<PAGE>
As filed with the Securities and Exchange Commission on April 13, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
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MOAI TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware* 7372 94-3274438
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
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25 Lusk Street
San Francisco, CA 94107
(415) 625-0601
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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ANNE PERLMAN
Chief Executive Officer
Moai Technologies, Inc.
25 Lusk Street
San Francisco, CA 94107
(415) 625-0601
(Name, Address Including Zip Code, and Telephone Number Including Area Code, of
Agent for Service)
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Copies to:
DONALD M. KELLER, JR. PETER T. HEALY
DANIEL W. BURKE STEVEN L. PICKERING
Venture Law Group O'Melveny & Myers LLP
A Professional Corporation 275 Battery Street, Suite 2600
2800 Sand Hill Road Embarcadero Center West
Menlo Park, CA 94025 San Francisco, CA 94111
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class Of Securities Proposed Maximum Aggregate
To Be Registered Offering Price(1) Amount Of Registration Fee
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<S> <C> <C>
Common Stock, par value $0.0001.. $75,000,000 $19,800
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</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) and 457(o) under the Securities
Act.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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* The Registrant intends to reincorporate into Delaware prior to the effective
date.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 2000
[Moai Logo]
Shares
Common Stock
We are offering shares of our common stock. This is our initial public
offering, and no public market currently exists for our common stock. We have
applied for approval of quotation of our common stock on the Nasdaq National
Market under the symbol "MOAI."
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Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 6.
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<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discounts and Commissions.............................. $ $
Proceeds to Moai.................................................... $ $
</TABLE>
--------------
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments. FleetBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 2000.
--------------
Robertson Stephens
Donaldson, Lufkin & Jenrette
Merrill Lynch & Co.
The date of this prospectus is , 2000.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of the common stock. In this prospectus, references
to "Moai," "we," "us" and "our" refer to Moai Technologies, Inc.
Until , 2000 (the 25th day after the final prospectus related to this
offering), all dealers that buy, sell or trade our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 22
Selected Financial Data.................................................. 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 25
Business................................................................. 32
Management............................................................... 44
Related Party Transactions............................................... 54
Principal Stockholders................................................... 56
Description of Capital Stock............................................. 58
Shares Eligible for Future Sale.......................................... 61
Underwriting............................................................. 63
Legal Matters............................................................ 67
Experts.................................................................. 67
Additional Information Available to You.................................. 67
Index to Financial Statements............................................ F-1
</TABLE>
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Moai(TM), Moai Technologies(TM), LiveExchange(TM), Moai's Dynamic Commerce
Engine(TM), Moai's OpenAPI(TM), Online Negotiated Exchange(TM), Virtual Private
Marketplace(TM) and the Moai logo are trademarks of Moai Technologies, Inc. All
other brand names or trademarks appearing in this prospectus are the property
of their respective holders.
<PAGE>
PROSPECTUS SUMMARY
This section is a summary and does not contain all of the information that
will be important to you. You should also read the more detailed information
regarding our company, including the "Risk Factors" section and our financial
statements, and the notes to those statements appearing elsewhere in this
prospectus, before deciding to invest in shares of our common stock.
Moai Technologies, Inc.
We are a leading provider of negotiated eCommerce solutions for online
auctions, online procurement and eMarketplaces. Negotiated eCommerce involves
the buying and selling of goods and services online through flexible
transaction models that change over time based on multiple terms such as price,
condition of goods, warranty and shipping costs. Our solutions address the
unique challenges faced by companies looking to initiate or expand their
eCommerce initiatives in the technologically complex and rapidly changing
Internet business climate. We provide companies doing business online with a
comprehensive eCommerce solution featuring sophisticated negotiated eCommerce
capabilities designed to help them increase revenues and market share, improve
business operations efficiency, and engage and retain customers. In addition,
our solution is rapidly deployable, easily integrated into existing business
processes, customizable and built on a scalable and robust architecture.
Our customers operate in a wide range of vertical markets, including
computer and high tech, transportation and logistics, wholesale distribution
and manufacturing. While our primary focus is on customers in the business-to-
business market, we also have customers in the business-to-consumer and
consumer-to-consumer markets.
The Internet's emergence as a highly efficient medium through which
companies can interact and transact commerce, often referred to as business-to-
business eCommerce, has fundamentally changed the way that many companies
conduct business with each other. By overcoming geographic constraints and
enabling the dissemination of information about products and services, the
Internet is creating new business opportunities and challenges. To compete in
this rapidly-evolving market, many businesses today face the strategic
imperative of embracing eCommerce initiatives. With so many new entrants,
eCommerce is rapidly evolving from its early days of online catalogs and simple
storefronts. New and more sophisticated forms of business-to-business eCommerce
are emerging and are prompting companies to seek competitive advantage and to
expand their business opportunities by offering differentiated and unique
online services. In particular, many companies today are supplementing their
traditional operations with online auctions, online procurement and,
increasingly, eMarketplaces.
Online auctions. Online auctions allow sellers to obtain demand-driven
pricing in eCommerce transactions. This typically involves a standard auction
format where multiple buyers submit bids to purchase an item offered by a
single seller. The price increases with each subsequent bid and the auction
winner is decided when the seller accepts the bid with the highest price and/or
the best other terms.
Online procurement. Online procurement allows a single buyer to interact
with multiple sellers during a single transaction to achieve the most favorable
terms. This typically involves a buyer who makes a request to buy a particular
item online with multiple sellers offering to sell the item in a reverse
auction format. In a reverse auction format, the price declines with each
subsequent offer and the auction winner is decided when the buyer ultimately
accepts the offer with the lowest price and/or the best other terms.
eMarketplaces. eMarketplaces allow multiple sellers and buyers to transact
business at a comprehensive trading hub designed to efficiently manage
transactions and services among buyers and sellers. These marketplaces
typically involve communities of buyers and sellers who negotiate and trade
online based on a bid and ask format, similar to a stock exchange.
1
<PAGE>
Our LiveExchange product suite, comprised of LiveExchange Enterprise and
LiveExchange Marketplace, is a customer-focused, comprehensive solution for
online auctions, online procurement and eMarketplaces. We offer our solutions
directly through our sales force and indirectly through our relationships with
application service providers, vertical solution providers and resellers. In
addition, our relationships with systems integrators, technology companies and
consulting firms strengthen our technological capabilities and provide us
access to additional customers. We also offer our customers a range of services
that enable them to rapidly integrate and deploy our products.
Our objective is to be the premier provider of negotiated eCommerce
solutions for online auctions, online procurement and eMarketplaces. Key
elements of our strategy include:
. expanding and leveraging our diverse and fast growing customer base;
. expanding and leveraging our base of strategic relationships;
. extending our technological leadership; and
. expanding our international presence.
Corporate Information
We were incorporated in Colorado in October 1995 and reincorporated in
California in June 1997. We intend to reincorporate in Delaware prior to the
completion of this offering. Our principal executive offices are located at 25
Lusk Street, San Francisco, CA 94107. Our telephone number at that location is
(415) 625-0601. Information contained in our web site at www.moai.com does not
constitute a part of this prospectus.
2
<PAGE>
The Offering
The following information assumes that the underwriters do not exercise
their option to purchase additional shares in the offering. See "Underwriting."
<TABLE>
<C> <S>
Common stock offered by Moai Technologies, Inc...... shares
Common Stock to be outstanding after this offering.. shares
Use of proceeds..................................... For working capital and
general corporate
purposes, funding
operating losses, product
development, capital
expenditures, expanding
our sales and marketing
organization, and any
acquisitions of
complementary products,
technologies and
businesses.
Proposed Nasdaq National Market symbol.............. MOAI
</TABLE>
The above information is based on 27,510,762 shares outstanding as of
December 31, 1999 and is presented on a pro forma basis, after giving effect to
our issuance of 3,745,318 shares of Series D preferred stock issued in the
first quarter of 2000, our issuance of 583,334 shares of Series A preferred
stock upon exercise of warrants in January 2000, and our expected issuance of
262,266 shares of Series D preferred stock upon exercise of warrants prior to
or upon the closing of this offering. The information above excludes the
following shares:
. 2,847,972 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $0.36 per share;
. 156,630 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $0.56 per share; and
. an aggregate of 639,338 shares available for future grant under our 1997
stock plan.
Subsequent to December 31, 1999, we increased the number of shares of
common stock reserved under our 1997 stock plan by 4,000,000 shares and
reserved an aggregate of 9,850,000 shares under our 2000 stock plan, 2000
executive stock incentive plan, 2000 directors' stock option plan and 2000
employee stock purchase plan. See "Management--Stock Plans" and Notes 9 and 11
of Notes to Financial Statements. Subsequent to December 31, 1999, we issued
options to purchase 2,098,096 shares of common stock under our 1997 stock plan
and our 2000 executive stock incentive plan and warrants to purchase 61,210
shares of Series D preferred stock.
Other Information
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. the automatic conversion of all outstanding shares of preferred stock
into shares of common stock on a one-for-one basis upon the closing of
this offering;
. no exercise of the underwriters' over-allotment option;
. our reincorporation into Delaware prior to the closing of this offering;
and
. the 2-for-1 forward split of our preferred and common stock effected on
January 14, 2000.
3
<PAGE>
Summary Financial Data
The summary table sets forth a summary of our statement of operations data
for the periods presented, and should be read in conjunction with our financial
statements and the related notes included elsewhere in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Figures in the Statement of Operations table below are in
thousands, except per share figures.
<TABLE>
<CAPTION>
Period from
October 4, 1995
(Inception)
through Year ended December 31,
December 31, -------------------------
1996 1997 1998 1999
--------------- ------ ------- --------
<S> <C> <C> <C> <C>
Statements of Operations Data:
Revenues........................... $ -- $ 60 $ 60 $ 1,164
Cost of revenues (includes $339 of
stock-based compensation in
1999)............................ -- 6 29 1,815
----- ------ ------- --------
Gross profit (loss)................ -- 54 31 (651)
Operating expenses (includes $1,211
of stock-based compensation in
1999)............................ 88 284 2,321 13,777
----- ------ ------- --------
Loss from operations............... (88) (230) (2,290) (14,428)
Interest and other income
(expense), net................... 134 (5) 49 188
----- ------ ------- --------
Net income (loss).................. $ 46 $ (235) $(2,241) $(14,240)
===== ====== ======= ========
Net income (loss) per share:
Basic and diluted................. $0.01 $(0.14) $ (0.75) $ (3.12)
===== ====== ======= ========
Weighted average shares........... 3,960 1,730 2,984 4,559
===== ====== ======= ========
Proforma net loss per share
(unaudited):
Basic and diluted................. $ (0.69)
========
Weighted average shares........... 20,633
========
</TABLE>
- --------
See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing pro forma basic
and diluted net loss per share.
4
<PAGE>
The following table sets forth a summary of our balance sheet data as of
December 31, 1999:
. on an actual basis;
. on a pro forma basis, after giving effect to our issuance of 3,745,318
shares of Series D preferred stock in the first quarter of 2000, our
issuance of 583,334 shares of Series A preferred stock upon exercise of
warrants in January, 2000, our expected issuance of 262,266 shares of
Series D preferred stock upon exercise of warrants prior to or upon the
closing of this offering, and the automatic conversion of all then-
outstanding shares of preferred stock into 24,568,988 shares of common
stock upon the closing of this offering; and
. on a pro forma as adjusted basis, after giving effect to our sale of
shares of common stock at an assumed initial public offering price of
$ per share in this offering, after deducting the estimated
underwriting discounts and commissions and estimated offering expenses
that we expect to pay in connection with this offering, and the
authorization of 150,000,000 shares of common stock and 10,000,000
shares of preferred stock upon the closing of the offering.
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments................................. $ 6,391 $38,667 $
Working capital............................... 3,720 35,996
Total assets.................................. 10,912 43,188
Capital lease obligations, long-term.......... 355 355 355
Mandatorily redeemable convertible preferred
stock....................................... 20,645 -- --
Total stockholders' equity (deficit).......... (14,890) 38,031
</TABLE>
5
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider the risks described below before making an investment decision.
Our business, operating results and financial condition could be materially and
adversely affected by any of the following risks, as well as by risks that we
are unaware of or by risks that we currently believe are immaterial. These risk
factors could cause the trading price of our common stock to decline, and you
may lose part or all of your investment.
This prospectus contains forward-looking statements that describe our
future plans, objectives, expectations and intentions. The matters described in
our forward-looking statements are subject to risks and uncertainties.
Consequently, our actual results could differ materially from the results
predicted by our forward-looking statements. Factors that may contribute to
these differences include the risks discussed below and elsewhere in this
prospectus.
Risks Related to Our Business
Because we have a limited operating history, it may be difficult for you to
evaluate and predict our commercial prospects and financial results.
We were incorporated in 1995 and commenced operations in 1996. Compared to
many public companies, our limited operating history gives you very little
basis upon which to evaluate our ability to accomplish our business plan. In
making an investment decision, you should consider our business in light of the
risks, expenses and difficulties frequently encountered by companies in early
stages of development, particularly companies in the rapidly changing software
and eCommerce markets. These risks are described in more detail in the risk
factors below. Since we have limited business experience and only a few years
of financial data, any predictions you make about our commercial prospects and
financial condition may not be as accurate as they would be if we had a longer
business history.
Failure to sustain our current revenue growth rate or to achieve profitability
will likely cause our stock price to fall.
We will need to increase our revenues significantly to become profitable.
Although our revenue grew rapidly in 1999 as compared to 1998, we do not
believe that we will maintain this rate of revenue growth because we started
from a small revenue base, and it is difficult to maintain high percentage
increases over a larger revenue base. A significant decrease in our rate of
revenue growth after this offering could cause our stock price to fall.
We incurred losses of $235,000 in 1997, $2,241,000 in 1998 and $14,240,000
in 1999. As of December 31, 1999, we had an accumulated deficit of
approximately $16,670,000. We expect to incur losses for the foreseeable
future. We cannot be certain that we will achieve profitability in the future
or, if we achieve profitability, that we will sustain it. If we do not achieve
profitability, the market price for our common stock may decline, perhaps
substantially.
We expect our cost of revenues and operating expenses to increase significantly
over the next year, which will impede our ability to achieve profitability.
As we grow our business, we expect our cost of revenues and operating
expenses to increase significantly and, as a result, we will need to generate
increased revenues to achieve and maintain profitability. In particular, we
expect to incur additional costs and expenses related to:
. expansion of our sales force and distribution channels;
. expansion of our product and services offerings;
. development of strategic relationships;
6
<PAGE>
. expansion of management and infrastructure;
. brand development, marketing and other promotional activities; and
. international expansion efforts.
We expect to depend on sales of our LiveExchange products and related services
for substantially all of our revenues for the foreseeable future.
We are substantially dependent on market acceptance of our LiveExchange
products, and these products are in full production at fewer than half of our
customers as of February 29, 2000. As a result, our current and potential
customers are unable to fully evaluate whether the features and functionality
of LiveExchange meet their business needs. Our LiveExchange products and
related services accounted for all of our revenues in 1999 and for the two
months ended February 29, 2000. We anticipate that revenues from our
LiveExchange products and related services will continue to constitute
substantially all of our revenues for the foreseeable future. Consequently, a
decline in the price of, or demand for, our LiveExchange products, or their
failure to achieve broad market acceptance, would seriously harm our business.
Factors that could adversely affect sales of LiveExchange include:
. failure of buyers and sellers to adopt negotiated eCommerce as a method
of doing business;
. competitive products that obtain greater market acceptance;
. our failure to adapt LiveExchange to new technologies and computing
platforms; and
. our failure to incorporate features and functionality in LiveExchange
which address customer needs.
We may require additional financing in the future and may not be able to obtain
this financing.
We require substantial working capital to fund our business. We experienced
operating losses and negative cash flow from operations since inception and
expect to continue to do so for the immediate future. We expect to use the net
proceeds of this offering primarily for working capital and to fund operating
losses. We believe that these proceeds, together with our existing capital
resources, will be sufficient to meet our capital requirements for at least the
next twelve months. However, our capital requirements depend on several
factors, including the rate of market acceptance of our products, the ability
to expand our customer base, the growth of sales and marketing and other
factors. If capital requirements vary materially from those currently planned,
we may require additional financing sooner than anticipated. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of our current stockholders will be reduced and these new securities
may have rights, preferences or privileges senior to the rights of our common
stock. If adequate funds are not available or are not available on acceptable
terms, we may be unable to develop or enhance our products or to take advantage
of future opportunities, which could harm our competitive position.
Our sales cycle can be lengthy and subject to delays, and these delays could
cause our operating results to suffer.
We believe that a customer's decision to purchase our software is
discretionary, involves a significant commitment of resources and is influenced
by customer budget cycles. To successfully sell our products, we generally must
educate our potential customers regarding the use and benefit of our products,
which can require significant time and resources. Consequently, the period
between initial contact and the purchase of our products is often long and
subject to delays associated with the lengthy budgeting, approval and
competitive evaluation processes that typically accompany significant capital
expenditures. Our sales cycles can be lengthy and variable, ranging from less
than one month to six months or longer from our initial contact with a
potential customer to the signing of a contract. In addition, our sales cycle
can be subject to seasonal fluctuations as a result of our customers' fiscal
year budgeting cycles. Any delays in our sales could cause our operating
results to vary widely.
7
<PAGE>
Our quarterly operating results fluctuate significantly and are difficult to
predict; if we fail to meet the expectations of public market analysts or
investors, the market price of our common stock may decrease significantly.
Our quarterly operating results have fluctuated significantly and we expect
them to continue to fluctuate significantly in the future. Our operating
results may fall below the expectations of securities analysts or investors in
one or more future quarters. Any failure to meet their expectations will likely
have an adverse affect on the market price of our common stock. In addition,
our expense budgets are based in part on our expectations of our future
revenues and our expense levels are relatively fixed in the near term.
