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
PAGE 3
<PAGE> 4
We look forward to your favorable consideration of this offer and to the
commencement of a long and rewarding relationship.
Sincerely,
/s/ LOUIS H. BORDERS
Louis H. Borders
ISR, President & CEO
I hereby acknowledge that I have reviewed the terms and conditions of this offer
of employment and have had the opportunity to consult with counsel. I hereby
accept the offer of employment upon the terms and conditions contained in this
letter.
Accepted: /s/ GARY DAHL Date: April 9, 1997
------------------------- ----------------------
Gary Dahl
PAGE 4
<PAGE> 1
EXHIBIT 10.12
August 4, 1999
Mr. Mark Holtzman
5838 E. LeMarche Avenue
Scottsdale, AZ 85254
Dear Mark:
We are very pleased to extend you an offer to serve as the Chief Financial
Officer for Intelligent Systems for Retail (ISR).
We at ISR believe that your skills, experience, and personal attributes will
enable us to be a leader in the development of this hybrid retail/internet
commerce company.
This letter serves as an offer of employment to you from ISR. The terms of the
offer supersede all prior oral and written communications between you and ISR or
any representative thereof. If the terms below are acceptable, please sign and
return one copy of the letter within two weeks of the above date to accept our
offer of employment.
POSITION
Your job title will be Chief Financial Officer (CFO).
EFFECTIVE DATE
Your first date to report to work at ISR, 1241 E. Hillsdale Blvd., Suite 210,
Foster City, CA 94404, will be on a start date, as soon as possible, but not
later than July 14,1997.
DUTIES
You will report to Louis H. Borders, President of ISR, and your primary
responsibilities will be to lead the development of financial procedures and
manage financial operations.
You will be a member of the Executive Team with responsibility for determining
the long term direction and goals of ISR, and for developing strategies and
tactics to meet those goals, along with all other duties as assigned.
<PAGE> 2
SALARY
Your salary shall be $14,583.33 per month. This salary shall be paid bi-weekly.
Your salary shall be reviewed on a periodic basis in accordance with review
procedures established by the ISR Associate Handbook. Upon the completion of our
second round of financing, which is targeted to be completed before December 31,
1997, or upon a management decision that a second round of financing from
outside parties is not required for a roll-out, then your salary will be
increased to $16,666.67 per month.
INCENTIVE PLAN
ISR will offer a stock option plan. Your plan will include the option to
purchase 105,000 shares of common stock with an exercise price of $.01 per
share, vested quarterly, under a modified cliff plan, over a four year period.
The modified cliff plan calls for 25% to be vested after 12 months of
employment, and 6 1/4% to be vested quarterly for the next three (3) years.
BENEFITS
You will receive the standard benefits for full-time Associates at ISR. These
benefits are listed and explained in the ISR Associate Handbook, a copy of which
is provided for your information.
In addition, ISR makes available a 401(k) plan to all employees on the first of
the next month following you date of hire. Eligible Employees may elect to
contribute up to 15% of their salary to the 401(k) plan, subject to the legal
maximum per year. The Company will match 100 of the first $500 and 25%
thereafter up to a maximum Employer match $2,000 per year of qualifying Employee
contributions. Further details will be provided in the 401(k) Plan Handbook at
the time of enrollment.
MOVING ALLOWANCE
You will also be paid a moving expense reimbursement of $40,000. Expenses will
be paid upon presentation of receipts or invoices due. If expenses are less than
$40,000, then the remaining balance will be paid on January 1, 1998, as salary.
In addition, ISR will pay travel and lodging costs for the first two months of
employment.
NON-DISCRIMINATION
ISR is an equal-opportunity employer, and will not discriminate against its
employees or applicants in any employment decision or practice because of race,
color, religion, sex, national origin, marital status, pregnancy, age, ancestry,
physical handicaps, or medical condition.
Page 2
<PAGE> 3
PROPRIETARY INFORMATION
You will be required, as a condition of employment, to sign a Proprietary
Information Agreement. A sample Proprietary Information Agreement is attached
hereto.
OUTSIDE WORK
All ISR associates are expected to devote their full energies, efforts, and
abilities to their employment. Accordingly, full-time associates are not
permitted to accept outside employment on a full-time or part-time basis without
first obtaining their supervisor's written approval.
AT-WILL EMPLOYMENT
The relationship between you and ISR will be for an unspecified term and will be
considered at will. No employment contract is created by the existence of any
policy, rule or procedure in the ISR Associate Handbook, any ISR document, or
any verbal statements made to you by representatives of ISR. Consequently, the
employment relationship between you and ISR can be terminated at will, either by
you or ISR, with or without cause or advance notice.
In the event that your employment is involuntarily terminated for other than
cause, or you resign for refusal to perform unlawful accounting practice(s),
then ISR will provide you with a six (6) month salary continuance. This
six-month continuance and your related stock option vesting will remain in
effect as long as you are not elsewhere employed at a comparable salary. No
salary continuance shall be payable in the event that you terminate voluntarily
or are involuntarily terminated for cause.
PERSONNEL POLICIES
ISR has an Associate Handbook. The policies in the Associate Handbook govern the
relationship between ISR and its Associates. The policies are hereby
incorporated by reference. Acceptance of this offer binds the offeree to follow
the policies.
This offer is contingent on compliance with the Immigration Reform and Control
Act of 1986, which requires the company to verify that each employee hired is
legally entitled to work in the United States. Also enclosed is a copy of the
Employment Verification form, I-9, with instructions, as required by such act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
Page 3
<PAGE> 4
We look forward to your favorable consideration of this offer and to the
commencement of a long and rewarding relationship.
Sincerely,
/s/ LOUIS H. BORDERS
Louis H. Borders
ISR, President
Page 4
<PAGE> 5
I hereby acknowledge that I have reviewed the terms and conditions of this offer
of employment and have had the opportunity to consult with counsel. I hereby
accept the offer of employment upon the terms and conditions contained in this
letter.
Accepted: /s/ MARK HOLTZMAN Date: June 10, 1997
----------------------- ------------------
Mark Holtzman
Page 5
<PAGE> 1
EXHIBIT 10.13
September 2, 1997
Coppy Holzman
5 Lost Lodge Via fax: 203-222-0365
Westport, CT 06880
Dear Coppy:
We are very pleased to extend you an offer to serve as the Vice President -
Merchandise for Intelligent Systems for Retail, Inc. ("ISR").
We at ISR believe that your skills, experience, and personal attributes will
enable us to be a leader in the development of this hybrid retail/internet
commerce company.
This letter serves as an offer of employment to you from ISR. The terms of the
offer supersede all prior oral and written communications between you and ISR or
any representative thereof. If the terms below are acceptable, please sign and
return one copy of the letter within two weeks of the above date to accept our
offer of employment.
POSITION
Your job title will be Vice President - Merchandise.
EFFECTIVE DATE
Your first date to report to work at ISR, 1241 E. Hillsdale Blvd., Suite 210,
Foster City, CA 94404, will be September 29, 1997.
DUTIES
You will report to Louis Borders, President, and your primary responsibility
will be to manage merchandising and category planning, along with all other
duties as assigned. You will also be a member of the Executive Team with
responsibility for determining the long term direction and goals of Oasis, and
for developing strategies and tactics to meet those goals, along with all other
duties as assigned.
SALARY
Your salary shall be $20,833.33 per month. This salary shall be paid bi-weekly.
Your salary shall be reviewed in January on an annual basis in accordance with
review procedures established by the ISR Executive Handbook.
<PAGE> 2
ALLOWANCES
You will also be paid a moving expense allowance of $2,500 within one week of
your start date and an additional $17,500 ($20,000 total), to be paid upon
presentation of receipts or invoices due for your complete relocation to
California.
In addition, ISR will pay you $2,500 per month as an expense allowance to cover
travel, lodging in California, auto and other expenses. This allowance will be
reduced to $1,000 per month after eight months or when you have relocated to the
Bay Area.
On an ongoing basis, ISR will reimburse you for air travel, telephone and pager
expenses.
INCENTIVE PLAN
ISR will offer a stock option plan. You will be granted the option to purchase
187,500 shares of common stock with an exercise price of $.01 per share, vested
(using a Modified Cliff Plan) over a four year period.
BENEFITS
You will receive the standard benefits for full-time Executives at ISR, with the
exception of your vacation/sabbatical policy, outlined below. These standard
benefits are listed and explained in the ISR Executive Handbook, administered
via TriNet Employer Group. A copy of the policies and benefits section of the
handbook will be provided for your information.
In addition, ISR makes available a 401(k) plan to all employees at the beginning
of the month following Employee's date of hire. Eligible Employees may elect to
contribute up to 15% of their salary to the 401(k) plan, subject to the legal
maximum per year. The company will match 100% of the first $500 and 25%
thereafter up to a maximum Employer match of $2,000 per year of qualifying
Employee contributions. Further details will be provided in the 401(k) Plan
Handbook at the time of enrollment.
As an exception to the standard ISR benefits package, you will accrue vacation
at a rate of four (4) weeks per calendar year (instead of two). The sabbatical
leave policy (six (6) weeks paid sabbatical leave after each five (5) years of
employment) will not apply to your position, for the duration of your employment
with ISR.
NON-DISCRIMINATION
ISR is an equal-opportunity employer, and will not discriminate against its
employees or applicants in any employment decision or practice because of race,
color, religion, sex,
PAGE 2
<PAGE> 3
national origin, marital status, pregnancy, age, ancestry, physical handicaps,
or medical condition.
PROPRIETARY INFORMATION
You will be required, as a condition of employment, to sign a Proprietary
Information Agreement. A sample Proprietary Information Agreement is attached
hereto.
OUTSIDE WORK
All ISR Executives are expected to devote their full energies, efforts, and
abilities to their employment. Accordingly, full-time Executives are not
permitted to accept outside employment on a full-time or part-time basis without
first obtaining their supervisor's written approval.
AT-WILL EMPLOYMENT
The relationship between you and ISR will be for an unspecified term and will be
considered at will. No employment contract is created by the existence of any
policy, rule or procedure in the ISR Executive Handbook, any ISR document, or
any verbal statements made to you by representatives of ISR. Consequently, the
employment relationship between you and ISR can be terminated at will, either by
you or ISR, with or without cause or advance notice.
In the event that your employment is involuntarily terminated for other than
cause, Oasis will provide you a six (6) month salary continuance. No salary
continuance shall be payable in the event that you terminate voluntarily or are
involuntarily terminated for cause. This continuance clause expires two (2)
years from your date of hire, October 1, 1999.
PERSONNEL POLICIES
ISR has an Executive Handbook. The policies in the Executive Handbook govern the
relationship between ISR and its Executives. The policies are hereby
incorporated by reference. Acceptance of this offer binds the offeree to follow
the policies.
This offer is contingent on compliance with the Immigration Reform and Control
Act of 1986, which requires the company to verify that each employee hired is
legally entitled to work in the United States. Enclosed is a copy of the
Employment Verification form I-9, with instructions, as required by such act.
Please review and execute this document and be prepared to bring the appropriate
documentation on the day you first report to work.
PAGE 3
<PAGE> 4
We look forward to your favorable consideration of this offer and to the
commencement of a long and rewarding relationship.
Sincerely,
Louis H. Borders
ISR, CEO
I hereby acknowledge that I have reviewed the terms and conditions of this offer
of employment and have had the opportunity to consult with counsel. I hereby
accept the offer of employment upon the terms and conditions contained in this
letter.
Accepted: /S/ COPPY HOLZMAN Date: September 8, 1997
--------------------- -------------------------
Coppy Holzman
PAGE 4
<PAGE> 1
EXHIBIT 10.14
CONTRACT
FOR
TURNKEY DESIGN/BUILD
CONSTRUCTION AND RELATED SERVICES
between
WEBVAN GROUP, INC.
and
BECHTEL CORPORATION
<PAGE> 2
CONTRACT
FOR
TURNKEY DESIGN/BUILD
CONSTRUCTION AND RELATED SERVICES
THIS CONTRACT ("CONTRACT") is dated the 8th day of July, 1999, for reference
purposes only, by and between Webvan Group, Inc. (formerly known as Intelligent
Systems for Retail, Inc.), a California corporation ("WEBVAN"), and Bechtel
Corporation, a Nevada corporation ("BECHTEL").
1.0 THE PROJECT
1.1 The project ("PROJECT") consists of the location, selection,
evaluation, design, development, construction, start-up and testing of up to
twenty-six (26) distribution center warehouse facilities ("DC'S") to be located
in various cities to be determined by Webvan throughout the United States and
the design, engineering, procurement, assembly, installation, start-up, testing
and calibration of materials handling and distribution equipment and systems and
all other materials, equipment and systems (including, without limitation, food
production, refrigeration and specialized heating, ventilation and air
conditioning equipment and systems) necessary for the operation of each DC in
the manner specified in the applicable Contract Documents (defined in Section
2.5) (collectively, the "OPERATING EQUIPMENT"). The provision of all such
services with respect to any DC is referred to herein as the "DEVELOPMENT" of a
DC. The Development of any particular DC is referred to herein as a "DC
PROJECT".
1.2 Each DC Project will be described more particularly in the
drawings, plans and specifications to be prepared by Bechtel. Webvan, however,
shall be solely responsible for the design and installation of [*]
(collectively, the "WEBVAN Systems"). Prior to Substantial Completion (defined
in Section 2.5), but after Bechtel has assembled and installed all Operating
Equipment for a DC Project, Bechtel shall notify Webvan that the materials
handling and distribution system at such DC is ready for start-up testing. No
later than ten (10) days after Webvan's receipt of such notice, Webvan shall
install the Webvan Systems [*] at such DC and shall conduct such testing as
reasonably required to confirm that each item (both individually and in concert
with other items) of the materials handling and distribution equipment and
systems installed at the DC meets the applicable functionality specifications
provided in the Contract Documents for such DC Project and to confirm that such
materials handling and distribution system properly operates at the volume and
through-puts specified in the Notice to Proceed for such DC Project
(collectively, the "PERFORMANCE STANDARDS").
1.3 The term of this Contract shall commence as of the Effective Date
(defined in Section 8.12) and shall expire on the third (3rd) anniversary of the
Effective Date, unless extended by the written agreement of Webvan and Bechtel.
Notwithstanding the expiration of the term of this Contract, Bechtel shall
continue thereafter to perform all Services (defined in Section 2.0) to achieve
Final Completion (defined in Section 3.2) of all DC Projects for which a Notice
to Proceed (defined in Section 2.0) has been executed in accordance with the
applicable Contract Documents (defined in Section 2.5).
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
1
<PAGE> 3
2.0 BECHTEL'S SERVICES
When requested by Webvan, Bechtel shall perform or cause to be performed for the
Project the services and items generally described below (collectively, the
"SERVICES"). Notwithstanding anything to the contrary in this Contract, Bechtel
shall not perform any of the Services unless and until a fully executed notice
to proceed ("NOTICE TO PROCEED") for specified Services in the form attached
hereto as Appendix 2.0 has been entered by Webvan and Bechtel, and Webvan shall
have no obligation to pay for any Services performed by Bechtel which are not
specifically authorized in a Notice to Proceed executed by Webvan. All Services
performed by Bechtel for the Project shall be classified as within one or more
of Sections 2.1 through 2.7 of this Section 2.0.
2.1 Program Management.
Based on Webvan's program and criteria for the Project, Bechtel shall prepare
and submit for Webvan's approval a "DEVELOPMENT PLAN" (which shall initially be
based upon Webvan's existing DCs located in Oakland, California and Atlanta,
Georgia) of preliminary proposals and recommendations regarding Project concept,
development strategy, architectural and design concepts, space requirements and
adjacency relationships, number and functional responsibilities of personnel,
special equipment and systems, human and material flow patterns, governmental
approval strategies, construction schedule requirements, construction budget
requirements, and other matters regarding the Development of the DC Projects,
including, but not limited to:
2.1.1 Preparation of a preliminary assessment of the Project budget
taking into account the activities contemplated for the Project.
2.1.2 Consultation with Webvan's independent consultants and Webvan
concerning the Project and development of Project plans, drawings and
specifications.
2.1.3 Assistance with utility optimization and sourcing, as requested,
to develop alternative methods to reduce utility costs and ongoing operation of
DC's.
2.1.4 Development of cost control systems for the Project, including
regular monitoring of actual costs for activities in progress and estimates for
uncompleted tasks.
2.1.5 Development of milestone completion dates for the Project.
2.2 Site Evaluation and Selection. As and when requested by Webvan:
2.2.1 Provide building and site evaluation to review physical plants and
properties and to assess and compare alternative DC sites.
2.2.2 Ascertain as to a proposed DC Project whether there are any
significant zoning, building code, entitlement or other governmental compliance
issues (including transportation issues), prepare a plan for addressing any such
issues, and assist Webvan in addressing such issues, including, without
limitation, Bechtel's development of an entitlement strategy for obtaining such
approvals as are required from governmental authorities to develop each DC
Project within the time frame and costs contemplated by the Project Schedule and
Project Budget (as each is defined below) for a DC Project, coordination of all
development requirements of applicable governmental authorities, and making such
appearances and attending such meetings as are necessary or appropriate in
connection with obtaining required permits and approvals.
2
<PAGE> 4
2.2.3 Assist Webvan in conducting inspections, evaluations, surveys and
tests as may be necessary or appropriate in connection with any DC Project,
including, without limitation, such engineering and geotechnical studies,
seismic tests, and inspections and reviews of all buildings and related
operating systems to determine the feasibility of a DC Project. Bechtel shall
not be required, however, to perform any testing or analysis to determine the
presence or extent of any hazardous materials at the DC Projects.
2.2.4 Bechtel's liability for any deficient Services provided under this
Section 2.2 shall be limited to the reperformance of such Services during the
term of this Contract at no additional charge to Webvan.
2.3 Design.
2.3.1 Schematic Design Services.
2.3.1.1 Based on the approved Development Plan for each of the DC
Projects and any adjustments authorized by Webvan in such Development Plan,
Bechtel shall prepare for Webvan's review and approval schematic drawings,
descriptive specifications and other documents appropriate to the size of each
of the DC Projects illustrating and describing the concept, quality, layout,
scale and relationship of the DC Project components (including, without
limitation, the Operating Equipment), which documents are collectively referred
to as the "SCHEMATIC DESIGN DOCUMENTS". Webvan acknowledges that the conceptual
design of the DC Projects shall initially be based upon Webvan's existing DCs
located in Oakland, California and Atlanta, Georgia. Bechtel shall, however,
review with Webvan alternative designs and construction methods relating to each
DC Project.
2.3.1.2 Upon completion of the Schematic Design Documents for a DC
Project, Bechtel shall prepare and submit to Webvan a comprehensive, detailed
preliminary budget for such DC Project and for all costs to be incurred as part
of the DC Project, which budget shall at all times be subject to Webvan's
approval both as to form and content. The parties acknowledge that such DC
Project budgets will be critical in allowing the parties to conceptualize and
monitor the Development of the Project, and Bechtel shall use its best efforts
to prepare and update each such DC Project budget so as to be as detailed and
realistic as possible. Each such DC Project budget, as revised from time to time
and approved by Webvan, is referred to herein as a "PROJECT BUDGET". Bechtel
shall design each DC Project in accordance with its Project Budget.
2.3.2 Design Development Services.
2.3.2.1 Based on the approved Schematic Design Documents for each
DC Project and any adjustments authorized by Webvan in the Development Plan or
the Project Budget for such DC Project, Bechtel shall prepare for Webvan's
review and approval drawings of sufficient detail to describe the size, shape,
configuration, and quantity of typical and non-typical elements of each such DC
Project (including, without limitation, the Operating Equipment), outline
specifications and other documents which fix and describe the size and character
of the DC Project as to architecture, engineering, structure, layout, electrical
systems, mechanical systems, plumbing systems, materials and equipment
(including the Operating Equipment), all of which documents are collectively
referred to herein as the "DESIGN DEVELOPMENT DOCUMENTS".
2.3.2.2 Bechtel shall refine the Project Budget for each DC
Project based on the Design Development Documents for such DC Project. Bechtel
shall revise the Design Development
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Documents as required by Webvan to make them acceptable to Webvan and shall
adjust the Project Budget for such DC Project accordingly.
2.3.3 Construction Documents Services.
2.3.3.1 Based on the Design Development Documents approved by
Webvan for each DC Project and the approved Project Budget for each such DC
Project, Bechtel shall prepare the final drawings, plans and specifications
setting forth in detail the requirements for Development of each such DC
Project, collectively referred to herein as the "CONSTRUCTION DOCUMENTS". The
Construction Documents shall include the detailed Performance Standards for the
operation of the materials handling and distribution system and equipment
included within such DC Project.
2.3.3.2 Bechtel shall revise the Construction Documents as
required by Webvan to make them acceptable to Webvan and shall adjust the
Project Budget for each such DC Project accordingly.
2.3.3.3 Bechtel shall complete the Construction Documents for each
DC Project, including Bechtel's coordination of all documents and corrections
based on such coordination, prior to preparing and issuing bid documents for
each such DC Project.
2.3.3.4 Bechtel shall submit all necessary Construction Documents
approved by Webvan and applications for all necessary permits and approvals for
the Development of each DC Project to the appropriate governmental authorities
and shall process such Construction Documents, subject to the terms of this
Contract, as required by such governmental authorities to secure the issuance of
such permits and approvals for the use and occupancy of each DC Project.
2.3.4 General.
2.3.4.1 The Design Services and Construction Documents provided
and/or prepared by Bechtel for each DC Project shall comply with (i) all
applicable federal, state and local laws, ordinances, building and other codes,
rules and regulations (collectively, "LAWS"), (ii) all covenants, conditions,
restrictions, easements and leases affecting the applicable DC Project sites,
copies of which have been provided to Bechtel by Webvan (collectively "PRIVATE
RESTRICTIONS"), (iii) all applicable manufacturers' and vendors' instructions
and specifications, and (iv) sound design and construction practices. Bechtel
shall make recommendations regarding alternative solutions whenever design
details appear to affect adversely the Development of any DC Project, the
Project Budget, or the Project Schedule. If Webvan or Bechtel determines that
modifications are necessary to any such Construction Documents to comply with
Laws which were in effect at the time each Construction Document is issued to
Webvan or if Webvan or Bechtel determines that modifications are necessary to
any Construction Documents to comply with any Private Restriction at the time
such Construction Documents were issued to Webvan, Bechtel, at its sole cost and
expense, shall immediately modify the Construction Documents as necessary to
bring the Construction Documents into compliance with such Laws and Private
Restrictions which were in effect at the time of issuing the Construction
Documents and shall notify Webvan in writing of such modifications.
2.3.4.2 Bechtel shall provide all design services for the
Development of the DC Projects requested by Webvan and shall employ the services
of reputable, licensed and well-qualified professional architects, engineers and
other design consultants in connection with the Project (collectively
"SUBCONSULTANTS") only with Webvan's prior written consent. After Webvan has
approved
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any particular Subconsultant, Bechtel shall contract, solely in its own name and
behalf and not in the name or behalf of Webvan, with such Subconsultant.
Bechtel's form of agreement with Subconsultants shall be subject to the prior
approval of Webvan and shall provide that the Subconsultants shall perform their
respective portions of the DC Project work in accordance with all applicable
provisions of this Contract and the other Contract Documents. Webvan's approvals
shall not, however, make Webvan a party to any such agreement. Bechtel shall
direct and coordinate the work of its Subconsultants and shall be responsible
for the work performed by its Subconsultants and the compensation payable to its
Subconsultants. Notwithstanding anything to the contrary in this Contract,
Webvan's consent to any Subconsultant shall not in any way relieve Bechtel of
any duty, liability or responsibility to Webvan for the Design Services (defined
in Section 3.1) provided by Bechtel or any of its Subconsultants.
2.3.4.3 Bechtel and the applicable Subconsultants shall sign all
Construction Documents and other design documents prepared by or caused to be
prepared by Bechtel under this Contract.
2.3.4.4 Bechtel shall cooperate with Webvan during Development of
the DC Projects to effect cost savings as deemed appropriate by Webvan without
unnecessarily altering established Project scope or quality. Bechtel shall
perform value-engineering concurrent with the design process to ensure that
building systems, materials, construction methods, Operating Equipment and
costing are properly considered. Bechtel shall seek to achieve construction
efficiency during the design process and capture savings for Webvan to the
extent reasonably possible.
2.3.4.5 Bechtel shall prepare and submit a critical path or
network construction schedule in form and substance satisfactory to Webvan for
the timing of the various components of the Development of each DC Project,
which shall show in detail the various major activities to be undertaken in
connection with each such DC Project (including demolition, design, bidding,
construction, assembly, installation, start-up and testing phases of the DC
Project, including the obtaining of all governmental approvals and permits for
use and occupancy) and the approximate timing of the commencement and completion
of such activities. Each such DC Project schedule shall also include at least a
general indication of the various activities that Bechtel expects to undertake
in connection with the DC Project and the approximate timing of the commencement
and completion of such activities. The parties acknowledge that each such DC
Project schedule will be critical in allowing the parties to conceptualize and
monitor the Development of the Project, and Bechtel shall use its best efforts
to prepare and regularly update each DC Project schedule so as to be as detailed
and accurate as possible. Each such DC Project schedule, as revised from time to
time and approved by Webvan, is referred to herein as a "PROJECT SCHEDULE".
2.3.4.6 All design approvals required by Webvan shall be in
writing. The approval by Webvan of any design document required by this Contract
(including, without limitation, the Schematic Design Documents, the Design
Development Documents, and the Construction Documents) shall not constitute a
waiver by Webvan or require Webvan to relinquish any of its rights under this
Contract, nor shall it relieve Bechtel of any of its obligations or liabilities
for the technical or professional adequacy of its services as described in this
Contract.
2.3.4.7 If any defect in any DC Project work arises on or before
the [*] anniversary of the date of Substantial Completion of the DC Project as a
result of any error or omission in the performance of Design Services, then
(provided that Webvan gives Bechtel notice of such defect on or before such [*]
anniversary) Bechtel shall, within ten (10) business days after receipt of such
written notice (or such longer time as may reasonably be necessary to correct
such defect) and at no cost
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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to Webvan, (i) perform all Design Services to remedy such errors and omissions,
including, without limitation, the development and preparation of additional
Construction Documents in accordance with this Contract to correct such errors
and omissions, and (ii) provide all Construction Services (including, without
limitation, all labor, equipment and materials at the applicable DC Property)
necessary (a) to cause the DC Project to comply in all respects with such
corrective Construction Documents and (b) to alter, repair, replace and/or
restore DC Project work (including, without limitation, Operating Equipment) and
the applicable DC Property damaged, destroyed or rendered unusable (in Webvan's
reasonable judgment) as a result of any such errors or omissions in the
performance of Design Services under this Contract. If Bechtel is required to
remedy any such defects, errors and omissions under the foregoing sentence, then
all Design Services and Construction Services provided by Bechtel to remedy such
defects, errors and omissions shall themselves be subject to the foregoing
remedial obligation. If, therefore, any defect in such corrective Design
Services and/or Construction Services arises within [*] Bechtel shall, within
ten (10) business days after receipt of a written notice of such further defect
(or such longer time as may reasonably be necessary to correct such defect)
perform such additional Design Services and provide such additional Construction
Services as may be necessary to correct such further defect as provided in the
foregoing provisions of this Section 2.3.4.7. If Bechtel fails promptly to
correct any such defects within the foregoing time periods, then Webvan may
(without affecting Bechtel's obligations or liability hereunder) correct, or
cause to be corrected, such defects and charge all related costs to Bechtel,
together with interest (accruing from the date fifteen (15) days following the
date of Webvan's invoice to Bechtel for such costs) at a rate (the "DEFAULT
RATE") equal to the lesser of (A) a simple per annum interest rate equal to four
percent (4%) above the prime lending rate quoted from time to time to
substantial and responsible commercial borrowers on 90-day loans by the Bank of
America, N.T.&S.A., San Francisco, California, or (B) the maximum rate permitted
by applicable Law, until Bechtel has paid such costs.
2.4 Reserved.
2.5 Construction Services. Bechtel shall provide all work and furnish all
labor, services, materials and equipment necessary to construct and complete, in
a good and workmanlike manner, each of the DC Projects (including, without
limitation, the procurement, assembly, installation, testing and calibration of
all Operating Equipment), as described and reasonably inferable from the
approved Construction Documents for such DC Projects. Bechtel shall also assist
Webvan with (i) planning and coordinating building systems and equipment and
Operating Equipment pre-operational tests, start-up performance tests, on-site
observation and troubleshooting, (ii) notifying vendors regarding necessary
modifications, if any, to equipment, and (iii) coordinating the services to be
provided by manufacturers in adjusting, calibrating and verifying the correct
installation of their equipment. Upon Bechtel's receipt, after completion of the
Construction Documents and Webvan's approval of the Project Schedule and Project
Budget for a DC Project, of a written request by Webvan substantially in the
form of Appendix 2.5A attached hereto and made a part hereof (a "REQUEST TO
SOLICIT BIDS"), Bechtel shall solicit bids for such work from Subcontractors (as
defined in Section 2.5.8) pursuant to the bidding and approval process more
particularly described in Section 2.5.8. Based on Subcontractor bids approved
pursuant to Section 2.5.8, Bechtel shall deliver to Webvan for Webvan's approval
a completed Notice to Proceed for such DC Project. If Webvan and Bechtel are
unable to agree upon the terms of a Notice to Proceed or if Bechtel fails to
deliver to Webvan a completed Notice to Proceed within thirty (30) days after
the date of Webvan's Request to Solicit Bids, then Webvan may, at Webvan's
election and in Webvan's sole discretion, rescind its request for such work and
obtain performance of such work by others. Bechtel
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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shall undertake the construction of only those DC Projects authorized in writing
by Webvan in a Notice to Proceed. Bechtel shall perform all Construction
Services (as defined in Section 3.1) specified in a Notice to Proceed in
accordance with this Contract (including the General Conditions for Construction
attached hereto as Appendix 2.5 and made a part hereof (the "GENERAL
CONDITIONS") and all other appendices attached hereto), the applicable approved
Construction Documents and all applicable Change Orders (as defined below in
Section 2.5.4) executed by Webvan and Bechtel. Bechtel shall achieve Substantial
Completion of such work on or before the date specified in such Notice to
Proceed, at a cost not exceeding the Budgeted Cost (defined in Section 2.5.1)
stated in such Notice to Proceed, subject to adjustment by Change Orders
executed by Webvan in accordance with Section 2.5.4.1. The "CONTRACT DOCUMENTS"
for a DC Project shall consist of this Contract, the applicable approved
Construction Documents, and Change Orders thereto executed by Webvan, and the
Notice to Proceed. As used herein, the term "SUBSTANTIAL COMPLETION" of a DC
Project shall mean that (i) the Development of the DC Project has been completed
in accordance with the applicable Contract Documents (including, without
limitation, the procurement, assembly, installation, calibration and testing of
all Operating Equipment and the confirmation that the materials handling and
distribution Operating Equipment meets the Performance Standards as provided in
Section 1.2) to the extent sufficient for Webvan to occupy and utilize the DC
Project in a manner consistent with the Contract Documents, (ii) Bechtel has
issued and Webvan has approved (such approval not to be unreasonably withheld) a
certificate of Substantial Completion for the DC Project, and (iii) Bechtel has
delivered to Webvan all required permits and approvals with respect to the DC
Project from the appropriate governmental authorities, including all
certificates and approvals (including food, health and safety permits and
approvals) necessary for Webvan to use and occupy the DC Project in a manner
consistent with the Contract Documents.
2.5.1 Budgeted Cost. The "BUDGETED COST" for the Development of a DC
Project shall equal the sum of (i) the Approved Cost of the Work for such DC
Project, plus (ii) the Contingency Amount (defined in Section 2.5.1.2 below)
based on such Approved Cost of the Work. Bechtel shall specify Bechtel's
proposed Budgeted Cost, estimated Cost of the Work (defined in Section 2.5.5
below), Base Contingency (defined in Section 2.5.1.2) and any requested Excess
Contingency (also defined in Section 2.5.1.2) for the Development of a
particular DC Project in Bechtel's Notice to Proceed for such DC Project. The
estimated Cost of the Work for a DC Project shall be determined by adding (a)
the sum of all accepted Subcontractor bids for the Cost of the Work and (b) the
General Work Requirements Amount (defined in Section 2.5.3 below). The estimated
Cost of the Work for a DC Project specified in the Notice to Proceed approved
and executed by Webvan for such DC Project is referred to herein as the
"APPROVED COST OF THE WORK".