Consequently, any decline in our revenues to a level that is below our
expectations may render us unable to fund our expenses, which would adversely
impact our business plan. Quarterly fluctuations in our operating results may
be caused by variations in our sales cycle, as discussed above, and by other
factors, including:
. changes in demand for our products and services from new or existing
customers;
. actions taken by our competitors, including new product introductions
and enhancements;
. our ability to develop, introduce and market new products and
enhancements to our existing products on a timely basis;
. changes in our pricing policies or those of our competitors;
. our ability to expand our sales and marketing operations, including
hiring additional sales personnel;
. size and timing of sales of our products and services;
. deferrals of customer orders in anticipation of product enhancements or
new products;
. changes in quota-based compensation policies for our sales personnel;
. our ability to control costs; and
. customer budget cycles and changes in these budget cycles.
These factors may impact our long-term results as well as our operating
results in any particular quarter. Furthermore, many of these factors, such as
the level of demand for our products and services and actions taken by our
competitors, are beyond our control. We believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as indicators of future performance.
A significant portion of our customer base consists of small companies which
are unproven and present a high risk of non-payment of license and service
fees.
A significant portion of our license and services revenues are derived from
small, entrepreneurial companies that are unproven. We therefore face a risk of
non-payment of these fees, especially under adverse market conditions, although
we do not consider the collectibility of revenues recognized to date to be
improbable. We expect that small companies will continue to comprise a
significant portion of our customer base over the near term. If we are unable
to collect fees from these customers, our cash flow may be insufficient to
cover our expenditures.
Our business could suffer if we cannot retain the services of key management
members.
Our success depends largely upon the continued services of our key
management members, the loss of which could seriously harm our business. In
particular, we rely on Anne Perlman, Chief Executive Officer and a director,
Matthew Miller, President and Chief Operating Officer, and Devapratim Hazarika,
Chief Strategy Officer and director. Ms. Perlman, Mr. Miller and Mr. Hazarika
are at-will employees and could therefore terminate their employment with us at
any time without penalty. Further, Mr. Miller joined us on April 10, 2000 and
therefore has limited experience managing our business. We maintain a key
person life insurance policy in the amount of $500,000 on Mr. Hazarika and in
the amount of $2 million on Ms. Perlman.
8
<PAGE>
Failure to expand our sales operations and channels of distribution would limit
our growth.
In order to maintain and increase our market share and revenues, we will
need to expand our direct and indirect sales operations and channels of
distribution. We have a small direct sales force, including a limited number of
quota-carrying sales personnel, and plan to hire additional sales personnel.
Competition for qualified sales personnel is intense, and we might not be able
to hire the kind and number of sales personnel we are targeting. New personnel
require extensive training and typically take several months to achieve
productivity. If we are unable to hire and retain a qualified sales force,
particularly quota-carrying sales personnel, our ability to sell our products
and generate revenues will suffer. In addition, if one or more of our sales
personnel resigns to join a competitor or to form a competing company, the loss
of that employee and any resulting loss of existing or potential customers to a
competitor could harm our business.
In addition, we need to expand our relationships with domestic and
international systems integrators, resellers, original equipment manufacturers
and application service providers to complement our direct sales efforts and
build our indirect sales channel. It may be difficult for us to establish these
relationships and, even if we do, we will then depend on these third parties'
sales efforts. In addition, because these relationships are nonexclusive, these
third parties may choose to promote products offered by our competitors rather
than our products. If we fail to successfully build our third-party
distribution channels or if the systems integrators and other third parties
with which we have distribution relationships do not perform as expected, our
business, financial condition and results of operations would be harmed.
Failure to attract and retain highly-skilled technical personnel could harm our
business and decrease the value of your investment.
Our future success will depend in large part upon our ability to attract
and retain highly-skilled technical personnel, particularly software engineers.
There is significant competition for technical employees in the San Francisco
Bay Area and across the country, especially for those with experience in both
the software and eCommerce industries. If we are not successful in attracting
and retaining these skilled employees, our product development efforts would
suffer. New personnel require training and education and take time to reach
full productivity. If we lose any key technical personnel, we may not be able
to prevent the unauthorized disclosure or use of our technical knowledge or
other trade secrets by those former employees.
If we are unable to expand our customer support and professional services
organizations, we may not be able to retain our existing customers and attract
new customers.
We currently have small customer support and professional services
organizations that must be expanded as our customer base grows and as we expand
our indirect distribution channels with systems integrators and other third
parties. This expansion will place significant pressures on our customer
support and professional services infrastructures. Hiring customer support and
professional services personnel is very competitive in our industry due to the
limited number of people available with the necessary technical skills. If we
do not meet our customers' demands for consulting or other support services, we
may not be able to retain our existing customers or attract new customers and
our product revenues may suffer. In addition, if our professional services
organization is unable to support the systems integrators and other third
parties with which we have relationships, our ability to sell and implement our
products through our indirect sales channels will be harmed.
We are in a highly competitive industry, and some of our competitors may be
more successful than we are in attracting and retaining customers.
The market for negotiated eCommerce solutions is new, rapidly evolving and
intensely competitive. We expect competition to intensify in the future. We
currently face competition from the following:
Independent software vendors. Ariba (through its acquisitions of Trading
Dynamics and Tradex), Commerce One (through its acquisition of CommerceBid),
OpenSite, i2, Oracle, WebVision and others offer
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auction and trading exchange software. In addition, Microsoft and IBM both
offer negotiated eCommerce add-on components to their SiteServer and
net.Commerce products, respectively.
Outsourced service providers. FairMarket, FreeMarkets, and Commerce One
provide outsourced auction and trading exchange solutions.
Custom-developed solutions. Some companies may build custom negotiated
eCommerce solutions in-house. In some cases, systems integrators, including iXL
and EDS, have developed and installed customized negotiated eCommerce solutions
on behalf of such companies.
We believe that the principal competitive factors in the market for
negotiated eCommerce software include:
. speed of deployment;
. breadth of products and services;
. system scalability, reliability and capability of integration with
existing business systems;
. market acceptance as indicated by vendor installed base;
. price;
. ease of customization; and
. breadth and depth of strategic relationships.
Some of our current competitors have longer operating histories, larger
customer bases, greater brand recognition and much greater financial, marketing
and other resources than we do. If we are not be able to compete successfully
against current and future competitors, we may lose customers and our revenues
may decline.
Larger, better known and more established companies may enter our market, which
could increase competitive pressures.
In addition to our current competitors, our market may attract new
competition. Because there are relatively low barriers to entry in the software
market, we expect additional competition from systems integrators, enterprise
software vendors and outsourced service providers as the negotiated eCommerce
software market continues to develop and expand. We may also face future
competition from the systems integrators with which we have relationships,
either on a direct basis or on an indirect basis in the event they partner with
our competitors. In addition, larger, well-established and well-financed
entities may acquire, invest in or form joint ventures with competitors as the
use of negotiated eCommerce increases. These companies have significant
resources and brand recognition in the negotiated eCommerce market. In
addition, software developers may add auction functionality to, or expand the
existing auction functionality of, their existing products. The barriers to
entry in the market for negotiated eCommerce products and services are
relatively low. Increased competition is likely to result in price reductions,
reduced gross margins, longer sales cycles and loss of market share, any of
which could seriously harm our financial condition and impede our business
plan.
The strain that our growth rate places upon our systems and management
resources may adversely affect our business.
We recently experienced a period of significant expansion of our
operations, including hiring a significant number of employees, that has
strained our management, administrative and operational resources. Our total
headcount has increased from 27 employees at December 31, 1998 to 119 employees
at February 29, 2000. In addition, we plan to further expand our operations,
including increasing our total headcount. To properly manage this growth, we
must, among other things, expand our finance, administrative and operations
staff and implement and improve additional and existing administrative,
financial and operational systems, procedures and controls on a timely basis.
If we are unable to properly manage this growth, our business will be harmed.
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We depend on the introduction of new versions of LiveExchange.
If we are unable to develop new software products or enhancements to our
existing products on a cost-effective basis, or if new products or enhancements
do not achieve market acceptance, our business would be seriously harmed. The
life cycles of our products are difficult to predict because the market for our
products is new and emerging, and is characterized by rapid technological
change, changing customer needs and evolving industry standards. The
introduction of products employing new technologies and emerging industry
standards could render our existing products or services obsolete and
unmarketable. For example, LiveExchange is written in the Java programming
language. If a new programming language becomes standard in our industry or is
considered more robust than Java, we may need to rewrite LiveExchange in
another language in order to remain competitive.
To be successful, our products and services must keep pace with
technological developments and emerging industry standards, address the ever-
changing and increasingly sophisticated needs of our customers and achieve
market acceptance. In developing new products and services, we may:
. fail to develop and market products that respond to technological
changes or evolving industry standards in a timely or cost-effective
manner;
. encounter products, capabilities or technologies developed by others
that render our products and services obsolete or noncompetitive or
that shorten the life cycles of our existing products and services; and
. fail to develop new products and services that adequately meet the
requirements of the marketplace or achieve market acceptance.
If we fail to release new products in a timely manner, or if our products do
not achieve market acceptance, our business would be seriously harmed.
We may fail to introduce or deliver new products on a timely basis or at
all. In the past, we have experienced delays in the commencement of commercial
shipments of our new releases. If our new releases or new products are delayed
or do not achieve market acceptance, we could experience a delay or loss of
revenues and customer frustration. Customers may delay purchases of
LiveExchange in anticipation of future releases. If customers defer material
orders of LiveExchange in anticipation of new releases or new product
introductions, our business would be seriously harmed.
Our business is evolving to become more reliant on scalable revenues, and it is
difficult to predict whether this new revenue model will be successful.
We allow our customers to license our products at a lower basic
subscription rate in exchange for scalable fees that are based on metrics such
as the value of customer transactions enabled by our technology or, in the case
of customers providing third-party services to others, based on a percentage of
commissions or fees generated from providing such services. We have only
recently begun to implement this revenue model and we have limited customers in
production who have begun to generate scalable revenues. As a result, to date
revenue from this model has been insignificant. It is therefore difficult to
predict whether and to what extent this new model will be successful. The
success of this model will depend on several factors, including the extent to
which our customers elect a scalable license, the pricing models of our
competitors, the extent to which our customers generate transactions and our
ability to verify our customers' transactions. Further, we are subject to the
risk that customers which begin to generate significant scalable revenues for
us will attempt to negotiate lower rates or threaten to switch to other
software providers. If our scalable revenues do not grow as a result of these
or other reasons, our business, financial condition and results of operations
may be harmed.
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If the steps we have taken to protect our intellectual property rights are
inadequate, our competitors may gain access to our technology, which would have
a material adverse effect on our business.
We regard substantial elements of our negotiated eCommerce solutions as
proprietary and attempt to protect them by relying on trademark, service mark,
copyright and trade secret laws and restrictions, as well as confidentiality
procedures and contractual provisions. Any steps we take to protect our
intellectual property may be inadequate, time consuming and expensive. In
addition, despite our efforts, we may be unable to prevent third parties from
infringing upon or misappropriating our intellectual property, which could have
a material adverse effect on our business. Furthermore, legal standards
relating to the validity, enforceability and scope of protection of
intellectual property rights in Internet-related industries are uncertain and
still evolving, and the future viability or value of any of our intellectual
property rights is uncertain. Effective trademark, copyright and trade secret
protection may not be available in every country in which our products are
distributed or made available through the Internet. Furthermore, our
competitors may independently develop similar technology that substantially
limits the value of our intellectual property.
Our products may contain defects which could seriously harm our business, and
this risk is difficult to assess because fewer than half of our customers have
fully implemented our products.
Despite internal testing and testing by current and potential customers,
current and prior versions of our products may contain serious defects. Any
defect could result in termination of licenses, damage to our reputation, lack
of market acceptance and lost revenues, any of which could seriously harm our
business, financial condition and results of operations. In addition, our
products and product enhancements are very complex and may from time to time
contain errors or result in failures that we did not detect or anticipate when
introducing our products or enhancements to the market. The computer software
environment is characterized by a wide variety of non-standard configurations
that make pre-release testing for programming or compatibility errors very
difficult and time consuming. Despite our testing, errors may still be
discovered in our products or enhancements after the products or enhancements
are implemented by our customers.
As of February 29, 2000, fewer than half of our customers have implemented
our products and have them in full production, and it is therefore difficult to
assess the extent to which our products contain errors or defects. Until our
products have been in full production at several customers for an extended
period of time, we will not be able to accurately assess the extent to which
our products contain material defects. Material defects or errors in
LiveExchange 3.0 or prior versions of our products could result in termination
of licenses, damage to our reputation, lack of market acceptance and lost
revenues, any of which could seriously harm our business.
We are subject to product liability claims that could require considerable
effort and expense to defend and which could harm our business.
Our products and services provide companies with the technology to engage
in negotiated eCommerce. These and other functions of our products are often
critical to our customers, particularly those which derive a substantial
portion of their revenues through their online sales channel. Although our
product licenses generally contain provisions that limit our exposure to
product liability claims, these provisions may not be enforceable in all
jurisdictions. Additionally, we maintain limited product liability insurance.
To the extent our contractual limitations are unenforceable or these claims are
not covered by insurance, a successful product liability claim could harm our
business.
If third-party software incorporated in our products is no longer available to
us, our business could be harmed.
We integrate third-party software as a component of our software. For
example, our LiveExchange products rely on Java application server and database
connectivity technology licensed to us by BEA WebLogic. This agreement renews
for one year periods unless either party gives written notice of non-renewal
and we cannot be certain that BEA WebLogic will renew this agreement. If BEA
WebLogic does not renew this
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agreement, we will be required to obtain similar technology from another party,
which may not be available to us on commercially reasonable terms. Furthermore,
if we cannot maintain licenses to other key third-party software products,
shipments of our products could be delayed until equivalent software is
developed or licensed and integrated into our products, which may not be
available on commercially reasonable terms, or at all.
We may be sued for violating the intellectual property rights of others.
The software industry is characterized by the existence of a large number
of patents and frequent litigation based on allegations of patent infringement
and the violation of other intellectual property rights. As the number of
competitors in the market for eCommerce solutions grows and the functionality
of products in different market segments overlaps, the possibility of an
intellectual property claim against us increases. For example, we may
inadvertently infringe a patent of which we are unaware. In addition, because
patent applications can take many years to issue, there may be a patent
application now pending of which we are unaware, which we may be infringing
when it is issued in the future. To address these patent infringement or other
intellectual property claims, we may have to enter into royalty or licensing
agreements on disadvantageous terms. Alternatively, we may be unable to obtain
a necessary license. A successful claim against us, and our inability to
license the infringed or similar technology on commercially reasonable terms or
at all, would significantly increase our expenses and may force us to
discontinue licensing our products until we can engineer a non-infringing
solution. In addition, any infringement or other intellectual property claims,
with or without merit, which are brought against us could be time consuming and
expensive to litigate or settle and could divert management attention from
administering our core business.
If we fail to successfully promote our Moai brand name or if we incur
significant expenses promoting and maintaining our Moai brand name, our
business would be harmed.
Due in part to the emerging nature of the market for negotiated eCommerce
solutions and the substantial resources available to many of our competitors,
there may be a time-limited opportunity for us to achieve and maintain a
significant market share. Developing and maintaining awareness of the Moai
brand name is critical to achieving widespread acceptance of our negotiated
eCommerce solutions. Furthermore, the importance of brand recognition will
increase as competition in the market for our products increases. Successfully
promoting and positioning the Moai brand will depend largely on the
effectiveness of our marketing efforts and our ability to develop reliable and
useful products at competitive prices. Therefore, we may need to increase our
financial commitment to creating and maintaining brand awareness among
potential customers. If we are unable to successfully promote our brand name,
our business and reputation may suffer.
If we expand our international sales, marketing and distribution activities,
our business will be susceptible to numerous risks associated with
international operations.
To be successful, we intend to expand our international operations and hire
additional international personnel. Therefore, we expect to commit significant
resources to expand our international sales, marketing and distribution
activities. If we expand internationally, we will be subject to a number of
risks associated with international business activities. These risks generally
include:
. currency exchange rate fluctuations;
. seasonal fluctuations in purchasing patterns;
. unexpected changes in regulatory requirements;
. fewer protections of proprietary rights;
. tariffs, export controls and other trade barriers;
. longer accounts receivable payment cycles and difficulties in
collecting accounts receivable;
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. difficulties in managing and staffing international operations;
. potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
. the burdens of complying with a wide variety of foreign laws;
. the risks related to the global economic turbulence; and
. political instability.
One or more of these risks may materially and adversely affect our future
international operations and, consequently, our business.
We may acquire other businesses or technologies, and if we do, we may be unable
to integrate them with our business, or we may impair our financial
performance.
If appropriate opportunities present themselves, we may acquire businesses,
technologies, services or products that we believe are strategic. We do not
currently have any understandings, commitments or agreements with respect to
any acquisition, nor are we currently pursuing any acquisition. We may not be
able to identify, negotiate or finance any future acquisition successfully.
Even if we do succeed in acquiring a business, technology, service or product,
we have no experience in integrating an acquisition into our business. The
process of integration may produce unforeseen operating difficulties and
expenditures and may absorb significant attention of our management that would
otherwise be available for the ongoing development of our business. Moreover,
we have not made any acquisitions, and we may never achieve any of the benefits
that we might anticipate from a future acquisition. If we make future
acquisitions, we may issue shares of stock that dilute other stockholders,
incur debt, assume contingent liabilities or create additional expenses related
to amortizing goodwill and other intangible assets, any of which might harm our
financial results and cause our stock price to decline. Any financing that we
might need for future acquisitions may only be available to us on terms that
restrict our business or that impose on us costs that reduce our net income.
We frequently rely on third parties to implement LiveExchange.
We frequently rely, and expect to increasingly rely, on a number of third
parties, including systems integrators, to implement LiveExchange at customer
sites. If we are unable to establish and maintain effective, long-term
relationships with our implementation providers, or if these providers do not
meet the needs or expectations of our customers, our business would be
seriously harmed. As a result of the limited resources and capacities of many
third-party implementation providers, we may be unable to establish or maintain
relationships with third parties having sufficient resources to provide the
necessary implementation services to support our needs. If these resources are
unavailable, we will be required to provide these services internally, which
would significantly limit our ability to meet our customers' implementation
needs. A number of our competitors have significantly more well-established
relationships with these third parties and, as a result, these third parties
may be more likely to recommend competitors' products and services rather than
our own. In addition, we cannot control the level and quality of service
provided by current and future implementation providers with which we enter
into relationships.
Risks Related to Our Industry
If business-to-business eCommerce in general and negotiated eCommerce in
particular do not develop as we currently envision, our business model could
fail and our revenues could decline.
Our performance and future success will depend on the growth and widespread
adoption of business-to-business eCommerce. The use of the Internet to buy,
sell and trade goods and services may not be commercially accepted for a number
of reasons, including the following:
. failure to adequately develop the necessary infrastructure for
conducting eCommerce over the Internet, including data compression or
broadband communication technology;
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. lack of adequate speed, access or server reliability;
. public perception of the security and confidentiality of digital
information;
. development of competing technologies;
. rate of adoption of eCommerce by the existing retail, wholesale and
other channels; and
. level of end-user discomfort with limited human interaction and the
process of purchasing goods and services through online transactions.
Our future success is also highly dependent upon the widespread acceptance
and use of negotiated eCommerce solutions. In particular, the continued
adoption by buyers and sellers of online auctions and other negotiated
eCommerce models on the Internet is critical to the continued growth in sales
of our products. Online auctions and other forms of negotiated eCommerce are
relatively new methods of buying and selling that market participants may not
adopt at levels sufficient to sustain our business. Traditional purchasing is
often based on long-standing relationships or familiarity with sellers. For
online auctions and other forms of negotiated eCommerce to succeed, buyers and
sellers must adopt new purchasing practices. For example, buyers must be
willing to rely less upon traditional relationships in making purchasing
decisions. We cannot be certain that acceptance of online auctions and other
forms of negotiated eCommerce will continue to develop. If business-to-business
eCommerce in general, and negotiated eCommerce in particular, do not achieve
widespread market acceptance or grow significantly, our business, financial
condition and results of operations would be seriously harmed.
If we are unable to meet the rapid changes in negotiated eCommerce technology,
our product revenues could decline.
The market for our products is marked by rapid technological change,
frequent new product introductions, Internet-related technology enhancements,
uncertain product life cycles, changes in client demands, changes in the way
software and services such as ours are priced and delivered, and evolving
industry standards. We cannot be certain that we will successfully develop and
market new products, new product enhancements or new products compliant with
present or emerging Internet technology standards. In developing our products,
we have made, and will continue to make, assumptions with respect to which
standards will be adopted by the industry, our customers and competitors. If
the standards adopted are different from those which we have chosen to support,
market acceptance of our products may be significantly reduced or delayed and
our business will be seriously harmed. In addition, we may be required to make
significant expenditures to adapt our products to changing or emerging
technologies. New products based on new technologies or new industry standards
can render existing products obsolete and unmarketable. To succeed, we will
need to enhance our current products and develop new products on a timely basis
to keep pace with developments related to Internet technology and to satisfy
the increasingly sophisticated requirements of our clients. The technology that
enables negotiated eCommerce is complex and new products and product
enhancements can require long development and testing periods. Any delays in
developing and releasing enhanced or new products could harm our business,
operating results and financial condition.
Increasing government regulation of the Internet could limit the market for our
products and services and add to our operating costs.
As Internet-enabled commerce evolves, we expect that federal, state or
foreign agencies will adopt regulations covering issues such as user privacy,
pricing, content and quality of products and services. It is possible that
legislation could expose companies involved in eCommerce to liability, which
could limit the growth of eCommerce generally. Legislation could dampen the
growth in Internet usage and decrease its acceptance as a communications and
commercial medium. If enacted, these laws, rules or regulations could limit the
market for our products and services.
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Imposition of sales and other taxes on eCommerce transactions may hinder
eCommerce, which would adversely affect our business.
The taxation of commerce activities in connection with the Internet has not
been well-established, may change in the future and may vary from jurisdiction
to jurisdiction. One or more states or other countries may seek to impose sales
or other taxes on companies that engage in or facilitate eCommerce. A number of
proposals have been made at the local, state and international level that would
impose additional taxes on the sale of products and services through the
Internet. These proposals, if adopted, could substantially impair the growth of
eCommerce and could significantly harm our business.
We depend on the speed and reliability of the Internet and our customers'
internal networks.
The recent growth in Internet traffic has caused frequent periods of
decreased performance. If Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently,
business-to-business eCommerce could grow more slowly or decline, which may
reduce the demand for our software. The ability of our software to satisfy our
customers' needs is ultimately limited by and depends upon the speed and
reliability of both the Internet and our customers' internal networks.
Consequently, the emergence and growth of the market for our software depends
upon improvements being made to the entire Internet as well as to our
individual customers' networking infrastructures to alleviate overloading and
congestion. If these improvements are not made, the ability of our customers to
utilize our solution will be hindered, and our business, operating results and
financial condition may suffer.
Concerns about Internet security may reduce demand for our products.
If concerns about Internet security reduce participation in negotiated
eCommerce, the demand for our software will decline. Our customers' negotiated
eCommerce operations normally involve the collection of sensitive user data,
such as names, addresses and credit card numbers. Our customers' operations
generally depend on protecting the confidential and customer-sensitive data in
their systems from damage or interruption from events such as human error,
break-ins, sabotage, computer viruses, intentional acts of vandalism. Our
customers' operations also generally depend upon the secure transmission of
this confidential information over public networks. Advances in computer
capabilities, new discoveries in the field of cryptography, or other
developments may result in a compromise or breach of the security features
contained in our software or the algorithms used by our customers and their
business partners to protect content and transactions on Internet eCommerce
marketplaces or proprietary information in our customers' and their business
partners' databases. Anyone who is able to circumvent security measures could
misappropriate proprietary, confidential customer information or cause
interruptions in our customers' and their business partners' operations. Our
customers and their business partners may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches, reducing their demand for our software. Further, a well-publicized
compromise of security could deter businesses from using the Internet to
conduct transactions that involve transmitting confidential information. The
failure of the security features of our software to prevent security breaches,
or well publicized security breaches affecting the Internet in general, could
significantly reduce demand for our products and cause our revenues to decline,
as well as expose us to potential liability and litigation.
Risks Related to the Offering
Our stock price will likely fluctuate significantly after this offering, which
could result in substantial losses for investors.
Although the initial public offering price will be determined based on
several factors, the market price for our common stock will vary from the
initial offering price after trading commences. This could result in
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substantial losses for investors. The market price of our common stock may
fluctuate significantly in response to a number of factors, some of which are
beyond our control. These factors include:
. quarterly variations in operating results;
. changes in financial estimates by securities analysts;
. announcements by us or our competitors of new product and service
offerings, significant contracts, acquisitions or strategic
relationships;
. publicity about our company, our products and services, our competitors
or eCommerce in general;
. additions or departures of key personnel;
. any future sales of our common stock or other securities; and
. stock market price and volume fluctuations of publicly-traded companies
in general and eCommerce companies in particular.
The trading prices of eCommerce companies have been especially volatile.
Investors may be unable to resell their shares of our common stock at or above
the offering price. In the past, securities class action litigation has often
been brought against a company following periods of volatility in the market
price of its securities. We may be the target of similar litigation in the
future. Securities litigation could result in substantial costs and divert
management's attention and resources, which could seriously harm our business,
financial condition and results of operations.
Our stock price could be depressed as a result of shares of our common stock
becoming available for sale in the future.
Sales of a substantial number of shares of our common stock in the public
market after this offering could depress the market price of the common stock
and could impair our ability to raise capital through the sale of additional
equity securities. For a description of shares of our common stock that are
available for future sale, see "Shares Eligible for Future Sale."
We have implemented certain anti-takeover provisions that could make it more
difficult for a third party to acquire us.
Provisions of our certificate of incorporation and bylaws, as well as
provisions of Delaware law, 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--Delaware Anti-Takeover Law and Provisions of our
Certificate of Incorporation and Delaware Law."
Our existing executive officers, directors and their affiliates control our
company and could limit the ability of our other stockholders to influence the
outcome of director elections and other transactions submitted for a vote of
our stockholders.
Upon completion of this offering, our executive officers, directors and
their affiliates will beneficially own, in the aggregate, approximately % of
our outstanding common stock. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions, which
could have the effect of delaying or preventing a third party from acquiring
control over us, causing our stock price to be lower than if otherwise might
be.
There has been no prior market for our common stock and an active trading
market may not develop following this offering.
Prior to this offering, there has not been a public market for our common
stock. We cannot predict the extent to which a market will develop or how
liquid that market might become. The initial public offering price
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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 the
prices that will prevail in the market following this offering. See
"Underwriting."
We have broad discretion in using the net proceeds from this offering and we
may not use the net proceeds of this offering effectively.
The net proceeds of this offering are not allocated for specific purposes.
We will have broad discretion in determining how to spend the proceeds of this
offering and may spend proceeds in a manner that our stockholders may not deem
desirable. We cannot assure you that our investments will yield favorable
returns or results. See "Use of Proceeds."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute forward-
looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue" or the negative of these terms
or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results.
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USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock we are
offering are estimated to be $ ($ if the underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of $
per share, after deducting the estimated underwriting discounts and commissions
and the estimated offering expenses.
We currently expect to use the net proceeds of this offering primarily for
working capital and general corporate purposes, funding operating losses,
product development, capital expenditures, and expanding our sales and
marketing organization. In addition, we may use a portion of the net proceeds
for further development of our product lines through acquisitions of products,
technologies and businesses, although we have no present commitments or
agreements to make any acquisitions. The amount of cash that we actually expend
for working capital purposes will vary significantly depending on a number of
factors, including future revenue growth, if any, and the amount of cash we
generate from operations. Thus, management will have significant discretion in
applying the net proceeds of this offering. Pending the uses described above,
we will invest the net proceeds in short-term, investment grade, interest-
bearing securities.
DIVIDEND POLICY
We have never paid dividends on our common stock or preferred stock. We
currently intend to retain any future earnings to fund the development of our
business. Therefore, we do not currently anticipate declaring or paying
dividends in the foreseeable future. In addition, our bank loan arrangements
restrict our ability to pay dividends.
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CAPITALIZATION
The following table sets forth the following information:
. our actual capitalization as of December 31, 1999;
. our pro forma capitalization, after giving effect to our issuance of
3,745,318 shares of Series D preferred stock in the first quarter of
2000, our issuance of 583,334 shares of Series A preferred stock upon
exercise of warrants in January 2000, our expected issuance of 262,266
shares of Series D preferred stock upon exercise of warrants prior to
or upon the closing of this offering, and the automatic conversion of
all of our then-outstanding shares of preferred stock into 24,568,988
shares of common stock upon the closing of this offering; and
. our pro forma as adjusted capitalization, after giving effect to our
sale of shares of common stock at an assumed initial public
offering price of $ per share in this offering, after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses that we expect to pay in connection with this offering, and
the authorization of 150,000,000 shares of common stock and 10,000,000
shares of preferred stock upon the closing of this offering.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
----------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
----------- ----------- -------------
(unaudited)
(in thousands, except share data)
<S> <C> <C> <C>
Cash, cash equivalents and short-term
investments.......................... $ 6,391 $ 38,667 $
=========== =========== ==========
Capital lease obligations, long-term... $ 355 $ 355 $ 355
----------- ----------- ----------
Mandatorily redeemable convertible
preferred stock, $0.0002 par value
per share, 20,958,660 shares
authorized, 19,978,070 shares issued
and outstanding, actual; 20,958,660
shares authorized, no shares issued
and outstanding, pro forma; no shares
authorized, issued or outstanding,
pro forma as adjusted................ 20,645 -- --
----------- ----------- ----------
Stockholders' equity (deficit):
Preferred stock, $0.0002 par value per
share, no shares authorized, issued
or outstanding, actual and pro
forma; 10,000,000 shares authorized,
no shares issued or outstanding, pro
forma as adjusted................... -- -- --
Common stock, $0.0002 par value per
share, 40,000,000 shares authorized,
7,532,692 shares issued and
outstanding, actual; 40,000,000
shares authorized, 32,101,680 shares
issued and outstanding, pro forma;
150,000,000 shares authorized,
issued and outstanding, pro forma as
adjusted............................ 2 6
Additional paid-in capital............. 6,269 59,186
Deferred compensation.................. (4,447) (4,447) (4,447)
Note receivable from stockholders...... (44) (44) (44)
Accumulated deficit.................... (16,670) (16,670) (16,670)
----------- ----------- ----------
Total stockholders' equity
(deficit).......................... $ (14,890) $ 38,031 $
=========== =========== ==========
Total capitalization................ $ 6,110 $ 38,386 $
=========== =========== ==========
</TABLE>
This table excludes the following shares:
. 2,847,972 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $0.36 per share;
20
<PAGE>
. 156,630 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $0.56 per share; and
. an aggregate of 639,338 shares available for future grant under our
1997 stock plan.
Subsequent to December 31, 1999, we increased the number of shares of
common stock reserved for issuance under our 1997 stock plan by 4,000,000
shares and reserved an aggregate of 9,850,000 shares under our 2000 stock plan,
2000 executive stock incentive plan, 2000 directors' stock option plan and 2000
employee stock purchase plan. See "Management--Stock Plans" and Notes 9 and 11
of Notes to Financial Statements. Subsequent to December 31, 1999, options to
purchase 2,098,096 shares of common stock were issued under our 1997 stock plan
and our 2000 executive stock incentive plan and warrants to purchase 61,210
shares of Series D preferred stock were issued.
21
<PAGE>
DILUTION
Our pro forma net tangible book value on December 31, 1999 was $38,031,000
or $1.18 per share of common stock. Pro forma net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the pro forma number of shares of common stock outstanding. See
"Capitalization" for a description of the pro forma number of shares of common
stock outstanding as of December 31, 1999. Dilution in net tangible book value
per share represents the difference between the amount per share paid by
purchasers of shares of our common stock in this offering and the net tangible
book value per share of our common stock immediately following this offering.
After giving effect to our sale of shares of common stock in this offering and
after deducting the estimated underwriting discounts and commissions and our
estimated offering expenses, our pro forma net tangible book value as of
December 31, 1999 would have been $ 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. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Pro forma net tangible book value per share before the offering.... $
Increase attributable to new investors.............................
-----
Adjusted pro forma net tangible book value after the offering........
----
Dilution per share to new investors.................................. $
====
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1999, the differences between the 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. The information
presented is based upon an assumed initial public offering price of $ per
share, before deducting estimated underwriting discounts and commissions and
estimated offering expenses of this offering.
<TABLE>
<CAPTION>
Shares
Purchased Total Consideration
-------------- --------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... % $ % $
New investors............. $
--- ----- --------- ----------
Totals.................. 100.0% $ 100.0%
=== ===== ========= ==========
</TABLE>
The information presented above with respect to existing stockholders
excludes the following:
. 2,847,972 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $0.36 per share;
. 156,630 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $0.56 per share; and
. an aggregate of 639,338 shares available for future grant under our
1997 stock plan.
Subsequent to December 31, 1999, we increased the number of shares of
common stock reserved for issuance under our 1997 stock plan by 4,000,000
shares and reserved an aggregate of 9,850,000 shares under our 2000 stock plan,
2000 executive stock incentive plan. 2000 directors' stock option plan and 2000
employee stock purchase plan. See "Management--Stock Plans" and Notes 9 and 11
of Notes to Financial Statements. Subsequent to December 31, 1999, options to
purchase 2,098,096 shares of common stock were issued under our 1997 stock plan
and our 2000 executive stock incentive plan and warrants to purchase 61,210
shares of Series D preferred stock were issued. The issuance of common stock in
connection with the exercise of these options and warrants will result in
further dilution to new investors.
22
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," our financial statements and the related notes and the other
information included elsewhere in this prospectus. The statements of operations
data set forth below for the years ended December 31, 1997, 1998 and 1999 and
the selected balance sheet data as of December 31, 1998 and 1999, are derived
from our audited financial statements included elsewhere in this prospectus.
The statement of operations data for the period from October 4, 1995, our
inception, through December 31, 1996 and the balance sheet data as of December
31, 1997 are derived from audited financial statements which are not included
in this prospectus. The balance sheet data as of December 31, 1996 has been
derived from unaudited financial statements which are not included in this
prospectus and which, in management's opinion, have been prepared on
substantially the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the balance sheet data presented. The historical results
are not necessarily indicative of results for any future period. All figures in
the table below are in thousands.