2.5.1.1 If the actual Cost of the Work is less than the Budgeted
Cost, then (except as otherwise expressly provided in Section 5.6) all savings
shall benefit Webvan. If the actual Cost of the Work is more than the Budgeted
Cost, then Bechtel shall pay such excess from its own funds, Webvan shall not be
required to pay any part of such excess, and Bechtel shall have no claim against
Webvan on account thereof. Without limiting the generality of the foregoing, the
Budgeted Cost for a particular DC Project shall apply only with respect to the
DC Project in question. Any savings of the Cost of the Work for a given DC
Project under the applicable Budgeted Cost shall not be offset or credited to
reduce the Budgeted Cost of any other DC Project, and any excess of the Cost of
the Work for a given DC Project over the applicable Budgeted Cost shall not be
applied to increase the Budgeted Cost of any other DC Project. The Approved Cost
of the Work and the Budgeted Cost for a DC Project may be modified only as
expressly provided in Change Orders executed by Webvan for such DC Project in
accordance with Section 2.5.4.1, 2.5.11 or 2.5.13.
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2.5.1.2 The "CONTINGENCY AMOUNT" for a DC Project shall equal the
sum of the Base Contingency for such DC Project plus any Excess Contingency
specified in the Notice to Proceed for such DC Project executed by Webvan. The
"BASE CONTINGENCY" for a DC Project shall equal (i) [*] of the Approved Cost of
the Work for each of the first [*] DC Projects for which Webvan has executed a
Notice to Proceed and (ii) [*] of the Approved Cost of the Work for each
additional DC Project. In addition to the Base Contingency, Bechtel may request
that Webvan approve an additional contingency amount (the "EXCESS CONTINGENCY")
for a particular DC Project. Notwithstanding anything to the contrary in any
Contract Document (including, without limitation, any Notice to Proceed), the
Excess Contingency for any DC Project shall in no event exceed [*] of the
Approved Cost of the Work for such DC Project. An Excess Contingency may only be
requested by Bechtel and shall only be deemed approved by Webvan if such Excess
Contingency is expressly identified in the Notice to Proceed executed both by
Bechtel and by Webvan for a DC Project. Webvan shall not unreasonably withhold
its approval of any Excess Contingency requested by Bechtel.
2.5.2 Bechtel Fee. As used herein, the "BECHTEL FEE" is defined to be
the amount equal to [*] of the actual Cost of the
Work of a given DC Project (except as provided in the following sentence),
subject to the applicable Budgeted Cost (as adjusted by Change Orders executed
by Webvan in accordance with Section 2.5.4.1). Notwithstanding the foregoing,
for purposes of calculating the Bechtel Fee, [*].
2.5.3 General Work Requirements Amount. Appendix 2.5.3 to this Contract
describes the general categories of Bechtel's General Work Requirements. Prior
to establishing the Budgeted Cost for a DC Project, Webvan and Bechtel shall
agree upon a schedule setting forth a more detailed, line item description of
each of such categories and an estimated amount that may be charged for General
Work Requirements (the "GENERAL WORK REQUIREMENTS AMOUNT").
2.5.4 Change in the Work. Without invalidating this Contract, Webvan may
from time to time order a change in the work described in the Contract Documents
for any given DC Project. The Cost of the Work shall be adjusted accordingly
based on the additive or deductive nature of any such change in the work in
accordance with this Section 2.5.4.
2.5.4.1 Webvan shall initiate a change in the work described in
the Contract Documents by preparing a written change order request ("CHANGE
ORDER REQUEST") setting forth in detail the nature of the requested change. On
or before the twenty-first (21st) day following Bechtel's receipt of a Change
Order Request, Bechtel shall (a) complete the Change Order Request setting forth
in detail, with a suitable breakdown, (i) the increase or decrease in the Cost
of the Work as a consequence of the change, (ii) the revised time for the
completion of all other affected work, and (iii) any adjustment in the date of
Substantial Completion or the amount of the Budgeted Cost of the DC Project
attributable to the change in the work, and (b) submit the completed Change
Order Request to Webvan for Webvan's written approval and execution. When Webvan
has approved in writing and executed such a completed Change Order Request, such
Change Order Request shall constitute a "CHANGE ORDER", and Bechtel shall
undertake the change in the work described therein. Bechtel shall prepare a
Change Order summary each month, incorporating all Change Orders that Webvan has
approved in writing and executed during that month. Each Change Order summary
shall include all changes in the Budgeted Cost, if any, and revisions to the
date of Substantial Completion, if applicable. The Budgeted Cost and the date of
Substantial Completion for a DC Project shall not be adjusted except by a
written Change
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Order executed by Webvan in accordance with this Section 2.5.4.1.
Notwithstanding anything to the contrary in any Contract Documents, however, in
no event shall the Budgeted Cost for any DC Project be increased, nor shall the
date of Substantial Completion for any DC Project be extended, on account of
Change Orders to correct errors or omissions in the Construction Documents for
such DC Project.
2.5.4.2 Bechtel shall submit all Subcontractor breakdowns for any
fixed overhead, labor and profit rates related to that portion of the DC Project
work covered by any Change Order ("CHANGE ORDER WORK") which has been included
in the Subcontractor's Subcontract. The cost for any Change Order Work shall not
exceed the applicable fixed rates, overhead and fees listed in any such
Subcontracts.
2.5.4.3 If Webvan and Bechtel are unable to agree (i) on a
proposed Change Order cost or (ii) whether work required by Webvan constitutes
part of the DC Project work or Change Order Work, then Bechtel shall submit a
Change Order Request which sets forth a "not-to-exceed" cost for the proposed
change in the DC Project work, as well as the information required by clauses
(i), (ii) and (iii) in Section 2.5.4.1, above. Webvan may then direct Bechtel to
proceed with such portion of the DC Project work or such Change Order Work on
such "not-to-exceed" cost basis with Bechtel accounting for the DC Project work
on a time and material basis. If the dispute over such Change Order Work
concerns cost (and not whether the work requested by Webvan already constitutes
part of the DC Project work), then, promptly following completion of such Change
Order Work, Webvan and Bechtel shall execute a Change Order which sets forth the
cost of the Change Order Work as the lesser of (x) such not-to-exceed cost or
(y) the actual cost computed on a time and material basis, and the Budgeted Cost
shall be adjusted accordingly. Webvan reserves the right to audit all Bechtel
and Subcontractor records regarding such Change Orders. If Bechtel submitted a
Change Order Request because Webvan and Bechtel could not agree on whether or
not certain work required by Webvan constituted part of the DC Project work or
constituted Change Order Work, then Webvan and Bechtel shall attempt to resolve
that issue as set forth in Section 2.5.12 within twenty-one (21) days after the
commencement of such disputed work. If Webvan and Bechtel are unable to agree on
a change in the date of Substantial Completion for any portion of the DC Project
work, but the Change Order is otherwise acceptable to Webvan and Bechtel, then
Bechtel shall commence the Change Order Work as directed by Webvan. If, within
twenty-one (21) days following such commencement, Webvan and Bechtel have not
agreed on a change in the applicable date of Substantial Completion, then Webvan
and Bechtel shall submit that issue to dispute resolution as set forth in
Section 2.5.12.
2.5.4.4 Notwithstanding anything in any Contract Document to the
contrary, no action, conduct, omission, prior failure or course of dealing by
Webvan shall act to waive, modify, or alter the requirement that Change Orders
must be in writing signed by Webvan, and that such written Change Orders are the
exclusive method for effecting any change to DC Project work, the Cost of the
Work, date of Substantial Completion of the DC Project or the Budgeted Cost;
provided, however, that Webvan's Vice President of Distribution, or any Webvan
personnel specifically designated by Webvan's Vice President of Distribution in
a written notice to Bechtel with respect to a particular DC Project, shall have
the right to enter into oral Change Orders with Bechtel for such DC Project so
long as (i) any such Change Order does not increase the Budgeted Cost for the DC
Project by more than Thirty Thousand Dollars ($30,000) and does not extend the
date for Substantial Completion of the DC Project, and (ii) within forty-eight
(48) hours after the parties have entered into such an oral Change Order, the
terms of such Change Order are confirmed in a written Change Order executed by
Bechtel and Webvan. Bechtel understands and agrees that the Cost of the Work,
date of Substantial Completion of the DC Project, and the Budgeted Cost cannot
be changed by implication, oral agreements (except as specified in the preceding
sentence), actions, inactions, course of conduct, or constructive change order.
Bechtel shall
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have no obligation to comply with any oral Change Order Request that Bechtel in
good faith believes does not comply with the requirements of the foregoing
clause (i) or that Bechtel cannot readily determine complies with such
requirements.
2.5.5 Costs to be Reimbursed. The term "COST OF THE WORK" shall mean
reasonable costs necessarily incurred in the proper performance of Construction
Services for the DC Project work which are actually incurred by Bechtel. Such
costs shall include the items set forth in this Section 2.5.5, subject to
Section 2.5.6:
2.5.5.1 The reasonable relocation, travel (coach or equivalent
class only) and subsistence expenses (or per diem as applicable) that Bechtel
employees incur in performing Construction Services for the DC Project work, in
accordance with reasonable policies and procedures established by Bechtel.
2.5.5.2 Cost of all materials, supplies and equipment (including
Operating Equipment) incorporated in the DC Project work, including costs of
transportation thereof, excess materials and supplies, and a reasonable
allowance for waste and spoilage.
2.5.5.3 Payments made by Bechtel to Subcontractors providing
Construction Services for DC Project work performed pursuant to written
Subcontracts entered into pursuant to this Contract.
2.5.5.4 Cost, including transportation and maintenance, of all
materials, supplies, equipment (including, without limitation, any computers and
other office equipment), temporary facilities and hand tools purchased by
Bechtel to perform the DC Project work which are consumed in the performance of
the DC Project work, and the cost (less salvage value) of such items used to
perform the DC Project work, but not consumed in the performance of the DC
Project work. In the latter of the two situations described in the immediately
preceding sentence, Bechtel shall become the owner of such items upon completion
or termination of the DC Project work. Webvan may, at its discretion, retain
ownership of those items not consumed in the performance of the DC Project work
or may direct Bechtel to sell or buy such items and credit the Cost of the Work
by the amount of the proceeds which would then determine the salvage value
described above. Bechtel shall provide Webvan with a schedule indicating the
then current inventory of all construction equipment, hand tools, and temporary
facilities, showing original cost (as amended from time to time, the "EQUIPMENT
SCHEDULE"). Bechtel shall amend the Equipment Schedule by deleting all items
consumed and adding all items purchased during the course of the DC Project
work. Bechtel shall maintain a current Equipment Schedule located at each DC
Project office for review by Webvan for equipment whose individual cost is One
Thousand Dollars ($1,000) or more.
2.5.5.5 Rental charges for all necessary machinery and equipment,
exclusive of hand tools, used at the site of the DC Project work, whether rented
from Bechtel or others, including installation, minor repairs and replacements,
dismantling, removal, transportation and delivery costs thereof.
2.5.5.6 Costs of premiums for insurance that Bechtel is required
to maintain pursuant to Section 7 hereof, deductibles thereunder not exceeding
Ten Thousand Dollars ($10,000) per occurrence, and costs of Subcontract bonds.
Bechtel shall have the right to require that any Subcontractor be bonded if such
requirement is commercially reasonable under the circumstances. With respect,
however, to any Subcontractor that Webvan has specified as the only
subcontractor that Bechtel is authorized to engage to perform particular
Services, Bechtel shall not have the right to require bonding
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of such Subcontractor if Webvan agrees that any delay in the performance of such
Services by such Subcontractor will constitute an Excusable Delay (as defined in
Section 2.5.13).
2.5.5.7 Sales, use or similar taxes imposed by any governmental
authority which are related to the DC Project work and for which Bechtel is
liable.
2.5.5.8 Permit fees, royalties approved in advance by Webvan, and
deposits lost for causes other than Bechtel's fault or negligence .
2.5.5.9 Construction temporary utilities costs, including, but not
limited to, the cost of water, gas and electricity consumed in construction of
the DC Project.
2.5.5.10 Minor expenses such as telegrams, long distance telephone
calls, telephone service at the site, overnight courier service, and similar
petty cash items in connection with the DC Project work.
2.5.5.11 The cost of removal of all debris from the site of the DC
Project work, unless such cost is otherwise included in the Cost of the Work
hereunder.
2.5.5.12 Costs incurred due to an emergency affecting the safety
of persons and property, unless arising out of the fault or negligence of
Bechtel or its Subcontractors, employees or agents.
2.5.5.13 The cost of on-site security necessary to protect the
materials, supplies, equipment and DC Project improvements at the DC Project
site, including any watchmen, temporary fencing, or other security services
reasonably required to protect the DC Project work.
2.5.5.14 Other costs incurred in the performance of the DC Project
work, if and to the extent approved in advance in writing by Webvan.
2.5.5.15 Unit Rates as set forth in Appendix 5.1.2 for Bechtel
employees performing Construction Services for DC Projects, it being understood
that such rates are deemed to include all benefits and other payroll burden and
overhead.
2.5.6 Costs Not to be Reimbursed. The term "COST OF THE WORK" shall not
include any of the items set forth in this Section 2.5.6.
2.5.6.1 Salaries, bonuses, benefits and other compensation of any
Bechtel employees or personnel, other than as expressly provided in Section
2.5.5.15.
2.5.6.2 Expenses of Bechtel's principal and branch offices other
than the DC Project field office.
2.5.6.3 Any part of Bechtel's capital expenses, including interest
on Bechtel's capital employed for the DC Project work.
2.5.6.4 Except as specifically provided in Section 2.5.5.5, rental
cost of machinery and equipment.
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2.5.6.5 Overhead or general expenses of any kind, unless expressly
included in Section 2.5.5.
2.5.6.6 Costs incurred by Bechtel, any Subcontractor,
Subconsultant, or anyone directly or indirectly engaged by any of them, as a
result of the negligence of any such parties or of anyone for whose acts any of
them may be liable, including but not limited to, the costs of correction of
defective or non-conforming DC Project work, disposal of materials and equipment
wrongly supplied, or making good any damage to property, subject to Section
7.2.5 hereof concerning waiver of subrogation rights.
2.5.6.7 The cost of any item not specifically and expressly
included in the items described in Section 2.5.5, unless previously specifically
approved in writing by Webvan.
2.5.6.8 Losses and expenses sustained by Bechtel, Subcontractors
or Subconsultants, not compensated by insurance or otherwise, if such losses or
expenses arise out of the infidelity or dishonesty on the part of an employee of
Bechtel or a Subcontractor or Subconsultant.
2.5.6.9 Losses and expenses not covered by insurance, if Bechtel
shall fail to obtain and/or maintain in effect the insurance required by the
Contract Documents, insurance deductibles in excess of Ten Thousand Dollars
($10,000) per occurrence, and coinsurance amounts.
2.5.6.10 Costs, losses, expenses, bonds and/or insurance incurred
by reason of Bechtel's general operations which Bechtel would customarily incur
or carry without reference to Bechtel's obligations under this Contract; and,
except as otherwise agreed to in writing by Webvan, insurance costs for any type
or amount of insurance other than the insurance Bechtel is required to carry
pursuant to Section 7 hereof.
2.5.6.11 Costs in excess of the Budgeted Cost, as it may be
adjusted pursuant to Section 2.5.4.
2.5.6.12 Intentionally omitted.
2.5.6.13 Provided that Webvan has paid Bechtel all amounts then
properly due and payable under this Contract, the Cost of the Work shall not
include any sums spent or costs incurred by Bechtel, or for which Bechtel is
liable or obligated, with respect to any Mechanics' Liens (defined in Section
4.2.2) filed or served by any Subcontractor or Subconsultant because of
Bechtel's failure or refusal to pay any such Subcontractor or Subconsultant,
whether or not any such failure or refusal is wrongful or as a result of a bona
fide dispute between Bechtel and any such Subcontractor or Subconsultant,
including, without limitation, any amounts paid or incurred to discharge or
release such Mechanics' Liens (whether paid to such claimant or other party, or
as attorneys' fees or otherwise), and all costs of any bonds obtained to clear
any such Mechanics' Liens.
2.5.6.14 Fees, compensation, costs or expenses of any
Subconsultant or any other person or entity providing Consultant Services or
Design Services (defined in Section 3.1), it being the intention of Webvan and
Bechtel that all such fees, compensation, costs and expenses for Consultant
Services and Design Services shall be paid only as provided in Section 5.1 and
Section 5.3, respectively.
2.5.6.15 Costs resulting from any errors or omissions in the
Construction Documents for any DC Project.
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2.5.7 Discounts, Rebates and Refunds. Bechtel shall use best efforts to
purchase all materials and equipment (including, without limitation, Operating
Equipment) to be included in the Cost of the Work for any DC Project at the
lowest prices commercially available to Bechtel given Bechtel's position as a
bulk purchaser of such materials and equipment. All trade discounts, rebates and
refunds, and all returns from sale of surplus materials and equipment, shall
accrue to Webvan.
2.5.8 Subcontracts and Other Agreements. All portions of the DC Project
work that Bechtel does not perform with its employees shall be performed
pursuant to written subcontracts and, where applicable, sub-subcontracts or
material purchase orders (collectively, "SUBCONTRACTS") with licensed or
otherwise properly qualified subcontractors, sub-subcontractors, laborers,
architects, design professionals, engineers, surveyors, consultants, equipment
lessors, and material suppliers (collectively, "SUBCONTRACTORS"). It is the
intention of the parties hereto that Bechtel shall act as a general contractor
in connection with Bechtel's performance of the Construction Services hereunder.
Bechtel shall secure at least three (3) qualified bids from Subcontractors on
each item in the construction of a DC Project (excluding those included in the
General Work Requirements), including, without limitation, those performed by
Bechtel, unless otherwise agreed to by Webvan. Bechtel shall promptly deliver to
Webvan for each DC Project a summary of all bids received, together with
Bechtel's analysis and recommendations for awards. In addition, upon Webvan's
request from time to time, Bechtel shall deliver to Webvan complete copies of
all bids received and all other pertinent data. Webvan may attend all bid
openings. Bechtel shall keep all bid results confidential. Bechtel shall certify
that, to the best of Bechtel's knowledge, each bid is bona fide, complete and
reasonable. As part of its bid analysis, Bechtel shall notify Webvan of any bid
that deviates from the Contract Documents. Webvan's approval of a bid on a
Subcontract shall not constitute approval of a deviation or omission from the
Contract Documents. Any approved deviation or omission from the Contract
Documents shall occur only by means of a Change Order.
2.5.8.1 All Subcontractors and Subcontracts for the procurement,
assembly, installation, start-up, testing and calibration of Operating Equipment
and any additional refrigeration systems or equipment shall be subject to
Webvan's prior written approval. In addition, Webvan reserves the right to
reject any Subcontractor or any bid of a Subcontractor at any time prior to
award. Webvan shall have five (5) business days after it receives Bechtel's
written recommendations to approve or disapprove Bechtel's recommendations for
all Subcontractors and Subcontracts for the procurement, assembly, installation,
start-up, testing and calibration of Operating Equipment and other refrigeration
systems and equipment and to reject Bechtel's recommendations for any other
Subcontractors or bids. After Webvan has approved or not rejected (as
applicable) the award of any such Subcontract, Bechtel shall contract, solely in
its own name and behalf, and not in the name or behalf of Webvan, with the
specified Subcontractor. Bechtel's Subcontract form shall provide that the
Subcontractor shall perform its portion of the DC Project work in accordance
with all applicable provisions of this Contract and the other Contract
Documents. In addition, all Subcontracts relating to any Operating Equipment or
refrigeration system or equipment shall be submitted to Webvan for approval
prior to execution by Bechtel. Webvan's approval shall not make Webvan a party
to any Subcontract.
2.5.8.2 All Subcontracts shall, so far as practicable, contain
unit prices, markups for overhead and profit, and any other feasible formula for
use in the determination of the cost of changes in the DC Project work and shall
contain (where applicable) warranties, conditions and covenants which are
substantively similar to the Contract Documents. Upon request by Webvan, Bechtel
shall furnish Webvan with copies of all warranties provided by vendors,
manufacturers, laborers and material suppliers relating to the Subcontracts and
will deliver all warranties at Substantial Completion. Bechtel shall hold all
Subcontractors, including all persons directly or indirectly employed by them,
responsible
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for any damages due to breach of contract, negligence and willful misconduct and
shall use reasonable efforts diligently to recover such damages. All
Subcontracts shall contain a clause approved by Webvan allowing for the direct
assignment of each Subcontract to Webvan upon termination or full performance of
this Contract. Each Subcontract may then be further assigned to a new general
contractor if Webvan so elects. Notwithstanding any such delivery of warranties
or assignment of Subcontracts, however, Bechtel shall reserve rights of recourse
thereunder to the extent necessary to permit Bechtel to enforce such warranties
and Subcontracts in the event that Webvan makes any claim against Bechtel with
respect to goods or services that are the subject of such warranties and
Subcontracts. The foregoing reservation of rights by Bechtel shall not, however,
in any way impair Webvan's right to pursue direct recourse against the makers of
such warranties and the Subcontractors under such Subcontracts.
2.5.9 Schedule of Values. Subject to the approval of Webvan, Bechtel
shall prepare (at such time as Bechtel has sufficient information) a schedule of
values which divides the Cost of the Work for the various trades, Subcontracts,
suppliers, materials, equipment (including Operating Equipment), labor or other
recognized industry trade breakdowns ("SCHEDULE OF VALUES"). Bechtel warrants
that the breakdowns so prepared will be accurate breakdowns of Bechtel's
estimated costs used to determine the Budgeted Cost. The Schedule of Values, as
approved by Webvan, shall be used as the basis for Bechtel's applications for
payment.
2.5.10 Warranty. Bechtel warrants to Webvan that (a) materials and
equipment (including Operating Equipment) furnished under this Contract will be
of good quality and new (unless otherwise required or permitted by the Contract
Documents) and will be assembled and installed in accordance with all vendors'
and manufacturers' instructions and specifications, (b) each DC Project will be
free from defects, and (c) each DC Project will conform with the requirements of
the applicable Contract Documents. DC Project work not conforming to these
requirements, including substitutions not properly approved and authorized,
shall be considered defective. All guaranties and warranties of materials and
equipment (including Operating Equipment) used or incorporated into the DC
Projects shall be assigned and delivered by Bechtel to Webvan upon demand, or
without demand upon Final Completion of each DC Project. The warranties in
Contract Documents or assigned to Webvan (i) shall survive the completion of the
Services for each DC Project and the termination of the Contract Documents, and
(ii) shall inure to the benefit of Webvan's successors and assigns. Without
limiting any other rights or remedies of Webvan under this Contract, if Webvan
provides written notice of any defect in a DC Project in violation of the
foregoing within [*] after the date of Substantial Completion of the DC
Project, Bechtel shall, within ten (10) business days after receipt of such
written notice of such defect (or such longer time as may reasonably be
necessary to correct such defect), furnish, at no cost to Webvan, all labor,
equipment and materials at the applicable DC Property (as defined in Section
5.2.2.8) necessary to correct such defect and cause the DC Project to comply
fully with the foregoing warranties. If Bechtel is required to remedy any such
defect under the foregoing sentence, then all labor, equipment and materials
provided by Bechtel to remedy such defect shall themselves be subject to the
foregoing warranties. If, therefore, Webvan provides written notice of any
defect in such corrective labor, equipment, or materials within the earlier to
expire of [*], then Bechtel shall, within ten (10) business days after
receipt of such written notice of such further defect (or such longer time as
may reasonably be necessary to correct such defect), furnish, at no cost to
Webvan, all labor, equipment and materials at the applicable DC Property
necessary to correct such further defect and cause the DC Project to comply
fully with the warranties provided in this Section 2.5.10. If Bechtel fails to
promptly correct any such defects within the foregoing time periods, then Webvan
may (without voiding Bechtel's warranties) correct, or cause to be corrected,
such defects and
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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charge all related costs to Bechtel, together with interest at the Default Rate
until Bechtel has paid such costs.
2.5.11 Claims.
2.5.11.1 Bechtel must give notice of any claim on or before the
earlier of (i) the twenty-first (21st) day after Bechtel first recognizes the
condition giving rise to the claim, or (ii) the delivery to Webvan of Bechtel's
Final Application for Payment. Claims must be made by written notice. Failure to
deliver any such notice or request within the required period shall constitute
an irrevocable waiver of any such claim. If a claim has been implemented by
Change Order, no further consideration will be given to such claim.
2.5.11.2 Pending final resolution of a claim (whether by
mediation, arbitration, or litigation), unless otherwise agreed in writing,
Bechtel shall proceed diligently with performance of this Contract and Webvan
shall continue to make payments in accordance with the Contract Documents.
2.5.11.3 If conditions are encountered at a DC Property which are
(i) subsurface or otherwise concealed physical conditions which differ
materially from those indicated in the Contract Documents or (ii) unknown
physical conditions of an unusual nature which differ materially from those
ordinarily found to exist and generally recognized as inherent in construction
activities of the character provided for in the Contract Documents, then notice
by the observing party shall be given to the other party promptly, before such
conditions are disturbed, and in no event later than twenty-one (21) days after
first observance of the conditions. Webvan will promptly investigate such
conditions and make its determination. If Bechtel is opposed to such
determination, Bechtel must make a claim within twenty-one (21) days after
notice of Webvan's decision.
2.5.11.4 If Bechtel wishes to make a claim for an increase in the
applicable Budgeted Cost, Bechtel shall give written notice within the 21-day
time period set forth Section 2.5.11.1 above to Webvan, and Webvan shall be
given reasonable time to evaluate the condition giving rise to such claim prior
to the time Bechtel proceeds to execute the applicable DC Project work. Prior
notice is not required for claims relating to an emergency endangering life or
property. If Bechtel believes additional cost is involved for reasons including
but not limited to (i) an order by Webvan to stop the DC Project work where
Bechtel was not at fault, (ii) failure of payment by Webvan, (iii) termination
of this Contract by Webvan, (iv) Webvan's suspension of DC Project work, or (v)
other reasonable grounds, such claim shall be filed in accordance with the
procedure established herein.
2.5.11.5 If Bechtel wishes to make a claim for an increase in the
Contract Time, written notice shall be given to Webvan within the time period
set forth above in Section 2.5.11.1. Bechtel's claim shall include an estimate
of cost and the probable effect of delay on progress of the DC Project work. In
the case of a continuing delay, only one claim is necessary.
2.5.12 Resolution of Claims and Disputes. If a claim by either party
against the other has not been resolved, the party making the claim shall,
within ten (10) days after the other party's preliminary response, take one or
more of the following actions: (i) submit additional supporting data, (ii)
modify the initial claim or (iii) notify the other party that the initial claim
stands.
2.5.12.1 Continued Performance. Notwithstanding any provisions to
the contrary in this Section 2.5.12, if any dispute arises between Webvan and
Bechtel which relates to the Contract Documents or any DC Project work, Bechtel
shall not interrupt the progress of the work or the
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performance of Services regarding any of the Project during the pendency of any
such dispute, unless ordered to do so by Webvan in writing and Webvan shall make
all progress payments for the Cost of the Work incurred by Bechtel other than
disputed amounts. Bechtel must submit claims on or before the earlier of (i) the
twenty-first (21st) day after Bechtel first recognizes the condition giving rise
to such claim, or (ii) the delivery to Webvan of Bechtel's Final Application for
Payment; no additional claim made by Bechtel after an initial claim on the same
matter has been implemented by a Change Order will be considered. Except to the
extent such costs are incurred with respect to the resolution of claims pursuant
to Sections 2.5.11 and 2.5.12 hereof, if either party brings any action or legal
proceeding for an alleged breach of any provision of this Contract, to terminate
this Contract or otherwise to enforce, protect or establish any term or covenant
of this Contract, the prevailing party shall be entitled to recover as a part of
such action or proceeding, or in a separate action brought for that purpose,
reasonable attorneys' fees, court costs, and expert fees as may be fixed by the
court.
2.5.12.2 Mediation of Disputes. All claims between the parties
shall be handled as follows: (i) the parties shall endeavor, in good faith, to
settle a claim in an amicable fashion pursuant to Section 2.5.11 hereof, and
(ii) if the parties are unable to resolve a claim pursuant to Section 2.5.11
within a reasonable period (but in no event longer than forty-five (45) days)
after the claim is submitted to the other party, then the parties shall submit
the claim to non-binding mediation with Jams/Endispute or its successor ("JAMS")
in San Francisco County, California, before having recourse to a judicial forum.
Mediation shall be initiated by the written request of either party and shall be
commenced within five (5) days after delivery of such notice. The mediator shall
be a neutral third party affiliated with and selected by JAMS. Upon request of
the initiating party or JAMS, the other party shall promptly evidence its
consent to the mediation if such consent is required to proceed.
2.5.12.3 Resolution. The resolution of any claim for adjustment to
the applicable Budgeted Cost or Contract Time for a DC Project shall be
documented, promptly after resolution of such claim, in a Change Order executed
by Bechtel and Webvan.
2.5.13 Delays and Extensions of Time. If Bechtel is delayed in the
performance of Construction Services for any DC Project by an Excusable Delay,
then the applicable Contract Time (defined in Section 3.2.2) and Budgeted Cost
shall be adjusted by Change Order for such time and in such amount as is
reasonable and appropriate under the circumstances, as approved by Webvan and
Bechtel, which approvals shall not be unreasonably withheld. No event of
Excusable Delay shall be deemed to have occurred unless Bechtel delivers notice
of a claim of justifiable delay to Webvan within twenty-one (21) days following
the commencement of the delay. Immediately upon commencement of a delay, Bechtel
shall take all steps reasonably available to Bechtel to lessen the adverse
impact of such delay. As used herein, "EXCUSABLE DELAY" means an actual delay in
the performance of Construction Services for any DC Project by Bechtel which is
caused by events beyond the reasonable control of Bechtel despite having made
all reasonable attempts to avoid such delay and to prevent and mitigate the
effects thereof. Such events may include, without limitation, the following:
2.5.13.1 Actions or inactions of Webvan, or of any employee,
agent, representative or separate contractor of Webvan (other than by reason of
the proper and timely exercise of their respective rights, duties and
obligations under the Contract Documents); or
2.5.13.2 Fire, flood, war, embargo, sabotage, earthquake, or by
injunction (not the fault of Bechtel) or other unavoidable damage to the
applicable DC Project not the fault of Bechtel; or
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2.5.13.3 Adverse weather conditions documented by data
substantiating that such weather conditions were abnormal for the period of time
and could not have been reasonably anticipated and had an adverse effect on the
scheduled construction; or
2.5.13.4 General strike, delays (not caused by Bechtel) in
obtaining required governmental permits and approvals, strikes and/or losses
during transportation.
Notwithstanding the foregoing, the financial inability or unwillingness of
Bechtel or any Subcontractor, Subconsultant, vendor or supplier to pay or
perform any obligation shall not be grounds for an Excusable Delay, unless the
Subcontractor, Subconsultant, vendor or supplier asserting such financial
inability was previously designated by Webvan as the sole provider that Webvan
would authorize Bechtel to engage to provide the applicable goods or services.
Claims arising from any Excusable Delay relating to Contract Time, Budgeted Cost
and the Bechtel Fee shall be made in accordance with applicable provisions of
Section 2.5.11; provided, however, that in no event will Bechtel be entitled to
recover from Webvan any damages resulting from such Excusable Delay.
Notwithstanding anything to the contrary contained herein or in any other
Contract Document, Bechtel shall have no remedy for, and shall be responsible
for, any delay in the Development of a DC Project other than an Excusable Delay.