<TABLE>
<CAPTION>
Period from
October 4,
1995
(Inception)
through Year Ended December 31,
December 31, -------------------------
1996 1997 1998 1999
------------ ------ ------- --------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License fees and support.............. $ -- $ 50 $ 38 $ 759
Services.............................. -- 10 22 405
------ ------ ------- --------
Total revenues....................... -- 60 60 1,164
------ ------ ------- --------
Cost of revenues:
License fees and support (excludes
$137 of stock-based compensation in
1999)............................... -- -- -- 268
Services (excludes $202 of stock-based
compensation in 1999)............... -- 6 29 1,208
Stock-based compensation.............. -- -- -- 339
------ ------ ------- --------
Total cost of revenues............... -- 6 29 1,815
------ ------ ------- --------
Gross profit (loss).................... -- 54 31 (651)
------ ------ ------- --------
Operating expenses:
Sales and marketing (excludes $563 of
stock-based compensation in 1999)... 19 26 930 7,119
Research and development (excludes
$347 of stock-based compensation in
1999)............................... 9 92 816 3,552
General and administrative (excludes
$301 of stock-based compensation in
1999)............................... 60 166 575 1,895
Stock-based compensation.............. -- -- -- 1,211
------ ------ ------- --------
Total operating expenses............. 88 284 2,321 13,777
------ ------ ------- --------
Loss from operations................... (88) (230) (2,290) (14,428)
Interest and other income (expense),
net.................................. 134 (5) 49 188
------ ------ ------- --------
Net income (loss)...................... $ 46 $ (235) $(2,241) $(14,240)
====== ====== ======= ========
Net income (loss) per share:
Basic and diluted..................... $ 0.01 $(0.14) $ (0.75) $ (3.12)
====== ====== ======= ========
Weighted average shares............... 3,960 1,730 2,984 4,559
====== ====== ======= ========
Pro forma net loss per share:
Basic and diluted net loss per share.. $ (0.69)
========
Shares used in computing pro forma
basic and diluted net loss per
share............................... 20,633
========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
------------------------------
1996 1997 1998 1999
---- ------ ------- --------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments................................. $ 5 $1,173 $ 3,192 $ 6,391
Working capital............................... 42 1,072 3,031 3,720
Total assets.................................. 62 1,218 3,885 10,912
Capital lease obligations, long-term.......... -- -- 68 355
Mandatorily redeemable convertible preferred
stock....................................... -- 1,248 5,714 20,645
Total stockholders' equity (deficit).......... 55 (158) (2,398) (14,890)
</TABLE>
The weighted average shares outstanding have been adjusted for the weighted
average of shares subject to repurchase of 3,350 in 1997, 4,162 in 1998 and
2,654 in 1999. See Note 1 of Notes to Financial Statements.
Pro forma basic and diluted net loss per share reflects the conversion of
all outstanding mandatorily redeemable convertible preferred stock into common
stock upon completion of this offering. See Note 1 of Notes to Financial
Statements.
During the period from October 4, 1995, our inception, though December 31,
1995, we recognized no revenues and both our loss from operations and our net
loss were insignificant. Based on the immateriality of these amounts, results
of 1995 operations are included in the period from October 4, 1995, our
inception, through December 31, 1996, as presented in the Statement of
Operations. Balance sheet information at December 31, 1995 was insignificant.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the related notes and the other information included elsewhere
in this prospectus. Certain statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" are forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended. These forward looking statements are based on our current expectations
and entail various risks and uncertainties that could cause our actual results
to differ materially from those expressed in these forward looking statements.
For a more detailed discussion of these and other business risks, see "Risk
Factors."
Overview
We are a leading provider of negotiated eCommerce solutions for online
auctions, online procurement and eMarketplaces. Our solutions address the
unique challenges faced by companies looking to initiate or expand their
eCommerce initiatives in the technologically complex and rapidly changing
Internet business climate. We provide companies doing business online with a
comprehensive eCommerce solution featuring sophisticated negotiated eCommerce
capabilities designed to help them increase revenues and market share, improve
business operations efficiency, and engage and retain customers. In addition,
our solution is rapidly deployable, easily integrated into existing business
processes, customizable and built on a scalable and robust architecture.
Moai was founded in 1995 to develop and implement negotiated eCommerce
software applications. In 1996 and 1997 we engaged in development of our
software architecture. In more recent years, our activities have primarily
consisted of product development, building customer and partner relationships
and establishing the infrastructure and resources required to run our business
effectively. We began licensing early versions of our software to customers in
1997 from which we realized minimal revenues in 1997 and 1998. In 1999, our
revenues increased as we released a new version of our LiveExchange software
with improved features and functionality, significantly grew our existing
customer base, and expanded our services offerings.
Our business model is designed to meet the needs of the negotiated
eCommerce market by offering flexible multi-year software licenses and support
and a range of value-added services. We expect our software licenses to provide
us with both recurring, subscription-based revenues and scalable fees. Scalable
fees are based on the number of web sites deployed and either a percentage of
our customers' transaction-based revenues or the number of transactions enabled
by our software. Our flexible pricing policy gives customers the option of
selecting which type of scalable fees they prefer to pay. We offer our
customers a lower basic subscription rate in exchange for scalable fees based
on both the number of web sites deployed and a percentage of transaction-based
revenues. However, these scalable fee licenses were only recently introduced
and have been selected by a limited number of customers to date. In the future,
we expect these scalable fees to provide us with additional revenues, while
providing our customers with a cost-effective entry into the market and the
predictability of a success-based cost model. The license and support agreement
entitles the customer to a license to our software, telephone support, bug
fixes and upgrades. We do not sell basic maintenance separately. Our range of
value-added services includes consulting, training and hosting.
We recognize the fixed annual fee related to our licenses and support
ratably over the term of the license agreement from the date of delivery of the
software provided there is a signed contract, the fee is fixed and determinable
and collection is probable. Our costs directly related to a license agreement,
including third-party royalties and sales commissions, are deferred until
delivery and then charged to cost of revenues and sales and marketing expense
ratably over the term of the license agreement. We recognize a portion of the
scalable fees upon receipt based on the ratio of the elapsed portion of the
term of the license agreement to the total term of the agreement. The remainder
of the scalable fee is recognized ratably over the remaining term of the
license agreement. Scalable fees have not been significant to date.
25
<PAGE>
When a license agreement includes a specified upgrade, all of the license
fees are deferred until the upgrade is delivered. A portion of each fee is
recognized upon delivery of the upgrade based on the ratio of the elapsed
portion of the term of the licensing agreement to the total term of the
agreement. The remainder of each license fee is recognized ratably over the
remaining term of the license agreement.
Revenues for hosting are recognized ratably over the life of the contract.
Revenues and related costs for consulting or training are recognized when the
related services are completed. When our license agreements also include
consulting, training or hosting services, the total fee is allocated to the
license agreement and each service element based on the price for which the
license agreement and services are sold separately. The fees allocated to each
element are recognized as revenue as described above except for the following:
. services revenues and related cost for significant customization, which
are deferred until the services are completed and then recognized
ratably over the term of the related license, and
. services rendered in connection with scalable fees, which are
recognized on the same basis as the scalable fees described above.
We have historically sold our product directly to our customers and we
expect to augment our sales efforts through indirect channels in future
periods. Two customers comprised 100% of revenues in 1997 and two customers
comprised 73% of revenues in 1998. One customer, Logicare, comprised 11% of
revenues in 1999. We do not expect significant concentration of our customers
in the future as our customer base continues to grow.
Since inception, and most notably in 1999, we have made substantial
investments in our services, sales and marketing and research and development
organizations to build the infrastructure necessary to support our long-term
growth strategy. The number of our full-time employees increased from 26 as of
December 31, 1998 to 96 as of December 31, 1999. Primarily as a result of
investments in our infrastructure, we incurred operating losses in each quarter
since inception and, as of December 31, 1999, we had an accumulated deficit of
$16.7 million. We anticipate that our operating expenses will increase
substantially as we continue to expand our services, sales and marketing and
research and development organizations. Accordingly, we expect to incur net
losses for the foreseeable future.
We believe that period-to-period comparisons of our operating results are
not meaningful and should not be relied upon as indicative of future
performance. Our business must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in early stages of
development, particularly companies in new and rapidly evolving businesses such
as ours. We cannot assure you that we will be successful in addressing these
risks and difficulties. In addition, although we have experienced revenue
growth recently, this trend may not continue and we may not achieve or maintain
profitability in the future. It is very possible that in some future periods,
our operating results may fall below the expectations of securities analysts or
investors, which could have a material adverse effect on the market price of
our common stock.
Results of Operations
Years Ended December 31, 1997, 1998 and 1999
Revenues. Total revenues were $60,000 in both 1997 and 1998 and $1.2
million in 1999.
License fees and support revenues consist of fees for licensing, scalable
fees and fees for support of our LiveExchange software. These revenues were
$50,000 in 1997, $38,000 in 1998 and $759,000 in 1999, representing a decrease
of $12,000 from 1997 to 1998 and an increase of $721,000 from 1998 to 1999. The
growth in our revenues from license fees and support revenues in 1999 resulted
primarily from an increase in the number of customers, driven by our increased
sales and marketing efforts, our release of LiveExchange 3.0 in the fourth
quarter of 1999 and increasing market acceptance of negotiated eCommerce
software solutions.
26
<PAGE>
Services revenues consist of fees for consulting, training and hosting. Our
services revenues were $10,000 in 1997, $22,000 in 1998 and $405,000 in 1999.
The growth in our services revenues from 1998 to 1999 resulted primarily from
implementation projects for both new and existing customers as well as revenues
from new services offerings such as hosting and training. Services revenues as
a percentage of total revenues increased from 16.7% in 1997 to 34.8% in 1999 as
we expanded our services organization, but we do not expect services revenues
to continue to increase significantly as a percentage of total revenues in the
future.
Cost of revenues. Our cost of license fees and support revenues primarily
consists of compensation, consultant fees and overhead costs incurred to
provide support. Beginning in 1999, it also includes royalties we pay to a
third party to license software that we have integrated as a component of Live
Exchange. We generally pay third-party royalties based on a percentage of our
revenues. Our cost of services revenues is comprised primarily of compensation
and third-party subcontractor and overhead costs incurred to provide
consulting, training and hosting services. Total cost of revenues was $6,000 in
1997, $29,000 in 1998 and $1.8 million in 1999. Our cost of services revenues
increased significantly in 1999 compared to 1998 primarily as a result of
increased hiring of services personnel throughout the year as we expanded the
scope of the services portion of our business. Related revenues from this
activity were not significant until the fourth quarter of 1999, resulting in
negative margins. We expect that our cost of license fees and support revenues
will continue to increase as related revenues increase. We expect that our cost
of services revenues will continue to increase in absolute terms as we expand
our services organization to meet anticipated customer demand, but decrease as
a percentage of total revenues.
Sales and marketing. Our sales and marketing expenses are comprised
primarily of compensation and related expenses for our sales and marketing
personnel and marketing expenses, primarily advertising, promotions and public
relations. Our sales and marketing expenses were $26,000 in 1997, $930,000 in
1998 and $7.1 million in 1999. The increase in these expenses in 1998 compared
to 1997 was primarily attributable to compensation, travel and recruiting costs
as we began to build our sales and marketing infrastructure and to the start of
various marketing activities. These same activities continued through 1999 but
at an accelerated pace, contributing to the $6.2 million increase from 1998 to
1999. Marketing expenses increased sharply toward the latter half of 1999 as we
initiated an advertising campaign in the third quarter of 1999. We expect sales
and marketing expenses to continue to increase as we expand our sales,
marketing and business development efforts and we broaden our presence both
domestically and internationally.
Research and development. Our research and development expenses include
costs associated with the development, enhancement and quality assurance of our
products. These costs are comprised primarily of compensation and related
expenses and the cost of consulting resources that supplement our internal
development team. Research and development expenses were $92,000 in 1997,
$816,000 in 1998 and $3.6 million in 1999. Our research and development
expenses grew from 1997 to 1999 primarily due to the addition of engineering
personnel, both on a regular and contract basis, required to support our
expanded development efforts. We anticipate that we will continue to devote
substantial resources to research and development and that these expenses will
continue to increase.
General and administrative. Our general and administrative expenses are
comprised primarily of salaries and benefits for our executive, finance and
administrative personnel, general recruiting costs and professional fees such
as legal and accounting fees. Our general and administrative expenses were
$166,000 in 1997, $575,000 in 1998 and $1.9 million in 1999. General and
administrative expenses increased from 1997 to 1999 primarily due to increased
hiring of general and administrative personnel, higher outside contractor
expenses associated with recruiting efforts and increased professional fees. We
believe that our general and administrative expenses will continue to increase
as a result of our growing operations and the additional expenses associated
with operating as a public company.
Stock-based compensation. Stock-based compensation includes the
amortization of deferred stock-based compensation. Deferred stock-based
compensation is amortized over a four-year vesting period using a multiple
option approach. In connection with the grant of some employee stock options,
we recorded aggregate deferred
27
<PAGE>
stock compensation of $6.1 million in 1999. Stock-based compensation expense
totaled $1.6 million in 1999. We expect to record stock-based compensation
expenses related to stock options granted through 1999 of approximately
$876,000 in the first quarter of 2000, $676,000 in the second quarter of 2000,
$552,000 in the third quarter of 2000 and $460,000 in the fourth quarter of
2000. However, stock-based compensation expense will be reduced for future
periods to the extent that options are terminated prior to full vesting.
From January 1, 2000 through April 11, 2000, we granted stock options to
purchase an aggregate of 2,098,096 shares of common stock at a weighted-average
exercise price of $5.92 per share. In connection with the grant of these stock
options, we recognized deferred stock-based compensation totaling $12,605,000
million, which will be amortized over the four year vesting period of the stock
options.
From January 1, 2000 through April 11, 2000, we granted warrants to
purchase 323,476 shares of Series D preferred stock. The warrants were recorded
at the difference between the fair value of the Series D preferred stock,
determined using the mid-point of the price range of the common stock offered
under this prospectus, and the exercise price of the warrants. This amount will
be amortized to the appropriate financial statement category over the service
period.
Interest and other income (expense), net. Interest and other income
(expense), net consists of interest income generated from our cash, cash
equivalents and short-term investments, interest expense incurred in connection
with outstanding borrowings under our capital lease obligations and other non-
operating income and expenses. Interest and other income (expense), net was
$(5,000) in 1997, $49,000 in 1998 and $188,000 in 1999. The increase in
interest and other income (expense), net from 1997 to 1999 was primarily due to
increases in interest income on higher average cash balances.
Provision for income taxes. We have incurred operating losses for all
periods since our inception. Our deferred tax assets primarily consist of net
operating loss carryforwards, nondeductible allowances and other accruals. We
have recorded a valuation allowance for the full amount of our net deferred tax
assets, because the future realization of the tax benefit is not considered by
management to be more-likely-than-not.
We had net operating loss carryforwards for federal and state tax purposes
of approximately $2.4 million as of December 31, 1998 and $13.3 million as of
December 31, 1999. These federal and state tax loss carryforwards are available
to reduce future taxable income. The federal tax loss carryforwards expire
beginning in 2010 and the state tax loss carryforwards expire beginning in
2001. Under the provisions of the Internal Revenue Code, substantial changes in
our ownership may limit the amount of net operating loss carryforwards that
could be used in the future to offset taxable income.
28
<PAGE>
Quarterly Results of Operations
The following tables set forth certain unaudited statements of operations
data for each of the four quarters in the year ended December 31, 1999, as well
as such data expressed as a percentage of our net revenues for the quarters
presented. This information has been derived from our unaudited financial
statements, which, in management's opinion, have been prepared on substantially
the same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information for the quarters presented. This
information should be read in conjunction with our financial statements and the
related notes included elsewhere in this prospectus. The operating results in
any quarter are not necessarily indicative of the results for any future
period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
Mar 31, June 30, Sep 30, Dec 31,
1999 1999 1999 1999
------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License fees and support.................. $ 105 $ 87 $ 167 $ 400
Services.................................. 4 12 71 318
------- ------- ------- -------
Total revenues........................... 109 99 238 718
------- ------- ------- -------
Cost of revenues:
License fees and support (excludes stock-
based compensation as per table below).. 10 16 42 200
Services (excludes stock-based
compensation as per table below)........ 99 151 273 685
Stock-based compensation.................. 17 27 48 247
------- ------- ------- -------
Total cost of revenues................... 126 194 363 1,132
------- ------- ------- -------
Gross loss................................. (17) (95) (125) (414)
Operating expenses:
Sales and marketing (excludes stock-based
compensation as per table below)........ 596 1,057 1,991 3,475
Research and development (excludes stock-
based compensation as per table below).. 431 627 762 1,732
General and administrative (excludes
stock-based compensation as per table
below).................................. 152 242 527 974
Stock-based compensation.................. 53 196 293 669
------- ------- ------- -------
Total operating expenses................. 1,232 2,122 3,573 6,850
------- ------- ------- -------
Loss from operations....................... (1,249) (2,217) (3,698) (7,264)
Interest and other income (expenses), net.. 34 11 119 24
------- ------- ------- -------
Net loss................................... $(1,215) $(2,206) $(3,579) $(7,240)
======= ======= ======= =======
The following table sets forth the stock-based compensation expense
excluded from the quarterly results of operations data above for each line and
period indicated:
<CAPTION>
Three Months Ended
-----------------------------------
Mar 31, June 30, Sep 30, Dec 31,
1999 1999 1999 1999
------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Cost of license fees and support revenues.. $ -- $ -- $ -- $ 137
Cost of services revenues.................. 17 27 48 110
Sales and marketing........................ 30 100 167 266
Research and development................... 20 60 65 202
General and administrative................. 3 36 61 201
</TABLE>
29
<PAGE>
Factors Affecting Results of Operations
We have a limited operating history, which makes it difficult to predict
future operating results. We intend to continue to invest heavily in our sales
and marketing, development and services organizations, and expect to incur net
losses in the future. Our operating expenses are based on anticipated revenue
trends. A delay in the recognition of revenues from license or services
transactions could cause large variations in operating results from quarter-to-
quarter. While a large portion of our license revenues each quarter is
recognized from deferred revenues, our quarterly performance will also depend
upon entering into new contracts to generate revenues for both current and
future quarters. We expect to continue to experience fluctuations in our future
quarterly and annual results of operations due to a variety of factors, many of
which are outside our control, including:
. changes in demand for our products and services from new or existing
customers;
. actions taken by our competitors, including new product introductions
and enhancements;
. our ability to develop, introduce and market new products and
enhancements to our existing products on a timely basis;
. changes in our pricing policies or those of our competitors;
. our ability to expand our sales and marketing operations, including
hiring additional sales personnel;
. size and timing of sales of our products and services;
. deferrals of customer orders in anticipation of product enhancements or
new products;
. changes in quota-based compensation policies for our sales personnel;
. our ability to control costs; and
. customer budget cycles and changes in these budget cycles.
Liquidity and Capital Resources
From inception through December 31, 1999, we financed our operations
primarily through private sales of common and preferred stock with net proceeds
totaling $20.6 million. At December 31, 1999, our principal source of liquidity
was $6.4 million of cash and cash equivalents and short-term investments.
Net cash used for operating activities was $85,000 in 1997, $2.1 million in
1998 and $10.4 million in 1999, primarily resulting in all periods from our net
operating losses. Net cash used for investing activities was $17,000 in 1997,
$1.5 million in 1998 and $1.3 million in 1999. Investing activities were
primarily comprised of purchases of property and equipment. Net cash provided
by financing activities was $1.3 million in 1997, $4.4 million in 1998 and
$14.8 million in 1999, primarily generated from the issuance of preferred
stock. We have issued preferred stock in the following amounts:
. In December 1997, we sold 5,833,332 shares of Series A preferred stock
for an aggregate purchase price of $1.75 million, or $0.30 per share.
. In August 1998, we sold 6,250,000 shares of Series B preferred stock
for an aggregate purchase price of $4.0 million, or $0.64 per share.
. In July, 1999 we sold 7,894,738 shares of Series C preferred stock for
an aggregate purchase price of $15.0 million, or $1.90 per share.
. In the first quarter of 2000, we sold 3,745,318 shares of Series D
preferred stock for an aggregate purchase price of $30.0 million, or
$8.01 per share.
As of December 31, 1999, we had two lines of credit with a bank for
borrowings up to an aggregate of $1.5 million. No borrowings were outstanding
at December 31, 1999. Borrowings under one of the lines of credit are limited
to 80% of eligible accounts receivable. Both lines bear interest at the lending
bank's prime rate plus 0.50% and are collateralized by our assets. Under the
terms of the line of credit agreement, we are not permitted to pay any
dividends on our capital stock.
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Payments under our non-cancelable operating lease agreements for facilities
and other equipment expire on various dates through 2010, resulting in
aggregate lease expenses ranging from $77,000 to $2,111,000 per year. We
finance a portion of our property and equipment purchases, which primarily
consist of purchases of computer hardware and software for our increasing
employee base, hardware used to provide hosting services and our internal
management information systems. We anticipate capital expenditures to continue
to increase significantly in 2000 for the items above as well as for increased
leasehold improvements as we continue to expand our facilities to accommodate
expected growth.
These increased expenditures, along with the potential rate of expansion of
our operations and any potential strategic investments or acquisitions we may
make will affect future capital requirements. We believe that the net proceeds
from this offering, together with existing cash balances, anticipated cash
flows from operations and anticipated borrowings should be sufficient to meet
our capital requirements for at least the next twelve months. However, we
cannot assure you that we will be successful in generating anticipated levels
of cash from operations or borrowings. If adequate funds are not available or
are not available on acceptable terms, we may seek to sell additional equity or
debt securities or secure bank financing earlier than planned, or be required
to sell assets or scale down our operations and expansion plans, any of which
could have a material adverse effect on our business, results of operations and
financial condition.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board, or FASB, issued
statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 established accounting and
reporting standards for derivative instruments, including derivative
instruments in other contracts, and for hedging activities. In June 1999, the
FASB issued SFAS No. 137, Accounting for Derivatives Instruments and Hedging
Activities--Deferral of Effective Date of FASB Statement No. 133. SFAS No. 133,
as amended by SFAS No. 137, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000, with earlier application encouraged. We do
not currently, nor do we intend in the future, to use derivative instruments.
We are evaluating the impact that the adoption of SFAS No. 133 will have on our
financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin, or SAB, 101, Revenue Recognition in Financial Statements.
SAB 101 provides guidance on the recognition, presentation, and disclosure of
revenues in financial statements filed with the Securities and Exchange
Commission and is effective in the second quarter of 2000. We comply with SAB
101.
Quantitative and Qualitative Disclosures About Market Risk
As of December 31, 1999, we had cash and cash equivalents and short-term
investments of approximately $6.4 million. These investments are subject to
interest rate risk and will decrease in relative value if market interest rates
increase; however, due to the short-term nature of our investments, we believe
that we face no material interest rate exposure. We currently have limited
international sales. As a result, we currently have limited exposure to risk
from foreign currency exchange fluctuations. Our foreign currency exchange risk
may increase in the future as our international operations increase.
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BUSINESS
Overview
We are a leading provider of negotiated eCommerce solutions for online
auctions, online procurement and eMarketplaces. Negotiated eCommerce involves
the buying and selling of goods and services online through flexible
transaction models that change over time based on multiple terms such as price,
condition of goods, warranty and shipping costs. Our solutions address the
unique challenges faced by companies looking to initiate or expand their
eCommerce initiatives in the technologically complex and rapidly changing
Internet business climate. We provide companies doing business online with a
comprehensive eCommerce solution featuring sophisticated negotiated eCommerce
capabilities designed to help them increase revenues and market share, improve
business operations efficiency, and engage and retain customers. In addition,
our solution is rapidly deployable, easily integrated into existing business
processes, customizable and built on a scalable and robust architecture.
Industry Background
The Internet's emergence as a highly efficient medium through which
companies can interact and transact commerce, often referred to as business-to-
business eCommerce, has fundamentally changed the way that many companies
conduct business with each other. Forrester Research, an independent research
firm, estimates that online business-to-business transactions will grow from
$406.2 billion in 2000 to $2.7 trillion by 2004. By overcoming geographic
constraints and enabling the dissemination of information about products and
services, the Internet is creating new business opportunities and challenges.
To compete in this rapidly-evolving market, many businesses today face the
strategic imperative of embracing eCommerce initiatives. With so many new
entrants, eCommerce is rapidly evolving from its early days of online catalogs
and simple storefronts. New and more sophisticated forms of business-to-
business eCommerce are emerging and are prompting companies to seek competitive
advantage and to expand their business opportunities by offering differentiated
and unique online services. In particular, many companies today are
supplementing their traditional operations with online auctions, online
procurement and, increasingly, eMarketplaces.
Online auctions. Online auctions allow sellers to obtain demand-driven
pricing in eCommerce transactions. This typically involves a standard auction
format where multiple buyers submit bids to purchase an item offered by a
single seller. The price increases with each subsequent bid and the auction
winner is decided when the seller accepts the best bid. As online auctions
evolve and market participants become more focused on negotiating terms in
addition to price, such as warranties, quality or delivery schedule, enhanced
online auction functionality becomes increasingly important. Forrester Research
projects that Internet-based auction transactions will grow from $8.7 billion
in 1998 to over $52.6 billion by 2002.
Online procurement. Online procurement allows a single buyer to interact
with multiple sellers during a single transaction to achieve the most favorable
terms. This typically involves a buyer who makes a request to buy a particular
item online with multiple sellers offering to sell the item in a reverse
auction format. In a reverse auction format, the price declines with each
subsequent offer and the auction winner is decided when the buyer ultimately
accepts the offer with the lowest price and/or the best other terms.
International Data Corporation, an independent research firm, estimates that
the market for online procurement applications will grow from $147 million in
1998 to $5.4 billion in 2003.
eMarketplaces. eMarketplaces allow multiple sellers and buyers to transact
business at a comprehensive trading hub designed to efficiently manage
transactions and services among buyers and sellers. These marketplaces
typically involve communities of buyers and sellers who negotiate and trade
online based on a bid and ask format, similar to a stock exchange. Forrester
Research projects that $1.4 trillion will be transacted through eMarketplaces
in 2004, representing 53% of all online business.
At the core of each of these three forms of eCommerce is the ability to
conduct online negotiations, or negotiated eCommerce. Negotiated eCommerce
addresses market inefficiencies by leveraging interactive
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bidding to enable flexible market-driven pricing, creating communities of
motivated buyers and sellers, aggregating market activity and personalizing
transaction mechanisms to facilitate individual buying behavior. The emergence
of online auctions was the first manifestation of negotiated eCommerce. Auction
and reverse auction applications include selling excess inventory, enabling
online procurement and allocating scarce goods and services. Over time,
negotiated eCommerce has evolved to include eMarketplaces. By conducting
transactions in real time and connecting buyers and sellers from highly
disparate locations, enterprises can significantly improve their efficiency and
streamline business operations.
When a business decides to add negotiated eCommerce functionality to its
web site, it requires a software solution that will meet the full spectrum of
its needs, both today and in the future. Generally, companies either develop
solutions in-house or purchase solutions from third-party providers. In-house
solutions divert technical resources, are frequently difficult to develop and
implement and may be inflexible in accommodating the rapidly changing demands
of negotiated eCommerce. Solutions offered by third-party providers are often
not comprehensive enough to perform and manage multiple processes, such as
procurement, retail distribution and liquidation of excess inventory, across a
single integrated platform.
To take advantage of the business-to-business eCommerce opportunity and
address the challenges posed by doing business online, companies need a
comprehensive eCommerce solution featuring sophisticated negotiated eCommerce
capabilities that will help them increase revenues and market share, improve
business operations efficiency and engage and retain customers. In particular,
companies need a solution that is rapidly deployable, easily integrated into
existing business processes, customizable and built on a scalable and robust
architecture.
The Moai Solution
We are a leading provider of negotiated eCommerce solutions for online
auctions, online procurement and eMarketplaces. Our solutions address the
unique challenges faced by companies looking to initiate or expand their
eCommerce initiatives in the technologically complex and rapidly changing
Internet business climate. Specifically, our solutions enable businesses to:
Rapidly deploy online auction sites, online procurement sites and
eMarketplaces, and easily integrate them with existing solutions. Our products
enable net market makers and other purely Internet-based businesses, commonly
referred to as dot-com companies, and more traditional manufacturers,
distributors, retailers and service providers, commonly referred to as bricks-
and-mortar companies, to rapidly deploy negotiated eCommerce solutions in a
business environment where time-to-market is crucial for success. Our services
and industry expertise and our products' open, extensible architecture and
application programming interfaces enable our customers not only to acquire a
software-based solution, but also to easily integrate it with existing
applications, customize it as required, establish best-practices based
operations and, if desired, outsource the operational aspects on a hosted
basis.
Utilize a comprehensive solution that incorporates broad business
services. We have developed an extensive network of value-added service
providers to broaden the capabilities of our solutions. Through these
relationships, we offer integrated payment systems, shipping and logistics,
order management and other value-added capabilities. We have also developed
strong relationships with systems integrators, consulting companies and other
experts who assist our customers in designing, implementing and deploying
value-added services.
Create large, global trading communities. Our LiveExchange product suite is
based upon a robust and scalable architecture. As a result, our solution can
accommodate significant volumes of traffic and allow eCommerce companies to
interact with large numbers of buyers and sellers across the Internet. In
addition, our solutions support multiple, simultaneous negotiated eCommerce
transactions.
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Increase revenues and market share. Our products provide our customers the
opportunity to increase revenues by achieving efficient interactions with their
suppliers, buyers and trading partners. Our solutions are designed to enable
customers to:
. obtain market-driven pricing;
. increase effective selling prices;
. achieve faster product turnover;
. eliminate intermediaries such as brokers and liquidators;
. create opportunities for cross-selling non-discounted items; and
. generate higher yields on surplus merchandise.
We believe our products will enable customers to access a larger and more
diverse group of buyers, increase the number of motivated buyers bidding on
their products, reach market participants in new geographic areas and penetrate
new market segments through alternate uses of their products. We believe these
revenue channels can drive our customers' growth, enhancing their competitive
position and extending their market share.
Reduce business costs and improve efficiency. We believe that with the
efficiencies gained using our negotiated eCommerce solutions, enterprises can
significantly reduce operating expenses associated with sales and procurement.
Our solutions are designed to enable customers to:
. improve margins on products sold;
. reduce inventory management and holding costs;
. eliminate the need to set a fixed price and continuously update
catalogs;
. automate selling and ordering processes; and
. reduce the costs of finding buyers and exchanging price catalogs.
In addition, our solutions for procurement are designed to enable customers to
improve supply chain management, increase competition, access new suppliers,
expand geographic reach and identify better offers, automate the request-for-
proposal, or RFP, and request-for-quote, or RFQ, processes and increase buyer
productivity. Whether using our solutions for online auctions, online
procurement or eMarketplaces, we believe customers can gather better
information about the marketplace and more efficiently streamline their
business processes.
Engage and retain their customers. In addition to providing a fully-
functional negotiated eCommerce environment, our solutions can accommodate a
high degree of customization to fit our customers' specific business needs. Our
solutions enable the collection of data on market participants, thereby
enabling our customers to offer their end-users unique, personalized and
interactive experiences in order to promote a strong sense of loyalty.
Strategy
Our objective is to be the premier provider of negotiated eCommerce
solutions for online auctions, online procurement and eMarketplaces. Key
elements of our strategy include:
Expanding and leveraging our diverse and fast growing customer base. Our
existing customers include dot-com companies, including net market makers, and
more traditional bricks-and-mortar companies. Our customers operate in a
diverse range of vertical markets, including computer and high tech,
transportation and logistics, wholesale distribution and manufacturing. We
expect continued growth in our customer base as the eCommerce market continues
to expand, as negotiated eCommerce gains further widespread acceptance and as
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we expand our geographic coverage and focus. In addition, we believe that as
our customers use our solutions across their networks with their suppliers,
buyers and other trading partners, numerous other eCommerce participants will
become aware of our products and features. We intend to leverage this increased
visibility across our targeted markets in order to drive increased sales,
which, in turn, should further accelerate this network effect.
Expanding and leveraging our base of strategic relationships. We have
already established a diverse network of relationships with leading systems
integrators, vertical solution providers, value-added service providers and
application service providers. We intend to further increase our number of
strategic relationships. Our strategic relationships improve our technical
capabilities and expose us to potential customers. By leveraging these
capabilities and interactions, we intend to improve and diversify our product
offerings, increase our global reach and strengthen our technical base.
Extending our technological leadership. Our current products provide
comprehensive, negotiated eCommerce solutions. As the business-to-business
eCommerce market has evolved, we have added features to increase the range of
functions and ease-of-use of our solutions. We intend to extend our leadership
by providing additional features to the LiveExchange suite such as more
sophisticated negotiated sale, procurement and exchange technologies and by
integrating additional value-added services.
Expanding our international presence. We currently have a number of
customers in countries such as Singapore, Australia and the United Kingdom. In
addition, many of our U.S. customers have international operations which may
also adopt our solution. We intend to further penetrate international markets
through aggressive expansion of our field sales, marketing and services
organizations and by leveraging our existing and future strategic
relationships.
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Products and Services
Our LiveExchange product suite is a customer-focused, comprehensive
solution which enables businesses to benefit from the advantages of negotiated
eCommerce. Our product suite has two configurations which support online
auctions, online procurement and eMarketplaces: LiveExchange Enterprise and
LiveExchange Marketplace. We offer these solutions directly through our sales
force and indirectly through our relationships with application service
providers, vertical solution providers and resellers. We also offer our
customers a range of services that enable them to rapidly integrate and deploy
our products.
LiveExchange Enterprise enables commerce between one primary party and many
participants. Its uses include procurement-focused reverse auctions, sell-side
excess inventory auctions, allocation auctions, liquidation auctions and retail
auctions.
<TABLE>
<CAPTION>
Features Benefits
- -------------------------------------------------------------------------------
<C> <S>
Competitive-bidding pricing model Enables buyers and sellers to optimize
with a wide variety of market-driven pricing by selecting the
customizable auction formats most appropriate auction format, allowing
the determination of winning bidders based
on the most relevant terms
- -------------------------------------------------------------------------------
Internet-based negotiated Online exchange of information in real-
eCommerce platform time among a broad range of participants
- -------------------------------------------------------------------------------
Solutions integrate with existing Allows the automated exchange of
enterprise resource planning and information among existing systems thereby
other systems eliminating the need to re-enter data
- -------------------------------------------------------------------------------
Automation of procurement process More efficient RFP and RFQ selection
process through the elimination of manual
document exchange and data comparison
- -------------------------------------------------------------------------------
Scalable architecture, including Helps optimize system performance during
intelligent caching high-volume bid activity
- -------------------------------------------------------------------------------
Customizable web site templates Allows control over web site branding,
navigation, category hierarchies and end-
user experience
- -------------------------------------------------------------------------------
Real-time notification system Increases buyer/seller activity by
providing a more responsive environment
with rapid market activity feedback
- -------------------------------------------------------------------------------
Internationalization Currency conversion and product
information in multiple languages opens
the market to global participants
- -------------------------------------------------------------------------------
Industry standard security Helps ensure that all transactions and
systems administration transmissions are
secure
- -------------------------------------------------------------------------------
End-user access restrictions Permits control over which participants
can view and participate in specific
auctions
- -------------------------------------------------------------------------------
Customer profiling Enables the aggregation of customer
information for more effective data mining
and direct marketing
</TABLE>
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LiveExchange Marketplace enables commerce among groups of buyers and groups
of sellers in an eMarketplace. These exchanges can use any of LiveExchange
Marketplace's pre-defined transaction models as well as customized transaction
models and structured negotiation features.
<TABLE>
<CAPTION>
Features Benefits
- ------------------------------------------------------------------------------
<C> <S>
Structured negotiation Multi-parameter, multi-stage negotiations and
capabilities online discussions among buyers and sellers
provide a greater degree of flexibility,
interaction and control for both buyers and
sellers
- ------------------------------------------------------------------------------
Buyer and seller ratings Provides information regarding market
participants, enabling the rating of participants
and the evaluation of their credibility
- ------------------------------------------------------------------------------
Scalable architecture, Helps optimize system performance during high-
including intelligent volume bid activity
caching
- ------------------------------------------------------------------------------
Customizable web site Allows control over web site branding,
templates navigation, category hierarchies and end-user
experience
- ------------------------------------------------------------------------------
Real-time notification Increases buyer/seller activity by providing a
system more responsive environment with rapid market
activity feedback
- ------------------------------------------------------------------------------
Internationalization Currency conversion and product information in
multiple languages opens the market to global
participants
- ------------------------------------------------------------------------------
Industry standard security Helps ensure that all transactions and systems
administration transmissions are secure
- ------------------------------------------------------------------------------
End-user access Permits control over which participants can view
restrictions and participate in specific transactions
- ------------------------------------------------------------------------------
Customer profiling Enables the aggregation of end-user information
for more effective data mining and direct
marketing
</TABLE>
In addition to our software-based offerings, we offer our customers a range
of services and support that add significant value to our total solution. These
include:
. consulting which enables customers to leverage our industry knowledge
and domain expertise to implement online auction, online procurement
and eMarketplace solutions;
. training which enables customers to successfully deploy, manage and
maintain our LiveExchange products;
. hosting services which permit customers to outsource the operational
aspects of our negotiated eCommerce solutions, including information
technology functions, administration and other activities;
. various levels of technical support, including 24 hours per day, seven
days per week availability; and
. customization of the Moai solution, including application enhancements,
design of the web site's look and feel, and integration with existing
systems and infrastructure.