2.6 Procurement
As and when requested by Webvan, Bechtel shall procure furniture, fixtures,
equipment and other personal property (collectively, "FF&E") for the DC Projects
which are not specified in the Construction Documents, the parties acknowledging
that procurement of all Operating Equipment and other goods, materials and
equipment described in any Construction Documents shall be included within
Construction Services and shall not be subject to this Section 2.6. Procurement
of FF&E shall include, without limitation, (a) Bechtel's best efforts to
purchase such FF&E at the lowest prices commercially available to Bechtel, (b)
Bechtel's assembly and installation of FF&E, at Webvan's request, in accordance
with all applicable Laws and manufacturers' and vendors' instructions and
specifications, and (c) Bechtel's transfer to Webvan of title to all FF&E free
and clear of any liens, security interests, claims or encumbrances of any kind.
Bechtel shall execute and deliver to Webvan such bills of sale and other
documents as Webvan may reasonably request to effect such transfers. In
connection with such procurement Bechtel shall also (i) identify and recommend
potential vendors for approval by Webvan, (ii) identify FF&E bulk pricing
strategies and purchase discount, rebate and refund opportunities, (iii) prepare
bid packages, contracts and purchase orders for approval by Webvan and enter
such contracts and execute purchase orders approved by Webvan, and (iii)
schedule, coordinate and supervise the delivery, storage and installation of
such FF&E. Bechtel shall assign to Webvan all warranties, guaranties and
indemnities and shall deliver to Webvan all instructions, operating manuals and
other materials in connection with such FF&E. If Bechtel fails to procure FF&E
in accordance with this Section 2.6, then Bechtel shall correct such improper
procurement at Bechtel's sole cost and expense. Correction of such procurement
shall include, without limitation, Bechtel's purchase, assembly, installation
and transfer, at no cost to Webvan, of replacement FF&E in the manner provided
in the foregoing clauses (a), (b) and (c) of this Section 2.6.
2.7 Training
As and when requested by Webvan, Bechtel shall provide skilled and competent
personnel to assist Webvan with the training of Webvan's operation and
maintenance personnel in proper operations, schedules and procedures for the
maintenance, repair and operation of DCs (including, without limitation, all
building systems and equipment and all Operating Equipment). Bechtel's liability
for any
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deficient Services provided under this Section 2.7 shall be limited to the
re-performance of such Services during the term of this Contract at no
additional charge to Webvan.
3.0 CONTRACT TIME
3.1 Generally. Time is of the essence for Bechtel's performance of Services
under this Contract. Bechtel shall perform all Services as expeditiously as is
consistent with the professional skill and care and the orderly progress of the
Project and shall complete performance as set forth in the executed Notices to
Proceed and approved Project Schedules. All Services described in Section 2.1
regarding program management and Section 2.3 regarding design are referred to
herein collectively as "DESIGN SERVICES". All Services described in Section 2.2
regarding site evaluation and selection, Section 2.6 regarding procurement, and
Section 2.7 regarding training are referred to herein collectively as
"CONSULTANT SERVICES". All Services described in Section 2.5 regarding
construction services are referred to herein collectively as "CONSTRUCTION
SERVICES".
3.2 Construction Services. The time allowed for Substantial Completion of the
Construction Services and all important construction milestones shall be set
forth in the Project Schedules and Notices to Proceed. Final Completion of a
given DC Project shall occur within forty-five (45) days following Substantial
Completion and agreement upon the Punch List. As used herein, "FINAL COMPLETION"
of a DC Project shall occur only when all of the following have occurred: (i)
the performance of the DC Project work has been fully completed (including,
without limitation, all Punch List items), (ii) all final releases, documents
and manuals required by the Contract Documents have been delivered to Webvan,
(iii) all start-up testing, inspection and calibration of building systems and
equipment and Operating Equipment have been completed, and (iv) all other
conditions have been satisfied for making the Final Payment to Bechtel for such
DC Project under Section 5.2.2.9. As used herein, "PUNCH LIST", shall mean a
comprehensive list of minor items to be completed or corrected following
Substantial Completion of the DC Project work, which items shall not materially
affect the use, occupancy or operation of the DC Project (including, without
limitation, the Operating Equipment).
3.2.1 Bechtel shall achieve Substantial Completion of each DC Project
within the time specified therefor in the corresponding Notice to Proceed for
such DC Project.
3.2.2 For purposes of this Contract, "CONTRACT TIME" shall mean the
period of time, including adjustments authorized by approved Change Orders,
allotted in the Contract Documents for the Substantial Completion of a DC
Project. If Bechtel is delayed on the critical path, then the provisions of
Section 2.5.13 shall apply. Bechtel shall advise Webvan of any delay in the
Substantial Completion of the DC Project work and the cause of such delay,
pursuant to Section 2.5.11.5. Bechtel shall take all prudent steps necessary to
minimize the delay and shall diligently proceed to complete the DC Project work
as required by the Contract Documents.
4.0 BECHTEL'S DUTIES AND STATUS
4.1 Standard of Care. Bechtel represents that it is skilled in the
professional callings necessary to perform the Services and acknowledges that
Webvan, not being skilled in such matters, is relying upon the skill and
knowledge of Bechtel. Bechtel accepts the relationship of trust and confidence
established by this Contract and shall exercise its best skill and judgment and
shall cooperate with Webvan to further the interests of Webvan. Bechtel shall
perform the Services under this Contract in accordance with the professional
standard and quality which prevails among reputable, well-qualified, nationally
recognized, licensed design/build general contracting, architectural and
engineering firms performing services of the
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nature and in the locations encompassed within this Contract. All Services shall
be performed by well-qualified, efficient, properly-trained and adequately
supervised Subcontractors, Subconsultants and employees of Bechtel in accordance
with the foregoing professional standards. Nothing contained in this Contract
shall create a contractual relationship between Webvan and such Subconsultants,
Subcontractors, suppliers or third parties. Webvan, however, shall be an express
third party beneficiary of any and all agreements between Bechtel and any such
Subconsultants, Subcontractors, suppliers and third parties entered into with
respect to the Project, and the Subconsultants, Subcontractors, suppliers and
third parties entering into such contractual relationships with Bechtel shall
expressly acknowledge Webvan as such third party beneficiary and shall have,
among other obligations, a professional responsibility and liability to Webvan
as such third party beneficiary.
4.2 Bechtel's Performance of the Contract.
4.2.1 Bechtel shall provide a sufficient and competent organization,
including a Program Director, a Deputy Program Director, Project Managers,
Construction Managers, Project Contracts Managers, Project Engineers, Site
Managers, Construction Superintendents, Construction Supervisors, engineers,
cost and schedule engineers, administrative and clerical personnel, and others,
as the Services may require. The Program Director and the Deputy Program
Director shall represent Bechtel, and communications given by or to either the
Program Director or the Deputy Program Director shall be as binding as if given
by or to Bechtel. Webvan shall have the right to approve of Bechtel's Program
Director, Deputy Program Director, Project Managers, Construction Managers, and
Site Managers for each of the DC Projects. Webvan may require Bechtel to dismiss
from the Project any of Bechtel's personnel whose performance is not
satisfactory, at Webvan's reasonable discretion. Any such dismissed personnel
shall be replaced with personnel reasonably satisfactory to Webvan. Bechtel
shall not replace any of Bechtel's Program Director, Deputy Program Director,
Project Managers, Construction Managers or Site Managers without Webvan's prior
written consent, which consent shall not be unreasonably withheld. If any
personnel engaged in the Project die, become disabled or voluntarily terminate
their employment with Bechtel, then such persons shall be replaced with persons
of equal or better skill and experience. Bechtel shall furnish efficient
business administration and superintendence, and shall use its best efforts to
furnish at all times an adequate supply of workers and materials and to perform
the Services in the best, most expeditious and most economical manner consistent
with the interests of Webvan.
4.2.2 Bechtel shall provide or cause to be provided all design services,
labor, materials, equipment, tools, construction equipment and machinery, water,
heat, utilities, transportation and other facilities and services necessary for
the Development and completion of the DC Projects, whether temporary or
permanent and whether or not incorporated or to be incorporated into the DC
Projects. Bechtel shall perform and complete the Services as described in this
Contract in a good and workmanlike manner, in accordance with the Contract
Documents, and free of any and all mechanics' liens, materialmen's liens, other
liens, encumbrances, stop notices, charges, impositions, garnishments and
attachments upon or against the real property upon which the DC Projects will be
located (collectively, "MECHANICS' LIENS"), the Project, any equipment or
materials (including, without limitation, Operating Equipment), or Webvan.
4.2.3 The design and construction of the DC Projects by Bechtel or any
of its Subconsultants or Subcontractors shall be in conformity in all respects
with all Laws. As of the time that Webvan and Bechtel agree upon the Budgeted
Cost for a DC Project, Bechtel shall have satisfied itself with respect to
visible conditions, then-current public knowledge, matters of record, and all
other then-existing information relevant to the DC Project and available to
Bechtel through the exercise of reasonable
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diligence. Bechtel's agreement to the Budgeted Cost for a DC Project shall be
deemed conclusively to be an acceptance by Bechtel of the foregoing information
and a determination by Bechtel that the Budgeted Cost is just and reasonable
compensation for the Construction Services.
4.2.4 If any disputed claim should arise between Webvan and Bechtel
under this Contract or otherwise concerning the DC Projects (including, without
limitation, any claim under Section 2.5.11), Bechtel shall proceed to perform
the Services as directed by Webvan pending resolution of the dispute. Until any
such disputed claim is resolved, Webvan shall continue to pay Bechtel all sums
due Bechtel which are not in dispute and/or are not directly related to Services
which are in dispute.
5.0 COMPENSATION
5.1 Consultant Services.
5.1.1 Payment.
5.1.1.1 For Consultant Services performed by Bechtel in accordance
with an approved Notice to Proceed, Webvan shall pay Recoverable Costs (defined
in Section 5.1.2 below) to Bechtel on a monthly basis, it being understood that
(i) Webvan shall have no obligation to pay for Recoverable Costs for Consultant
Services which have not been approved in advance by Webvan in a written Notice
to Proceed, and (ii) the maximum amount of Recoverable Costs payable by Webvan
to Bechtel for Consultant Services shall not exceed the stated "not to exceed"
amounts set forth in the approved Notice to Proceed; any charges by Bechtel in
excess of such amounts shall be at no cost to Webvan.
5.1.1.2 On or before the tenth (10th) day of the first month in
which Bechtel is to provide Consultant Services for particular DC Projects,
Bechtel shall submit to Webvan an invoice for each such DC Project of the amount
of Recoverable Costs for Consultant Services that Bechtel reasonably estimates
that it will incur during such first month for such DC Project. On or before the
tenth (10th) day of the second month in which Bechtel is to provide Consultant
Services for each such DC Project and continuing each month thereafter until the
month following the last month in which Consultant Services are provided by
Bechtel for each such DC Project, Bechtel shall submit to Webvan an invoice that
states (a) the estimated amount of Recoverable Costs paid in advance by Webvan
for the prior month, (b) the actual amount of Recoverable Costs incurred by
Bechtel during the prior month, and (c) the amount of Recoverable Costs that
Bechtel reasonably estimates that it will incur during the current month. Each
such invoice shall (1) be in a form reasonably acceptable to Webvan, (2) provide
in reasonable detail the actual amount of time spent daily by each Bechtel
employee, and the total Unit Rate costs allocable to such employee's work for
each day during the prior month, and a reasonable estimate of the work to be
provided by Bechtel employees during the current month, (3) describe in detail
the Recoverable Costs actually incurred by Bechtel during the prior month (and
shall include copies of invoices from the applicable vendors of any FF&E
procured by Bechtel), and a reasonable estimate of the type and amount of
Recoverable Costs that Bechtel will incur during the current month, and (4)
provide a reconciliation of the actual Recoverable Costs incurred by Bechtel
during the prior month against the estimate of the Recoverable Costs paid by
Webvan for such prior month.
5.1.1.3 Notwithstanding anything contained in any invoice
submitted by Bechtel, (a) if the amount of estimated Recoverable Costs paid by
Webvan for any month is greater than the amount of actual Recoverable Costs
incurred by Bechtel during such month (which amount shall be reduced by any
amounts offset or credited by Webvan against such Recoverable Costs on account
of Webvan's prior overpayments, as hereinafter provided), then Webvan shall have
the right either to offset and credit the
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amount of such overpayment against Bechtel's estimate of Recoverable Costs to be
provided during the current month or to require that Bechtel promptly refund to
Webvan the amount of such overpayment; and (b) if the amount of estimated
Recoverable Costs paid by Webvan for any month is less than the amount of actual
Recoverable Costs incurred by Bechtel during such month, then the amount of such
shortfall shall be paid by Webvan to Bechtel at the same time that Webvan pays
Bechtel's reasonable estimate of Recoverable Costs for Consultant Services to be
provided during the following month.
5.1.1.4 Webvan shall pay Bechtel for each monthly invoice
submitted to Webvan within [*] days after Webvan's receipt of such invoice,
unless prior to the expiration of such [*]-day period, Webvan advises Bechtel
that Webvan disagrees with the invoice submitted or disapproves the Consultant
Services performed. If an invoice is in question, Bechtel and Webvan shall
forthwith attempt to resolve the issue. Webvan shall pay the undisputed portion
of each invoice within [*] days after receipt thereof. Undisputed amounts due
and payable to Bechtel shall bear interest, from thirty (30) days after the
applicable invoice was received until paid by Webvan, at the Default Rate. When
requested by Webvan, Bechtel shall submit applicable lien waivers with its
invoices stating that for that specific portion of Consultant Services for which
Webvan has paid all labor, material and subcontractor and subconsultant accounts
have been duly paid. All such lien waivers (other than lien waivers to be
provided promptly following final payments to Subconsultants and Subcontractors)
may be conditioned upon receipt of payment for the invoiced labor and materials.
Upon completion of the Consultant Services set forth in a Notice to Proceed and
promptly after receiving final payment for such Services, Bechtel shall submit
such unconditional lien waivers and payment affidavits as Webvan may reasonably
require.
5.1.2 Recoverable Costs. Bechtel shall be entitled to reimbursement for
the following costs and expenses (collectively, the "RECOVERABLE COSTS"): (i)
the cost of Bechtel employees performing Consulting Services as provided in the
Unit Rate Schedule attached hereto as Appendix 5.1.2 and made a part hereof,
(ii) ordinary and reasonable expenses of relocation, transportation (coach or
equivalent class only), and subsistence (or per diem, as applicable) in
connection with such Consultant Services (excluding travel within the San
Francisco Bay Area or within the other localities in which the DC Projects are
located), in accordance with reasonable policies and procedures established by
Bechtel; (iii) long-distance communications, facsimile communications (long
distance only), courier services, and express mail; (iv) ordinary and reasonable
expenses of reproduction, postage and handling of drawings, specifications and
other documents (not for internal use); (v) if authorized in advance in writing
by Webvan, expense of overtime work by non-exempt employees requiring higher
than regular rates; (vi) ordinary and reasonable expenses of renderings, models
and mock-ups requested in writing by Webvan; (vii) ordinary and reasonable
expenses of photographic production techniques and photography and photo prints
used for a DC Project; (viii) the purchase prices actually paid by Bechtel for
FF&E title to which has been transferred to Webvan in accordance with Section
2.6; and (ix) ordinary and reasonable fees and costs incurred by Bechtel's
approved Subconsultants in performing Consultant Services, which fees and costs
of Subconsultants shall be evidenced by invoices (copies of which are provided
to Webvan) providing in reasonable detail the actual amount of time billed by
the employees of such Subconsultants, a description of the work performed, and a
detailed description of any and all approved Recoverable Costs incurred by such
Subconsultants. Any and all other costs and expenses incurred by Bechtel in
performing the Consultant Services which are not covered in the preceding
sentence shall require the prior written approval of Webvan and unless such
prior approval is given, Webvan shall not reimburse Bechtel for such costs and
expenses. Bechtel shall review all accounts for reimbursables of its
Subconsultants and Subcontractors before submitting the same to Webvan for
payment and confirm to Webvan if so requested, in writing, that such
reimbursables are reasonable and necessary and were
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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incurred by Subconsultants and Subcontractors in the performance of their duties
on behalf of the Project.
5.2 Construction Services.
5.2.1 Applications for Payment. Not later than the first (1st) business
day of each calendar month, Bechtel shall submit to Webvan a separate
application for payment for the prior month ("APPLICATION FOR PAYMENT") for each
DC Project for which Bechtel is then rendering Construction Services, which
application shall also include any portions of the DC Project work completed
during periods of time covered by previously submitted Applications for Payment
to the extent such portions of the DC Project work were not shown on any such
previous applications. Each Application for Payment shall be for a sum equal to:
(i) that portion of the Cost of the Work incurred during the period covered by
the particular application, determined in accordance with the Schedule of
Values, calculated on the basis of the percentage of the DC Project work
completed during such month, provided that no payment to Bechtel for DC Project
work performed shall exceed the actual Cost of the Work performed (together with
any items applicable to the period covered by any preceding Application for
Payment to the extent such items were not reflected in any such Application for
Payment); and (ii) that portion of the Bechtel Fee applicable to the percentage
of the DC Project work completed during the prior month. In no event, however,
shall the Cost of the Work set forth in any Application for Payment for a DC
Project, when added to all amounts previously invoiced for the Cost of the Work
for the DC Project, represent a percentage of the Budgeted Cost greater than the
completed percentage of the total DC Project work to be performed under the
Contract Documents.
5.2.1.1 Bechtel shall include with each Application for Payment
back-up material satisfactory to Webvan to support all components of the
application, including, without limitation, verifiable Subcontractor payment
applications, current month as-built information, and actual Cost of the Work,
indicating in detail all monies paid out or to be paid out for costs incurred on
account of the Cost of the Work.
5.2.1.2 In each Application for Payment, including the Final
Application for Payment upon the Final Completion of the DC Project, Bechtel
shall certify that: (i) the Application for Payment represents a just estimate
of the costs then due Bechtel under the terms of this Contract; (ii) all DC
Project work covered by the Application for Payment has been completed in
accordance with the applicable Contract Documents; (iii) there are no known
unbonded Mechanics' Liens outstanding at the date of the Application for
Payment; (iv) all due and payable bills (except for amounts in dispute with
Subcontractors) with respect to the DC Project work have been paid to date or
are included in the amount requested in the Application for Payment; (v) there
is no known basis for the filing of any Mechanics' Liens for or relating to the
DC Project work except for (a) unpaid bills included in the Application for
Payment, all of which will be paid from the amount due to Bechtel with respect
to the Application for Payment, or (b) amounts in dispute with Subcontractors;
(vi) subject to receipt of payment, Bechtel waives any Mechanics' Lien rights to
the extent of such payments; (vii) there is no default, or event which with the
passage of time or giving of notice, or both, could constitute a default under
this Contract or under any Subcontract; (viii) the remaining balance of the
applicable Budgeted Cost is sufficient, in Bechtel's reasonable estimation, to
complete construction of the remaining portion of the applicable DC Project
work; and (ix) the DC Project work which is the subject of the Application for
Payment has been performed in accordance with the Contract Documents and all
applicable Laws.
5.2.1.3 Each Application for Payment shall include conditional
lien releases from Bechtel and all Subcontractors for all DC Project work which
is the subject of the Application for
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Payment in the form required by applicable Law. Promptly after Webvan's payment
pursuant to each Application for Payment that includes any final amount to be
paid to a Subcontractor, Bechtel shall deliver to Webvan an unconditional
Mechanics' Lien release from such Subcontractor in the form required by
applicable Law for all DC Project work performed by such Subcontractor.
5.2.1.4 Requests for payment for materials stored on-site or
off-site shall be limited to materials on a list approved by Webvan. Webvan will
not pay for on-site materials such as drywall or any other commodity-like
material until it is in place as a part of the DC Project work.
5.2.1.5 As a condition of payment, Bechtel shall submit a detailed
construction report to Webvan each month, in a form satisfactory to Webvan and
together with the Application for Payment a separate, detailed construction
report for each DC Project for which Webvan is then rendering Construction
Services. The report shall contain pertinent information on the following
aspects of the DC Project: (i) past month's activities; (ii) current month's
activities; (iii) current problems; (iv) Webvan action required; (v) progress
billing which shall include actual expenditures to date in reasonable detail;
(vi) updated Project Schedule; (vii) Change Order log and (viii) projected
monthly cash expenditures for the remainder of the applicable DC Project.
5.2.1.6 Bechtel warrants that title to all DC Project work and
materials covered by an Application for Payment (including, without limitation,
all Operating Equipment) will pass to Webvan either by incorporation in the
construction or upon the receipt of payment by Bechtel, whichever occurs later,
free and clear of all Mechanics' Liens, claims, charges, liens, security
interests or encumbrances of any kind. As a condition to Webvan's obligation to
make any payment pursuant to an Application for Payment, Bechtel shall execute
and deliver to Webvan bills of sale and other documents reasonably requested by
Webvan transferring to Webvan such title to all materials and equipment
(including, without limitation, Operating Equipment) the cost of which is
included in such Application for Payment.
5.2.2 Payments to Bechtel.
5.2.2.1 Webvan will review each Application for Payment and will
promptly take appropriate action thereon as provided in the applicable Contract
Documents. The amount agreed upon for payment shall be payable by Webvan no
later [*] days after Webvan's receipt of a complete and accurate
Application for Payment, but no sooner than the tenth (10th) day of the month.
5.2.2.2 Payment by Webvan with respect to any Application for
Payment shall not constitute Webvan's approval or acceptance of any item or cost
in such Application for Payment, nor shall it be construed to be final
acceptance or approval of that part of the DC Project work to which the payment
relates, nor shall it relieve Bechtel of any of its obligations under this
Contract.
5.2.2.3 Except as otherwise provided in Section 2.5.1, with
respect to each Application for Payment, Webvan shall pay Bechtel an amount
equal to the Cost of the Work and the Bechtel Fee then payable according to the
Schedule of Values. Any provision to the contrary in this Contract or any other
Contract Documents notwithstanding, in the event of a disputed claim between
Webvan and Bechtel with respect to any amount or circumstance covered by any
Application for Payment, Webvan may withhold from the payment in question an
amount sufficient to reimburse Webvan for its expenditures and to secure (i)
correction or re-execution of DC Project work which is defective or has not been
performed in accordance with the Contract Documents; (ii) past due payments to
Subcontractors; (iii) Webvan's remedies in consequence of any default by Bechtel
under this Contract; and (iv) any costs incurred by Webvan as a result of
claims, liabilities, losses and other damages covered
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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by Bechtel's indemnification obligations pursuant to Section 8.16. If Webvan, in
its good faith judgment, determines that the portion of the Budgeted Cost then
remaining unpaid will not be sufficient to complete the applicable DC Project
work in accordance with this Contract, then no additional payments, including
any payments in respect of the Bechtel Fee, will be due Bechtel hereunder unless
and until Bechtel performs a sufficient portion of the work so that such portion
of the Budgeted Cost then remaining unpaid is determined by Webvan to be
sufficient to complete the DC Project work.
5.2.2.4 In no event shall any interest be due and payable by
Webvan to Bechtel, any Subcontractor, Subconsultant or any other party on any of
the sums properly retained by Webvan pursuant to any of the terms or provisions
of any of the Contract Documents.
5.2.2.5 In taking action on each Application for Payment, Webvan
shall have the right to rely on the accuracy and completeness of the information
furnished by Bechtel. Webvan shall not be deemed to have made audits of the
supporting data or exhaustive or continuous on-site inspections or any other
examination to ascertain how or for what purposes Bechtel has used the monies
previously paid on account of this Contract.
5.2.2.6 Except for the Bechtel Fee and any amounts payable to
Bechtel under Section 5.6 or Section 5.7, all sums paid to Bechtel pursuant to
this Contract shall be used for the performance of the DC Project work and for
no other purpose whatsoever. To the extent applicable, all sums paid to Bechtel
in turn shall be paid promptly (but in no event later than the time period
permitted under applicable Law) to the respective Subcontractors and
Subconsultants.
5.2.2.7 Subject to Subparagraph 5.2.2.4, payments due and unpaid
under any Application for Payment for fifteen (15) days shall bear interest,
from thirty (30) days after the particular Application for Payment in question
was received until paid, at the Default Rate.
5.2.2.8 If, in connection with any DC Project work for which
Webvan has paid Bechtel as required by this Contract, any Mechanics' Lien is
filed or served on Webvan or on any lender or landlord with respect to the DC
Project or the applicable DC Property, then Webvan shall have the right to
withhold from any sums otherwise payable to Bechtel, an amount sufficient to
discharge any or all such Mechanics' Liens. Releases or receipted vouchers in
settlement of such Mechanics' Liens, or other security satisfactory to Webvan,
must be furnished to Webvan by Bechtel before the withheld sums will be paid to
Bechtel. If Bechtel has not settled or provided acceptable security for any such
Mechanics' Liens within a reasonable time, not to exceed fifteen (15) days after
the date on which such Mechanics' Lien is asserted, then Webvan shall have the
right, but not the obligation, to discharge any or all such Mechanics' Liens out
of the withheld sums. Notwithstanding the foregoing, Bechtel shall have the
right to bond over the Mechanics' Lien, in an amount not less than one hundred
fifty percent (150%) of the Mechanics' Lien, and receive payment if the effect
of such bonding under applicable Law is to release the Mechanics' Lien from the
real property at which the DC Project is located (the "DC PROPERTY").
5.2.2.9 Except as otherwise set forth below, the entire unpaid
balance due Bechtel on account of the Cost of the Work and the Bechtel Fee, with
respect to the applicable DC Project (the "FINAL PAYMENT"), shall be due to
Bechtel within [*] days after the date on which the final approvals
from the appropriate governmental authorities of satisfaction of all terms and
conditions and other provisions of all necessary permits and approvals
(including, without limitation, all food, health and safety permits and
approvals) authorizing the full use and occupancy of the DC Project (including
the Operating Equipment) as contemplated by the Contract Documents
(collectively, a "CERTIFICATE OF
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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OCCUPANCY") are issued for the DC Project, provided that all of the following
have occurred: (i) a copy of such final approvals from the appropriate
governmental authorities shall have been delivered to Webvan; (ii) Bechtel shall
have certified, in writing, that the Development of the DC Project and
performance of all of the DC Project work and Services has been completed in
accordance with the Contract Documents, subject only to minor, corrective Punch
List items which do not in any way interfere with Webvan's use, operation or
occupancy of the DC Project, which shall be noted on such certification (an
amount equal to [*] to complete such items may be withheld by Webvan); (iii)
Bechtel's certificate described in the foregoing clause (ii) shall in fact be
true, complete and correct; (iv) the applicable requirements of Section 5.2.1
(regarding Applications for Payment) shall have been met (including, without
limitation, Bechtel's delivery to Webvan of all bills of sale and other
documents described in Section 5.2.1.6); (v) Bechtel shall have delivered to
Webvan a waiver of Mechanics' Lien rights, complying with applicable Law,
conditioned only upon receipt of the funds requested in the Final Application
for Payment, and executed by Bechtel and by each person or entity entitled to
record a Mechanics' Lien against the DC Project or the DC Property (or, if any
Subcontractor refuses to furnish such waiver, then a lien bond in form,
substance and amount satisfactory to Webvan, protecting Webvan any lender or
landlord and the DC Project and the DC Property from Mechanics' Liens by such
persons); (vi) Bechtel shall have delivered to Webvan (a) an affidavit in a form
satisfactory to Webvan stating that the Final Payment is being requested and
that the Mechanics' Lien releases and/or bonds delivered to Webvan include and
cover all materials, labor, and services for which a Mechanics' Lien could be
filed against the DC Project or the DC Property and (b) such other affidavits
and agreements reasonably required by Webvan's and/or Webvan's landlord's title
insurers as a condition to insuring Webvan's and/or Webvan's landlord's title to
the DC Project and the DC Property free and clear of any Mechanics' Liens; and
(vii) Bechtel shall have delivered to Webvan one complete set of "as built"
drawings and one electronic copy, which shall be furnished in AutoCAD for
Windows, or a similar format reasonably acceptable to Webvan, and all
guaranties, warranties, operating and maintenance manuals applicable to the
portion of the work in question and/or required by the Construction Documents.
5.2.2.10 In the event of a disputed claim between Webvan and
Bechtel with respect to any amount or circumstance covered by any Final
Application for Payment, Webvan may withhold from the Final Payment in question
an amount not to exceed [*].
5.2.2.11 Bechtel shall file all notices of completion or notices
or filings of similar import for the applicable DC Project work within ten (10)
days of the issuance of a Certificate of Occupancy for the DC Project work in
question in accordance with applicable Law and local custom and practice.
5.3 Design Services.
5.3.1 Payment.
5.3.1.1 Bechtel shall prepare and attach to any Notice to Proceed
executed by Bechtel for Design Services a comprehensive, line-item budget
describing in reasonable detail each Design Service to be provided by Bechtel
(including, without limitation, Schematic Design Services, Design Development
Services and Construction Documents Services) and specifying Bechtel's
reasonable estimate of the Recoverable Costs (as described in Section 5.3.2
below) that will be incurred for each such Design Service. For Design Services
performed by Bechtel in accordance with such a Notice to Proceed executed by
Webvan, Webvan shall pay Recoverable Costs (as described in Section 5.3.2
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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below) to Bechtel on a monthly basis. Webvan shall not, however, have any
obligation to pay for any Recoverable Costs for Design Services in excess of the
Recoverable Costs estimated by Bechtel in the budget for such Design Services
attached to the Notice to Proceed executed by Webvan, unless Webvan has
previously agreed in writing to pay such excess Recoverable Costs. Similarly,
Bechtel shall have no obligation to perform Design Services to the extent the
Recoverable Costs therefor exceed the total amount of Recoverable Costs
specified in such budget, unless Webvan agrees in writing to pay such additional
Recoverable Costs. If, in the course of performing Design Services, Bechtel
determines that the amount of Recoverable Costs that will be incurred for such
Design Services exceeds the total amount of such Recoverable Costs provided in
such budget, then Bechtel shall give Webvan written notice thereof as soon as
reasonably possible and shall deliver to Webvan a revised budget for such Design
Services.
5.3.1.2 On or before the tenth (10th) day of the first month in
which Bechtel is to provide Design Services for a particular DC Project, Bechtel
shall submit to Webvan an invoice of the amount of Recoverable Costs for Design
Services that Bechtel reasonably estimates that it will incur during such first
month. On or before the tenth (10th) day of the second month in which Bechtel is
to provide Design Services for such DC Project and continuing each month
thereafter until the month following the last month in which Design Services are
provided by Bechtel for such DC Project, Bechtel shall submit to Webvan an
invoice that states (a) the estimated amount of Recoverable Costs paid in
advance by Webvan for the prior month, (b) the actual amount of Recoverable
Costs incurred by Bechtel during the prior month, and (c) the amount of
Recoverable Costs that Bechtel reasonably estimates that it will incur during
the current month. Each such invoice shall (1) be in a form reasonably
acceptable to Webvan, (2) provide in reasonable detail the actual amount of time
spent daily by each Bechtel employee, a description of work performed, and the
total Unit Rate costs allocable to such employee's work for each day during the
prior month, and a reasonable estimate of the work to be provided by Bechtel
employees during the current month, (3) describe in detail the Recoverable Costs
actually incurred by Bechtel during the prior month, and a reasonable estimate
of the type and amount of Recoverable Costs that Bechtel will incur during the
current month, and (4) provide a reconciliation of the actual Recoverable Costs
incurred by Bechtel during the prior month against the estimate of the
Recoverable Costs paid by Webvan for such prior month.
5.3.1.3 Notwithstanding anything contained in any invoice
submitted by Bechtel, (a) if the amount of estimated Recoverable Costs paid by
Webvan for any month is greater than the amount of actual Recoverable Costs
incurred by Bechtel during such month (which amount shall be reduced by any
amounts offset or credited by Webvan against such Recoverable Costs on account
of Webvan's prior overpayments, as hereinafter provided), then Webvan shall have
the right either to offset and credit the amount of such overpayment against
Bechtel's estimate of Recoverable Costs to be provided during the current month
or to require that Bechtel promptly refund to Webvan the amount of such
overpayment; and (b) if the amount of estimated Recoverable Costs paid by Webvan
for any month is less than the amount of actual Recoverable Costs incurred by
Bechtel during such month, then the amount of such shortfall shall be paid by
Webvan to Bechtel at the same time that Webvan pays Bechtel's reasonable
estimate of Recoverable Costs for Design Services to be provided during the
following month.
5.3.1.4 Webvan shall pay Bechtel for each monthly invoice
submitted to Webvan within [*] days after Webvan's receipt of such invoice,
unless prior to the expiration of such [*]-day period, Webvan advises Bechtel
that Webvan disagrees with the invoice submitted or disapproves the Design
Services performed. If an invoice is in question, Bechtel and Webvan shall
forthwith attempt to resolve the issue. Webvan shall pay the undisputed portion
of each invoice within [*] days after receipt thereof. Undisputed amounts due
and payable to Bechtel shall bear interest,
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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from thirty (30) days after the applicable invoice was received until paid by
Webvan, at the Default Rate. When requested by Webvan, Bechtel shall submit
applicable lien waivers with its invoices stating that for that specific portion
of Design Services for which Webvan has paid all labor, material and
subcontractor and subconsultant accounts have been duly paid. All such lien
waivers (other than lien waivers to be provided promptly following final
payments to Subconsultants and Subcontractors) may be conditioned upon receipt
of payment for the invoiced labor and materials. Upon completion of the Design
Services set forth in a Notice to Proceed and promptly after receiving final
payment for such Services, Bechtel shall submit such unconditional lien waivers
and payment affidavits as Webvan may reasonably require.
5.3.2 Recoverable Costs. Bechtel shall be entitled to reimbursement for
the following Recoverable Costs for Design Services: (i) the cost of Bechtel
employees performing Design Services as provided in the Unit Rate Schedule
attached hereto as Appendix 5.1.2, (ii) ordinary and reasonable expenses of
relocation, transportation (coach or equivalent class only) and subsistence (or
per diem, if applicable) in connection with such Design Services (excluding
travel within the San Francisco Bay Area or within the other localities in which
the DC Projects are located) in accordance with reasonable policies and
procedures established by Bechtel; (iii) long-distance communications, facsimile
communications (long distance only), courier services, and express mail; (iv)
ordinary and reasonable expenses of reproduction, postage and handling of
drawings, specifications and other documents (not for internal use); (v) if
authorized in advance in writing by Webvan, expense of overtime work by
non-exempt employees of Bechtel or any approved Subconsultants requiring higher
than regular rates; (vi) ordinary and reasonable expenses of renderings, models
and mock-ups requested in writing by Webvan; (vii) ordinary and reasonable
expenses of photographic production techniques and photography and photo prints
used for a DC Project; and (viii) ordinary and reasonable fees and costs
incurred by Bechtel's approved Subconsultants in performing Design Services,
which fees and costs of Subconsultants shall be evidenced by invoices (copies of
which are provided to Webvan) providing in reasonable detail the actual amount
of time billed by the employees of any such Subconsultants, a description of the
work performed, and a detailed description of any and all approved Recoverable
Costs incurred by such Subconsultant. Any and all other costs and expenses
incurred by Bechtel in performing the Design Services which are not covered in
the preceding sentence shall require the prior written approval of Webvan and
unless such prior approval is given, Webvan shall not reimburse Bechtel for such
costs and expenses.
5.4 Entire Compensation. Bechtel specifically understands that the
compensation set forth in this Section 5 and the Notices to Proceed is the sole
compensation payable to Bechtel by Webvan for all Services and no work
undertaken by Bechtel or its agents, employees, Subcontractors or Subconsultants
will result in any obligation of Webvan to pay any additional compensation or
any additional expense reimbursement not expressly authorized in this Section 5,
in the absence of a formal, duly authorized and executed written Notice to
Proceed for such services and Webvan's approval of the maximum cost payable for
such additional services. Bechtel, for itself and its employees, agents,
Subcontractors and Subconsultants hereby (i) waives any right to compensation or
reimbursement for services performed or expenses incurred (a) without written
authorization pursuant to an approved Notice to Proceed or (b) in excess of the
amounts set forth in an approved Notice to Proceed, and (ii) covenants not to
sue for amounts which might otherwise be payable under the theory of quantum
meruit, or under any other legal theory, except to the extent Bechtel is
expressly entitled to payment under Section 5 of this Contract.
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5.5 Books and Records.
5.5.1 Bechtel shall check all materials, equipment and labor being
incorporated into Project work and shall keep such full and detailed accounts as
may be necessary for proper financial management under this Contract. Webvan
shall have access to all Bechtel's records, books, correspondence, instructions,
drawings, receipts, vouchers, memoranda and similar data relating to this
Contract and/or Project work or Services, and Bechtel shall preserve (either in
hard copy or on electronic storage) all such records for a period of four (4)
years following Final Payment for each DC Project, or for any longer period
required by Law. Webvan shall have the right to copy all or any part of
Bechtel's job records.
5.5.2 All Services shall be performed by Bechtel on an "open book"
basis. Webvan shall have the right, during the performance of the Services and
for a period of four (4) years after Final Payment for each DC Project has been
made, to inspect and audit Bechtel's books and records regarding the Project,
except that Webvan shall not have the right to audit the basis for the Unit
Rates described in Appendix 5.1.2 or any other fixed rates or fixed prices that
Bechtel and Webvan may agree to as the basis for compensation. Bechtel shall
have the opportunity to audit itself prior to any audit by Webvan. Should any
overcharge be found by Bechtel's audit, Bechtel shall pay Webvan an amount equal
to the amount overcharged plus interest at the Default Rate (including any part
of the Bechtel Fee based on such overcharge). After Bechtel's audit, if any such
audit by Webvan reveals that the amounts charged to Webvan by Bechtel exceeded
the actual compensation to which Bechtel was entitled for Services, then Bechtel
shall pay Webvan an amount equal to the amount overcharged plus interest at the
Default Rate (including any part of the Bechtel Fee based on such overcharge)
and shall pay for the cost of the audit if the net amount overcharged exceeds
Ten Thousand Dollars ($10,000) per occurrence.
5.6 Cost Incentive.
5.6.1 For purposes of this Contract, [*] Notwithstanding anything in
this Section 5.6 to the contrary, however, the aggregate amount payable to
Bechtel under this
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Section 5.6 for any particular DC Project shall in no event exceed [*].
5.6.2 [*].
5.7 Time Incentive. If the Substantial Completion of a particular DC Project
occurs before the date (the "SCHEDULED DATE") specified for Substantial
Completion in the then-current Project Schedule approved by Webvan and the
Notice to Proceed executed by Webvan for such DC Project (as such date may be
adjusted pursuant to Change Orders executed by Webvan for such DC Project in
accordance with Section 2.5.4.1), and if at the time of such Substantial
Completion no Event of Default by Bechtel exists under the Contract Documents
nor has any event or condition been identified which (with the giving of notice
or the passage of time or both) could constitute such an Event of Default, then
Webvan shall pay Bechtel, concurrently with the Final Payment for such DC
Project, an amount (the "TIME INCENTIVE AMOUNT") equal to the sum of the
following: [*].
5.8 Incentive Warrant. Concurrently with Bechtel's and Webvan's
execution and delivery of this Contract, Webvan has delivered to Bechtel a
warrant (the "WARRANT") in the form of Appendix 5.8 attached hereto and made a
part hereof for the purchase of up to six hundred thousand (600,000) shares of
preferred stock of Webvan. As provided in the Warrant, Bechtel's rights under
the Warrant shall vest with respect to certain shares of preferred stock of
Webvan only when the DC Project has been completed On Time/On Budget. For
purposes of the Warrant, "ON TIME/ON BUDGET" shall mean, with respect to any
particular DC Project, that [*]
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*] Except as expressly provided in this Section 5.8, under no circumstance
shall a DC Project be deemed to have been completed On Time/On Budget if [*].
Notwithstanding the foregoing clause (ii), if [*] then Bechtel shall be deemed
to have satisfied the requirement of clause (ii) of this Section 5.8 for
purposes of determining whether such DC Project has been completed On Time/On
Budget.
6.0 TERMINATION OF CONTRACT
6.1 Bechtel's Termination Rights.
6.1.1 Bechtel may suspend the Services for a particular DC Project (i)
if Webvan fails to pay or to object to an Application for Payment or invoice for
Consulting Services or Design Services for such DC Project within thirty (30)
days after written notice of delinquency is received by Webvan from Bechtel,
(ii) pursuant to an order of any court or other public authority having
jurisdiction, or (iii) as a result of an act of government, such as a
declaration of a national emergency, making materials unavailable.
6.1.2 For purposes of this Section 6.1.2, (a) the "OUTSTANDING AMOUNT"
shall equal the sum of all amounts (without duplication) both (i) that are
specified as due and payable in all Applications for Payment for Construction
Services and all invoices for Consultant Services and Design Services that
Bechtel has properly completed and submitted (including all related
documentation required under the Contract Documents) and (ii) that Webvan has
not paid; and (b) the "PAST-DUE AMOUNT" shall equal that portion of the
Outstanding Amount as to which Webvan has neither objected nor made payment
within [*] after Webvan's receipt of the Applications for Payment and invoices
therefor. If at any time during the term of this Contract the Past-Due Amount
exceeds [*] for a period of five (5) consecutive days, then Bechtel shall have
the right to give Webvan written notice (a "PAST-DUE NOTICE") of such event.
Bechtel shall specify in any Past-Due Notice the Past-Due Amount as of the date
of such Past-Due Notice, and Bechtel shall attach to any Past-Due Notice copies
of all Applications for Payment for Construction Services and copies of all
invoices for Consultant Services and Design Services evidencing the unpaid
amounts which, when added together, constitute the Past-Due Amount specified in
Bechtel's Past-Due Notice. Webvan shall have five (5) days after Webvan's
receipt of a Past-Due Notice within which either to pay the Past-Due Amount
specified by Bechtel or to give Bechtel written notice that Webvan objects to
Bechtel's calculation of such Past-Due Amount. Any such objection to Bechtel's
calculation of such Past-Due Amount may be based only upon Webvan's assertion
(1) that Bechtel's calculation includes an arithmetic error or (2) that Bechtel
has included in such calculation amounts that Webvan either paid or objected to
within fifteen (15) days after Webvan's receipt of the applicable Applications
for Payment and invoices. If Webvan has not paid or so objected to such Past-Due
Amount on or before the fifth (5th) day after Webvan's receipt of such Past-Due
Notice, then Bechtel shall have the right (by giving Webvan written notice
thereof) to suspend performance of any or all Services. If both (a) Webvan has
not timely objected to Bechtel's calculation of
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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such Past-Due Amount in the manner hereinabove provided, and (b) on or before
the thirty-fifth (35th) day after Webvan's receipt of such Past-Due Notice,
Webvan has not paid such Past-Due-Amount, then Bechtel shall have the right to
terminate this Contract by giving Webvan written notice of such termination.
Following any such termination of this Contract by Bechtel, Bechtel shall have
the right to recover from Webvan payment for all Services completed for the
Project as of the date of such termination. If Webvan objects to Bechtel's
calculation of the Past-Due Amount specified in any Past-Due Notice, the dispute
shall be resolved in accordance with Section 2.5.12. Any period during which
Bechtel has properly suspended performance of Services pursuant to this Section
6.1.2 shall constitute an Excusable Delay with respect to each DC Project as to
which Bechtel has properly suspended performance.
6.1.3 Webvan may, at any time and without cause, order Bechtel, in
writing, to suspend the Services in whole or in part for such period of time as
Webvan may determine. If Bechtel's work as to a particular DC Project is
suspended pursuant to any such written order of Webvan for a period of thirty
(30) consecutive days or more, then Bechtel shall have the right to terminate
this Contract as to such DC Project only and to recover from Webvan payment for
all Services completed for such DC Project as of the date of termination.
6.1.4 [*].
6.1.5 Upon any termination of this Contract by Bechtel pursuant to this
Section 6.1, Webvan and Bechtel shall have the same rights and obligations as if
Webvan had terminated this Contract under Section 6.2.
6.2 Webvan's Right to Terminate Without Cause. The following provisions of
this Section 6.2 shall govern Webvan's right to terminate this Contract without
cause.
6.2.1 In addition to Webvan's right to terminate on account of Bechtel's
default, as set forth in Section 6.4, Webvan may terminate this Contract and/or
the Services, in whole or in part, at any time and from time to time without
cause, by giving Bechtel at least ten (10) days' prior written notice. Upon
receipt of any such notice, Bechtel shall, unless the notice directs otherwise:
(i) immediately discontinue the Services on that date and to the extent
specified in the notice; (ii) enter into no further Subcontracts or
Subconsultant agreements, except as may be necessary for completion of such
portion of the DC Project work or Services as is not discontinued; (iii)
promptly make every reasonable effort to procure cancellation, or assignment,
upon terms satisfactory to Webvan, of all Subcontracts and all Subconsultant
agreements to the extent they relate to the performance of the discontinued
portion of the DC Project work and other Services; and (iv) thereafter, with
respect to the DC Project(s) as to which Webvan has terminated this Contract, do
only such DC Project work as may be necessary to preserve and protect the DC
Project work already in progress and to protect materials, landscaping materials
and equipment on the DC Property(ies) or in transit thereto. Upon such
termination, the obligations of the parties under this Contract shall continue
as to DC Projects and/or Services as to which Webvan has not terminated this
Contract and, with respect to the DC Project(s) as to which Webvan has
terminated this Contract, those portions of the Services already performed by
Bechtel prior to the date of termination. In addition, Bechtel shall take all
steps, including the legal assignment of its contractual rights with respect to
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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terminated Project work, which Webvan may require for the purpose of fully
vesting in Webvan such contractual rights. Notwithstanding any such assignment
of contractual rights, however, Bechtel shall reserve rights of recourse
thereunder to the extent necessary to permit Bechtel to enforce such contracts
in the event that Webvan makes any claim against Bechtel with respect to goods
or services that are the subject of such contracts. The foregoing reservation of
rights by Bechtel shall not, however, in any way impair Webvan's right to pursue
direct recourse against the parties to such contracts.
6.2.2 In the event of such termination by Webvan, Webvan shall reimburse
Bechtel for any unpaid Consultant Services, Design Services or Cost of the Work
due under Section 5, plus, in the case of Construction Services, an amount which
will increase the payments already made on account of the Bechtel Fee to a sum
which bears the same ratio to such fixed sum as the actual Cost of the Work at
the time of termination bears to the Budgeted Cost. In addition, in the event of
any such termination by Webvan of Construction Services, Webvan shall also pay
to Bechtel (i) fair compensation, either by purchase or rental, at the election
of Webvan, for any equipment Webvan wishes to continue to use, and (ii)
reasonable and necessary costs actually incurred by Bechtel to relocate Bechtel
employees to their points of origin and to dispose of materials and equipment
located at the applicable DC Property that Webvan does not purchase and other
reasonable costs of termination actually incurred by Bechtel with Webvan's prior
written approval. If, at the date of such termination, Bechtel has properly
prepared or fabricated off the applicable site any goods for subsequent
incorporation into DC Project work, and if Bechtel delivers such goods to the
applicable site or to such other place as Webvan shall reasonably direct, then
Bechtel shall be paid for such goods or materials. Bechtel shall, as a condition
to receiving the payments described in this Section 6, execute and deliver to
Webvan such documents as may be reasonably acceptable to Webvan releasing Webvan
and the applicable DC Properties from all liability to Bechtel under this
Contract, including, without limitation, the waiver of Mechanics' Lien rights
and the affidavit described in clauses (v) and (vi) of Section 5.2.2.9.
6.2.3 Bechtel hereby waives all claims for damages and loss of
anticipated profits on account of any termination by Webvan pursuant to this
Section 6.2 and, as the sole right or remedy of Bechtel on account of such
termination, Bechtel shall have the right to receive the amounts payable to
Bechtel under this Section 6.2.
6.3 Bechtel Default. Any of the following events shall be deemed to be a
material default by Bechtel under the Contract Documents (an "EVENT OF
DEFAULT"): (i) failure by Bechtel to perform any material contractual obligation
under this Contract or the Contract Documents, which failure by its nature
Bechtel has no capacity to cure; (ii) failure by Bechtel to pay any monetary
obligation under the Contract Documents for a period of five (5) days following
receipt of written notice of such failure from Webvan; (iii) failure by Bechtel
to perform any other obligation under, or to comply with any term, provision or
condition of, the Contract Documents for a period of ten (10) days following
receipt of written notice of such failure from Webvan, or such longer period
(but in no event exceeding forty-five (45) days following receipt of Webvan's
notice) as reasonably required to remedy such failure provided that Bechtel
commences such remedy within such ten (10)-day period and thereafter uses its
best efforts to complete such remedy at the earliest date reasonably possible;
(iv) the occurrence of any of the following: (a) the making by Bechtel of any
general arrangement or assignment for the benefit of creditors; (b) Bechtel
becomes a "debtor" as defined in 11 USC Section 101 or any successor statute
(unless, in the case of a petition filed against Bechtel, the same is dismissed
within sixty (60) days); (c) the appointment of a trustee or receiver to take
possession of substantially all of Bechtel's assets or of any asset used in
connection with the Project, where possession is not restored to Bechtel within
thirty (30) days; or (d) the attachment, execution or other judicial seizure of
substantially all of Bechtel's assets or of any asset used in connection with
the Project, where such seizure is not discharged within thirty (30)
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days; and (v) repeated failure (defined as a failure for which Webvan has given
more than one (1) notice) by Bechtel to perform its obligations under this
Contract or the Contract Documents in a timely fashion, which failure materially
interferes with Webvan's scheduled completion of any DC Project within the
Contract Time provided in the Contract Documents.
6.4 Webvan Remedies.
6.4.1 Upon the occurrence of an Event of Default, Webvan shall have the
right (subject to Sections 6.4.2 and 8.17) to pursue any and all remedies
available at law and in equity including, without limitation, the following: (i)
the right to keep this Contract in effect and sue Bechtel for all damages caused
by the default and recover the cost thereof; (ii) the right to cure any such
default by Bechtel and to recover any damages caused thereby; and (iii) the
right to terminate this Contract either as to the entire Project or as to any or
all Services with respect to any DC Project as to which an Event of Default has
occurred, in either case by giving Bechtel written notice of such termination.
Upon such termination, Webvan shall have the right to complete the Services or
to contract with others for completion of the Services and, in either event, to
charge the cost of completion to Bechtel. Webvan may deduct, offset and credit
such costs of completion and all other damages incurred by Webvan as a
consequence of Bechtel's default from and against any amounts that may at any
time be payable to Bechtel under this Contract. If the cost of completion
exceeds the amount that would have been payable under this Contract had Bechtel
completely performed the Services pursuant to the terms of this Contract,
Bechtel shall immediately pay the amount of such excess to Webvan. Upon
termination, Bechtel shall be deemed to have waived all claims against Webvan
for profits, loss or damage on or with respect to the uncompleted Services.
6.4.2 If the Substantial Completion of any particular DC Project occurs
after the Scheduled Date for such DC Project, then Bechtel shall pay Webvan, no
later than the time Final Payment is payable to Bechtel, an amount (the
"LIQUIDATED DAMAGES AMOUNT") equal to sum of the following: [*]. Webvan's
recovery of the Liquidated Damages Amount under this Section 6.4.2 shall
constitute Webvan's sole damages that may be recovered from Bechtel due to
Bechtel's failure to achieve Substantial Completion of a particular DC Project
by the Scheduled Date for such DC Project. Nothing contained in this Section
6.4.2, however, shall restrict Webvan from exercising any other right or remedy
or from seeking or recovering any and all damages directly or indirectly
resulting from any default of Bechtel under this Contract other than Bechtel's
failure to achieve Substantial Completion of a particular DC Project by the
Scheduled Date for such DC Project. Webvan may deduct, offset and credit the
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Liquidated Damages Amount for any DC Project from and against any amounts that
may at any time be payable to Bechtel under this Contract, whether or not
payable to Bechtel with respect to the same DC Project as to which the
Liquidated Damages Amount has been incurred.
6.5 Possession. If Webvan terminates this Contract with respect to
Construction Services for any DC Project on account of Bechtel's default as
provided in Section 6.4, then in addition to its obligations under Section 6.2,
Bechtel shall promptly and peaceably vacate all applicable DC Property and, at
Webvan's election, Webvan may (i) take possession of such DC Property and of all
materials, equipment, tools, construction equipment and machinery thereon owned
by Bechtel and Webvan may finish the DC Project work by whatever method it may
deem expedient, or (ii) cease construction and require Bechtel promptly to
remove from the DC Property, at Bechtel's expense, all materials, equipment,
tools, and construction equipment owned by Bechtel. Webvan shall pay to Bechtel
fair compensation (at the election of Webvan either by purchase at fair market
value or by rental at the prevailing rate of the locale) for any equipment owned
by Bechtel and used by Webvan during the completion of the DC Project. Upon
demand, (a) Bechtel shall assign and deliver to Webvan all Construction
Documents, Subcontracts, documents, tangible and intangible property, and
contractual rights as Webvan may demand for the purpose of completing the DC
Project work, and (b) Bechtel shall execute and deliver to Webvan such written
documentation as Webvan may request for the purpose of evidencing the vesting in
Webvan of the rights and benefits of Bechtel with respect to the documents and
rights so delivered and assigned.
6.6 Compensation. If Webvan terminates this Contract with respect to
Construction Services for any DC Project as provided herein on account of
Bechtel's default, and Webvan then elects to complete the DC Project work,
Bechtel shall not be entitled to receive any further payments under this
Contract until the DC Project work is fully completed. Upon completion of the DC
Project work, if the expenses reasonably incurred by Webvan in completing the DC
Project work (including, without limitation, (a) payments made by Webvan to any
party supplying labor, materials, equipment, services and the like for the DC
Project work, and (b) all costs incurred by Webvan for managerial,
administrative or supervisory services in excess of such costs that Webvan would
have incurred but for Bechtel's default), plus the amounts previously paid by
Webvan to Bechtel, exceed any applicable Budgeted Cost and Bechtel Fee, then
Bechtel shall pay Webvan, upon demand, the amount of such excess, plus interest
thereon at the Default Rate. In all other cases of termination for Bechtel's
default, Webvan's liability to Bechtel shall be limited to reimbursement to
Bechtel of that portion of the applicable Budgeted Cost and Bechtel Fee which is
earned, due and payable to Bechtel as of the date of the termination, less the
sum of (i) any amounts owing to Webvan by Bechtel under the terms of the
applicable Contract Documents, and (ii) all other amounts to which Webvan is
entitled under the terms of this Contract as a result of Bechtel's default.
7.0 INSURANCE
7.1 Liability Insurance.
7.1.1 Bechtel shall purchase and maintain insurance which will protect
Bechtel and Webvan from the following types of claims that may arise out of or
result from Services under this Contract and for which Bechtel may be legally
liable, whether such operations are by Bechtel or by a Subcontractor or
Subconsultant or by anyone directly or indirectly employed by any of them, or by
anyone for whose acts any of them may be liable: (i) claims under workers' or
workmen's compensation, disability benefit and other similar employee benefit
acts which are applicable to the Services to be performed; (ii) claims for
damages because of bodily injury, sickness or disease, or death; (iii) claims
ordinarily covered by
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commercial general liability insurance; (iv) claims for damages because of
injury to or destruction of tangible property, including loss of use by third
parties other than Webvan resulting therefrom (whether resulting from operations
of Bechtel, any Subcontractor or Subconsultant, or anyone directly or indirectly
employed by any of them); (v) claims for damages because of bodily injury, death
of a person or property damage arising out of ownership, maintenance or use of a
motor vehicle; and (vi) claims involving contractual liability for Bechtel's
indemnity obligations, if insurable, under this Contract. All insurance coverage
required to be obtained and maintained by Bechtel pursuant to the terms of this
Contract and the Contract Documents shall be primary in the event of any loss,
with any insurance carried by Webvan to be excess capacity to Bechtel's
coverage. All insurance policies required of Bechtel by this Contract and any
modifications thereto shall be subject to Webvan's reasonable approval as to
form, insurer, and adequacy of protection. Bechtel shall carry insurance with
coverage and limits of liability as specified in Appendix 7.1.1 to this
Contract, entitled "Insurance Requirements." All insurance required by this
Section 7.1.1 shall be purchased from and maintained with a company or companies
lawfully authorized to do business in the State of California, who are
incorporated admitted insurance companies in such State, and who have an A.M.
Best Rating of at least A IX.
7.1.2 Bechtel shall require that each of its Subcontractors and
Subconsultants obtain and maintain, at all times during the period such
Subcontractor or Subconsultant is performing Services, the insurance described
in Appendix 7.1.1.
7.1.3 All coverages shall be written on an occurrence basis and
maintained without interruption from date of commencement of the Services until
the date of completion of all Services and termination of any coverage required
to be maintained after the completion of all Services; provided, however, that,
subject to Section 7.1.6, Bechtel shall only be required to maintain in force
the site-specific policies described in Appendix 7.1.1 through the Final
Completion of each DC Project. All coverages shall be maintained by insurance
carriers acceptable to Webvan and Webvan's lenders and landlords in all
respects. The insurance referenced in clause (iii) of Section 7.1.1 shall
contain no exclusion which denies coverage for third party bodily injury or
property damage arising out of errors or omissions in maps, plans, drawings,
designs, or inspection or construction management services.
7.1.4 Certificates of insurance acceptable to Webvan shall be filed with
Webvan prior to commencement of the Services for each DC Project. These
certificates and the insurance policies required by Section 7.1 shall contain a
provision that coverages afforded under the policies will not be modified,
canceled or allowed to expire until at least thirty (30) days' prior written
notice has been given to Webvan. If any of the foregoing insurance coverages are
required to remain in force after the completion of all Services, an additional
certificate evidencing continuation of such coverage shall be submitted upon
completion and final payment for all Services as required by this Contract.
7.1.5 Webvan and Bechtel each acknowledge that Webvan's insurance
carrier may require that those provisions of the Contract Documents setting
forth the respective insurance coverages required of Webvan and Bechtel,
respectively, be varied. In such event, Bechtel and each Subcontractor and
Subconsultant shall, upon the request of Webvan, obtain any other or additional
insurance coverage so required, provided Webvan bears any additional costs
occasioned thereby. All policies of insurance shall name Webvan, its employees,
officers, directors, shareholders, and agents, and, at Webvan's option, any
landlord or lender for the applicable DC Property and any other person(s) Webvan
deems to have an insurable interest in the DC Property and/or the DC Project
work, as additional insured(s) under the policy. Upon request by Webvan, Bechtel
shall furnish each of its Subcontractor's and Subconsultant's policies (or
certificates thereof) to Webvan before commencement of the Services, evidencing
all coverage required hereunder. In addition, Bechtel shall promptly furnish to
Webvan copies of all
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endorsements both with respect to its own insurance and that of its
Subcontractors and Subconsultants which are subsequently issued and which amend
coverage, but delivery of such endorsements will not release such parties from
their obligation to obtain the insurance required by this Contract. The
requirements for the foregoing insurance shall not diminish or limit Bechtel's
obligations to indemnify Webvan under this Contract.
7.1.6 Notwithstanding any provision in any of the Contract Documents to
the contrary, Bechtel shall obtain products and completed operations coverage
required under this Contract, which coverage shall be maintained in force for
four (4) years after Substantial Completion of each DC Project for claims for
damages to tangible property resulting from defects (latent or otherwise) in
construction of improvements to real property or in the assembly and
installation of the Operating Equipment.
7.1.7 If Bechtel fails to secure and maintain the required insurance,
Webvan shall have the right (without the obligation to do so) to secure same in
the name and for the account of Bechtel, in which event Bechtel shall pay the
cost thereof and shall furnish upon demand all information that may be required
in connection therewith.
7.2 Property Insurance.
7.2.1 With respect to each DC Project and unless otherwise provided in
any provision of the Contract Documents, Bechtel shall purchase and maintain
"builder's risk" property insurance in the amount of the Budgeted Cost plus the
Bechtel Fee (as they may be modified pursuant to this Contract) and the
applicable DC Property, as appropriate, on a replacement cost basis and with
such deductible amounts as Webvan may approve. Bechtel's insurance (i) shall be
placed in the name of Bechtel and its Subcontractors and, at Webvan's option,
shall name Webvan and any other person(s) whom Webvan deems to have an insurable
interest in the applicable DC Property and/or the DC Project work, or any part
thereof, as named insureds, and (ii) shall be payable to Bechtel for the
insureds as the respective interests of such named insureds may appear. Such
insurance shall not insure against loss, damage, or destruction of any
contractor equipment, materials and supplies or temporary buildings or other
such property located in, on or about the DC Property, which are the property of
Bechtel, or any Subcontractor or Subconsultant, or any person directly or
indirectly employed by or under contract with Bechtel or its Subcontractors or
Subconsultants, all of which shall be insured by Bechtel under a separate
policy. The policy shall be retained and held by Bechtel. A copy of each policy
required of Bechtel by the Contract Documents shall be delivered to Webvan upon
demand. Bechtel shall be responsible for the payment of all costs not covered
because of deductibles in excess of $10,000 per occurrence under Bechtel's
property insurance.
7.2.2 Intentionally omitted.
7.2.3 Property insurance shall be on a "Special Form" policy form, and
shall insure against the perils of fire and extended coverage and physical loss
or damage, including theft, vandalism, malicious mischief, collapse, false-work,
temporary buildings and debris removal, including demolition occasioned by
enforcement of any applicable legal requirements. Coverage shall also be
provided, as needed, for earthquake and flood, for inland transit of permanent
plant equipment and offsite storage exposures for materials to be incorporated
into a DC Project, and for physical damage to DC Project work resulting from
faulty workmanship, materials or design.
7.2.4 If requested by Webvan, Bechtel shall obtain and provide Webvan
with a certificate (or certificates) of any insurance carried by Bechtel
covering the DC Project work during the course of
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construction, to the extent any such insurance affects or covers any interest of
Webvan in the DC Project work.
7.2.5 Webvan and Bechtel, by their execution of this Contract, each
hereby waives all rights against each other and any of their Subconsultants,
Subcontractors, agents and employees, each of the other, for damages to property
caused by fire or other perils to the extent such damages are covered by
property insurance obtained pursuant to this Section 7.2 or any other provision
of the Contract Documents, or any other property insurance maintained by Webvan
or Bechtel applicable to the DC Project work or the applicable DC Property,
regardless of the negligence of the entity so released; provided, however, that
such waivers are effective only if the applicable insurance policies of both
parties contain a clause to the effect that such release shall not affect the
right of the insured to recover under such policy. Each party shall cause each
property insurance policy obtained by it to provide that the insurer waives all
right of recovery by way of subrogation against the other party in connection
with any injury or damage covered by such policy. Bechtel shall also require of
all Subcontractors and Subconsultants similar waivers in favor of Webvan and
Bechtel. In addition, as to any DC Property for which Webvan's landlord is
required to maintain property insurance under Webvan's lease, Webvan shall
request such landlord to obtain from its property insurer a waiver of
subrogation for the benefit of Bechtel. Bechtel shall similarly obtain from
Bechtel's property insurer of any DC Project work a waiver of subrogation for
the benefit of Webvan's landlord at the applicable DC Property, if such
landlord's insurer provides Bechtel with a waiver of subrogation.
7.2.6 A loss covered under Bechtel's property insurance shall be
adjusted reasonably by Bechtel and shall be made payable to Bechtel for the
insureds, as their interests may appear. Bechtel shall pay Subcontractors their
just portion of any insurance proceeds received by Bechtel and, by appropriate
written agreements, shall require Subcontractors to make payments to their
sub-subcontractors in a similar manner. Bechtel shall deposit in a separate
account any insurance proceeds actually received by Bechtel under any of the
applicable policies. Bechtel shall apply such proceeds only toward the repair,
restoration and performance of DC Project work and shall distribute such
proceeds in accordance with such agreement as the parties in interest may reach.
If, after such loss, no other special agreement is made, replacement of damaged
property shall be covered by appropriate Change Order. Notwithstanding the
foregoing provisions of this Section 7.2.6, if following any such loss Webvan
elects to terminate this Contract with respect to the DC Project affected by
such loss, then all proceeds of Bechtel's property insurance for such DC Project
shall be paid to Webvan.
7.3 Risk of Loss. From the date that a Notice to Proceed for a DC Project is
first executed by Webvan through and including the date of Substantial
Completion of such DC Project, Bechtel shall bear all risk of loss, casualty,
damage, destruction, theft, vandalism and malicious mischief (collectively,
"RISK OF LOSS") to and for such DC Project work and the applicable DC Property.