Customers
We target two primary customer types:
. Dot-com companies building eCommerce driven marketplaces. These
companies seek to disintermediate existing supply chains, create online
eMarketplaces and establish other Internet-based business models. Our
LiveExchange solution enables these companies to auction or procure
goods and services for others, hold public or private auctions and
allow their end-users to enter their own inventory items in an
eMarketplace. Dot-com companies actively market these opportunities and
are frequently driven by time-to-market considerations.
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. Bricks-and-mortar companies, including established manufacturers,
distributors, retailers and service providers. These companies are
frequently looking to expand or enhance their current business by
utilizing online auctions to buy and sell products and services. By
integrating our LiveExchange solution into existing business
strategies, bricks-and-mortar companies can reduce costs, increase
revenues and improve overall operating efficiency. These companies also
increasingly seek to incorporate eMarketplaces into their existing
business models.
Our customers operate in a wide range of vertical markets, including
computer and high tech, transportation and logistics, wholesale distribution
and manufacturing. While our primary focus is on customers in the business-to-
business market, we also have customers in the business-to-consumer and
consumer-to-consumer markets.
In the period from January 1, 1999 through February 29, 2000, we sold
licenses to 89 new customers. Less than half of our customers have fully
implemented our products. A representative customer list is as follows:
<TABLE>
<S> <C>
AMO Inc. ("EC.net") Hewlett-Packard Company
Bid Buy Build IPNetwork.com
BigEquip.com I-Work Networks ("e7th.com")
Machine Trade Hub
ContractorsEResource ("Equipp.com/Toughstuff")
CQ, Inc. ("Cool Question") Neoforma.com
Eastman Chemical Co. PrintBid.com
eQuotation ("CleanOffer.com") Retek ("Retail.com")
Finning International Tradepac.com ("Rebound.com")
GoCargo.com WineBid.com
</TABLE>
The following case studies illustrate how selected customers have used our
products to address their eCommerce needs. These case studies are based on
information supplied by these customers.
BigEquip.com. BigEquip.com's goal is to transform the used construction
equipment industry by building a business-to-business Internet exchange for
buyers and sellers. Existing auction practices in that industry have numerous
limitations including the high cost and time required to transport heavy
equipment to a traditional auction and a limited number of participants due to
geographic barriers. Building an Internet-based equipment exchange removes this
friction from the marketplace. To construct its exchange, BigEquip.com chose
Moai's LiveExchange Marketplace. BigEquip.com needed a true cross-platform
solution allowing it to build its exchange using Microsoft NT and a Microsoft
SQL database, and also providing a migration path to an Oracle database if
needed. Additionally, BigEquip.com required a very open solution that allowed
customization of functionality, such as product searching, site advertisements,
inspection reports, maintenance records and multiple photos on the product
information pages. After reviewing the alternatives, BigEquip.com concluded
that Moai's LiveExchange Marketplace was the only solution that allowed
BigEquip.com to develop its trading community with all of the essential
features that its customers need to conduct business.
Eastman Chemical Company. As a leading international chemical company that
produces more than 400 chemicals, fibers and plastics, Eastman Chemical Company
needed an efficient and secure eCommerce solution to manage inventory for wide-
spec polymers. Eastman selected Moai's LiveExchange Enterprise software to
implement weekly online auctions, thereby quickly reducing inventory, accessing
a wider market and maintaining margins. Auction participants are also expected
to realize benefits, including access to real-time information on competitive
activity, so bids can be adjusted to reflect true market pricing, and the
ability to continuously track information without interruption. Eastman readily
configured LiveExchange Enterprise to meet the precise needs of the chemical
industry so all parties could negotiate efficiently. Plans are underway to
integrate existing back-end business systems with LiveExchange Enterprise and
to implement reverse auction capability for raw material procurement.
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Neoforma.com. Neoforma.com is a leading provider of business-to-business
eCommerce services in the highly fragmented medical equipment and supplies
market. Meeting the needs of the medical community requires a sophisticated and
flexible technology for buyers and sellers to list, sell and buy needed medical
products easily and efficiently. Neoforma.com chose Moai's LiveExchange
Marketplace to drive its AuctionOnline exchange, an eMarketplace for idle
assets. LiveExchange Marketplace augmented Neoforma.com's other services by
allowing Neoforma.com to build a specialized marketplace where buyers and
sellers could come together to trade used, refurbished and surplus medical
products. LiveExchange Marketplace has provided Neoforma.com's users with
increased visibility and better access to necessary medical equipment, while
enhancing Neoforma.com's overall offering. Furthermore, the flexibility of the
underlying technology upon which LiveExchange Marketplace is built allowed
Neoforma.com to customize and deploy AuctionOnline in a tight timeframe.
GoCargo.com. GoCargo.com is the world's first online exchange bringing
together buyers and sellers of international container shipments. GoCargo.com
needed a solution that provided critical functionality and allowed for rapid
implementation. GoCargo.com chose Moai's LiveExchange Marketplace because it
offered these features. Using reverse auction capabilities with manual
selection of winning bids, shippers (importers and exporters) post requests for
quotes, and shipping service providers (carriers) competitively bid to
transport the cargo. In this format, LiveExchange Marketplace allows shippers
to optimize their rates, while carriers and intermediaries can bid for
shipments that best match their services based on commodity, trade route or
volume. Traditionally, this process took several days and was labor intensive.
Now the process is much easier and faster and allows shippers to secure
multiple calculations from service providers using a single entity.
LiveExchange Marketplace provides an eCommerce platform where pricing is only
one of the deciding factors in a trade. Shippers can also select a winning bid
based on several other criteria, including transit time or logistics solution.
In addition, Moai's technical expertise and services helped GoCargo.com create
its exchange in a short timeframe. As a result, shippers increase their
purchasing power by gaining access to more information and service providers.
At the same time, service providers can expand their customer base, liquidate
excess capacity, increase revenues and reduce sales costs by tapping into the
demand aggregated online and by automating many business practices online.
Strategic Relationships
Our strategic relationships are critical to our long-term success. We form
strategic relationships in order to create broader, integrated solution sets
for our customers, accelerate and augment our product development efforts,
expand our sales and distribution channels and increase our geographic market
penetration. We have and will continue to pursue such relationships in the
following key areas:
Technology relationships. Technology relationships enhance our product
offerings by:
. Extending our technological capabilities through relationships such as
that with Extricity, which provides extensible markup language, or XML,
capabilities enabling our customers to connect our solutions to the
systems of their suppliers, buyers and trading partners.
. Expanding the compatability of our solutions across a broad range of
platforms such as those of Hewlett-Packard and BroadVision.
Systems integration and consulting relationships. Systems integrators and
consulting firms are critical to expanding our market penetration by helping us
market, sell and implement our solutions in targeted market segments and
expanding our services capabilities. These companies help identify new
customers, deploy our solutions, augment our solutions through their vertical
industry expertise and software offerings and increase our geographic market
penetration. We have strategic relationships with:
. Global, full-service systems integrators and consulting firms. These
companies typically help us gain access to major corporations and
strategic dot-com companies and implement Moai-based
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solutions. We have relationships with Andersen Consulting, Ernst &
Young and Computer Sciences Corporation.
. Global, national and regional eCommerce systems integrators and
consulting firms. These companies help us implement our solutions and
open new sales opportunities in selected vertical and geographical
markets and with dot-com companies. We have relationships with 3rd
Millenium, Appnet, Braun Consulting, Context, Fort Point Partners,
Inventa, Luminant, NerveWire, Quidnunc, Pakana, Xcelerate, Xpedior,
Xuma and Zefer.
. Technical and other consulting firms. These firms provide trained
personnel for customer projects and allow our customers to more fully
access skilled resources. We have relationships with eInitiatives and
Techspan.
We train these systems integrators and consultants in our technology,
support them in joint selling and marketing activities and offer them
technical support to promote our solutions. We are actively pursuing
relationships with other similar companies.
Value-added services. To increase the value and utility of our solutions
to our customers we have developed relationships with companies providing
additional services and functionality. These capabilities are made available
via interfaces developed for the Moai platform. Examples of such capabilities
and relationships include:
. shipping and logistics services via United Parcel Service, McHugh and
SmartShip;
. order management and fulfillment via Yantra;
. payments services, fraud detection and other capabilities via
CyberSource;
. online escrow services via iEscrow; and
. real-time credit, financing and related services via eCredit.
We plan to expand such relationships to include companies providing
additional functionalities in the future.
Application service providers. ASPs offer our solution to end-users on an
outsourced basis. ASPs typically host solutions that end-users require but do
not wish to maintain in-house for reasons such as a lack of skilled personnel
or high cost of operations. They provide services to end-users based on our
solution. For example, we have established a relationship with AserA to
deliver negotiated exchanges as part of its eCommerce offering that allows
companies to automate and accelerate the process of marketing, selling and
supporting their products through their distribution channels. We have also
established a relationship with Corio and expect to develop further
relationships with other ASPs in various markets.
Vertical solution providers. Vertical solution providers operate in a
similar manner to ASPs except that they deliver services based on our
negotiated exchange solution within their own networks of end-users. We have
established relationships with Concur Technologies, Clarus Corporation and
Quaris to deliver LiveExchange over their trading networks and expect to
develop further relationships with other vertical solution providers.
Resellers and distributors. Relationships with resellers and distributors
enable us to increase our distribution capabilities beyond those provided by
direct sales. For example, we have a relationship with Hewlett-Packard by
which Hewlett-Packard may resell the LiveExchange solution as an integrated
component of some of their broader eCommerce offerings. We expect to increase
our number of relationships in these areas.
Sales, Marketing and Distribution
Our sales and marketing strategy is to target companies with significant
negotiated eCommerce business requirements. While a high percentage of our
customer base has historically consisted of early adopters of technology,
including entrepreneurial and dot-com companies, we expect to further broaden
our sales efforts to
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include additional bricks-and-mortar companies as they increasingly adopt
negotiated eCommerce initiatives both directly and through establishing
separate online operations of their own.
We deploy a range of marketing programs and initiatives designed to
generate sales leads and increase our name recognition in the marketplace.
These efforts include: advertising in online media and print publications and,
in select markets, radio; participation in industry trade shows and
professional conferences; and conducting online and in-person seminars. Sales
leads generated from these activities and other sources are screened by our in-
house telesales organization and, if qualified, are passed to our sales
representatives for follow up. In addition, we conduct market research to
identify selected markets that we believe offer the best growth prospects for
our solutions. Our telesales organization then initiates contacts with
prospective new customers in markets identified by this research.
To date we have sold primarily to end-user accounts through our own direct
sales force of commission-based sales representatives who are teamed with
technical sales engineers. These teams focus on geographic territories and work
closely with prospects to analyze their business problems and structure
appropriate solutions. Our sales cycle varies significantly by type of customer
and may range from one month or less for a dot-com company to a number of
months for a traditional bricks-and-mortar company. In some cases customers
have licensed software for limited trial purposes prior to the execution of a
full license.
In addition to selling our solutions directly, we are expanding our ability
to deliver solutions via relationships with systems integrators, resellers,
ASPs and other third parties. These companies may resell our solutions and/or
bundle them with their eCommerce offerings.
Technology
Moai's negotiated eCommerce solutions all utilize Moai's Negotiated
Commerce Engine, or NCE, platform. This technology is distributed to customers
as enterprise application server software. The NCE architecture also provides
the technology foundation for Moai's hosted solutions.
The NCE is a Java-based eCommerce server that provides a distributed
Application Program Interface, or API, for accessing negotiated eCommerce
transaction processing mechanisms. The API provides access to the server from
other computer applications or from Internet browsers such as Netscape
Navigator and Microsoft's Internet Explorer, in addition to Web-TV Networks,
America Online and other types of browsers such as Internet-enabled phones. It
can also operate with multiple browsers simultaneously.
The architecture has the following functional characteristics:
. The NCE uses a Java-servlet mechanism to deliver dynamic content to web
browsers using a straightforward template design and built-in Java
scripting to generate the web pages sent to end-users. These templates
can be customized allowing customers to brand the solutions and provide
additional business and processing rules in the end solution.
. The cross-platform nature of Java allows LiveExchange to operate on
multiple platforms. We have successfully tested LiveExchange on Windows
NT 4.0, Solaris 2.7, and HP-UX 11.0, which we believe cover the
majority of installed operating systems used by our target customers.
. The NCE can communicate with different database platforms through Java
Database Connectivity, or JDBC, allowing customers to choose a database
based on their own preferences. We have successfully tested the
operation of the NCE on Microsoft SQL Server and Oracle 8i.
. The Negotiated Commerce Markup Language, or NCML, is an XML-based
implementation for negotiated eCommerce markets which we intend to
release soon. XML is rapidly becoming a standard mechanism for data
interchange between applications. Through Moai's NCML, LiveExchange
solutions can be easily integrated into back-end enterprise resource
planning and fulfillment systems as well as front-end eCommerce
systems. Moai's Java-technology based
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<PAGE>
OpenAPI also allows LiveExchange solutions to be interfaced with other
open standards such as Component Object Module, or COM, Enterprise Java
Beans, or EJB, and Common Object Request Broker Architecture, or CORBA.
. The multi-threaded capabilities of Java provide linear scalability on
multi-processor hardware platforms. Additionally, the NCE utilizes a
proprietary caching scheme that allows recently accessed information to
be stored in memory rather than accessing the database for the
information. The multi-threaded architecture and the caching technique
provide significant performance benefits to LiveExchange solutions.
. The NCE architecture provides scalability and fault tolerance by
including presentation layer clustering. This allows multiple servers to
provide information requested by web browsers or via other protocols
such as XML and provides better overall system scalability and
redundancy if one presentation server should fail. Additionally, the NCE
includes a bid queuing system that immediately commits all bids to the
LiveExchange database, while a separate thread processes bids in the
queue. This enables increased performance by separating bid capture from
bid processing, and helps protect the integrity of bidding activity in
the event of a LiveExchange server system failure.
. Client-to-server connections use industry standard Secure Sockets Layer
encryption in order to encrypt the data being sent between the clients
and the server. The NCE also supports the optional use of both server-
side and client-side digital certificates for user authentication. These
certificates can be purchased from a standard certifying authority such
as VeriSign. The security mechanisms ensure safe and secure transmission
of data to and from LiveExchange solutions.
. Unlike many alternative solutions, which may have delays of several
minutes before a submitted bid appears in an auction during peak bidding
activity, the NCE is designed to deliver updated bidding information in
near real time without affecting the ability of the server to handle
large numbers of simultaneous bidders. The NCE also provides a mechanism
that allows users to run a real-time applet that is automatically
updated by the server through a publish-subscribe mechanism so users do
not need to manually refresh their page to see new bids. This
functionality is especially important in business-to-business
transactions where timing is crucial.
Competition
The market for negotiated eCommerce solutions is new, rapidly evolving and
intensely competitive. We expect competition to intensify in the future. We
currently face competition from the following:
Independent software vendors. Ariba (through its acquisitions of Trading
Dynamics and Tradex), Commerce One (through its acquisition of CommerceBid),
OpenSite, i2, Oracle, WebVision and others offer auction and trading exchange
software. In addition, Microsoft and IBM both offer negotiated eCommerce add-on
components to their SiteServer and net.Commerce products, respectively.
Outsourced service providers. FairMarket, FreeMarkets, and Commerce One
provide outsourced auction and trading exchange solutions.
Custom-developed solutions. Some companies, through their information
technology departments, may build custom negotiated eCommerce solutions. In
some cases, systems integrators, including iXL and EDS, have developed and
installed customized negotiated eCommerce solutions on behalf of such
companies.
Because there are relatively low barriers to entry in the software market,
we expect additional competition from systems integrators, independent software
vendors and outsourced service providers as the negotiated eCommerce software
market continues to develop and expand. We may also face future competition
from the systems integrators with which we have relationships, either on a
direct basis or on an indirect basis in the
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event they partner with our competitors. We believe that the principal
competitive factors in the market for negotiated eCommerce software include:
. speed of deployment;
. breadth of products and services;
. system scalability, reliability and capability of integration with
existing business systems;
. market acceptance as indicated by vendor installed base;
. price;
. ease of customization; and
. breadth and depth of strategic relationships.
Some of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and much greater
financial, marketing and other resources than we do. In addition, larger, well-
established and well-financed entities may acquire, invest in or form joint
ventures with competitors as the use of negotiated eCommerce increases.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could seriously harm our
business, financial condition and results of operations. If we are not be able
to compete successfully against current and future competitors, our business
could suffer.
Employees
As of February 29, 2000, we had a total of 119 employees. We supplement our
regular workforce with additional contract and temporary resources where we
need additional expertise and capabilities. We have not experienced any work
stoppages and believe that our relations with our employees are good.
Properties
Our principal executive offices are located are 25 Lusk Street, San
Francisco, CA 94017, where we lease approximately 15,500 square feet under a
lease that expires in September 2003. We also lease additional offices in San
Francisco and in Mountain View, CA. We have signed a lease for 18,300 square
feet of additional office space in San Francisco, which we anticipate occupying
beginning in August 2000. Although we believe that our existing facilities will
be insufficient to meet our needs through the near term, we expect our
additional San Francisco office space to meet our needs over the twelve-month
period following August 2000.