After the date of Substantial Completion of a DC Project, Webvan shall bear all
Risk of Loss to such DC Project and the applicable DC Property. Bechtel and
Webvan acknowledge, however, that the foregoing allocation of Risk of Loss is
made solely for the purpose of allocating responsibilities between Bechtel and
Webvan for the repair, replacement and restoration of DC Project work and the
applicable DC Properties following any loss, casualty, damage, destruction,
theft, vandalism or malicious mischief of or to such DC Project work and/or the
applicable DC Properties. Nothing contained in this Section 7.3, therefore,
shall release Bechtel or any of its Subcontractors or Subconsultants from, or
waive or modify the liability and responsibility of Bechtel and its
Subcontractors and Subconsultants for, any of their respective obligations
otherwise provided under this Contract or the applicable Contract Documents,
including, without limitation, Section 2.3.4.7, Section 2.5.10, Section 2.6, and
Section 8.16.
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8.0 MISCELLANEOUS PROVISIONS
8.1 Year 2000 Compliance Warranty. Bechtel warrants that any computer
product, application or system developed by Bechtel hereunder ("PRODUCT"), if
any, will be Year 2000 Compliant in all material respects at the time of
turnover of a DC Project. As used in this warranty, the term "YEAR 2000
COMPLIANT" means that the Product, when configured and used according to the
documented instructions on the Project, will, without manual intervention or
interruption, either meet the Year 2000 compliance standard set by a recognized
industry association or code (such as the American Society for Testing and
Materials, the American Standard Code for Information Interchange, or the
Institute of Electrical and Electronics Engineers, Inc.) or will: (i) correctly
handle and process date information before, during and after January 1, 2000,
accepting date input, providing date output and performing calculations,
including but not limited to sorting and sequencing, on dates or portions of
dates; (ii) function according to the documentation before, during and after
January 1, 2000 without changes in operation resulting from the advent of the
new century; (iii) when appropriate, respond to two-digit date input in a way
that resolves any ambiguity as to century in a disclosed, defined and
predetermined manner; (iv) store and provide output of date information in ways
that are unambiguous as to century; and (v) manage the leap year occurring in
the year 2000, following the quad-centennial rule. The "quad-centennial rule"
means (a) if the year is divisible by 4, it is a leap year, unless (b) the year
is also divisible by 100, then it is not a leap year, unless (c) the year is
also divisible by 400, then it is a leap year. Bechtel will require all
Subcontractors to warrant Year 2000 Compliance in respect of services and
products they supply to the Project.
8.2 Ownership of Data.
8.2.1 Data Defined. For the purposes of this Section 8.2, " DATA" means
all designs, plans, models, drawings, prints, samples, transparencies,
specifications, reports, manuscripts, working notes, documentation, manuals,
photographs, negatives, tapes, discs, databases, software, works of art,
inventions, discoveries, components and any Contract Documents or similar items.
8.2.2 Ownership and Use of Background Data.
8.2.2.1 All intellectual property rights, copyrights, design
rights, patents, and other similar invention rights, trademarks, trade names,
service marks, trade secrets, all applications for and rights in or to any of
the foregoing (collectively "IP RIGHTS") in or to all Data now or hereafter
owned or prepared by Webvan ("WEBVAN DATA") shall be owned solely by Webvan.
Without limiting the generality of the foregoing sentence, Webvan Data shall
include, without limitation, [*]. Bechtel shall have no ownership or other
rights or interest in any Webvan Data or any of Webvan's IP Rights. Any Webvan
Data and Webvan IP Rights disclosed to Bechtel shall be used by Bechtel solely
in the performance of Services on behalf of Webvan hereunder and shall be
subject to the obligation to keep same strictly confidential as provided in
Section 8.10.
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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8.2.2.2 All IP Rights in or to all construction and program
management systems and designs, construction estimating, measurement and
procurement control systems, plot plan processor software, and construction and
program management information technology systems and software which Bechtel
owns or has prepared prior to the date hereof (collectively, "BECHTEL BACKGROUND
DATA") shall remain the property of Bechtel. Bechtel Background Data shall not,
however, include any Webvan Data or Developed Data. Bechtel hereby grants to
Webvan a perpetual, non-exclusive, irrevocable, royalty-free license to use,
copy and modify the Bechtel Background Data to the extent necessary to operate,
use or maintain any DC Project work, but solely in connection with DC Projects
for which Bechtel has provided Services under this Contract. Except as provided
herein, Webvan shall have no ownership or other rights or interest in any
Bechtel Background Data.
8.2.3 Developed Data. All IP Rights in all Data prepared or developed by
or for Bechtel or any of its Subcontractors or Subconsultants hereunder,
including, without limitation, all Contract Documents (collectively, "DEVELOPED
DATA") shall vest in and become the sole property of Webvan, shall be treated by
Bechtel (and Bechtel shall require that all of its Subcontractors and
Subconsultants treat it) as strictly confidential, and shall at all times remain
the property of Webvan, and all works of art which constitute copyrightable
subject matter shall be considered "works made for hire" to the fullest extent
allowable under the United States Copyright Act. All such Developed Data shall
automatically and immediately constitute Webvan Data and shall be clearly
marked, where possible, as Webvan's property, and Bechtel agrees to assign and
does hereby assign all right, title and interest in, under and to the Developed
Data to Webvan. Each party agrees to perform any further acts and execute and
deliver any and all further documents and/or instruments which are considered
necessary or appropriate by Webvan to ensure that the Developed Data vests in
Webvan, including but not limited to executing assignments, oaths and
declarations for IP Rights on a country by country basis as deemed advisable by
Webvan and any other action for perfecting in Webvan all right, title and
interest in, under and to the Developed Data. At Webvan's request from time to
time, Bechtel shall furnish a copy of all such Developed Data to Webvan and
copies of designs, drawings, plans, specifications, databases and reports (in
electronic format, to the extent available). Bechtel shall maintain in good
order at each DC Project site one record copy of the drawings, Change Orders and
other modifications, specifications, product data, samples, and shop drawings
marked currently to record changes made during Development. Each of the items
specified in the foregoing sentence shall be delivered to Webvan upon completion
of the Development of the DC Project and prior to Final Payment. Bechtel shall,
however, have the right to retain one copy of each such item for Bechtel's
archive records, subject to the provisions of this Section 8.2, Section 8.10 and
any confidentiality covenant executed pursuant to Section 8.10.
8.2.4 Equitable Relief. Bechtel acknowledges that the damages that
Webvan will incur as a consequence of any breach by Bechtel or any Subcontractor
or Subconsultant of the provisions of this Section 8.2, of Section 8.10 or of
any confidentiality covenant executed pursuant to Section 8.10 of this Agreement
will be irreparable and may not readily be capable of calculation. Accordingly,
to the fullest extent permissible by Law and without limiting any other rights
or remedies that may be available to Webvan pursuant to this Contract, Webvan
shall be entitled, as a matter of right, to specific performance and other
injunctive relief to protect Webvan's interests, including but not limited to
preliminary and permanent injunctive relief. Bechtel hereby consents to the
issuance by any court of competent jurisdiction of both temporary and permanent
injunctions restraining and prohibiting Bechtel and its agents and
representatives, from violating any of the provisions of this Section 8.2, of
Section 8.10 or of any other confidentiality covenant executed pursuant to
Section 8.10. Bechtel shall cause each of its Subcontractors and Subconsultants
to consent to the foregoing injunctive relief and shall provide Webvan with
copies of such consents upon Webvan's request.
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8.3 Public Releases. Bechtel shall not make public announcements or publicity
releases related to the Project without Webvan's prior written approval,
including, without limitation, Webvan's prior written approval of the form and
content of any such announcements or releases, in both cases such approval not
to be unreasonably withheld.
8.4 Time of Performance. If the date for any payment under this Contract
falls on a Saturday, Sunday or legal holiday, payment shall be made as specified
on the next following business day.
8.5 Independent Contractor. Bechtel is and at all times shall be an
independent contractor with respect to the Services and the Project. Neither
this Contract nor any of the Contract Documents nor any course of dealing or
practice shall be interpreted as creating, or shall be deemed to create, any
employer-employee, principal-agent, partnership, joint venture or other
relationship between Webvan and Bechtel. Bechtel has and hereby retains the
right to exercise full control over the employment, direction and discharge of
all persons assisting it in the execution of the Services. Bechtel shall be
solely responsible for all matters relating to payment of its employees,
including compliance with Social Security, withholding and all other regulations
governing such matters. Bechtel shall be solely and fully responsible for its
own acts and those of its subordinates, employees, Subconsultants and
Subcontractors during the term of this Contract.
8.6 Prior Work. Any Services, including all engineering and design work
performed by Bechtel or its Subconsultants and Subcontractors for the Project
prior to the Effective Date shall be and hereby are incorporated into this
Contract and covered by the conditions and requirements set forth herein.
8.7 Notices. All notices required or permitted to be given hereunder shall be
in writing, and shall be deemed duly delivered, received and given, (i) upon
personal delivery to the address set forth below, or to such other address
designated by five (5) days' prior written notice to the other party, (ii) one
(1) business day following delivery to an overnight courier guaranteeing next
business day delivery to the address set forth below, or to such other address
designated by five (5) days' prior written notice to the other party, or (iii)
immediately upon the next business day after confirmation of facsimile receipt
at the fax number set forth below or to such other fax number designated by five
(5) days' written notice to the other party. The address of the parties for the
purpose hereof shall respectively be:
For Webvan: Webvan Group, Inc.
1241 E. Hillsdale Boulevard, Suite 210
Foster City, California 94404
Attention: Gary B. Dahl
Facsimile: 650-524-4801
For Bechtel: Bechtel Corporation
50 Beale Street
San Francisco, California 94119-3965
Attention: Thomas R. McKinney
Facsimile: 415-768-5253
8.8 Successors and Assigns. This Contract calls for the personal services of
Bechtel and, therefore, Bechtel has no right to assign, delegate or transfer,
and shall not assign, delegate or transfer, any right or obligation under this
Contract (including Bechtel's right to payments). Webvan may assign this
Contract to any person or entity controlled by, under common control with, or
which controls Webvan or to any
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<PAGE> 42
lender on all or any portion of the Project, or to any entity or entities which
succeed to Webvan's interest in any of the Project, without Bechtel's consent,
or to any other persons or entities with Bechtel's consent, which consent shall
not be unreasonably withheld. Webvan shall promptly notify Bechtel of any such
assignment or transfer. Subject to the foregoing, this Contract shall extend to,
be binding upon and inure to the benefit of, the respective heirs, executors,
administrators, successors and assigns of Webvan and Bechtel.
8.9 Occupancy and Use of DC Project Work Prior to Completion. Webvan shall
have the right to occupy any DC Property or use any portion of the DC Project
work prior to Substantial Completion thereof. Unless otherwise agreed upon,
partial occupancy or use of a portion or portions of the DC Project work shall
not constitute acceptance of work not complying with the requirements of the
Contract Documents.
8.10 Confidentiality. Bechtel shall keep, and shall require all Subcontractors
and Subconsultants to keep, confidential all "Confidential Information" as
defined in and subject to the terms of the Confidentiality and Nondisclosure
Agreement attached hereto as Appendix 8.10 and made a part hereof.
8.11 Entire Agreement; Amendments; Survival of Provisions. This Contract
constitutes the entire agreement between the parties hereto relating to the
subject matter hereof and supersedes any previous agreements or understandings.
This Contract may be amended only by a written instrument signed by both Webvan
and Bechtel. All provisions of this Contract shall survive the termination or
expiration of this Contract.
8.12 Effective Date. The "EFFECTIVE DATE" of this Contract shall be the date
by which this Contract has been executed by the parties, as indicated opposite
each party's respective signature at the end of this Contract, provided that the
executed Contract has been mutually delivered. If the parties do not execute
this Contract on the same date, the Effective Date shall be the date on which
the second party delivers the fully executed Contract to the other party.
8.13 No Waiver. No term or condition of this Contract may be waived except by
an instrument duly executed by the waiving party. No delay or failure by any
party in exercising any of its rights, remedies, powers or privileges under this
Contract and no custom, practice or course of dealing between or among any of
such parties or any other person shall be deemed a waiver by such party of any
such rights, remedies, powers or privileges, even if such delay or failure is
continuous or repeated. No single or partial exercise of any right, remedy,
power or privilege shall preclude any other or further exercise thereof by any
such party or the exercise of any other right, remedy, power or privilege by
such party, including, without limitation, the right of such party subsequently
to demand strict compliance with the terms and conditions of this Contract.
8.14 Bechtel's Representations and Warranties. Bechtel hereby represents and
warrants to Webvan that it is legally empowered to provide all of the Services
required by this Contract in the states in which the DC Projects are and will be
located and the states in which all Services will be performed. At all times
during the term of this Contract, Bechtel shall, at its sole cost and expense,
keep in full force and effect all professional and business permits, licenses
and approvals affecting Bechtel's ability to perform the Services and otherwise
necessary and appropriate to enable Bechtel to perform this Contract, including,
without limitation, all professional licenses and qualifications of any
individual employees of Bechtel providing services under this Contract or any
other Contract Documents. The person executing this Contract on behalf of
Bechtel represents that this Contract is binding and enforceable against Bechtel
in accordance with its terms, and that no other signature of any party is
necessary to make this Contract
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binding on and enforceable against Bechtel. Bechtel has made these
representations and warranties to Webvan knowing that Webvan is relying to a
material extent on said representations and warranties in entering into this
Contract.
8.15 Exposure to Hazardous Materials. Webvan shall have no liability to
Bechtel, its Subcontractors or Subconsultants or any of their respective
employees or agents with respect to any exposure to asbestos, PCB's or hazardous
materials on any DC Property or elsewhere. Bechtel shall cause its
Subcontractors and Subconsultants, and the respective employees and agents of
Bechtel and all Subcontractors and Subconsultants, to take all reasonable
precautions necessary to prevent their exposure to any asbestos, PCB's and other
hazardous materials disclosed by Webvan or otherwise known by Bechtel as being
present at a DC Property. In addition, Webvan and Bechtel shall each have the
rights and obligations set forth in Section 8.1 of the General Conditions.
8.16 Indemnification. To the fullest extent permitted by Law, Bechtel shall
indemnify, defend (with counsel reasonably acceptable to Webvan) upon demand,
protect and hold harmless Webvan, its subsidiaries and affiliates and their
respective officers, directors, shareholders, agents, consultants and employees
from and against any and all causes of action, demands, losses, violations,
infringements of Law, patent, license or trademark, costs, attorneys' and
experts' fees, claims, damages, and liabilities of every kind and nature arising
out of, alleged to have arisen out of, or resulting in any way from, the
Services to be performed under this Contract by Bechtel and its Subcontractors
and Subconsultants which are the result of any willful misconduct, negligent act
or omission, or breach of any obligation or representation under this Contract
or any of the other Contract Documents, by Bechtel or any of its Subcontractors
or Subconsultants or material suppliers, or by the respective agents, officers,
employees, representatives, contractors or subconsultants of any of them. The
foregoing notwithstanding: (i) Bechtel's obligations to indemnify and hold
Webvan and its employees harmless shall in no event apply to the portion of any
claim which is due to the negligence or willful misconduct of Webvan, its
subsidiaries or affiliates or their respective officers, directors,
shareholders, agents or employees; (ii) Bechtel shall have no obligation to
protect, indemnify, defend or hold harmless any consultant of Webvan if any
claim is due in part to the negligence or willful misconduct of such consultant;
and (iii) Bechtel's foregoing indemnity obligation shall not apply with respect
to infringements of patents by any Subcontractor that Webvan has specified as
the only subcontractor that Bechtel is authorized to engage to perform
particular Services. Acceptance of any Services by Webvan shall not operate as a
waiver of the foregoing indemnification, and the foregoing indemnification shall
survive the completion of the Project and the termination of this Contract. All
of the foregoing indemnification shall (a) be in full force and effect and apply
at all times during the progress of the Services and notwithstanding the
Substantial Completion of any DC Project, and the filing of a notice of
completion or notice of similar import, or the termination of this Contract, and
at all times thereafter, (b) not be deemed limited in any way by the amount or
type of any insurance coverage that the Bechtel is required to maintain
hereunder, (c) not be limited by any limitation on amount or type of damages,
compensation or benefits payable by or for Bechtel or a Subcontractor or
Subconsultant under workers' or workmen's compensation acts, disability benefit
acts or other employee benefit acts, and (d) shall be subject to the express
limitations of liability and releases from liability set forth elsewhere in this
Contract. [*]
8.17 Limitation of Rights and Remedies.
8.17.1 Notwithstanding Section 6.4 and Section 8.16, (a) the aggregate
monetary liability of Bechtel arising from Bechtel's performance or
non-performance of Services under this Contract shall not
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
42
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exceed the sum of [*] and (b) neither Bechtel nor any of its Subconsultants or
Subcontractors shall be liable to Webvan, and Webvan hereby releases Bechtel and
its Subconsultants and Subcontractors from any liability, for [*].
8.17.2 The limitations of liability and releases from liability under
Section 8.17.1 shall not apply to any losses, costs, claims, liabilities or
damages incurred by Webvan or any of its subsidiaries or affiliates or any of
their respective officers, directors, agents, shareholders or representatives
arising from or relating in any manner to (i) any intentional violation of
Section 8.2 (entitled "Ownership of Data"), Section 8.10 (entitled
"Confidentiality" or any confidentiality agreement executed thereunder), or
Section 8.25 (entitled "Bechtel Exclusivity") by any corporate officer of
Bechtel or any of its subsidiaries or affiliates, or by Bechtel's Program
Director for the Project or any of his direct reports, or (ii) any claims
brought by third parties.
8.17.3 The foregoing limitations of liability and releases from liability
are personal to Bechtel and its Subcontractors and Subconsultants and any of its
or their subsidiaries or affiliates and their respective officers, directors,
shareholders and agents and shall not apply to any other person or entity. No
acts, omissions, reviews, approvals or other actions hereunder by Bechtel shall
give rise to any claim by any other party against Webvan or limit the liability
of any party to Webvan. Except as expressly provided to the contrary in this
Contract, no provision of this Contract is intended to, and no provision of this
Contract shall, limit the rights or remedies of Webvan pursuant to any other
provisions of this Contract. To the maximum extent permitted by law, however,
but no further, the limitations on damages, the releases from liability, the
limitations of liability, and the exclusive remedies provisions expressly
provided in this Contract shall apply even in the event of the fault, negligence
(in whole or in part), strict liability or breach of contract of the party who
is released or whose liability is limited by such provisions of this Contract
and shall extend to such party's officers, directors, employees and agents. The
remedies provided in this Contract are exclusive, except that Webvan shall in
addition have the right to obtain specific performance and all other injunctive
relief that may be available. Bechtel disclaims, and Webvan waives, any implied
warranties of merchantability or fitness for a particular purpose with respect
to any equipment or other personal property procured by Bechtel and provided to
Webvan as part of any DC Project.
8.18 Governing Law. The validity, effect, construction, performance and
enforcement of this Contract and the rights and obligations of the parties
hereunder shall be governed in all respects by the laws of the State of
California without reference to conflicts of law, except that the enforcement of
remedies against any DC Property shall be governed by the law of the state where
the DC Property is located. Venue for the resolution of any disputes between
Bechtel and Webvan regarding the Project shall be within the courts of the State
of California.
8.19 Counterparts. This Contract may be executed in one or more counterparts.
All counterparts so executed shall constitute one agreement, binding on all
parties, even though all parties are not signatory to the same counterpart.
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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8.20 Construction. Each party has reviewed and revised this Contract. The
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not apply to the interpretation of
this Contract.
8.21 Severability. If all of any portion of any provision of this Contract as
applied to either party or to any circumstance shall be ruled by a court of
competent jurisdiction to be void or unenforceable for any reason, the same
shall in no way affect (to the maximum extent permissible by Law) that provision
or the remaining portions of that provision as applied to any parties or
circumstances or any other provision of this Contract or the validity or
enforceability of this Contract as a whole, all of which shall be enforced to
the greatest extent permitted by Law.
8.22 Headings. The headings used herein are for purposes of convenience only
and shall not be used in construing the provisions hereof.
8.23 Cooperation with Lender and Landlords. Bechtel shall at all times
cooperate with any lender and/or landlord on the Project, any DC Property, any
DC Project, or any portion thereof, including, without limitation, executing any
agreements, documents, acknowledgments, certificates and/or amendments to this
Contract as Webvan and/or such lender or landlord may reasonably require in
connection with any sale or financing, whether construction or permanent, for
the Project, any DC Property, or any portion thereof, as further provided in the
General Conditions. In no event, however, shall Bechtel be required to execute
any such document or amendment which would adversely affect Bechtel's
limitations of liability or other rights under this Contract, unless agreed to
by Bechtel in its sole discretion.
8.24 Attorneys' Fees and Costs. In any action arising under or in connection
with this Contract, the prevailing party in such action shall be awarded, in
addition to other legal or equitable relief, its reasonable costs and expenses
and reasonable attorneys' fees.
8.25 Bechtel Exclusivity.
8.25.1 Notwithstanding any term or condition of this Contract or any
Contract Documents to the contrary, neither Bechtel nor any entity controlling,
controlled by, or under common control with Bechtel shall, for the Exclusive
Period, provide any goods or services substantially similar to the Services
described in this Contract for distribution or delivery facilities of any person
or entity in the business (a "RELEVANT BUSINESS") of [*]. For purposes of this
Section 8.25, the "EXCLUSIVE PERIOD" shall commence [*]
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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[*].
8.25.2 Webvan acknowledges Webvan's intent to engage Bechtel in the
future to provide Services similar to those described in this Contract for
Webvan DC's outside the United States of America ("USA"). Bechtel acknowledges,
however, that this Contract creates no obligation of Webvan to engage Bechtel
for such services outside the USA. If, therefore, [*].
8.25.3 Bechtel acknowledges that the damages that Webvan will incur as a
consequence of any breach by Bechtel of the provisions of this Section 8.25 will
be irreparable and may not readily be capable of calculation. Accordingly, to
the fullest extent permissible by Law and without limiting any other rights or
remedies that may be available to Webvan pursuant to this Contract, Bechtel
hereby consents to the issuance by any court of competent jurisdiction following
any breach of this Section 8.25 by Bechtel of both temporary and permanent
injunctions restraining and prohibiting Bechtel and its agents and
representatives from violating any of the provisions of this Section 8.25.
8.26 Days. Whenever used in this Contract, the word "days" shall refer to
calendar days except where otherwise expressly provided to the contrary.
9.0 APPENDICES
9.1 The following Appendices are incorporated into this Contract by this
reference:
<TABLE>
<S> <C>
Appendix 2.0 Notice to Proceed
Appendix 2.5A Request to Solicit Bids
Appendix 2.5 General Conditions
Appendix 2.5.3 General Work Requirements
Appendix 5.1.2 Unit Rate Schedule
Appendix 5.8 Warrant
Appendix 7.1.1 Insurance Requirements
Appendix 8.10 Confidentiality and Nondisclosure Agreement
</TABLE>
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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In the event of any conflict or inconsistency between the terms
and conditions of this Contract form and the terms and conditions of any of the
appendices attached hereto, the terms and conditions of this Contract form shall
govern and control.
IN WITNESS WHEREOF, the parties hereto have executed this Contract to be
effective on the Effective Date provided in Section 8.12.
WEBVAN GROUP, INC.
By:/S/ LOUIS H. BORDERS
---------------------------------------
Print
Name:/S/ LOUIS BORDERS
-------------------------------------
Title: CHAIRMAN & CEO
------------------------------------
Date: 7/8/99
-------------------------------------
BECHTEL CORPORATION
By: /S/ D. DONLY
---------------------------------------
Print
Name: D. DONLY
-------------------------------------
Title: PRES - N.A. REGION
------------------------------------
Date: 8 JULY 99
-------------------------------------
46
<PAGE> 48
SCHEDULE OF DEFINITIONS
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
APPLICATION FOR PAYMENT..............................................Section 5.2.1
APPROVED COST OF THE WORK............................................Section 2.5.1
BASE CONTINGENCY.....................................................Section 2.5.1.2
BECHTEL BACKGROUND DATA..............................................Section 8.2.2.2
BECHTEL FEE..........................................................Section 2.5.2
BUDGETED COST........................................................Section 2.5.1
CERTIFICATE OF OCCUPANCY.............................................Section 5.2.2.9
CHANGE ORDER.........................................................Section 2.5.4.1
CHANGE ORDER REQUEST.................................................Section 2.5.4.1
CHANGE ORDER WORK....................................................Section 2.5.4.2
CONSTRUCTION DOCUMENTS...............................................Section 2.3.3.1
CONSTRUCTION SERVICES................................................Section 3.1
CONSULTANT SERVICES..................................................Section 3.1
CONTINGENCY AMOUNT...................................................Section 2.5.1.2
CONTRACT DOCUMENTS...................................................Section 2.5
CONTRACT TIME........................................................Section 3.2.2
COST INCENTIVE AMOUNT................................................Section 5.6.1
COST INCENTIVE CAP...................................................Section 5.6.1
COST OF THE WORK.....................................................Section 2.5.5
COST SAVINGS.........................................................Section 5.6.1
</TABLE>
-i-
<PAGE> 49
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
DC PROJECT...........................................................Section 1.1
DC PROPERTY..........................................................Section 5.2.2.8
DC'S.................................................................Section 1.1
DATA.................................................................Section 8.2.1
DEFAULT RATE.........................................................Section 2.3.4.7
DESIGN DEVELOPMENT DOCUMENTS.........................................Section 2.3.2.1
DESIGN SERVICES......................................................Section 3.1
DEVELOPED DATA.......................................................Section 8.2.3
DEVELOPMENT..........................................................Section 1.1
DEVELOPMENT PLAN.....................................................Section 2.1
EFFECTIVE DATE.......................................................Section 8.12
EQUIPMENT SCHEDULE...................................................Section 2.5.5.4
EVENT OF DEFAULT.....................................................Section 6.3
EXCESS CONTINGENCY...................................................Section 2.5.1.2
EXCLUSIVE PERIOD.....................................................Section 8.25.1
EXCUSABLE DELAY......................................................Section 2.5.13
FF&E.................................................................Section 2.6
FINAL COMPLETION.....................................................Section 3.2
FINAL PAYMENT........................................................Section 5.2.2.9
GENERAL CONDITIONS...................................................Section 2.5
GENERAL WORK REQUIREMENTS AMOUNT.....................................Section 2.5.3
</TABLE>
-ii-
<PAGE> 50
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
IP RIGHTS............................................................Section 8.2.2.1
JAMS.................................................................Section 2.5.12.2
LAWS.................................................................Section 2.3.4.1
LIQUIDATED DAMAGES AMOUNT............................................Section 6.4.2
MECHANICS' LIENS.....................................................Section 4.2.2
NOTICE TO PROCEED....................................................Section 2.0
ON TIME/ON BUDGET....................................................Section 5.8
OPERATING EQUIPMENT..................................................Section 1.1
OUTSTANDING AMOUNT...................................................Section 6.1.2
PAST-DUE AMOUNT......................................................Section 6.1.2
PAST-DUE NOTICE......................................................Section 6.1.2
PERFORMANCE STANDARDS................................................Section 1.2
PRIVATE RESTRICTIONS.................................................Section 2.3.4.1
PRODUCT..............................................................Section 8.1
PROJECT..............................................................Section 1.1
PROJECT BUDGET.......................................................Section 2.3.1.2
PROJECT SCHEDULE.....................................................Section 2.3.4.5
PUNCH LIST...........................................................Section 3.2
RECOVERABLE COSTS....................................................Section 5.1.2
RELEVANT BUSINESS....................................................Section 8.25.1
REQUEST TO SOLICIT BIDS..............................................Section 2.5
</TABLE>
-iii-
<PAGE> 51
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
RISK OF LOSS.........................................................Section 7.3
SCHEDULED DATE.......................................................Section 5.7
SCHEDULE OF VALUES...................................................Section 2.5.9
SCHEMATIC DESIGN DOCUMENTS...........................................Section 2.3.1.1
SERVICES.............................................................Section 2.0
SUBCONSULTANTS.......................................................Section 2.3.4.2
SUBCONTRACTORS.......................................................Section 2.5.8
SUBCONTRACTS.........................................................Section 2.5.8
SUBSTANTIAL COMPLETION...............................................Section 2.5
TIME INCENTIVE AMOUNT................................................Section 5.7
USA..................................................................Section 8.25.2
WARRANT..............................................................Section 5.8
WEBVAN DATA..........................................................Section 8.2.2.1
WEBVAN SYSTEMS.......................................................Section 1.2
YEAR 2000 COMPLIANT..................................................Section 8.1
</TABLE>
-iv-
<PAGE> 52
APPENDIX 2.0
NOTICE TO PROCEED
This "Notice to Proceed" is made and entered into as of this ___
day of ___________, _______, pursuant to the provisions of the Contract for
Turnkey Design/Build Construction and Related Services (the "Contract") between
WEBVAN GROUP, INC. ("Webvan") and BECHTEL CORPORATION ("Bechtel") dated as of
July 8, 1999, concerning the DC Project located at
__________________________________ _______________________________(the "DC
Project"). All capitalized terms used, but not defined herein shall have the
meanings given to them in the Contract.
Bechtel is hereby directed to furnish all labor, materials,
supervision, tools, equipment and supplies necessary to perform, and Bechtel
hereby agrees to perform, all of the Services selected below for the DC Project
in accordance with the terms and conditions of the Contract and this Notice to
Proceed.
___ I. Work Authorization for Consultant Services.
___ A. Site Evaluation and Selection.
1. Description of Services:
-------------------------------
-------------------------------------------------------------
2. Total not-to-exceed Recoverable Costs: $ .
------------
3. Target completion date: .
----------------
___ B. Procurement.
1. Description of FF&E:
--------------------------------------
-------------------------------------------------------------
2. Total not-to-exceed Recoverable Costs: $ .
------------
3. Target completion date: .
------------------
___ C. Training.
1. Description of Services:
----------------------------------
-------------------------------------------------------------
2. Total not-to-exceed Recoverable Costs: $ .
------------
3. Target completion date: .
------------------
___ II. Work Authorization for Design Services.
Bechtel shall provide the following Design Services in accordance with
the Design Services Budget attached hereto as Exhibit A and made a part hereof:
___ A. Program Management.
<PAGE> 53
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ B. Schematic Design Services.
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ C. Design Development Services.
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ D. Construction Documents Services.
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ III. Work Authorization for Construction Services.
A. Scope of Work. All work (the "Work") shown on, described in or
reasonably inferable from the following documents: the Construction Documents
for the DC Project, including the drawings and specifications (including,
without limitation, those relating to Operating Equipment), dated ____________,
prepared by ________________________________.
B. Completion of the Work. Bechtel shall complete the Work in
accordance with the approved Project Schedule attached hereto as Exhibit B and
made a part hereof.
C. Budgeted Cost. The Budgeted Cost for the Work is the sum of the
following:
1. Approved Cost of the Work:
(a) Subcontractor Bids: $__________
(b) General Work
Requirements Amount: $__________
Total Approved Cost of the Work $_____________
2. Contingency Amount:
(a) Base Contingency: $___________
(b) Excess Contingency: $___________
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Total Contingency Amount $______________
3. Total Budgeted Cost $______________
(Approved Cost of the Work plus Contingency Amount)
Any costs incurred by Bechtel in performing the Work in excess of the Total
Budgeted Cost shall be paid out of the Bechtel's own funds, and Bechtel shall
have no claim against Webvan on account thereof.
D. Scheduled Date for Substantial Completion: _____________________
(per attached Project Schedule)
E. Target Date for Final Completion: _______________________________.
(per attached Project Schedule)
THIS NOTICE TO PROCEED is made and entered into as of the date first
above written.
WEBVAN GROUP, INC.
By:_____________________________________
Print
Name:___________________________________
Title:__________________________________
Date:___________________________________
BECHTEL CORPORATION
By:______________________________________
Print
Name:____________________________________
Title:___________________________________
Date:____________________________________
3
<PAGE> 55
EXHIBIT A
Design Services Budget
[To be attached]
4
<PAGE> 56
EXHIBIT B
Project Schedule
[To be attached]
5
<PAGE> 57
APPENDIX 2.5A
REQUEST TO SOLICIT BIDS
This "Request to Solicit Bids" is made pursuant to Section 2.5 of that
certain Contract for Turnkey Design/Build Construction and Related Services (the
"Contract") dated July 8, 1999, between WEBVAN GROUP, INC. ("Webvan") and
BECHTEL CORPORATION ("Bechtel"). All capitalized terms used, but not defined,
herein shall have the meanings given to them in the Contract.