Legal Proceedings
We have received a letter from a former employee in which he alleges
various claims against Moai for damages, including emotional distress, loss of
wages and benefits, and attorneys fees. This former employee alleges that Moai
acted in a manner which resulted in discrimination, harrassment, retaliation
and breach of contract. We believe that we have meritorious defenses to these
claims and that these claims will not have a material adverse effect on our
business. However, these claims may result in litigation and the outcome of
litigation is inherently uncertain. As a result, these claims could adversely
affect us.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and their ages and positions as of
April 11, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Anne Perlman............ 46 Chief Executive Officer and Director
Matthew R. Miller....... 36 President and Chief Operating Officer
Devapratim Hazarika..... 28 Chief Strategy Officer and Director
Philip N. Smith......... 48 Chief Financial Officer and Vice President of Finance
Frank T. Kang........... 28 Chief Scientist
Arnold Waldstein........ 51 Vice President of Business Development
David Oller............. 45 Vice President of Sales
Raymond T. Letulle,
Jr.................... 31 Chief Technology Officer and Director of Product Management
Joseph Collins.......... 51 Vice President of Customer Advocacy
Michelle Messina........ 39 Vice President of Marketing
Denis Concordel......... 36 Vice President of Engineering and Product Development
Steven L. Eskenazi (1).. 37 Director
C. Lloyd Mahaffey (1)... 45 Director
</TABLE>
- --------
(1) Member of the Audit Committee and Compensation Committee
Anne Perlman has served as Chief Executive Officer and Director since
December 1997 and served as President from December 1997 to April 2000.
Previously, from 1996 to December 1997, Ms. Perlman was a strategic management
consultant assisting Internet start-ups and other high-tech companies. From
1981 to 1996, Ms. Perlman held a variety of management positions at Tandem
Computers, including Vice President and General Manager of Multimedia, Vice
President of Marketing and President of Tandem Source Company. From 1977 to
1981, she served as Director of Marketing, among other positions, at Computer
Curriculum Corporation. Ms. Perlman holds a Bachelor of Arts in Mathematics and
a Bachelor of Arts in Economics from the University of California at Santa Cruz
and a Masters in Business Administration from the University of California at
Los Angeles.
Matthew R. Miller has served as President and Chief Operating Officer since
April 2000. Previously, Mr. Miller worked at Remedy Corporation, a manufacturer
of enterprise software, serving as Vice President from July 1996 to July 1998
and as General Manager from July 1998 to April 2000. From May 1993 to July
1996, he served as Vice President of Centura Corporation. Mr. Miller holds a
Bachelor of Arts degree in Psychology and Computer Science from Cornell
University and a Masters in Business Administration from Columbia University.
Devapratim Hazarika co-founded Moai in October 1995 and has served as
director since June 1997 and as Chief Strategy Officer since February 2000.
From June 1997 to December 1997, he served as President and Chief Executive
Officer and from December 1997 to June 1999, he served as Chief Technology
Officer. Prior to co-founding Moai, Mr. Hazarika worked as an independent
consultant from February 1995 to October 1995. From May 1993 to February 1995,
he was employed as consultant with BSG Consulting, a client-server systems
integrator. Mr. Hazarika holds a Bachelor of Science in Electrical and Computer
Engineering from Rice University.
Philip N. Smith joined Moai as Chief Financial Officer and Vice President
of Finance in May 1999. Previously, Mr. Smith was employed by Network Equipment
Technologies, a provider of networking equipment, serving as Senior Director of
Corporate Strategy and Business Development from June 1997 to April 1999, as
Director of Business Development for the Asia Pacific/Latin America business
division from 1994 to June 1997 and as Director of Finance, Worldwide Sales and
Customer Support from 1991 to 1994. From 1983 to 1991, Mr. Smith served in
various financial management positions for Tandem Computers, including Finance
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<PAGE>
Manager and Division Controller. He is an Associate of the Royal College of
Science, London, a Fellow of the Institute of Chartered Accountants in England
and Wales and a Certified Public Accountant. Mr. Smith holds a Bachelor of
Science degree in Physics from Imperial College of Science and Technology at
London University.
Frank T. Kang co-founded Moai in October 1995 and has served as Chief
Scientist since June 1999. He previously served as Vice President of
Engineering from December 1997 to June 1999, as Chief Financial Officer from
June 1997 to May 1999, and as director from June 1997 to July 1998. Prior to
co-founding Moai, Mr. Kang worked as an independent consultant from February
1995 to October 1995. From July 1993 to February 1995, he was employed as a
consultant with BSG Consulting, a systems integrator. Mr. Kang holds a Bachelor
of Science in Electrical and Computer Engineering from Rice University.
Arnold Waldstein joined Moai as Vice President of Business Development in
April 1999. From March 1998 to 1999, Mr. Waldstein was President of Waldstein
Consulting, a consulting company specializing in marketing and strategic
alliances for technology companies. From 1996 to 1998, he served as Vice
President of Marketing at Electric Communities, a company engaged in the
graphical chat business. From 1992 to 1996, he served as Vice President of
Software and Product Marketing at Creative Labs. Mr. Waldstein has also worked
in business development and marketing for Digital F/X, Racal and Atari
Corporation. He holds a BA in English from Ohio University.
David Oller has served as Vice President of Sales since February 1999.
Previously, from 1992 to 1999, Mr. Oller served as General Manager of E-
business Solutions at IBM. From 1987 to 1992, Mr. Oller was Vice President of
Sales for Information Resources Medialink Division, a provider of data
information technologies to the food industry. Previously, he held a variety of
sales positions for CompuServe, GTE and Western Union Corporation. Mr. Oller
holds a Bachelor of Arts in History and a Bachelor of Science in Biology from
the University of California at Los Angeles.
Raymond T. Letulle, Jr. has worked at Moai since September 1997 and was
appointed Chief Technology Officer and Director of Product Management in
February 2000. Before joining Moai, from April 1997 to September 1997
Mr. Letulle was an information systems consultant for BSG Alliance/IT, a
national systems integrator, where he acted as Chief Architect for several
large-scale distributed computing projects for Fortune 500 companies. From
March 1995 to April 1997, he was an independent software consultant. Mr.
Letulle holds a Bachelor of Arts in Economics from Rice University.
Joseph Collins joined Moai in November 1999 as Vice President of Customer
Advocacy. Prior to joining Moai, from 1997 to 1999 Mr. Collins worked as a
Manager of Business Development for Tantau Software, a developer of enterprise
software. Previously, Mr. Collins was employed by Tandem Computer, serving as
Consultant Manager--EDS Relationship from 1991 to 1996 , as Manager--U.S.
Customer Education from 1987 to 1991, as Regional Systems Manger 1984 to 1987
and as Senior Systems Analyst from 1978 to 1984. Mr. Collins holds a Bachelor
of Science in Mechanical Engineering from Marquette University.
Michelle Messina has served as Vice President of Marketing since June 1998.
Prior to joining Moai from January 1997 to 1998, she served as Business
Development Manager for Open Market, an eCommerce software company. From 1995
to 1996, Ms. Messina was employed at Quarterdeck Corporation as a Senior
Director, Business Development and Director & General Manager, Communications
Business Unit. From 1992 to 1994. Ms. Messina served as Vice President of
Marketing for Visionware. She previously held a variety of marketing positions
for Microbics Corporation and Asmytek.
Denis Concordel joined Moai as Vice President of Product Development in
April 1999 and was appointed Vice President of Engineering and Product
Development in February 2000. Mr. Concordel leads Moai's Development
Engineering and Quality Assurance divisions. From September 1998 to April 1999,
Mr. Concordel was employed as a Senior Engineering Manager with Manugistics
Inc., a provider of software and services for supply chain management. From
1995 to September 1998, Mr. Concordel served as Research and Development
Engineering Manager for KLA-Tencor, a semiconductor manufacturer. Mr. Concordel
has a Masters of Science degree in electrical engineering and computer science
from the Ecole Nationale Superieure des Telecommunications in Paris.
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<PAGE>
Steven L. Eskenazi joined Moai as a director in July 1998. Since March
1997, Mr. Eskenazi has been a General Partner of Walden Technology & Media
Fund, with primary responsibility for Walden's new media and Internet
investments. From February 1990 to March 1997, Mr. Eskenazi was employed at
Alex.Brown & Sons, most recently as Managing Director in charge of New Media
Research. Previously, Mr. Eskenazi served as a marketing representative with
IBM from 1985 to 1990. Mr. Eskenazi holds a Bachelor of Science Degree in
Applied Mathematics, with Honors, from Union College and a Masters of Business
Administration from the Amos Tuck School at Dartmouth College.
C. Lloyd Mahaffey has served as a director since March 1999. Since June
1998, Mr. Mahaffey has been a Managing Director of Redleaf Venture Management,
a venture capital firm, and co-chief executive officer of Redleaf Group, an
Internet operating company. From 1995 to 1998, he served as Senior Vice
President and Chief Marketing Officer at VeriFone Incorporated, a provider of
secure electronic payment methods. From 1994 to 1995, he served as Chairman and
Managing Director of Dynamis Group, an international business consulting firm
whose clients included IBM, Kodak and Motorola. From 1990 to 1994, Mr. Mahaffey
founded and served as Chief Executive Officer of Start, Inc., an international
consumer marketing, travel and financial services company. Previously, Mr.
Mahaffey held a variety of senior executive positions at Apple Computer,
Commodore Business Machines and Honeywell. Mr. Mahaffey holds a Bachelor of
Arts in History, with Honors, from The Citadel, The Military College of South
Carolina.
Board Composition
Upon the closing of this offering, our certificate of incorporation will
provide for seven directors and our board of directors will be divided into two
classes: Class I, whose term will expire at the 2001 annual meeting of
stockholders and Class II, whose term will expire at the 2002 annual meeting of
stockholders. Each member of a class will be elected for a two-year term
following his or her respective initial term. As a result, only one class of
directors will be elected at each annual meeting of our stockholders, with the
other class continuing for the remainder of its respective term. Our officers
are appointed by the board of directors and serve at the discretion of the
board of directors. There are no family relationships among any of our
directors or executive officers.
Board Compensation
Our directors do not currently receive compensation for their services as
members of the board of directors, except for reimbursement of reasonable
travel expenses relating to attendance at board meetings. Employee directors
are eligible to participate in our 1997 stock plan, 2000 stock plan and 2000
executive stock incentive plan and will be eligible to participate in our 2000
employee stock purchase plan. Nonemployee directors are eligible to participate
in our 1997 stock plan and 2000 stock plan and will be eligible to participate
in our 2000 directors' stock option plan. See "Stock Plans."
Board Committees
In October 1999, the board of directors established the audit committee and
compensation committee. The compensation committee currently consists of Steven
L. Eskenazi and C. Lloyd Mahaffey. The functions of the compensation committee
are to:
. review and approve the compensation and benefits for our executive
officers and grant stock options under our stock option plans; and
. make recommendations to the board of directors regarding these matters.
The audit committee consists of Steven L. Eskenazi and C. Lloyd Mahaffey,
with one vacancy. The functions of the audit committee are to:
. make recommendations to the board of directors regarding the selection
of independent auditors;
. review the results and scope of the audit and other services provided
by our independent accountants; and
. review and evaluate our audit and control functions.
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<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of the board of directors are
currently Steven L. Eskenazi and C. Lloyd Mahaffey, neither of whom has ever
been an officer or employee of Moai. None of our executive officers serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving on our board of directors or
compensation committee. Before establishing the compensation committee in
October 1999, the board of directors as a whole performed the functions
delegated to the compensation committee.
Executive Compensation
The following table sets forth the compensation received for services
rendered to us during the year ended December 31, 1999 by our Chief Executive
Officer and our five other most highly compensated executive officers during
the year ended December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------ ------------
Securities
Underlying All Other
Name and Principal Position Salary($) Bonus($) Options(#) Compensation($)
- --------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Anne Perlman................... $175,000 -- -- --
Chief Executive Officer
David Oller (1)................ 130,250 $69,170 200,000 --
Vice President of Sales
Michelle Messina............... 141,146 -- -- --
Vice President of Marketing
Arnold Waldstein (2)........... 109,697 19,000 200,000 --
Vice President of Business
Development
Devapratim Hazarika............ 122,667 -- -- --
Chief Strategy Officer
Frank T. Kang.................. 122,667 -- -- --
Chief Scientist
</TABLE>
- --------
(1) Mr. Oller commenced employment with us on January 25, 1999. On an annual
basis, Mr. Oller's salary for the year ended December 31, 1999 would have
been $140,000. The option vests at the rate of 1/8th of the total number of
shares on July 25, 1999 and 1/48th of the total number of shares per month
thereafter.
(2) Mr. Waldstein commenced employment with us on April 26, 1999. On an annual
basis, Mr. Waldstein's salary for the year ended December 31, 1999 would
have been $160,000. Option vests at the rate of 1/8th of the total number
of shares on October 26, 1999 and 1/48th of the total number of shares per
month thereafter.
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<PAGE>
Option Grants
The following table provides summary information regarding stock options
granted to our Chief Executive Officer and our five other most highly
compensated executive officers during the year ended December 31, 1999. No
stock appreciation rights were granted to these individuals during the year.
The options were granted pursuant to our 1997 stock plan.
<TABLE>
<CAPTION>
Potential
Realizable Value
At Assumed Annual
Rates of
Stock Price
Appreciation For
Individual Grants Option Term
---------------------------------------------- -----------------
Number Of
Securities Percent Of
Underlying Total Options Exercise
Options Granted To Or
Granted Employees In Base Price Expiration
Name (#) Year ($/Share) Date 5% 10%
- ---- ---------- ------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Anne Perlman............ -- -- -- -- -- --
David Oller (1)......... 200,000 8.77% $0.15 2/4/09
Michelle Messina ....... -- -- -- -- -- --
Arnold Waldstein (2).... 200,000 9.21% $0.15 5/10/09
Devapratim Hazarika..... -- -- -- -- -- --
Frank T. Kang........... -- -- -- -- -- --
</TABLE>
Option Grants in Last Year
- --------
(1) Option vests at the rate of 1/8th of the total number of shares on July 25,
1999 and 1/48th of the total number of shares per month thereafter.
(2) Option vests at the rate of 1/8th of the total number of shares on October
26, 1999 and 1/48th of the total number of shares per month thereafter.
The percentages in the above table are based on a total of 2,279,400 shares
subject to options granted by us during the year ended December 31, 1999 to all
of our employees and consultants, including the executive officers named in the
table. The exercise price per share of each option was equal to the fair market
value of the common stock as determined by the board of directors on the date
of grant. The potential realizable value assumes that the stock price on the
date of grant appreciates from the assumed initial public offering price of $
per share, which is the midpoint of the range set forth on the cover page of
this prospectus, at the indicated rate for the entire term of the option and
that the option is exercised at the exercise price and sold on the last day at
the appreciated price. The assumed stock price appreciation rates of 5% and 10%
are mandated pursuant to the rules of the Securities and Exchange Commission.
There can be no assurance that the actual stock price will appreciate over the
ten-year option terms at the assumed rates of 5% and 10% or at any other
defined rate. Unless the market price of the common stock appreciates over the
option term, the named executive officers will not realize value from these
option grants.
Option Exercises and Holdings
The following table provides summary information concerning outstanding
stock options held by the Chief Executive Officer and the five other most
highly compensated executive officers during the year ended December 31, 1999.
The values realized and the values of unexercised options at December 31, 1999
are based on the assumed initial public offering price of $ per share, which
is the midpoint of the range set forth on the cover page of this prospectus.
Therefore, these values are calculated based on the $ per share value, less
the applicable exercise price per share, multiplied by the number of shares
underlying these options.
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<PAGE>
Aggregated Option Exercises in 1999 and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at December 31, 1999 at December 31, 1999
Acquired Value -------------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anne Perlman............ -- -- -- -- -- --
David Oller............. -- -- 45,833 154,167
Michelle Messina........ -- -- 78,750 131,250
Arnold Waldstein........ 29,166 4,167 166,667
Devapratim Hazarika..... -- -- -- -- -- --
Frank T. Kang........... -- -- -- -- -- --
</TABLE>
Change of Control Agreements
We entered into revised offer letters with Anne Perlman, Devapratim
Hazarika and Frank T. Kang and an offer letter with Matthew R. Miller which
entitles each of these officers to accelerated vesting with respect to 50% of
his or her then unvested stock options or restricted stock in the event that we
experience a change of control. In addition, each of these officers is entitled
to receive a severance payment equal to twelve months salary and full vesting
of his or her stock options and restricted stock if we experience a change of
control and: (a) he or she is not offered continued employment, is terminated
without cause or resigns for good reason, (b) our offices are relocated outside
the San Francisco Bay area, or (c) he or she remains employed with Moai or our
successor for a period of at least one subsequent year.
We have approved a form of change of control agreement for every employee
with a title of Vice President or higher. This agreement entitles these
employees to receive a severance payment equal to six months salary and six
months acceleration of all options and shares of restricted stock held by these
employees in the event they are terminated without cause or resign for good
reason within twelve months following a change of control of Moai. We have
entered into such change of control agreements with Philip N. Smith, David
Oller, Michelle Messina, Arnold Waldstein, Joseph Collins, Denis Concordel and
Raymond T. Letulle, Jr.
Stock Plans
2000 Stock Plan. Our 2000 stock option plan provides for the grant of
incentive stock options to employees, including employee directors, and of
nonstatutory stock options and stock purchase rights to employees, directors
and consultants. The purposes of the 2000 stock plan are to attract and retain
the best available personnel, to provide additional incentives to our employees
and consultants and to promote the success of our business. The 2000 plan was
originally adopted by our board of directors in April 2000 and will be
submitted for approval by by our stockholders prior to completion of this
offering. The 2000 plan provides for this issuance of options and rights to
purchase up to 5,750,000 shares of our common stock, plus an automatic annual
increase on the first day of each of our fiscal years beginning in 2001 through
2005 equal to the lesser of 2,500,000 shares, 5% of our outstanding common
stock on the last day of the immediately preceding fiscal year, or a lesser
number of shares as our board of directors determines. Unless terminated
earlier by the board of directors, the 2000 plan will terminate in April 2010.