Webvan hereby requests Bechtel to solicit bids from Subcontractors to
perform, in accordance with the Contract, all work shown on, described in, or
reasonably inferable from the Construction Documents for the DC Project located
at ______________________________________, including the drawings and
specifications (including, without limitation, those relating to Operating
Equipment), dated ______________, prepared by
_______________________________________.
This Request to Solicit Bids has been executed as of the date indicated
below.
WEBVAN GROUP, INC.
By:_____________________________________
Print
Name:___________________________________
Title:__________________________________
Date:___________________________________
<PAGE> 58
APPENDIX 2.5
GENERAL CONDITIONS FOR CONSTRUCTION SERVICES
ARTICLE 1
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS. Unless otherwise provided in these "GENERAL
CONDITIONS", the capitalized terms used herein shall have the meanings ascribed
to them in Contract for Turnkey Design/Build Construction and Related Services
to which this appendix is attached.
1.2 EXECUTION, CORRELATION AND INTENT.
1.2.1 The Contract Documents for a DC Project shall not be
construed to create a contractual relationship of any kind (i) for the DC
Project between Webvan and any Subcontractor or Subconsultant, or (ii) between
any persons or entities other than Webvan and Bechtel. Bechtel is an independent
contractor of Webvan. Bechtel is not the employee, agent, joint venturer, or
partner of Webvan. Bechtel shall have the sole responsibility for performance
under any Subcontract or Subconsultant agreement entered into by Bechtel with
respect to a DC Project.
1.2.2 Intentionally omitted.
1.2.3 The intent of the Contract Documents is to include all
items necessary for the proper execution and completion of the DC Project work
by Bechtel. The Contract Documents are complementary, and what is required by
one shall be as binding as if required by all. Conflicts or discrepancies among
the Contract Documents shall be resolved in the following order of priority:
1.2.3.1 Contract;
1.2.3.2 Notices to Proceed;
1.2.3.3 Supplementary Conditions, if any;
1.2.3.4 The General Conditions;
1.2.3.5 Construction Documents, including all applicable
drawings and specifications (drawings govern specifications for quantity and
location, and specifications govern drawings for quality and performance; in the
event of ambiguity in quantity or quality, the greater quantity and the better
quality shall govern);
1.2.3.6 Figured dimensions govern scale dimensions, and
large scale drawings govern small scale drawings; and
1.2.3.7 Approved revisions and addenda take precedence over
the original documents, and those of later date take precedence over those of
earlier date.
1.2.4 Organization of the specifications into divisions, sections
and articles, and arrangement of drawings, shall not control Bechtel in dividing
any DC Project work among
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Subcontractors or Subconsultants or in establishing the extent of any DC Project
work to be performed by any trade. Bechtel represents that the Subcontractors
and Subconsultants engaged or to be engaged by it are and will be familiar with
the requirements for performance by them of their obligations.
1.2.5 Unless otherwise defined in the Contract Documents for a DC
Project, words which have well-known technical or construction industry meanings
are used in the Contract Documents in accordance with such recognized meanings.
1.3 OWNERSHIP AND USE OF DRAWINGS AND SPECIFICATIONS AND OTHER
DOCUMENTS. Webvan shall be deemed the owner of all Construction Documents,
drawings and specifications and other documents (including any and all copies
thereof, except that Bechtel may retain one copy for its archive records,
subject to Bechtel's confidentiality and non-disclosure obligations under the
Contract) furnished to Webvan. However, submittal or distribution to meet
official regulatory requirements or for other purposes in connection with a DC
Project is not and shall not be construed as a publication in derogation of
Webvan's copyright or other reserved rights.
ARTICLE 2
OWNER
2.1 DEFINITION. Webvan is the person or entity identified as such in
the Contract. The term "WEBVAN" means Webvan or Webvan's authorized
representative designated by Webvan in writing.
2.2 INFORMATION REQUIRED OF WEBVAN.
2.2.1 Upon receipt of a written request therefor from Bechtel,
information under Webvan's control shall be furnished by Webvan with reasonable
promptness to avoid delay in orderly progress of DC Project work.
2.2.2 Webvan will not have control over or charge of, and will
not be responsible for, the design, construction means, methods, techniques,
sequences or procedures, or for safety precautions and programs in connection
with a DC Project, since those are solely Bechtel's responsibility as provided
in the Contract Documents for such DC Project. Webvan will not be responsible
for Bechtel's failure to carry out any DC Project work in accordance with the
Contract Documents for such DC Project. Webvan will not have control over or
charge of, and will not be responsible for, negligent acts or omissions of
Bechtel, Subcontractors, Subconsultants or their respective agents or employees.
2.3 WEBVAN'S RIGHT TO STOP THE WORK.
2.3.1 If suspension of any DC Project work is warranted by
reason of unforeseen conditions which may adversely affect the quality and/or
progress of such DC Project work if such DC Project work were continued, Webvan
by written notice to Bechtel may do either or both of the following, to the
extent necessary to address such unforeseen conditions: (i) entirely suspend
such DC Project work; or (ii) cause such DC Project work, or portions thereof,
to be partially suspended or delayed, while other portions of such DC Project
work continue on the same or a different schedule as determined by Webvan and
Bechtel. In such event, the Contract Time for the DC Project shall be extended
by such reasonable amount of time as is appropriate as a consequence of the
delay caused by the exercise by Webvan of such remedies. Bechtel shall take all
reasonable steps to mitigate the effects of such suspension. Any claim by
Bechtel to adjust the Budgeted Cost for such DC Project shall be
2
<PAGE> 60
made in accordance with the applicable provisions of Section 2.5.11 of the
Contract; provided, however, that in no event will Bechtel be entitled to
recover any damages resulting from such a suspension. If Bechtel reasonably
believes that a suspension of any DC Project work is warranted by reason of
unforeseen circumstances which may adversely affect the quality of the DC
Project work if the DC Project work were continued, Bechtel shall immediately
notify Webvan of such belief, but Bechtel shall have no right to suspend such DC
Project work, except with the written consent of Webvan or in the case of an
emergency (in which event Bechtel shall resume work upon cessation of the
emergency).
2.3.2 Notwithstanding any provision of the Contract Documents for
a DC Project to the contrary, if Bechtel fails to correct defective DC Project
work, fails to complete any DC Project work on time, or is in default of its
obligations hereunder or under any other Contract Documents, Webvan may order
Bechtel to stop the DC Project work, or any portion thereof, until the cause for
such order has been eliminated and/or Webvan may pursue its remedies as set
forth in the Contract.
ARTICLE 3
CONTRACTOR
3.1 DEFINITION. Bechtel is the person or entity identified as such in
the Contract and is referred to throughout the Contract Documents as if singular
in number. The term "BECHTEL" means Bechtel or Bechtel's authorized
representative.
3.2 REVIEW OF FIELD CONDITIONS BY BECHTEL.
3.2.1 By its execution of a Notice to Proceed for a DC Project,
Bechtel acknowledges, agrees and represents to Webvan that:
3.2.1.1 Intentionally omitted;
3.2.1.2 Bechtel has inspected the DC Property and has
satisfied itself as to the condition thereof, including, without limitation, all
structural, surface and subsurface conditions which (a) are visible or (b)
reasonably should be known to Bechtel following such review of records, files
and documents relevant to the DC Project in local building, planning and/or
public works departments, and/or the recorder's or other public offices which
Bechtel deems prudent and reasonable in the circumstances, including a review of
all reasonably accessible records, files and documents; provided, however, that
Webvan shall (i) provide Bechtel with a copy of a current title report on the DC
Property (including copies of all matters described therein as exceptions to
title), (ii) satisfy itself to the availability of zoning and land use
entitlements for the DC Project, and (iii) furnish Bechtel with copies of any
inspection and test reports, analyses and studies (including environmental
audits) obtained by Webvan or otherwise in Webvan's possession regarding the DC
Property; and
3.2.1.3 Intentionally omitted.
3.2.2 Bechtel shall exercise special care in executing subsurface
work in proximity of known subsurface utilities, improvements and easements. At
Webvan's request, Bechtel shall make available to Webvan the results of any DC
Property investigation, test borings, analyses, studies or other tests conducted
by or in the possession of Bechtel or any of its agents.
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<PAGE> 61
3.2.3 For each of the DC Projects, Bechtel shall take field
measurements and verify field conditions and shall carefully compare such field
measurements and conditions and other information known to Bechtel with the
Contract Documents before commencing activities.
3.2.4 Bechtel shall perform all DC Project work in accordance
with the Contract Documents.
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES.
3.3.1 Bechtel shall supervise and direct all DC Project work,
using Bechtel's best skill and attention. Bechtel shall be solely responsible
for and have control over construction means, methods, techniques, sequences and
procedures, and for the design and coordination of all portions of the DC
Project work under each of the Notices to Proceed, including coordination of the
duties of all trades.
3.3.2 Bechtel shall be responsible to Webvan for acts and
omissions of Bechtel's employees, Subcontractors, Subconsultants and their
agents and employees, and other persons performing any portion of the DC Project
work under contracts with Bechtel, in accordance with the terms of the Contract.
3.3.3 Bechtel shall not be relieved of its obligation to perform
any DC Project work in accordance with the applicable Contract Documents either
by tests, inspections or approvals required or performed by persons other than
Bechtel.
3.3.4 Intentionally omitted.
3.3.5 If any DC Project work is required to be inspected or
approved by any public authority, or if Webvan requires as an express
requirement in the Contract Documents or as a Change Order Request that any DC
Project work be inspected or approved, then Bechtel shall cause such inspection
or approval to be performed. No inspection performed or failed to be performed
by Webvan hereunder shall be a waiver of any of Bechtel's obligations hereunder,
or be construed as an approval or acceptance of any DC Project work or any part
thereof.
3.3.6 Bechtel acknowledges that it is Bechtel's responsibility to
hire all personnel for the proper and diligent prosecution of all DC Project
work, and Bechtel shall use its best efforts to maintain labor peace for the
duration of all DC Projects. If a labor dispute occurs on a DC Project that is
within Bechtel's control, then Bechtel shall not be entitled to any increase in
the Budgeted Cost for such DC Project.
3.3.7 Bechtel shall require that all of Bechtel's employees,
Subcontractors, Subconsultants and their agents and employees, and other persons
performing portions of any DC Project work under a contract with Bechtel,
perform the DC Project work in a safe manner and in compliance with all
applicable Laws and Contract Documents.
3.4 LABOR AND MATERIALS.
3.4.1 Bechtel shall provide all labor, materials, equipment,
tools, construction equipment and machinery, water, heat, utilities,
transportation, and other facilities and services necessary for proper execution
and completion of a DC Project, whether temporary or permanent, and whether or
4
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not incorporated or to be incorporated into the DC Project. Bechtel shall check
all materials and labor entering into a DC Project and shall keep full detailed
accounts thereof.
3.4.2 Bechtel shall enforce strict discipline and good order
among Bechtel's employees, Subcontractors, Subconsultants and other persons
carrying out the Contract. Bechtel shall not permit employment of unfit persons
or persons not skilled in tasks assigned to them.
3.4.3 Neither Bechtel nor any Subcontractor or Subconsultant
shall incorporate into a DC Project any materials (i) to which it does not hold
sole and exclusive title, (ii) against which there is any claim by a
manufacturer or other entity, or (iii) which are encumbered by any lien, charge
or security interest other than vendor's liens incurred in the ordinary course
of business prior to Webvan's payment for the materials involved. Bechtel shall
be solely responsible for all materials specified by the Contract Documents
which are delivered to a DC Property. Any materials delivered to a DC Property,
which are not to be used in or incorporated into the DC Project work under the
Contract Documents, shall be forthwith removed from the DC Property and Bechtel
shall be solely responsible for all costs incurred with respect to such
materials.
3.4.4 After a Notice to Proceed for a DC Project has been
executed, Bechtel shall not substitute products in place of those specified in
the Contract Documents for such DC Project without Webvan's prior written
approval, it being understood that any such substitution requests are required
to be submitted by Bechtel prior to the execution of a Notice to Proceed.
3.4.5 By making requests for substitutions based on Subparagraph
3.4.4 above, Bechtel:
3.4.5.1 Represents that Bechtel has personally investigated
the proposed substitute product and determined that it is equal or superior in
all respects to that specified;
3.4.5.2 Represents that Bechtel will provide the same
warranty for the substitute product that Bechtel would for the product
originally specified;
3.4.5.3 Certifies that the cost data presented is complete
and includes all related costs and/or savings under the Notice to Proceed, and
waives all claims for additional costs related to the substitution; and
3.4.5.4 Will coordinate the installation of the accepted
substitute to ensure that the DC Project work will be complete in all respects.
3.5 TAXES. For each of the DC Projects, Bechtel shall pay, subject to
reimbursement under Section 2.5.5.7 of the Contract, sales, use and similar
taxes for any DC Project work or portions thereof provided by Bechtel.
3.6 PERMITS, FEES AND NOTICES.
3.6.1 Bechtel shall obtain all permits, licenses and certificates
of inspection, use and occupancy required for each DC Project. Bechtel shall
furnish Webvan with copies of all permits, licenses and certificates of
inspection, use and occupancy obtained during the course of all DC Project work.
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3.6.2 Bechtel shall comply with and give all notices required by
any Laws bearing on performance of any DC Project work.
3.6.3 Bechtel shall comply with all Laws applicable to the
performance of all DC Project work, including, without limitation, the
employment of labor.
3.6.4 Bechtel shall send all notices, make all necessary
arrangements, and provide all labor and materials, required to protect and
maintain in operation all public utilities serving a DC Property as required for
or affected by DC Project work.
3.7 RESERVED.
3.8 RESERVED.
3.9 BECHTEL'S CONSTRUCTION SCHEDULES.
3.9.1 Bechtel shall include as an exhibit to each Notice to
Proceed for a DC Project a construction schedule for such DC Project work (the
"CONSTRUCTION SCHEDULE") which shall be prepared in consultation with Webvan.
The Construction Schedule shall be updated and revised at appropriate intervals
as required by the DC Project, shall be related to the entire DC Project to the
extent required by the Contract Documents for such DC Project, shall provide for
expeditious and practicable execution of the DC Project work, and shall not
modify or extend critical dates (milestones) without the prior approval of
Webvan in each instance.
3.9.2 Bechtel shall prepare, not later than twenty (20) days
after each date of Subcontractor award for a trade, a shop drawing schedule
which shall include a complete list of suppliers and fabricators, under contract
items to be purchased from the suppliers or fabricators, time required for
fabrication and the scheduled delivery dates for each item to be purchased. As
soon as available, Bechtel shall furnish copies of purchase orders to Webvan.
3.9.3 Bechtel shall prepare any additional reports that Webvan
may reasonably request considering the size, type and complexity of such DC
Project and the DC Project work.
3.9.4 Bechtel shall prepare and keep current a schedule of
submittals which shall be coordinated with Bechtel's Construction Schedule and
allows Webvan reasonable time to review submittals.
3.9.5 Bechtel shall hold weekly progress meetings at the
applicable DC Property, or at such other time and frequency as Webvan reasonably
requests, and Bechtel shall keep written minutes of each such meeting, and
distribute true and correct copies of the same to Webvan promptly following each
such meeting. At each such meeting, progress of the DC Project work shall be
reported in detail with reference to the Construction Schedule.
3.9.6 Bechtel acknowledges that, independent of Bechtel's
schedule requirements, Webvan may retain the services of a scheduling consultant
at Webvan's expense. Bechtel shall cooperate with any such scheduling consultant
at Webvan's direction with regard to the preparation of any DC Project schedule.
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3.10 DOCUMENTS AND SAMPLES AT THE DC PROPERTY.
3.10.1 Bechtel shall maintain at each DC Property, for Webvan, one
(1) record copy of the Construction Documents, drawings and specifications,
addenda, Change Orders and other modifications, in good order and marked
currently to record changes and selections made during construction, and in
addition approved shop drawings, product data, samples and similar required
submittals. These shall be delivered to Webvan upon completion of the DC Project
work. They shall be signed by Bechtel, certifying that they show complete and
accurate "as-built" conditions, stating sizes, kind of materials, vital piping,
conduit locations and similar matters.
3.10.2 Bechtel shall maintain all approved permit drawings in a
manner which allows access to governmental inspectors and other authorized
agencies.
3.1 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES.
3.1.1 Shop drawings are drawings, diagrams, schedules and other
data specially prepared for DC Project work by a Subcontractor to illustrate
some portion of a DC Project.
3.1.2 Product data are illustrations, standard schedules,
performance charts, instructions, brochures, diagrams and other information
furnished by Bechtel to illustrate materials or equipment for some portion of a
DC Project.
3.1.3 Samples are physical examples which illustrate materials,
equipment or workmanship and establish standards by which a DC Project will be
judged.
3.1.4 Shop drawings, product data, samples and similar submittals
are not Contract Documents. The purpose of their submittal is to demonstrate,
for those portions of a DC Project for which submittals are required, the way
Bechtel proposes to conform to the information given and the design concept
expressed in the Contract Documents.
3.1.5 Bechtel shall review and approve and submit to Webvan, if
and when requested by Webvan, shop drawings, product data, samples and similar
submittals required by the Contract Documents with reasonable promptness and in
such sequence as to cause no delay in any DC Project work or in the activities
of Webvan or of separate contractors.
3.1.6 Bechtel shall perform no portion of any DC Project work
requiring submittal and review of shop drawings, product data, samples or
similar submittals until the respective submittal has been approved by Webvan,
if such approval right is provided in any Contract Document or has been
requested by Webvan through a Change Order Request. Such DC Project work shall
be in accordance with approved submittals.
3.1.7 By approving and submitting shop drawings, product data,
samples and similar submittals, Bechtel represents that Bechtel has determined
and verified materials, field measurements and field construction criteria
related thereto, or will do so, and has checked and coordinated the information
contained within such submittals with the requirements of the applicable DC
Project work and Contract Documents.
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3.1.8 Bechtel shall not be relieved of responsibility for
deviations from requirements of the Contract Documents by Bechtel's or Webvan's
approval of shop drawings, product data, samples or similar submittals.
3.1.9 Bechtel shall assemble for Webvan's approval three (3)
complete copies, in loose-leaf binders, of all operating and maintenance data
from all manufacturers whose equipment is or will be installed in each DC
Project. Bechtel shall also prepare a checklist or schedule showing the type of
lubricant to be used at each point of application, and the intervals between
lubrication for each item of equipment.
3.2 USE OF PROPERTY.
3.2.1 Bechtel shall confine operations at each DC Property to
areas permitted by Laws, permits and the Contract Documents and any applicable
lease of such DC Property, and shall not unreasonably burden any DC Property
with materials. In performing any DC Project work, Bechtel shall not cause or
allow water, dust, noxious vapors, noise, or other intrusions to go beyond the
boundaries of the applicable DC Property in any manner that would constitute a
nuisance or a violation of Law.
3.2.2 Bechtel shall assure free, convenient, unencumbered and
direct access to properties neighboring a DC Property for the owners of such
properties and their respective tenants, agents, invitees and guests.
3.3 CUTTING AND PATCHING.
3.3.1 Bechtel shall be responsible for cutting, fitting or
patching required to complete all DC Project work or to make its parts fit
together properly.
3.3.2 Bechtel shall not damage or endanger a portion of any DC
Project work, or fully or partially completed construction of Webvan or separate
contractors, by cutting, patching or otherwise altering such construction, or by
excavation. Bechtel shall not cut or otherwise alter such construction by Webvan
or a separate contractor except with written consent of Webvan and of such
separate contractor, such consent to be timely and not to be unreasonably
withheld. Bechtel shall not unreasonably withhold from Webvan or a separate
contractor consent to cutting or otherwise altering any DC Project work.
3.4 CLEANING UP.
3.4.1 Bechtel shall keep each DC Property and surrounding area
free from accumulation of waste materials or rubbish caused by operations under
the Contract. At completion of a DC Project, Bechtel shall remove from and about
the DC Property waste materials, rubbish, Bechtel's tools, construction
equipment, machinery and surplus materials. Bechtel shall maintain streets and
sidewalks around each DC Property in a clean condition. Bechtel shall remove all
spillage and tracking arising from the performance of the DC Projects from such
areas, and shall establish a regular maintenance program of sweeping and hosing
to minimize accumulation of dirt and dust upon such areas.
3.4.2 If Bechtel fails to clean up as provided in any of the
Contract Documents, Webvan may do so and the cost thereof shall be charged to
Bechtel.
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3.4.3 Bechtel shall be responsible for broken glass, and at the
completion of a DC Project shall replace such damaged or broken glass. Bechtel
shall remove all labels and shall wash and polish both sides of all glass.
3.14.4 In addition to general broom cleaning, Bechtel shall
perform the following final cleaning for all trades:
3.14.4.1 Remove temporary protections;
3.14.4.2 Remove marks, stains, fingerprints and other soil
or dirt from painted, decorated and natural-finished woodwork and other DC
Project work;
3.14.4.3 Remove spots, plaster, soil and paint from ceramic
tile, marble and other finished materials, and wash or wipe clean;
3.14.4.4 Clean fixtures, cabinet work and equipment and
remove stains, paint, dirt and dust, and leave same in undamaged, new condition;
3.14.4.5 Clean aluminum in accordance with recommendations
of the manufacturer; and
3.14.4.6 Clean resilient floors thoroughly with a
well-rinsed mop containing only enough moisture to clean off any surface dirt or
dust, and buff dry by machine to bring the surfaces to sheen.
3.5 ACCESS TO WORK. Bechtel shall provide Webvan access to all DC
Project work in preparation and progress wherever located.
3.6 ROYALTIES AND PATENTS. Bechtel shall pay, subject to reimbursement
under Section 2.5.5.8 of the Contract, all royalties and license fees. Bechtel
shall defend suits or claims for infringement of patent rights (except as
regards Webvan's property IP Rights or infringements by any Subcontractor that
Webvan has specified as the only subcontractor that Bechtel is authorized to
engage to provide the particular services, material or equipment) and shall, in
accordance with Section 8.16 of the Contract, indemnify, defend, protect and
hold harmless Webvan from any claim, damage, loss, cause of action or liability
on account thereof, and shall be responsible for the same when a particular
design, process or product of a particular manufacturer or manufacturers is
required by any of the Contract Documents.
3.7 RESERVED.
3.8 LENDER AND LANDLORD REQUIREMENTS.
3.8.1 Intentionally omitted.
3.8.2 If Webvan's landlord or lender (if any) for a DC Project
shall designate an inspecting architect or other representative, Bechtel shall
cooperate with such inspecting architect or representative to the fullest extent
possible.
3.9 LABOR RELATIONS.
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3.9.1 If Bechtel has entered into any labor agreements covering
work at any DC Property, Bechtel shall comply with all of the terms and
conditions of those labor agreements, including, without limitation, the
procedure contained therein for resolution of jurisdictional disputes. Should
there be picketing on any DC Property and if it becomes necessary for Webvan to
establish a reserved gate for Bechtel's purposes, and Webvan establishes such
gate, Bechtel shall continue the proper performance of the DC Project work,
without interruption or delay, using such gate.
3.9.2 By its execution of the Contract, Bechtel acknowledges that
Webvan has reserved the right to contract with non-union contractors for work on
each of the DC Projects. If Webvan elects to contract with any non-union
contractors for any DC Project work which is not part of the Contract, Bechtel
shall cooperate reasonably with Webvan.
3.9.3 If, notwithstanding the foregoing, it becomes necessary to
establish a separate gate because of labor problems related to Webvan's use of
non-union labor, Webvan shall bear the direct cost of such gate, and any delay
related to the same which is not reasonably within the control of Bechtel shall
be treated as an Excusable Delay in accordance with Section 2.5.13 of the
Contract.
ARTICLE 4
RESERVED
ARTICLE 5
SUBCONTRACTORS
5.1 DEFINITIONS.
5.1.1 The term "SUBCONTRACTOR" is defined in the Contract and is
referred to throughout the Contract Documents as if singular in number and means
a Subcontractor or an authorized representative of the Subcontractor. The term
"Subcontractor" does not include a separate contractor or subcontractors of a
separate contractor. As used herein, a "SEPARATE CONTRACTOR" shall mean a
third-party contractor hired directly by Webvan.
5.1.2 A subcontractor to a Subcontractor (or "SUB-SUBCONTRACTOR")
is included within the definition of "Subcontractor" for purposes of the
Contract Documents.
5.2 AWARD OF SUBCONTRACTS FOR PORTIONS OF THE WORK. Webvan may require
Bechtel to change any Subcontractor, whether or not such Subcontractor was
previously approved by Webvan, for a DC Project and, if at such time Bechtel is
not in default under the Contract, the Budgeted Cost for such DC Project shall
be increased or decreased by the difference in cost, and the Project Schedule
shall be adjusted, if necessary, to take into account any delay, occasioned by
such change.
5.3 SUBCONTRACTUAL RELATIONS.
5.3.1 Each Subcontract shall preserve and protect the rights of
Webvan under the Contract Documents with respect to all DC Project work to be
performed by the Subcontractor so that subcontracting thereof will not prejudice
such rights. Where appropriate, Bechtel shall require each Subcontractor to
enter into similar agreements with its respective Sub-Subcontractors. Bechtel
shall
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make available to each proposed Subcontractor, prior to the execution of
the Subcontract, copies of any Contract Documents to which the Subcontractor
will be bound.
5.3.2 Notwithstanding any provision of Subparagraph 5.3.1, any
part of any DC Project work performed for Bechtel by a Subcontractor shall be
pursuant to a written Subcontract between Bechtel and such Subcontractor (or the
Subcontractor and its sub-subcontractor at any tier), which shall, in addition
to the applicable requirements set forth in the Contract, contain provisions
that:
5.3.2.1 Require that such DC Project work be performed in
strict accordance with the requirements of the Contract Documents, including,
without limitation, the labor and employment provisions thereof;
5.3.2.2 Waive all rights the contracting parties may have
against one another or that the Subcontractor may have against Webvan for
damages caused by fire or other perils covered by the insurance described in the
Contract Documents or which is otherwise covered by property insurance;
5.3.2.3 Require the Subcontractor to carry and maintain
insurance coverage in accordance with the Contract Documents, and to file
certificates of such coverage with Bechtel;
5.3.2.4 Require the Subcontractor to submit certificates
and unconditional waivers of Mechanics' Liens for the DC Project work completed
by it and by its Sub-Subcontractors to the extent included in the current and in
any previous progress payments as a condition to the disbursement of the
progress payment next due and owing;
5.3.2.5 Require submission to Bechtel or Subcontractor, as
the case may be, of Applications for Payment, together with clearly defined
invoices and billings supporting all such applications under each Subcontract to
which Bechtel is a party;
5.3.2.6 Report, as far as practicable, unit prices,
mark-ups for overhead and profit, and any other feasible formula for use in the
determination of costs of changes in the DC Project work;
5.3.2.7 Require each Subcontractor to furnish to Bechtel in
a timely fashion all information necessary for the preparation and submission of
the reports required herein;
5.3.2.8 Require that each Subcontractor continue to perform
under its Subcontract if the Contract is terminated, and permit Webvan to take
an assignment of such Subcontract and request such Subcontractor to continue
such performance;
5.3.2.9 Require each Subcontractor to remove all debris
created by its activities (unless Bechtel has otherwise made reasonable
arrangements for the removal of such debris);
5.3.2.10 Require that each Subcontractor warrant the DC
Project work and materials supplied and/or installed by them in the same manner
and for the same period as is required of Bechtel under the Contract and other
Contract Documents or in such broader manner and for such longer period as may
be required by the Construction Documents, drawings and specifications, in
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which case the additional warranties obtained from such Subcontractor shall be
passed through to Webvan for Webvan's benefit;
5.3.2.11 Require each Subcontractor to coordinate its
respective DC Project work with all adjacent work and all other trades so as to
facilitate the general progress of the overall DC Project, and require each
Subcontractor to afford all other contractors every reasonable opportunity to
install other work and materials; and
5.3.2.12 Require each Subcontractor to perform its portion
of the DC Project work in a safer manner and in compliance with all applicable
Laws.
ARTICLE 6
CONSTRUCTION BY WEBVAN OR BY
SEPARATE CONTRACTORS
6.1 WEBVAN'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE
CONTRACTS.
6.1.1 During the performance of any DC Project work, Webvan
reserves the right to perform construction or operations related to such DC
Project with Webvan's own forces, and to award separate contracts in connection
with other portions of a DC Project or other construction or operations on any
DC Property under conditions of contract identical or substantially similar to
these General Conditions. If Bechtel claims that delay or additional costs have
been incurred by Bechtel as a result of actions by Webvan's separate
contractors, Bechtel shall make such claims as provided elsewhere in the
Contract Documents for such DC Project.
6.1.2 Webvan, at its option, either (i) shall provide for
coordination of the activities of Webvan's own forces and of each separate
contractor with the DC Project work of Bechtel, who shall cooperate with them,
or (ii) shall require that Bechtel provide for such coordination, which Bechtel
shall perform when directed by Webvan to do so. Bechtel shall participate with
other separate contractors and Webvan in reviewing their respective construction
schedules when directed by Webvan to do so.
6.2 MUTUAL RESPONSIBILITY.
6.2.1 Bechtel shall afford Webvan and separate contractors
reasonable opportunity for introduction and storage of their materials and
equipment and performance of their activities, and shall connect and coordinate
Bechtel's construction and operations with theirs as required by the Contract
Documents.
6.2.2 If any part of Bechtel's DC Project work depends for proper
execution or results upon construction by Webvan or a separate contractor,
Bechtel shall, prior to proceeding with that portion of such DC Project work,
promptly inspect such construction and report to Webvan apparent discrepancies
or defects detected by Bechtel in such other construction that would render it
unsuitable for such proper execution and results. Failure of Bechtel to so
report any detected discrepancies or defects shall preclude Bechtel from making
claims for adjustment to cost or schedule resulting from such discrepancies or
defects.
6.2.3 Intentionally omitted.
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6.2.4 Intentionally omitted.
6.3 WEBVAN'S RIGHT TO CLEAN UP. If a dispute arises among Bechtel,
separate contractors and Webvan as to the responsibility under their respective
contracts for maintaining the applicable DC Property and surrounding area free
from waste materials and rubbish as described in Paragraph 3.14, Webvan may
clean up and allocate the cost among those responsible in Webvan's reasonable
discretion.
ARTICLE 7
PAYMENTS AND COMPLETION
7.1 SUBSTANTIAL COMPLETION.
7.1.1 Intentionally omitted.
7.1.2 When Bechtel considers that a DC Project, or any portion
thereof which Webvan agrees to accept separately, is Substantially Complete,
Bechtel shall prepare and submit to Webvan a comprehensive proposed "PUNCH LIST"
of items to be completed or corrected. Bechtel shall proceed promptly to
complete and correct all items on the Punch List. Webvan's acceptance of such
proposed Punch List or any failure to include an item on such Punch List will
not alter the responsibility of Bechtel to complete all DC Project work in
accordance with the Contract Documents. Upon receipt of Bechtel?s Punch List,
Webvan will make an inspection to determine whether the DC Project work or
designated portion thereof is Substantially Complete. When a DC Project or
designated portion thereof is Substantially Complete, Bechtel shall prepare a
Certificate of Substantial Completion which shall (i) establish the date of
Substantial Completion, and (ii) fix the time within which Bechtel shall finish
all items on the Punch List accompanying the Certificate of Substantial
Completion. Warranties required by the Contract Documents shall commence on the
date of Substantial Completion of the DC Project work or designated portion
thereof unless otherwise provided in the Contract Documents.
7.2 PARTIAL OCCUPANCY OR USE. Immediately prior to partial occupancy
or use of a DC Project, Webvan and Bechtel shall jointly inspect the area to be
occupied in order to determine and record the condition of the DC Project work.
7.3 FINAL COMPLETION AND FINAL PAYMENT.
7.3.1 Upon receipt of written notice that a DC Project is ready
for final inspection and acceptance, and upon receipt of a Final Application for
Payment, Webvan will promptly make such inspection.
7.3.2 Acceptance of Final Payment by Bechtel or a Subcontractor
shall constitute a waiver of claims by that payee except those previously made
in writing and identified by that payee as unsettled at the time of Final
Application for Payment.
7.3.3 Webvan may withhold a reasonable sum from payments
otherwise payable to Bechtel until Bechtel delivers to Webvan record
Construction Documents, drawings and specifications, addenda, Change Orders and
other modifications maintained at the DC Property pursuant to Subparagraph
3.10.1, and the warranties, instructions and maintenance manuals required to be
furnished pursuant to Subparagraph 3.11.9, and a final statement of the Cost of
the Work for the DC
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Project allocated in accordance with the Budgeted Cost for such DC Project and
in a form approved by Webvan's lender, if any.
ARTICLE 8
PROTECTION OF PERSONS AND PROPERTY
8.1 HAZARDOUS MATERIALS.
8.1.1 If there is any conflict between the provisions of this
Paragraph 8.1 and the provisions of Section 8.15 of the Contract, then the
provisions of the Contract shall control.
8.1.2 If during the course of the work Bechtel encounters on any
DC Property material reasonably believed to be a hazardous material not placed
at the DC Property by Bechtel or by any Subcontractor or by any person under the
control of either of them, Bechtel shall immediately stop DC Project work in the
area affected and report the condition to Webvan in writing. The DC Project work
in the affected area shall not thereafter be resumed except by written agreement
of Webvan and Bechtel.
8.1.3 Bechtel shall not be required to perform, without Bechtel's
consent, any DC Project work relating to hazardous materials not placed at the
DC Property by Bechtel or any Subconsultant or Subcontractor or any person under
the control of any of them.
8.1.4 Neither Bechtel nor any Subconsultant or Subcontractor
shall cause or permit, without the prior written consent of Webvan, any
hazardous material to be brought upon any DC Property or used in any DC Project
work, other than reasonable amounts of such materials as are necessary for the
performance of Construction Services. Bechtel and each Subconsultant and
Subcontractor shall comply with all Laws regarding the use, storage,
transportation, exposure of employees to, and disposal of, hazardous materials
brought onto any DC Property by them or any of them. If the foregoing
obligations are breached, or if the presence of a hazardous material brought on
any DC Property by Bechtel or its Subconsultants or Subcontractors results in
contamination of any DC Property, which contamination has not been caused by
Webvan or its separate subcontractors or landlords, then, without limiting any
of Bechtel's other indemnity obligations, Bechtel shall indemnify, defend,
protect and hold Webvan, and it employees, agents, and landlords harmless from
any and all claims which arise as a result of the breach of such obligation or
such contamination. This indemnification of Webvan by Bechtel includes, without
limitation, costs incurred by Webvan in connection with any investigation of any
DC Property, or any clean-up, remedial, removal, or restoration work required by
any federal, state or local governmental authority because of hazardous
materials present in the soil or ground water on or under any DC Property. Any
claim by Webvan for indemnification under this provision shall be subject to the
express limitations of liability set forth in the Contract and must be brought
within four (4) years after the date of Substantial Completion of the applicable
DC Project, and in any event no later than four (4) years after the date of
termination of this Contract.
8.1.5 As used in this Paragraph 8.1 and in the Contract, the term
"HAZARDOUS MATERIAL" shall mean any hazardous or toxic substance or material or
radioactive material which is or becomes regulated by any local, state or
federal governmental authority.
8.2 SAFETY OF PERSONS AND PROPERTY.
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8.2.1 Bechtel shall be responsible for initiating, maintaining,
supervising and enforcing all safety precautions and programs in connection with
the performance of all of the DC Project work, and prior to performing any of
the Construction Services for a DC Project, Bechtel shall prepare a written
safety program manual for each such DC Project (the "BECHTEL SAFETY MANUAL").
Bechtel shall take reasonable precautions, and shall similarly require its
Subcontractors and Subconsultants to take reasonable precautions, for safety of,
and shall provide reasonable protection to prevent damage, injury or loss to:
8.2.1.1 Employees on any DC Project and other persons who
may be affected thereby;
8.2.1.2 Each of the DC Projects and materials and equipment
to be incorporated therein or used in connection therewith, whether in storage
on or off a DC Property, under care, custody or control of Bechtel or the
Subcontractors; and
8.2.1.3 Other property at a DC Property or adjacent
thereto, such as trees, shrubs, lawns, walks, pavements, roadways, structures
and utilities not designated for removal, relocation or replacement in the
course of construction.
8.2.2 Bechtel shall give all notices required by and shall comply
with all applicable Laws bearing on safety of persons or property or their
protection from damage, injury or loss.
8.2.3 Bechtel shall erect and maintain, as required by existing
conditions and performance of a DC Project, reasonable safeguards for safety and
protection of persons and property, including posting danger signs and other
warnings against hazards, promulgating safety regulations and notifying the
owners and users of adjacent sites and utilities.
8.2.4 When use or storage of explosives or other hazardous
materials or equipment or unusual methods are necessary for execution of any DC
Project work, Bechtel shall exercise utmost care and carry on such activities
under supervision of properly qualified personnel.
8.2.5 Intentionally omitted.
8.2.6 Bechtel shall designate responsible and qualified members
of Bechtel's organization whose duties shall include the maintenance of site
health and safety.
8.2.7 Bechtel shall not load or permit any part of the
construction or any DC Property to be loaded so as to endanger its safety.
8.2.8 Bechtel assumes all risk of loss of, or damage to, its
materials or equipment and the materials and equipment of its Subcontractors and
employees due to theft or vandalism regardless of any available insurance. Until
incorporated into a DC Project, all materials ordered by Bechtel or any of its
Subcontractors which are delivered to a DC Property shall be the responsibility
of Bechtel, who shall provide for the care, protection and security of such
materials. Bechtel shall bear the risk of loss with respect to such materials
until they are incorporated into the DC Project work. Bechtel shall furnish any
watchman or other security services reasonably required to protect the DC
Project work.
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8.2.9 Bechtel shall maintain all DC Project work, materials and
equipment free from injury or damage from rain, wind, storms, frost or heat. If
adverse weather makes it impossible to continue operations safely in spite of
weather precautions, Bechtel shall cease such DC Project work and notify Webvan
of such cessation. Bechtel shall not permit open fires on any DC Property.
8.2.10 On each DC Property, Bechtel shall protect adjoining
private or municipal property and shall provide barricades, temporary fences,
and covered walkways required to protect the safety of passers-by, as required
by prudent construction practices, Laws, or the Contract Documents.
8.2.11 In addition to its other obligations pursuant to this
Article 8, Bechtel shall, at its sole cost and expense, promptly repair any
damage or disturbance to walls, utilities, sidewalks, curbs and the property of
third parties (including municipalities) caused by Bechtel or any of its
Subcontractors.
8.3 EMERGENCIES. In an emergency affecting safety of persons or
property, Bechtel shall act, at Bechtel's reasonable discretion, to prevent
threatened damage, injury or loss.
ARTICLE 9
UNCOVERING AND ACCEPTANCE OF WORK
9.1 UNCOVERING OF WORK.
9.1.1 If a portion of any DC Project work is covered contrary to
requirements specifically expressed in the Contract Documents, it must, if
required in writing by Webvan or any governmental authority, be uncovered for
their observation and be replaced, at Bechtel's expense, without change in the
applicable Contract Time. Bechtel will establish a mutually acceptable procedure
for inspection of all DC Project work which will be covered by other DC Project
work.
9.1.2 If a portion of any DC Project work has been covered which
Webvan or any governmental authority has not specifically requested to observe
prior to its being covered, Webvan may request to see such DC Project work and
it shall be uncovered by Bechtel. If such DC Project work is in accordance with
the Contract Documents, costs of uncovering and replacement shall, by
appropriate Change Order, be charged to Webvan. If such DC Project work is not
in accordance with the Contract Documents, Bechtel shall pay such costs if the
condition was caused by Bechtel's failure to perform the work in accordance with
the Contract Documents; if caused by Webvan or a separate contractor of Webvan,
then Webvan shall be responsible for payment of such costs.
9.2 RESERVED.
9.3 ACCEPTANCE OF NONCONFORMING WORK. If Webvan, in its sole
discretion, elects to accept any completed portion of DC Project work which is
not in accordance with the requirements of the Contract Documents for such DC
Project, Webvan may do so instead of requiring its removal and correction, in
which case the Approved Cost of the Work for such DC Project will be reduced as
appropriate and equitable.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 COMPLIANCE WITH LOCAL LAWS.
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10.1.1 Historical lack of enforcement of any local Law shall not
constitute a waiver of Bechtel's responsibility for compliance with such Law in
a manner consistent with the Contract Documents for a DC Project unless and
until Bechtel has received written consent for the waiver of such compliance
from Webvan and the agency responsible for the local Law enforcement.
10.2 TESTS AND INSPECTIONS.
10.2.1 Tests, inspections and approvals of portions of any DC
Project work required by Contract Documents or by Laws shall be made at an
appropriate time. At Webvan's election, Webvan shall contract with one or more
independent testing or laboratory entities to conduct inspections and/or tests
of the DC Project work. Bechtel shall give Webvan timely notice of when and
where tests and inspections are to be made so Webvan (if so requested by Webvan)
may observe such procedures.
10.2.2 If Webvan or public authorities having jurisdiction
determine that portions of any DC Project work require additional testing,
inspection or approval not included under Subparagraph 10.2.1, Webvan will
instruct Bechtel to make arrangements for such additional testing, inspection or
approval by an entity acceptable to Webvan, and Bechtel shall give timely notice
to Webvan of when and where tests and inspections are to be made so Webvan (if
so requested by Webvan) may observe such procedures.
10.2.3 If such procedures for testing, inspection or approval
under Subparagraphs 10.2.1 and 10.2.2 reveal failure of the portions of any DC
Project work to comply with requirements established by the applicable Contract
Documents, Bechtel shall bear all costs made necessary by such failure including
those of repeated procedures and compensation for any necessary third party
services and expenses, including the cost of re-testing for verification of
compliance if necessary, until the DC Project work in question complies with the
requirements of the Contract Documents.
10.2.4 Required certificates of testing, inspection or approval
shall, unless otherwise required by the Contract Documents, be secured by
Bechtel and promptly delivered to Webvan.
10.2.5 Tests or inspections conducted pursuant to any of the
Contract Documents shall be made promptly to avoid unreasonable delay in the DC
Project work.
10.2.6 Bechtel shall furnish, promptly, all facilities, labor and
materials necessary to permit safe, thorough and convenient inspection and
testing as required in the Contract Documents. Bechtel shall pay any costs of
inspection or testing when material and workmanship is not ready for such
inspection or testing at the time specified in the Contract Documents or
mutually agreed to in advance, unless otherwise agreed to by the parties.
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APPENDIX 2.5.3
GENERAL WORK REQUIREMENTS
(CATEGORIES)
<TABLE>
<S> <C>
I. JOBSITE ADMINISTRATION
II. SURVEY/LAYOUT
III. TEMPORARY FACILITIES
IV. TEMPORARY UTILITIES
V. SAFETY AND HEALTH
VI. CLEAN-UP
VII. MISCELLANEOUS EQUIPMENT
VIII. SITE CONDITIONS
IX. PERMITS, TAXES, INSURANCE
X. OTHER
</TABLE>
The above list describes only the general categories of the General Work
Requirements. Prior to establishing the Budgeted Cost for a DC Project, Webvan
and Bechtel shall agree upon a schedule setting forth a more detailed, line item
description of each of the above categories and the estimated General Work
Requirements Amount. Once such schedule and the estimated General Work
Requirements Amount have been signed by both Webvan and Bechtel, they shall be
deemed to be incorporated into this Appendix 2.5.3 and shall become a part of
this Contract to the same extent as if they had been originally set forth
herein.
<PAGE> 76
APPENDIX 5.1.2
UNIT RATE SCHEDULE
<TABLE>
<CAPTION>
PAYROLL SAN FRANCISCO HOME OFFICE ALL OTHER OFFICES
CLASSIFICATION UNIT RATES UNIT RATES
<C> <C> <C>
31 $[*] $[*]
30 $[*] $[*]
29 $[*] $[*]
28 $[*] $[*]
27 $[*] $[*]
26 $[*] $[*]
25 $[*] $[*]
24 $[*] $[*]
23 $[*] $[*]
22 $[*] $[*]
21 $[*] $[*]
H $[*] $[*]
</TABLE>
The Program Director, Deputy Program Director, Program Contracts Manager, and
Project Managers will typically have payroll classifications of 29, 30 or 31.
Construction Managers will typically have payroll classifications of 28, 29 or
30.
Site Managers and Design Managers will typically have payroll classifications of
27, 28 or 29.
Project Engineers will typically have payroll classifications of 26, 27, 28 or
29.
Construction Superintendents and Project Contracts Managers will typically have
payroll classifications of 26, 27 or 28.
Construction Supervisors will typically have payroll classifications of 26 or
27.
Cost and Schedule Engineers will typically have payroll classifications of 24,
25, 26 or 27.
Administration and clerical personnel will typically have payroll
classifications of 21, 22, 23 or 24.
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 77
APPENDIX 5.8
Form of Warrant
<PAGE> 78
APPENDIX 7.1.1
INSURANCE REQUIREMENTS
1. Amounts of Coverage. As a material part of the consideration for
this Contract, Bechtel agrees, for Webvan's benefit, that Bechtel shall maintain
amounts and types of insurance coverages as follows and that Webvan shall be
named as an additional insured thereunder:
1.1 Commercial General Liability. Commercial General Liability
insurance with respect to or in any way related to the Project. Such insurance
shall contain all coverage customarily found in such policies of insurance,
including, endorsements or other provisions covering products and completed
operations, covering the contractual liabilities contained in this Contract (if
insurable), and including employees as additional insureds. This coverage should
be at least as broad as the Insurance Service Office ("ISO") occurrence form CG
000110 1993 or 1996 edition. Such insurance shall have a per occurrence limit of
Two Million Dollars ($2,000,000) for all damages arising out of the bodily
and/or personal injuries to or death of one or more persons, and for all damages
to or destruction of tangible property, including loss of use resulting
therefrom, in any one occurrence, and subject to that limit, where applicable,
an annual aggregate limit of Two Million Dollars ($2,000,000). The limits of
such insurance shall apply on a per-site basis. Each Subcontractor and
Subconsultant shall also be required to maintain the coverage described in this
Section 1.1.
1.2 Umbrella Liability. Umbrella liability insurance including
the coverages required in Paragraph 1.1 above and Paragraphs 1.3 and 1.5 below,
with limits of Twenty Million Dollars ($20,000,000) per site.
1.3 Commercial Auto Liability. Auto Liability, comprehensive or
business automobile form at least as broad as ISO form CA 0001, covering "any
auto" (hired, owned or non-owned) of One Million Dollars ($1,000,000) per
accident. Each Subcontractor and Subconsultant shall also be required to
maintain the coverage described in this Section 1.3.
1.4 Worker's Compensation. Worker's Compensation covering all
employees of Bechtel performing services under this Contract and complying with
all laws of the state in which each of the DC Projects is located. Each
Subcontractor and Subconsultant shall also be required to maintain the coverage
described in this Section 1.4.
1.5 Employer's Liability. Employers' Liability covering
employees of Bechtel performing services under this Contract providing a limit
of One Million Dollars ($1,000,000). Each Subcontractor and Subconsultant shall
also be required to maintain the coverage described in this Section 1.5.
1.6 Valuable Papers and Records. Property insurance covering
valuable papers that will insure all documentation produced or used in
connection with the Project in an amount of One Million Dollars ($1,000,000),
with coverage provided against "Special Form" perils.
2. Additional Insurance. In addition to the insurance policies
required above, Webvan shall have the right to require additional insurance
policies, additional or increased
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limits of coverage in existing policies of insurance, and additional
endorsements, including, without limitation, project-specific liability
insurance, builder's risk and property damage insurance, and contractor's bonds.
Such additional insurance shall be in such amounts, on such policy forms, and
with such carriers as Webvan may reasonably require. Within five (5) days after
written request by Webvan at any time after the execution of this Contract,
Bechtel shall procure and deliver to Webvan, at Webvan's expense, one or more
commitments or binders for insurance, in form and content satisfactory to
Webvan, issued by insurance carrier(s) satisfactory to Webvan, assuring that
such carrier(s) will be obligated, upon payment of the required premium, to
issue for Webvan's benefit such additional insurance as may be requested by
Webvan. The premiums and all other costs to obtain any such additional insurance
requested by Webvan shall be reimbursed by Webvan to Bechtel at cost.
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APPENDIX 8.10
CONFIDENTIALITY AND
NONDISCLOSURE AGREEMENT
THIS CONFIDENTIALITY AND NONDISCLOSURE AGREEMENT (this "Agreement") is
made and entered into as of July 8, 1999, by and between WEBVAN GROUP, INC.
(formerly known as Intelligent Systems for Retail, Inc.), a California
corporation ("WEBVAN"), and BECHTEL CORPORATION, a Nevada corporation
("BECHTEL").
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "CONFIDENTIAL INFORMATION" shall mean [*]. Confidential
Information shall not, however, include any information which (i) was publicly
known and made generally available in the public domain prior to the time of
disclosure to Bechtel by Webvan; (ii) becomes publicly known and made generally
available after disclosure to Bechtel by Webvan through no action or inaction of
Bechtel or any of its Subcontractors or Subconsultants (as defined in the
Contract); or (iii) was independently developed by Bechtel or by third parties
without reliance upon any information or Data that would otherwise constitute
Confidential Information hereunder.
1.2. "CONTRACT" shall mean that certain Contract for Turnkey
Design/Build Construction and Related Services dated July 8, 1999, by Webvan and
Bechtel.
1.3. "DATA" shall mean all designs, plans, models, drawings,
prints, samples, transparencies, specifications, reports, manuscripts, working
notes, documentation, manuals, photographs, negatives, tapes, disks, databases,
software, works of art, inventions, discoveries, components, and any Contract
Documents (as defined in the Contract), or similar items.
1.4 "DEVELOPED DATA" shall mean all Data prepared or developed
by or for Bechtel or any of its Subcontractors or Subconsultants pursuant to the
Contract, including, without limitation, all Contract Documents (as defined in
the Contract).
1.5 "IP RIGHTS" shall mean all intellectual property rights,
copyrights, design rights, patents, and other similar invention rights,
trademarks, trade names, service marks, trade secrets, and all applications for
and rights in or to any of the foregoing.
1.6 "WEBVAN DATA" shall mean all information and all Data now
or hereafter owned or prepared by or for Webvan, including, without limitation,
all Developed Data, relating to [*], and all inventions, discoveries and
improvements relating to Webvan's business (including, without limitation, any
information relating to the manufacturing techniques, processes, formulas,
designs, "look and feel", logos, developments and experimental work or
work-in-progress), and all formulas, devices and compilations of information
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 81
(including customer lists), which are used in or related to Webvan's business.
Without limiting the generality of the foregoing, Webvan Data shall include all
information and Data now or hereafter owned or prepared by or for Webvan
relating to [*].
2. Limited Use Bechtel shall not use any Confidential Information for
any purpose except as expressly authorized in the Contract. Bechtel shall not
disclose any Confidential Information to third parties or to employees of
Bechtel, except to (i) those employees, Subcontractors, or Subconsultants who
are required to have the Confidential Information to perform services expressly
authorized under the Contract and then only to the extent reasonably necessary
to permit such employees, Subcontractors, and Subconsultants to perform such
services, and (ii) those government officials, Webvan landlords and bidders for
Subcontracts to whom Bechtel is required to disclose such Confidential
Information to enable Bechtel to perform such services and then only to the
extent reasonably necessary to enable Bechtel to perform such services. Bechtel
shall not reverse engineer, disassemble or decompile any prototypes, software,
data or other tangible objects which embody any Confidential Information and
which are provided to Bechtel under the Contract.
3. Maintenance of Confidentiality. Bechtel shall hold and keep all
Confidential Information strictly confidential. Bechtel shall take all
reasonable measures to protect the secrecy, and avoid disclosure and
unauthorized use, of all Confidential Information. Without limiting the
foregoing, Bechtel shall develop and strictly adhere to secrecy and security
protocols and procedures reasonably acceptable to Webvan. Bechtel shall use its
best efforts to ensure that all employees having access to Confidential
Information comply with the terms of this Agreement; Bechtel shall cause all
such employees, Subcontractors, and Subconsultants to sign a non-disclosure
agreement reasonably acceptable to Webvan prior to any disclosure of
Confidential Information to such employees, Subcontractors, or Subconsultants.
Bechtel shall reproduce Webvan's proprietary rights notices on any copies of
Confidential Information, in the same manner in which such notices were set
forth in or on the original. Bechtel shall immediately notify Webvan in the
event of any unauthorized use or disclosure of any Confidential Information of
which Bechtel becomes aware. In the event Bechtel is compelled to disclose
Confidential Information pursuant to the order or requirement of a court,
administrative agency, or other governmental body, Bechtel shall provide prompt
notice thereof to Webvan and shall use best efforts to obtain a protective order
or otherwise prevent public disclosure of such information, and in any event
shall disclose only that portion of the Confidential Information that is
required to be disclosed pursuant to such order or requirement.
4. Notification of Disclosure. Bechtel shall immediately notify Webvan
of any unauthorized disclosure of Confidential Information of which Bechtel
becomes aware. Bechtel shall, at Bechtel's sole cost and expense, take all
reasonable steps necessary to recover any Confidential Information improperly
disclosed by Bechtel or its employees, and Bechtel shall use its best efforts to
minimize any further dissemination of such Confidential Information and any
damages to Webvan resulting from such improper disclosure.
5. Return of Materials. All documents, Data, and other tangible objects
containing or representing Confidential Information and all copies thereof shall
be and remain at all times the property of Webvan and shall promptly be returned
to Webvan or destroyed by Bechtel upon termination or expiration of the Contract
or upon Webvan's request. Bechtel shall, however, have the right to maintain one
copy of the
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
-2-
<PAGE> 82
foregoing solely for Bechtel's archive files, subject to the terms, restrictions
and conditions of this Agreement.
6. No License. Nothing in this Agreement is intended to grant any
rights to Bechtel or any Subcontractor or Subconsultant under any IP Rights of
Webvan, nor shall this Agreement grant Bechtel any rights in or to Confidential
Information except as expressly set forth herein.
7. Equitable Relief. Bechtel acknowledges that the damages that Webvan
will incur as a consequence of any breach by Bechtel or any of its employees,
Subcontractors, or Subconsultants of this Agreement will be irreparable and may
not readily be capable of calculation. Accordingly, to the fullest extent
permissible by law and without limiting any other rights or remedies that may be
available to Webvan, Webvan shall be entitled, as a matter of right, to
equitable relief to protect Webvan's interests, including, but not limited to,
preliminary and permanent injunctive relief. Bechtel hereby consents to, and
shall require that its Subcontractors and Subconsultants consent to, the
issuance by any court of competent jurisdiction of both temporary and permanent
injunctions in the event of such breach or threatened breach restraining and
prohibiting Bechtel and its Subcontractors and Subconsultants, and their
respective agents and representatives, from violating any of the provisions of
this Agreement.
8. Miscellaneous. This Agreement shall survive the expiration or
earlier termination of the Contract until the later of (i) the [*] anniversary
of the date of this Agreement, or (ii) the [*] anniversary of the date the
Contract is terminated in its entirety. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns.
This Agreement shall be governed by the laws of the State of California, without
reference to conflict of laws principles. Any failure to enforce any provision
of this Agreement shall not constitute a waiver thereof or of any other
provision hereof. This Agreement may not be amended, nor any term or condition
hereof waived, except by a writing signed by both parties hereto. This Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one agreement. In any
action arising under or in connection with this Agreement, the prevailing party
in such action shall be awarded, in addition to other legal or equitable relief,
its reasonable costs and expenses and reasonable attorneys' fees. If all or any
portion of any provision of this Agreement as applied to any party or any
circumstance shall be ruled by a court of competent jurisdiction to be void or
unenforceable for any reason, the same shall in no way affect (to the maximum
extent permissible by law) that provision or the remaining portions of that
provision as applied to any parties or circumstances or any other provision of
this Agreement or the validity or enforceability of this Agreement as a whole,
all of which shall be enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WEBVAN GROUP, INC. BECHTEL CORPORATION
By: /S/ LOUIS H. BORDERS By: /S/ D. DONLY
--------------------------------- ---------------------------------
Name: LOUIS BORDERS Name: D. DONLY
------------------------------- -------------------------------
Title: CHAIRMAN & CEO Title: PRESIDENT N.A. REGION
------------------------------ ------------------------------
-3-
<PAGE> 1
EXHIBIT 10.15
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS
ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF
SECTION 7 OF THIS WARRANT.
WEBVAN GROUP, INC.
WARRANT TO PURCHASE UP TO 600,000 SHARES
OF SERIES C PREFERRED STOCK
THIS CERTIFIES THAT, for value received, Bechtel Corporation, a Nevada
corporation, is entitled to purchase up to 600,000 shares of Series C Preferred
Stock, no par value (as adjusted pursuant to Section 4 hereof, the "Shares"), of
Webvan Group, Inc., a California corporation (the "Company"), at a price of Six
Dollars and Ninety-Seven Cents ($6.97) per share (such price and such other
price as shall result, from time to time, from the adjustments specified in
Section 4 hereof is herein referred to as the "Warrant Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. As used
herein, (a) the term "Series C Preferred" shall mean the Company's presently
authorized Series C Preferred Stock, and any stock into or for which such Series
C Preferred Stock may hereafter be converted or exchanged, and (b) the term
"Date of Grant" shall mean July 8, 1999.
1. Vesting; Term. The purchase right represented by this Warrant shall
be exercisable in accordance with the following vesting schedule:
(a) This Warrant shall first be exercisable as to 50,000 Shares
beginning on the date hereof.
(b) This Warrant shall first be exercisable as to an additional
[*] Shares at such time as [*] DC Projects (as defined in that certain
Contract for Turnkey Design/Build Construction and Related Services by and
between the Company and Bechtel Corporation dated as of July 8, 1999 (the
"Construction Contract")) for which Bechtel Corporation has performed
Construction Services under the Construction Contract have achieved [*].
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 2
(c) This Warrant shall first be exercisable as to an additional
[*] Shares at such time as each DC Project (including the DC projects
referred to in Section 1(b) hereof) for which Bechtel Corporation has performed
Construction Services under the Construction Contract achieves [*] and [*].
The holder of this Warrant understands that except as set forth in Sections 1(a)
and 1(b) hereof, this Warrant shall only become exercisable at such time as each
individual DC Project for which Bechtel Corporation has performed Construction
Services under the Construction Contract achieves [*] and that under no
circumstances shall this Warrant be exercisable as a result of any lapse of time
or in connection with any other services provided by Bechtel Corporation to the
Company, whether under the Construction Contract or otherwise.
Notwithstanding anything to the contrary in this Warrant, this Warrant
shall immediately terminate and expire unless exercised on or prior to 5:00 p.m.
(California Time) on July 8, 2004, and this Warrant shall be of no further force
or effect on and after such date.
2. Method of Exercise: Payment. Subject to Section 1 hereof, the
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part, at any time, by either, at the election of the
holder hereof, (a) the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A duly executed) at the principal office of the
Company and by the payment to the Company, by check or wire transfer to an
account designated by the Company, of an amount equal to the then applicable
Warrant Price multiplied by the number of Shares then being purchased, or (b)
pursuant to the provisions of Section 9 hereof. The person in whose name any
certificate representing shares of Series C Preferred shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder of record of,
and shall be treated for all purposes as the record holder of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as reasonably practicable and in any
event within thirty (30) days after such exercise. If such exercise is in part
only, a notation shall be made on this Warrant indicating the number of shares
as to which the Warrant has been exercised.
3. Stock Fully Paid: Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series C
Preferred to provide for the exercise of the rights represented by this Warrant
and a sufficient number of shares of its Common Stock to provide for the
conversion of the Series C Preferred into Common Stock.
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
2
<PAGE> 3
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than (i) a merger effected for the principal purpose of changing the Company's
state of incorporation, (ii) a merger in which the shareholders of the Company
prior to the transaction continue to hold at least fifty percent (50%) of the
voting power of the successor corporation following the transaction, or (iii) a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance reasonably satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series C Preferred theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of the number of shares of Series C Preferred then
purchasable under this Warrant. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers,
consolidations and transfers.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide, by
split or otherwise, or combine its outstanding shares of Series C Preferred, the
Warrant Price shall be proportionately decreased in the case of a subdivision or
increased in the case of a combination, effective at the close of business on
the date the subdivision or combination becomes effective. When any adjustment
is required to be made to the Warrant Price, the number of shares issuable upon
the exercise of this Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the exercise
of this Warrant immediately prior to such adjustment, multiplied by the Warrant
Price in effect immediately prior to such adjustment, by (ii) the Warrant Price
in effect immediately after such adjustment, such that the aggregate purchase
price payable for the total number of shares purchasable under this Warrant (as
adjusted) shall remain the same.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Series C Preferred payable in Series C Preferred, or
(ii) make any other distribution with respect to Series C Preferred (except any
distribution specifically provided for in the foregoing subparagraphs (a) and
(b)) then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall
3
<PAGE> 4
be the total number of shares of Series C Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series C Preferred outstanding immediately
after such dividend or distribution. When any adjustment is required to be made
to the Warrant Price, the number of shares issuable upon the exercise of this
Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Warrant Price in effect
immediately prior to such adjustment, by (ii) the Warrant Price in effect
immediately after such adjustment, such that the aggregate purchase price
payable for the total number of shares purchasable under this Warrant (as
adjusted) shall remain the same.
(d) Conversion Ratio. Each share of Series C Preferred is
convertible into one (1) share of the Company's Common Stock as of the date
hereof. The number of shares of the Company's Common Stock issuable upon the
conversion of the Series C Preferred shall be adjusted from time to time
pursuant to the Company's Restated Articles of Incorporation.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price and the number of Shares
purchasable hereunder after giving effect to such adjustment, which shall be
mailed (without regard to Section 12 hereof, by first class mail, postage
prepaid) to the holder of this Warrant. In addition, whenever the conversion
price or conversion ratio of the Series C Preferred shall be adjusted, the
Company shall make a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series C
Preferred after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (without regard to Section 12 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series C Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares, the Company shall make a cash payment therefor based on the fair market
value of the Series C Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares.
(a) Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant, and the shares of Series C
Preferred to be issued upon exercise hereof and any Common Stock issued upon
conversion thereof are being acquired for investment and that such holder will
not offer, sell or otherwise dispose of this Warrant, or any shares of Series C
Preferred to be issued upon exercise hereof or any Common Stock issued upon
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise
of this Warrant, unless the Shares being acquired are registered under the Act
or an exemption from such registration is available, the holder hereof shall
confirm in writing, by executing the form attached as Schedule 1 to Exhibit A
hereto, that the shares of Series C Preferred so purchased (and any shares of
Common Stock issued upon conversion thereof) are being acquired for investment
and not with a view toward distribution or resale. This
4
<PAGE> 5
Warrant and all shares of Series C Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its 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 Act.
(2) The holder understands that this Warrant and any securities issuable
upon the exercise hereof have not been registered under the Act in reliance upon
a specific exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of the holder's investment intent as expressed
herein. In this connection, the holder understands that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if the holder's representation was predicated
solely upon a present intention to hold the Warrant 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 Warrant, or for a period of one
year or any other fixed period in the future.
(3) The holder further understands that this Warrant and any securities
issuable upon the exercise hereof must be held indefinitely unless subsequently
registered under the Act and any applicable state securities laws, or unless
exemptions from registration are otherwise available. Moreover, the holder
understands that the Company is under no obligation to register this Warrant and
any securities issuable upon the exercise hereof; provided however, that the
Company will use its good faith efforts to permit the holder to become a party
to the Registration Rights Agreement dated October 29, 1997, as amended, by and
among the Company and certain shareholders of the Company.
5
<PAGE> 6
(4) The holder is aware of the provisions of Rule 144, promulgated under
the 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, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; 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, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell
this Warrant and any securities issuable upon the exercise hereof 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, the holder may be
precluded from selling this Warrant and any securities issuable upon the
exercise hereof under Rule 144 even if the one-year minimum holding period had
been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption 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.
(b) Disposition of Warrant or Shares. With respect to any offer,
sale or other disposition of this Warrant or any shares of Series C Preferred
acquired pursuant to the exercise of this Warrant or any shares of Common Stock
issued upon conversion of the Series C Preferred, in each case prior to
registration of such Warrant or shares, the holder hereof and each subsequent
holder of this Warrant agrees to give written notice to the Company prior
thereto, describing in sufficient detail the manner thereof, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such shares of
Series C Preferred or Common Stock and indicating whether or not under the Act
certificates for this Warrant or such shares of Series C Preferred to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such laws.
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify such
holder that such holder may sell or otherwise dispose of this Warrant or such
shares of Series C Preferred or Common Stock, all in accordance with the terms
of the notice delivered to the Company. Notwithstanding the foregoing, at any
time that the Common Stock is publicly traded, such Common Stock may, as to such
federal laws, be offered, sold or otherwise disposed of in accordance with Rule
144 under the Act, provided that the
6
<PAGE> 7
Company shall have been furnished with such information as the Company and its
counsel may reasonably request to provide assurance that the provisions of Rule
144 have been satisfied. Each certificate representing this Warrant or the
shares of Series C Preferred or Common Stock transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
8. No Rights as a Shareholder. No holder of this Warrant, as such, shall
be entitled to vote or receive dividends or be deemed the holder of Series C
Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Conversion Right.
9.1 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without
limiting the rights of the holder under the terms of this Warrant, but only to
the extent this Warrant has not otherwise been exercised, the holder shall have
the right to convert this Warrant or any portion thereof (the "Conversion
Right") into shares of Series C Preferred (or Common Stock if the Series C
Preferred has been automatically converted into Common Stock) as provided in
this Section 9.1(a) at any time or from time to time during the term of this
Warrant. Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant (the "Converted Warrant Shares"), the
Company shall deliver to the holder (without payment by the holder of any
exercise price or any cash or other consideration) (X) that number of shares of
fully paid and nonassessable Series C Preferred (or Common Stock if the Series C
Preferred has been automatically converted into Common Stock) equal to the
quotient obtained by dividing the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in subsection (b) hereof),
which value shall be determined by subtracting (A) the aggregate Warrant Price
of the Converted Warrant Shares immediately prior to the exercise of the
Conversion Right from (B) the aggregate fair market value of the Converted
Warrant Shares issuable upon exercise of this Warrant (or the specified portion
hereof) on the Conversion Date (as herein defined) by (Y) the fair market value
of one share of Series C Preferred (or Common Stock if the Series C Preferred
has been automatically converted into Common Stock) on the Conversion Date (as
herein defined).
Expressed as a formula, such conversion shall be computed as follows:
7
<PAGE> 8
X= B - A
------
Y
Where: X = the number of shares of Series C Preferred
(or Common Stock) that may be issued to holder
Y = the fair market value (FMV) of one share of
Series C Preferred (or Common Stock)
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant
Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal office
of the Company together with a written statement specifying that the holder
thereby intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
subsection (a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right shall be issued as of the Conversion Date and shall be delivered to the
holder within thirty (30) days following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of
this Section 9.1, "fair market value" of a share of Series C Preferred (or
Common Stock if the Series C Preferred has been automatically converted into
Common Stock) as of a particular date (the "Determination Date") shall mean:
(i) If traded on a securities exchange, the fair
market value per share of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on such exchange over the five (5) day
period ending one (1) business day prior to the Determination Date, and the fair
market value of the Series C Preferred shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares of Common Stock
into which each share of Series C Preferred is then convertible;
(ii) If traded over-the-counter, the fair market
value per share of the Common Stock shall be deemed to be the average of the
closing bid prices of the Common Stock over the five (5) day period ending one
(1) business day prior to the Determination Date, and the fair market value of
the Series C Preferred shall be deemed to be such fair market value of the
Common
8
<PAGE> 9
Stock multiplied by the number of shares of Common Stock into which each share
of Series C Preferred is then convertible; and
(iii) If there is no public market for the
Common Stock, then fair market value per share shall be determined by mutual
agreement of the holder of this Warrant and the Company (by action of its Board
of Directors), and if the holder and the Company are unable to so agree, by an
appraiser approved by both the Company (by action of its Board of Directors) and
the holder of this Warrant, such approvals not to be unreasonably withheld. The
fees and expenses of such appraiser shall be borne equally by the parties.
10. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Restated Articles of Incorporation, as amended,
will be validly issued, fully paid and nonassessable; and
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Restated Articles of
Incorporation or by-laws, do not and will not contravene any material law,
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a default under, any material indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby.
11. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the registered holder of this Warrant.
9
<PAGE> 10
12. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to the holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
13. Market Stand-off Agreement. The holder of this Warrant agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by such holder during a period of time determined by the
Company and its underwriters (not to exceed 180 days) following the effective
date of the registration statement of the Company filed under the Act with
respect to the Company's initial public offering. The holder of this Warrant
further agrees to execute any standard lock-up agreement that the underwriters
require in connection with such offering. The Company may impose stop-transfer
instructions with respect to the Common Stock (or securities) subject to the
foregoing restriction until the end of said period.
14. Binding Effect on Successors. Except as otherwise set forth herein,
this Warrant shall be binding upon any corporation succeeding the Company by
merger, consolidation or acquisition of all or substantially all of the
Company's assets and shall be binding upon any holder of this Warrant.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company and its transfer agent, or in the case of
any such mutilation upon surrender and cancellation of such Warrant, the Company
will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
[Remainder of page intentionally left blank]
10
<PAGE> 11
This Warrant was issued by the Company and the terms hereof were
accepted by the holder of this Warrant on July 8, 1999.
WEBVAN GROUP, INC.
By: /S/ LOUIS H. BORDERS
---------------------------------------------
Title: CHAIRMAN & CEO
------------------------------------------
Address: 1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404-1214
BECHTEL CORPORATION
By:/S/ D. DONLY
----------------------------------------------
Title: PRESIDENT N.A. REGION
-----------------------------------------
Address: 50 Beale Street
San Francisco, CA 94105
11
<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
To: Webvan Group, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404-1214
1. The undersigned hereby elects to exercise this Warrant as to
__________ shares of Series C Preferred Stock (or Common Stock issuable upon the
conversion thereof) of Webvan Group, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full. The purchase price is being paid by (check one):
___ (i) check;
___ (ii) wire transfer;
___ (iii) exercise of the Conversion Right (as defined in Section
9 of the Warrant).
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned.
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
--------------------------------------------
(Signature)
- ---------------------
(Date)
<PAGE> 13
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser: Bechtel Corporation
Company: Webvan Group, Inc.
Security: Series C Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities and
underlying Common Stock issuable upon conversion of the securities
(collectively, the "Securities"), the undersigned (the "Purchaser") represents
to the Company as follows:
(a) The 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. The
Purchaser is purchasing the Securities for its 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 "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser'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.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144, promulgated
under the 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, if applicable, including, among other
things: The
<PAGE> 14
availability of certain public information about the Company, the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; 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, as amended) and the
amount of securities being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, the Purchaser may be precluded from selling the Securities under
Rule 144 even if the one-year minimum holding period had been satisfied.
(f) The Purchaser agrees not to sell or otherwise transfer or dispose of
any Common Stock (or other securities) of the Company held by such Purchaser
during a period of time determined by the Company and its underwriters (not to
exceed 180 days) following the effective date of the registration statement of
the Company filed under the Act with respect to the Company's initial public
offering. The Purchaser further agrees to execute any standard lock-up agreement
that the underwriters require in connection with such offering. The Company may
impose stop-transfer instructions with respect to the Common Stock (or
securities) subject to the foregoing restriction until the end of said period.
(g) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption 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.
Purchaser:
-------------------------------------------
Date: ________________, 199__
<PAGE> 1
EXHIBIT 10.16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
TO PURCHASE SHARES OF THE SERIES B PREFERRED STOCK OF
INTELLIGENT SYSTEMS FOR RETAIL, INC.
DATED AS OF MAY 27, 1998 (THE "EFFECTIVE DATE")
WHEREAS, Intelligent Systems for Retail, Inc., a California corporation
(the "Company") has entered into a Master Lease Agreement dated as of March 23,
1998, Equipment Schedule No. VL-1 and VL-2 dated as of March 23, 1998, and
related Summary Equipment Schedules (collectively, the "Leases") with Comdisco,
Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 27,372 fully paid and
non-assessable shares of the Company's Series B Preferred Stock ("Preferred
Stock") at a purchase price of $5.48 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i) ten
(10) years from the Effective Date or (ii) five (5) years from the effective
date of the Company's initial public offering, whichever occurs first.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I (the "Notice of Exercise"), duly completed and executed,
together with the Exercise Price for the portion of the Warrant being exercised.
Promptly upon receipt of the Notice of Exercise and the payment of the purchase
price in accordance with the terms set forth below, and in no event later than
twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the acknowledgment of exercise in the form attached hereto as Exhibit II
(the "Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either
(i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
<PAGE> 2
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to
be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, the current fair market value of
the Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been
declared effective by the SEC, then the fair market value per share
shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in
connection with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair
market value shall be deemed to be the product of (x) the
average of the closing prices over a twenty-one (21) day period
ending three (3) days before the day the current fair market
value of the securities is being determined and (y) the number
of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise; or
(b) if traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of
the closing bid and asked prices quoted on the NASDAQ system (or
similar system) over the twenty-one (21) day period ending three
(3) days before the day the current fair market value of the
securities is being determined and (y) the number of shares of
Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred
Stock shall be the product of (x) the highest price per share which the
Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board
of Directors and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not
the surviving party, in which case the fair market value of Preferred
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Common Stock issuable
upon conversion of any Preferred Stock issuable upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the Securities
Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
<PAGE> 3
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation whether or not the Company is the surviving corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person (hereinafter referred to as a "Merger Event"), then, as a part
of such Merger Event, lawful provision shall be made so that the Warrantholder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of preferred stock or other securities of the successor
corporation resulting from such Merger Event, equivalent in value to that which
would have been issuable if Warrantholder had exercised this Warrant immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be assumed by
the successor corporation
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, conversion, exchange or subdivision of securities
or otherwise, change any of the securities as to which purchase rights under
this Warrant Agreement exist into the same or a different number of securities
of any other class or classes, this Warrant Agreement shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant Agreement immediately prior to
such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) , (b) or (c)) of the Company's
stock, then the Exercise Price shall be adjusted, from and after the record date
of such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding (or issuable upon the conversion or exercise of all
outstanding securities convertible into or exercisable for shares of Preferred
Stock) immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of all shares of the Company's
stock outstanding (or issuable upon the conversion or exercise of all
outstanding securities convertible into or exercisable for shares of Preferred
Stock) immediately after such dividend or distribution.
(e) Antidilution Rights. Additional antidilution rights applicable
to the Preferred Stock purchasable hereunder are as set forth in the Company's
Articles of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit A2 (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter.
<PAGE> 4
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least ten (10) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
ten (10) days' prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least ten (10) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances ; provided, however, that the Preferred
Stock issuable pursuant to this Warrant Agreement may be subject to restrictions
on transfer under state and/or Federal securities laws. The Company has made
available to the Warrantholder true, correct and complete copies of its Charter
and Bylaws, as amended. The issuance of certificates for shares of Preferred
Stock upon exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the 1933 Act and any filing required by
applicable state securities law, which filings will be effective by the time
required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) As of May 27, 1998, the authorized capital stock of the
Company consisted of (A) 50,000,000 shares of Common Stock (the "Common
Stock"), of which 13,804,537 shares were issued and outstanding and; (B)
25,741,528 shares of Preferred Stock, of which 18,772,528 were
designated Series A Preferred Stock (the "Series A Preferred"), all of
which were issued and outstanding; and of which 6,969,000 were
designated as Series B Preferred Stock (the "Series B Preferred"), none
of which were issued and outstanding. Up to all of the shares of Series
B Preferred are expected to be sold to investors at a price of $5.48 per
share. Each share of Series A Preferred is convertible into one share of
Common Stock and each share of Series B Preferred is convertible into
one share of Common Stock.
<PAGE> 5
(ii) As of May 27, 1998, the Company had reserved 7,000,000
shares of Common Stock for issuance under the Company's 1997 Stock
Option Plan, of which options to purchase an aggregate of 2,645,042
shares were outstanding at a weighted average exercise price of $0.06
per share. As of May 27, 1998, there were no options, warrants,
conversion privileges or other rights outstanding to purchase or
otherwise acquire any authorized but unissued shares of the Company's
capital stock or other securities of the Company.
(iii) Other than as provided for in the Registration Rights
Agreement dated October 29, 1997 by and between the Company and the
holders of Series A Preferred Stock ("Registration Rights Agreement"),
as of May 27, 1998 no shareholder of the Company had preemptive rights
to purchase new issuances of the Company's capital stock. The Company
expects to amend the Registration Rights Agreement to extend the rights
in such agreement to the purchasers of its Series B Preferred.
(e) Other Commitments to Register Securities. Except as set forth in
this Warrant Agreement and the Registration Rights Agreement, the Company is
not, pursuant to the terms of any other agreement currently in existence, under
any obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(f) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the applicable state securities laws.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock and the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein (and any Common Stock or other securities issuable upon conversion
thereof) will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of this Warrant (and any Common Stock or
other securities issuable upon conversion thereof) is not registered under the
1933 Act or qualified under applicable state securities laws on the ground that
the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights (and any Common Stock
or other securities issuable upon conversion thereof) unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights (and any Common Stock or other
securities issuable upon conversion thereof) shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 (k) under the 1933 Act, or (3)
a letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action shall
be recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. At any time following the initial public offering of the Company's
Common Stock, whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
<PAGE> 6
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports
pursuant to Section 15(d), of the 1934 Act", or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase (and any Common Stock or other securities issuable upon conversion
thereof), it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock (and any Common
Stock or other securities issuable upon conversion thereof) which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers and provided further that any transferee
shall agree to be bound by the terms of this Warrant, including without
limitation, the provisions of Section 12 hereof. The transfer shall be recorded
on the books of the Company upon receipt by the Company of a notice of transfer
in the form attached hereto as Exhibit III (the "Transfer Notice"), at its
principal offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer and evidence of compliance with
all of the provisions of Section 10 hereof.
12. MARKET STAND-OFF AGREEMENT
The Warrantholder agrees not to sell or otherwise transfer or dispose of
any Common Stock (or other securities) of the Company held by the Warrantholder
during a period of time determined by the Company and its underwriters (not to
exceed one hundred eighty (180) days in the case of an initial public offering)
following the effective date of a registration statement of the Company filed
under the Securities Act of 1933, provided that all officers and directors of
the Company who then hold Common Stock (or other securities) of the Company
enter into substantially identical agreements. Such agreement shall be in
writing in a form satisfactory to the Company and such underwriter. The Company
may impose stop-transfer instructions with respect to securities subject to the
foregoing restriction until the end of said period.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall
be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to reasonable attorneys' fees and expenses
and all reasonable costs of proceedings incurred in enforcing this Warrant
Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
California.
(d) Counterparts. This Warrant Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or five (5) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if
by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 1241
Hillsdale Blvd., #210, Foster City, CA 94404, Attention:Chief Financial Officer
(and/or if by facsimile, (650) 524-4801 or at such other address as any such
party may subsequently designate by written notice to the other party.
<PAGE> 7
(f) Remedies. In the event of any default hereunder, the
non-defaulting party may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including but not limited to an action
for damages as a result of any such default, and/or an action for specific
performance for any default where Warrantholder will not have an adequate remedy
at law and where damages will not be readily ascertainable. The Company
expressly agrees that it shall not oppose an application by the Warrantholder or
any other person entitled to the benefit of this Agreement requiring specific
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of
its Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment provided however, that no issuances of
securities, whether convertible or otherwise, when made in accordance with the
Company's Articles of Incorporation shall be considered an impairment of the
Warrantholder's rights hereunder.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized as of the
Effective Date.
COMPANY: INTELLIGENT SYSTEMS FOR RETAIL, INC.
By: /S/ LOUIS H. BORDERS
----------------------------------------
Title: CEO
----------------------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /S/ JAMES P. LABE
----------------------------------------
Title: PRESIDENT, COMDISCO VENTURES DIVISION
----------------------------------------
<PAGE> 8
EXHIBIT I
NOTICE OF EXERCISE
TO: Intelligent Systems for Retail, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404
Attention: Chief Financial Officer
(1) The undersigned Warrantholder hereby elects to exercise its right to
purchase _______ shares of the Series B Preferred Stock of Intelligent
Systems for Retail, Inc., pursuant to the terms of the Warrant Agreement
dated as of May 27, 1998 (the "Warrant Agreement") between Intelligent
Systems for Retail, Inc. and the Warrantholder, and tenders herewith
payment of the purchase price for such shares in full, together with all
applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series B Preferred Stock of
Intelligent System for Retail, Inc._, the undersigned hereby confirms
and acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series B Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
<PAGE> 9
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby
acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase
____ shares of the Series ____ Preferred Stock of _________________, pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
COMPANY:
By: _________________________
Title: _________________________
Date: _________________________
<PAGE> 10
EXHIBIT III
TRANSFER NOTICE
(TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND
SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
___________________________________________________________________
(Please Print)
whose address is___________________________________________________
___________________________________________________________________
Dated: ___________________________
Holder's Signature: ______________
Holder's Address: ________________
___________________________________
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
<PAGE> 1
EXHIBIT 10.17
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. __________ Number of Shares 109,489
Series B Preferred Stock
INTELLIGENT SYSTEMS FOR RETAIL, INC.
Void after November 18, 2005
1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS II,
L.P., by INTELLIGENT SYSTEMS FOR RETAIL, INC., a California corporation
(hereinafter with its successors called the "Company").
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "Shares") at a price per share of
$5.48 (the "Purchase Price"), 109,489 fully paid and nonassessable shares of
Series B Preferred Stock, no par value, of the Company (the "Preferred Stock").
Until such time as this Warrant is exercised in full or expires, the Purchase
Price and the securities issuable upon exercise of this Warrant are subject to
adjustment as hereinafter provided. The person or persons in whose name or names
any certificate representing shares of Preferred Stock is issued hereunder shall
be deemed to have become the holder of record of the shares represented thereby
as at the close of business on the date this Warrant is exercised with respect
to such shares, whether or not the transfer books of the Company shall be
closed.
3. PAYMENT OF PURCHASE PRICE; ISSUANCE OF SHARES. The Purchase Price
may be paid in cash or by check. Upon the exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the Holder as soon as possible and in any event within thirty (30)
days after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of Shares, if any, with respect
to which this Warrant shall not have been exercised shall also be issued to the
Holder as soon as possible and in any event within thirty (30) days.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X = Y (A-B)
-------
A
where: X = the number of shares of Preferred Stock to be issued
to the Holder pursuant to this SECTION 4.
Y = the number of shares of Preferred Stock covered by
this Warrant in respect of which the net issue
election is made pursuant to this SECTION 4.
<PAGE> 2
A = the Fair Market Value (defined below) of one share of
Preferred Stock, as determined at the time the net
issue election is made pursuant to this SECTION 4.
B = the Purchase Price in effect under this Warrant at the
time the net issue election is made pursuant to this
SECTION 4.
"Fair Market Value" of a share of Preferred Stock (or Common Stock if the
Preferred Stock has been converted into Common Stock) as of a particular date
(the "Determination Date") shall mean:
(i) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock
to the public in a public offering pursuant to a Registration Statement
under the 1933 Act (a "Public Offering"), and if the Company's
Registration Statement relating to such Public Offering ("Registration
Statement") has been declared effective by the Securities and Exchange
Commission, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of
shares of Common Stock into which each share of Preferred Stock is then
convertible.
(ii) If the net issue election is not made in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock
shall be deemed to be the average of the closing or last
reported sale prices of the Common Stock on such exchange or
market over the five day period ending five business days
prior to the Determination Date, and the fair market value of
the Preferred Stock shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares
of Common Stock into which each share of Preferred Stock is
then convertible;
(B) If otherwise traded in an over-the-counter
market, the fair market value of the Common Stock shall be
deemed to be the average of the closing ask prices of the
Common Stock over the five day period ending five business
days prior to the Determination Date, and the fair market
value of the Preferred Stock shall be deemed to be such fair
market value of the Common Stock multiplied by the number of
shares of Common Stock into which each share of Preferred
Stock is then convertible; and
(C) If there is no public market for the Common
Stock, then fair market value shall be determined by mutual
agreement of the holder of this Warrant and the Company, and
if the holder and the Company are unable to so agree, at the
Company's sole expense by a valuation or investment banking
firm selected by the Company and reasonably acceptable to the
holder of this Warrant.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of
Preferred Stock or Common Stock be issued upon any exercise of this Warrant. If,
upon exercise of this Warrant in its entirety, the Holder would, except as
provided in this SECTION 6, be entitled to receive a fractional share of
Preferred Stock or Common Stock, then the Company shall pay the Holder cash
equal to the fraction of such share multiplied by the Fair Market Value of such
share.
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at
5:00 p.m. Pacific Standard Time on November 18, 2005, and shall be void
thereafter. This Warrant shall automatically be deemed to be
2.
<PAGE> 3
exercised in full pursuant to the provisions of SECTION 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, no par
value, of the Company (the "Common Stock"), free from all preemptive or similar
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company
shall subdivide the Preferred Stock, by stock split or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a stock split or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a stock split or stock dividend, or
proportionately increased in the case of a combination.
10. ADJUSTMENTS FOR DILUTING ISSUANCES. The number of shares of Common
Stock into which the Preferred Stock is convertible is subject to adjustment
from time to time pursuant to Article III of the Company's Restated Articles of
Incorporation, as amended from time to time (the "Articles"), a true and
complete copy in its current form which is attached hereto as EXHIBIT A. Such
rights shall not be restated, amended or modified in any manner which affects
the Holder differently than the other holders of Series B Preferred without such
Holder's prior written consent. The Company shall promptly provide the Holder
hereof with any restatement, amendment or modification to the Articles promptly
after the same has been made.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
the then unexercised portion of this Warrant, the kind and amount of shares of
stock and other securities and property receivable upon such Reorganization by a
holder of the number of shares of Preferred Stock which might have been
purchased by the Holder immediately prior to such Reorganization upon the
exercise of the unexercised portion of this Warrant, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "Reorganization" shall mean any reclassification,
capital reorganization or change of the Preferred Stock (other than as a result
of a subdivision, combination or stock dividend provided for in SECTION 9
hereof), or any consolidation of the Company with, or merger of the Company
into, another corporation or other business organization (other than a merger or
consolidation in which the Company is the surviving corporation and which does
not result in any reclassification or change of the outstanding Preferred
Stock), or any sale or conveyance to another corporation or other business
organization of all or substantially all of the assets of the Company.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price or the
number of Shares purchasable hereunder is adjusted, as herein provided, the
Company shall promptly deliver to the Holder a certificate of the Company's
chief financial officer setting forth the Purchase Price and number of Shares
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. In addition, whenever the conversion price or conversion ratio
of the Preferred Stock shall be adjusted, the Company shall deliver to the
Holder a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
conversion price or ratio of the Preferred Stock after giving effect to such
adjustment.
3.
<PAGE> 4
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof at the time such notice is provided to the
holders of the Company's Preferred Stock or Common Stock.
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. This
Warrant is issued and delivered by the Company and accepted by each Holder on
the basis of the following representations, warranties and covenants made by the
Company:
A. The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms, subject to laws of general application related to bankruptcy, insolvency
and the relief of debtors and other laws of general application affecting
enforcement of creditors' rights generally, rules of law governing specific
performance, injunctive relief or other equitable remedies.
B. The shares of Preferred Stock issuable upon the exercise of this
Warrant have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
C. The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Company's Articles or by-laws, or any law, statute, regulation, rule, judgment
or order applicable to the Company, (ii) violate, contravene or result in a
breach or default under any material contract, agreement or instrument to which
the Company is a party or by which the Company or any of its assets are bound or
(iii) require the consent or approval of or the filing of any notice or
registration with any person or entity other than a filing to be made under
Section 25102(f) of the California Corporations Code.
D. So long as this Warrant has not terminated, Holder shall be
entitled to receive such financial and other information as the Holder would be
entitled to receive under the Series B Preferred Stock Purchase Agreement if
Holder were a holder of that number of shares issuable upon full exercise of
this Warrant.
E. As of the date hereof, the Company's authorized capital stock
consists of (a) 50,000,000 shares of Common Stock (the "Common Stock"), of which
13,880,162 shares are issued and outstanding; and (b) 25,741,528 shares of
Preferred Stock, of which 18,772,528 are designated Series A Preferred Stock
(the "Series A Preferred"), all of which are issued and outstanding; and
6,969,000 are designated as Series B Preferred Stock (the "Series B Preferred"),
of which 6,516,884 shares are issued and outstanding. The Company has reserved
18,772,528 shares of Common Stock for issuance upon conversion of the Series A
Preferred; 6,969,000 shares of Common Stock for issuance upon conversion of the
Series B Preferred; an aggregate of 372,262 shares of Series B Preferred for
issuance upon exercise of this Warrant and the other warrants being issued on
the date hereof; an aggregate of 30,372 shares of Series B Preferred for
issuance upon exercise of other outstanding options and warrants; and 9,000,000
shares of Common Stock for issuance under the Company's 1997 Stock Option Plan.
All representations and warranties of the Company and the holder hereof
contained herein shall survive the exercise and conversion of this Warrant (or
any part hereof) or the termination or expiration of the rights hereunder.
4.
<PAGE> 5
15. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
16. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:
A. INVESTMENT PURPOSE. This Warrant and the right to acquire the
Preferred Stock issuable upon exercise of the Holder's rights contained herein
(and the Common Stock issuable upon conversion of the Preferred Stock) will be
acquired for investment and not with a view to the sale or distribution of any
part thereof, and the Holder has no present intention of selling or engaging in
any public distribution of the same except pursuant to a registration or
exemption.
B. ACCREDITED INVESTOR. Holder is an "accredited investor" within
the meaning of the Securities and Exchange Commission Rule 501 of Regulation D,
as presently in effect.
C. PRIVATE ISSUE. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein (and the
Common Stock issuable upon conversion of the Preferred Stock) is not registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this SECTION 16.
D. FINANCIAL RISK. The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
17. NOTICES, TRANSFERS, ETC.
A. Any notice or written communication required or permitted to be
given to the Holder may be given by first class mail or delivered to the Holder
at the address most recently provided by the Holder to the Company.
B. This Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder subject to compliance with
applicable restrictions in the Registration Rights Agreement dated as of October
29, 1997, as amended. Upon surrender of this Warrant to the Company, together
with the assignment notice annexed hereto duly executed, for transfer of this
Warrant as an entirety by the Holder, the Company shall issue a new warrant of
the same denomination to the assignee. Upon surrender of this Warrant to the
Company, together with the assignment hereof properly endorsed, by the Holder
for transfer with respect to a portion of the shares of Preferred Stock
purchasable hereunder, the Company shall issue a new warrant to the assignee, in
such denomination as shall be requested by the Holder hereof, and shall issue to
such Holder a new warrant covering the number of shares in respect of which this
Warrant shall not have been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant and the agreement of each Holder to indemnify the
Company with respect to such matter.
18. NO IMPAIRMENT. The Company will not, by amendment of its Articles
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the
5.
<PAGE> 6
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder, provided however, that the no issuance of securities,
whether convertible or otherwise, when made in accordance with the Company's
Articles shall be considered an impairment of the Holders rights hereunder.
19. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
20. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
21. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
22. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Company's Articles in effect immediately prior to such offering, then, effective
upon such conversion, this Warrant shall change from the right to purchase
shares of Preferred Stock to the right to purchase shares of Common Stock at the
conversion price then in effect, and the Holder shall thereupon have the right
to purchase, at a total price equal to that payable upon the exercise of this
Warrant in full, the number of shares of Common Stock which would have been
receivable by the Holder upon the exercise of this Warrant for shares of
Preferred Stock immediately prior to such conversion of such shares of Preferred
Stock into shares of Common Stock, and in such event appropriate provisions
shall be made with respect to the rights and interest of the Holder to the end
that the provisions hereof (including, without limitation, the provisions for
the adjustment of the Purchase Price and of the number of shares purchasable
upon exercise of this Warrant and the provisions relating to the net issue
election) shall thereafter be applicable to any shares of Common Stock
deliverable upon the exercise hereof.
23. VALUE. The Company and the Holder agree that the value of this
Warrant on the date of grant is $100.
Dated: November 18, 1998 INTELLIGENT SYSTEMS FOR RETAIL, INC.
[CORPORATE SEAL] By: /S/ LOUIS H. BORDERS
------------------------------
Attest: Name: Louis H. Borders
-----------------------------
Title: Chief Executive Officer
- ----------------------------- ----------------------------
6.
<PAGE> 7
EXERCISE NOTICE
To: Intelligent Systems for Retail, Inc. Date:_____________
1241 E. Hillsdale Boulevard, Suite 210
Foster City, CA 94404
Attention: Chief Financial Officer
The undersigned hereby elects to exercise the attached Warrant as to
shares of Preferred Stock covered by this Warrant and hereby tenders the
exercise price for such shares, together with applicable transfer taxes, if any.
The certificate(s) for such shares shall be issued in the name of the
undersigned or as otherwise indicated below:
In exercising its rights hereby, the undersigned hereby confirms the
representations and statements made in Section 17 of the Warrant with respect to
the shares being acquired upon exercise hereof.
Name of Holder:
----------------------------
Signature of Holder:
-----------------------
Name for Registration:
---------------------
Mailing Address:
---------------------------
---------------------------
NET ISSUE EXERCISE NOTICE
To: Intelligent Systems for Retail, Inc. Date:_____________
1241 E. Hillsdale Boulevard, Suite 210
Foster City, CA 94404
Attention: Chief Financial Officer
The undersigned hereby elects under SECTION 4 of the attached Warrant
to surrender the right to purchase _____ shares of Preferred Stock pursuant to
this Warrant. The certificate(s) for such shares issuable upon such net issue
election shall be issued in the name of the undersigned or as otherwise
indicated below:
In exercising its rights hereby, the undersigned hereby confirms the
representations and statements made in Section 17 of the Warrant with respect to
the shares being acquired upon exercise hereof.
Name of Holder:
----------------------------
Signature of Holder:
-----------------------
Name for Registration:
---------------------
Mailing Address:
---------------------------
---------------------------
1.
<PAGE> 8
ASSIGNMENT
For value received_______________________________hereby sells, assigns
and transfers unto_____________________________________________________________
_______________________________________________________________________________
[Please print or typewrite name and address of Assignee]
the within Warrant, and does hereby irrevocably constitute and appoint_________
___________________________________ its attorney to transfer the within Warrant
on the books of the within named Company with full power of substitution on the
premises.
Dated:
--------------------------------
Name of Holder:
-----------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
In the Presence of:
- --------------------------------------
2.
<PAGE> 9
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
SEE ATTACHED PAGES.
3.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 13,839 21,836
<SECURITIES> 7,728 22,231
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 596
<CURRENT-ASSETS> 21,681 48,804
<PP&E> 32,934 58,882
<DEPRECIATION> (310) (2,696)
<TOTAL-ASSETS> 60,009 112,429
<CURRENT-LIABILITIES> 10,758 17,031
<BONDS> 0 0
0 0
45,582 118,369
<COMMON> 7,401 25,091
<OTHER-SE> (19,371) (63,834)
<TOTAL-LIABILITY-AND-EQUITY> 60,009 112,429
<SALES> 0 395
<TOTAL-REVENUES> 0 395
<CGS> 0 419
<TOTAL-COSTS> 0 419
<OTHER-EXPENSES> 3,547 32,599
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 32 1,194
<INCOME-PRETAX> (11,810) (32,176)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,810) (32,176)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,810) (32,176)
<EPS-BASIC> (0.18) (0.44)
<EPS-DILUTED> (0.18) (0.44)
</TABLE>