As of February 29, 2000, no options to purchase shares of common stock were
outstanding under the 2000 plan, no shares had been issued upon exercise of
outstanding options or pursuant to stock purchase rights, and 5,750,000 shares
remained available for future grant.
The 2000 plan may be administered by the board of directors or a committee
of the board, each known as the administrator. The administrator determines the
terms of options and stock purchase rights granted under the 2000 plan,
including the number of shares subject to the award, the exercise or purchase
price, and the vesting and/or exercisability of the award and any other
conditions to which the award is subject. No employee may receive awards for
more than 300,000 shares under the 2000 plan in any fiscal year. Incentive
stock options
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<PAGE>
granted under the 2000 plan must have an exercise price of at least 100% of the
fair market value of the common stock on the date of grant. The plan does not
impose restrictions on the exercise or purchase price applicable to
nonstatutory stock options and stock purchase rights, although we expect that
nonstatutory stock options and stock purchase rights granted to our Chief
Executive Officer and our five other most highly compensated officers will
generally equal at least 100% of the grant date fair market value. Payment of
the exercise or purchase price may be made in cash or any other consideration
determined by the administrator and allowed under the plan.
With respect to options granted under the 2000 plan, the administrator
determines the term of options, which may not exceed 10 years (or 5 years in
the case of an incentive stock option granted to a holder of more than 10% of
the total voting power of all classes of our stock). Generally, an option is
nontransferable other than by will or the laws of descent and distribution, and
may be exercised during the lifetime of the optionee only by such optionee. In
certain circumstances, the administrator has the discretion to grant
nonstatutory stock options with limited transferability rights. Stock options
are generally subject to vesting, meaning that the optionee earns the right to
exercise the option over a specified period of time only if he or she continues
to provide services to Moai over that period. Shares of stock issued pursuant
to stock purchase rights granted under the 2000 plan will generally be subject
to a repurchase right exercisable by Moai upon the termination of the holder's
employment or consulting relationship with us for any reason (including death
or disability). This repurchase right will lapse according to the schedule
determined by the administrator at the time of grant.
If Moai or its business is acquired by another corporation, we would expect
that options and stock purchase rights outstanding under the 2000 plan at the
time of the transaction would be assumed or replaced with substitute options by
our acquiror. If a plan participant's service relationship with us or our
successor is terminated involuntarily in connection with or within twelve
months following our change of control, the vesting of any award held by such
person would accelerate as to 25% of the shares underlying the award. If our
acquiror did not agree to assume or replace outstanding awards, the vesting of
these awards would accelerate so that these awards would become fully vested
prior to the transaction. Outstanding awards, the number of shares remaining
available for issuance under the 2000 plan, the maximum number of shares
subject to awards that may be granted to an employee during a year and the
fixed number in the plan's evergreen formula will adjust in the event of a
stock split, stock dividend or other similar change in our capital stock. The
administrator has the authority to amend or terminate the 2000 plan, but no
action may be taken that impairs the rights of any holder of an outstanding
option or stock purchase right without the holder's consent. In addition, we
must obtain stockholder approval of amendments to the plan as required by
applicable law.
1997 Stock Plan and 2000 Executive Stock Incentive Plan. In addition to our
2000 stock plan, we have two other stock plans, our 1997 stock plan and our
2000 executive stock incentive plan.
Our 1997 stock plan provides for the grant of incentive stock options to
employees (including employee directors) and the grant of nonstatutory stock
options and stock purchase rights to employees, consultants and directors. The
1997 stock plan was originally adopted by our board of directors in December
1997 and approved by our stockholders in December 1997. It has been amended and
restated three times since its adoption such that there are currently 7,866,834
shares of common stock reserved for issuance under this plan. As of February
29, 2000, options to purchase 2,842,413 shares of common stock at a weighted
average exercise price of $0.80 were outstanding, 649,693 shares with a
weighted average purchase price of $0.88 have been issued upon exercise of
options and stock purchase rights and 4,374,728 shares remain available for
grant under our 1997 plan. Unless terminated earlier, the 1997 plan will
terminate in December 2007.
Our 2000 executive stock incentive plan provides for the granting of
incentive stock options, nonstatutory stock options and stock purchase rights
to executive officers of Moai. This plan was originally adopted by our board of
directors and stockholders in March 2000 to attract and retain qualified
persons as officers of Moai. There are 1,500,000 shares reserved for issuance
under the plan and as of April 11, 2000, options to purchase 1,200,000 shares
of common stock with a weighted average exercise price of $6.00 per share were
outstanding and no shares have been issued upon exercise of options or stock
purchase rights, and 300,000 shares remain
50
<PAGE>
available for future grant. Unless terminated earlier, the 2000 executive stock
incentive plan will terminate upon the effective date of this offering.
The terms of awards issued under our 1997 plan and our 2000 executive stock
incentive plan are generally the same as those that may be issued under our
2000 stock plan, except with respect to the following features. Neither plan
imposes an annual limitation on the number of shares of stock subject to
options that may be granted to any individual employee during a fiscal year. In
addition, the 1997 plan does not provide for transferability of options under
any circumstances.
2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan
was adopted by the board of directors in April 2000 and will be submitted for
approval by our stockholders prior to completion of this offering. A total of
2,000,000 shares of common stock has been reserved for issuance under the 2000
purchase plan, none of which have been issued as of the date of this offering.
The number of shares reserved for issuance under the 2000 purchase plan will be
subject to an automatic annual increase on the first day of each of our fiscal
years beginning in 2001 through 2010 equal to the lesser of 1,000,000 shares,
2% of our outstanding common stock on the last day of the immediately preceding
fiscal year, or a lesser number of shares as the board of directors determines.
The 2000 purchase plan becomes effective upon the date of this offering. Unless
terminated earlier by the board of directors, this plan will terminate in April
2020.
The 2000 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, will be implemented by a series of overlapping
offering periods of approximately 24 months' duration, with new offering
periods (other than the first offering period) commencing on February 1 and
August 1 of each year. Each offering period will generally consist of four
consecutive purchase periods of six months' duration, at the end of which an
automatic purchase will be made for participants. The initial offering period
is expected to commence on the date of this offering and end on July 31, 2002;
the initial purchase period is expected to begin on the date of this offering
and end on January 31, 2001, with subsequent purchase periods ending on July
31, 2001, January 31, 2002 and July 31, 2002. The 2000 purchase plan will be
administered by the board of directors or by a committee appointed by the
board. Our employees (including officers and employee directors), or of any
majority-owned subsidiary designated by the board, are eligible to participate
in the purchase plan if they are employed by us or a designated subsidiary for
at least 20 hours per week and more than five months per year. The 2000
purchase plan permits eligible employees to purchase common stock through
payroll deductions at a rate of not more than 15% of an employee's
compensation. The purchase price is equal to the lower of 85% of the fair
market value of the common stock at the beginning of each offering period or at
the end of each purchase period, subject to certain adjustments as provided in
the plan. Employees may end their participation in the 2000 purchase plan at
any time during an offering period, and participation ends automatically on
termination of employment.
An employee is not eligible to participate in the 2000 purchase plan if
immediately after the grant of an option to purchase stock under the plan such
employee would own stock and/or hold outstanding options to purchase stock
equaling 5% or more of the total voting power or value of all classes of our
stock or stock of our subsidiaries, or if such option would permit an
employee's rights to purchase stock under the 2000 purchase plan at a rate that
exceeds $25,000 of fair market value of such stock for each calendar year in
which the option is outstanding. In addition, no employee may purchase more
than 3,100 shares of common stock under the 2000 purchase plan in any one
purchase period. If the fair market value of the common stock on the first day
of an offering period that begins while another offering period is ongoing is
less than the fair market value at the beginning of the ongoing offering
period, each participant in that ongoing offering period will automatically be
withdrawn from that offering period as of the end of the purchase date that
occurs immediately before the new offering period begins and re-enrolled in the
new 24-month offering period beginning at that time.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the 2000
purchase plan will be assumed or an equivalent right substituted by our
acquiror. If our acquiror did not agree to assume or substitute stock purchase
rights, any offering period and purchase period then in progress would be
shortened and a new exercise date occurring prior to the closing of
51
<PAGE>
the transaction would be set. Outstanding awards, shares remaining available
for issuance under the plan, the fixed number in the plan's evergreen formula,
and the maximum number of shares that may be purchased during a six-month
purchase period will each adjust in the event of a stock split, stock dividend
or other similar change in our capital stock. Our board of directors has the
power to amend or terminate the 2000 purchase plan and to change or terminate
offering periods as long as such action does not adversely affect any
outstanding rights to purchase stock thereunder. However, the board of
directors may amend or terminate the 2000 purchase plan or an offering period
even if it would adversely affect outstanding options in order to avoid our
incurring adverse accounting charges.
2000 Directors' Stock Option Plan. The 2000 directors' stock option was
adopted by the board of directors in April 2000 and will be approved by our
stockholders prior to the date of this offering. There are 600,000 shares of
common stock reserved for issuance under the directors' plan. As of February
29, 2000, no awards have been made under this plan.
The directors' plan provides for the grant of nonstatutory stock options to
our nonemployee directors. The plan is designed to be a formula award plan that
works automatically without administration; however, to the extent
administration is necessary, it will be performed by our board of directors. To
the extent they arise, it is expected that conflicts of interest will be
addressed by abstention of any interested director from both deliberations and
voting regarding matters in which a director has a personal interest. Unless
terminated earlier, the directors' plan will terminate in April 2010.
The directors' plan provides that each person who becomes a nonemployee
director after the completion of this offering will be granted a nonstatutory
stock option to purchase 40,000 shares of common stock on the date on which
such individual first becomes a member of our board of directors. In addition,
on the date of each annual stockholders meeting, each nonemployee director who
will continue serving on the board following the meeting and who has been a
director of Moai for at least six months prior to the meeting date will be
granted an option to purchase 10,000 shares of common stock.
All options granted under the directors' plan will have a term of ten years
and an exercise price equal to the fair market value of on the date of grant
and will be transferable only to members of a directors' immediate family and
to trusts and other entities for the benefit their family members. Options
granted under the directors' plan will vest as to 25% of the shares underlying
the option on the first anniversary of the date of the option grant and as to
1/48th of the shares each month after the first anniversary so that these
options will be fully vested on the fourth anniversary of the grant date. If a
nonemployee director ceases to serve as a director for any reason other than
death or disability, he or she may, but only within 90 days after the date he
or she ceases to be a director, exercise options granted under the directors'
plan. If he or she does not exercise the option within this 90-day period, the
option will terminate. If a director's service terminates as a result of his or
her disability or death, or if a director dies within three months following
termination for any reason, the director or his or her estate will have 12
months after the date of termination or death, as applicable, to exercise
options that were vested as of the date of termination. In addition, if Moai
determines that a director has engaged in fraud, embezzlement or similar acts
against us, or if a director has disclosed information that is confidential to
Moai or engaged in any conduct constituting unfair competition against us, we
have the right to suspend or terminate that director's right to exercise an
option under the directors' plan.
If we are acquired by another corporation, we would expect each option
outstanding under our 2000 directors' plan to be assumed or replaced with
equivalent options by our acquiror. Regardless of whether or not our acquiror
assumed or replaced outstanding awards, the vesting and exercisability of
outstanding awards will accelerate in full upon a change of control of Moai.
Outstanding awards, the number of shares remaining available for grant under
the plan, and the number of shares subject to the automatic director grants
described above will each adjust in the event of a stock split, stock dividend
or other similar change in our capital stock. Our board of directors may amend
or terminate the directors' plan as long as such action does not adversely
affect any outstanding option. We will obtain stockholder approval for any
amendment to the plan to the extent required by applicable law.
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<PAGE>
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
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission. Our bylaws provide that we
shall indemnify our employees and other 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.
We have entered into agreements to indemnify our directors and executive
officers in addition to the indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors
and executive officers for expenses specified in the agreements, including
attorneys' fees, judgments, fines and settlement amounts incurred by a director
or executive officer in any action or proceeding arising out of his or her
services as a director or executive officer of Moai or any subsidiary of Moai.
In addition, we maintain directors' and officers' insurance. We believe that
these provisions and agreements are necessary to attract and retain qualified
persons as directors and executive officers.
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<PAGE>
RELATED PARTY TRANSACTIONS
Agreements with Management
We entered into revised offer letters with Anne Perlman, Devapratim
Hazarika and Frank T. Kang and an offer letter with Matthew R. Miller which
entitles each of these officers to accelerated vesting with respect to 50% of
his or her then unvested stock options or restricted stock in the event that we
experience a change of control. In addition, each of these officers is entitled
to receive a severance payment equal to twelve months salary and full vesting
of his or her stock options and restricted stock if we experience a change of
control and: (a) he or she is not offered continued employment, is terminated
without cause or resigns for good reason, (b) our offices are relocated outside
the San Francisco Bay area, or (c) he or she remains employed with Moai or our
successor for a period of at least one subsequent year.
We have approved a form of change of control agreement for every employee
with a title of Vice President or higher. This agreement entitles these
employees to receive a severance payment equal to six months salary and six
months acceleration of all options and shares of restricted stock held by these
employees in the event they are terminated without cause or resign for good
reason within twelve months following a change of control of Moai. We have
entered into such change of control agreements with Philip N. Smith, David
Oller, Michelle Messina and Arnold Waldstein and Raymond T. Letulle, Jr.
In November 1999, we granted Joseph Collins options to purchase 140,000
shares of common stock at $0.75 per share. These options vest at the rate of
17,500 shares on May 1, 2000 and about 2,917 shares per month thereafter.
In March 2000, we granted Matthew R. Miller options to purchase 1,200,000
shares of common stock at $6.00 per share. These options vest at the rate of
240,000 shares on April 11, 2000, 2000 and 20,000 shares per month thereafter.
We have entered into agreements to indemnify our directors and executive
officers. See "Management--Limitation of Liability and Indemnification
Matters."
Financing Activities
On December 9, 1997, we issued a convertible promissory note in the
principal amount of $250,000 to Redleaf Venture I, L.P. This note converted
into 833,332 shares of Series A preferred stock on December 18, 1997. On
December 18, 1997, we also issued warrants to purchase 583,334 shares of Series
A preferred stock to entities affiliated with Redleaf Ventures.
In connection with the sale of Series C preferred stock in July 1999, we
entered into a Letter Agreement which provides Reuters Holdings Switzerland, SA
with the following rights: (i) the right to license our products on terms not
less favorable than those extended to similarly situated customers; (ii) the
right to bid as our supplier of news and data feeds in the event we seek to
enter a line of business requiring such services; and (iii) a right of first
offer with respect to other strategic partners in the event we create a
subsidiary or joint venture in order to expand our European or Asian
operations.
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<PAGE>
The following table summarizes the shares of preferred stock purchased by
executive officers, directors and 5% stockholders and persons and entities
associated with them in private placement transactions. Each share of preferred
stock converts into one share of common stock automatically upon the closing of
this offering. The shares of Series A preferred stock were sold at $0.30 per
share, the shares of Series B preferred stock were sold at $0.64 per share, the
shares of Series C preferred stock were sold at $1.90 per share and the shares
of Series D preferred stock were sold at $8.01 per share. See "Principal
Stockholders."
<TABLE>
<CAPTION>
Series A Series B Series C Series D
Name preferred preferred preferred preferred
- ---- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Redleaf Venture Management II, L.L.C.
(C. Lloyd Mahaffey) (1).............. 3,916,666 1,606,704 741,158 62,422
Walden Media and Information Technology
Fund, L.P.
(Steven L. Eskenazi) (2)............. -- 3,322,828 526,316 209,928
TGI Fund I, LC......................... 2,500,000 1,205,028 263,158 --
HarbourVest Partners V-Direct Fund L.P.
(3).................................. -- -- 2,631,578 143,523
Reuters Holdings Switzerland SA........ -- -- 1,578,948 86,115
</TABLE>
- --------
(1) Includes 5,455,610 shares held by Redleaf Venture I, L.P., 741,158 shares
held by Redleaf Venture II, L.P., 67,760 shares held by Redleaf Associates
I, L.P. and 64,422 shares held by Redleaf Group, L.L.C. Mr. Mahaffey is a
general partner of the general partner of Redleaf Venture I, L.P., Redleaf
Venture II, L.P. and Redleaf Associates I, L.P and the chief executive
officer of Redleaf Group, L.L.C. Mr. Mahaffey disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.
(2) Includes 897,016 shares held by Walden-SBIC, L.P. and 299,025 shares held
by Walden Technology Ventures II, L.P. These funds are affiliated with
Walden Media and Information Technology Fund, L.P., of which Mr. Eskenazi
is a manager and general partner. Mr. Eskenazi disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.
(3) Includes 143,523 shares held by HarbourVest Partners LLC.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to
beneficial ownership of our common stock as of February 29, 2000, as adjusted
to reflect the issuance of 1,872,659 shares of Series D preferred stock in
March 2000, the expected exercise of warrants to purchase 262,266 shares of
Series D preferred stock prior to or upon the closing of this offering and the
sale of common stock offered in this offering, by:
. each person, or group of affiliated persons, known by us to own
beneficially more than 5% of our outstanding common stock,
. each director,
. the Chief Executive Officer and five other most highly compensated
executive officers during the year ended December 31, 1999, and
. all directors and executive officers as a group.
<TABLE>
<CAPTION>
Percent Beneficially
Owned
-------------------------
Number of Before After
Name Shares Offering Offering
- ---- ---------- ----------- ----------
<S> <C> <C> <C>
Redleaf Venture Management II, L.L.C.
(1).................................. 6,326,950 19.54%
c/o Redleaf Venture Management, LLC
14395 Saratoga Avenue, Suite 130
Saratoga, CA 95070
C. Lloyd Mahaffey (2).................. 6,326,950 19.54
c/o Redleaf Venture Management, LLC
14395 Saratoga Avenue, Suite 130
Saratoga, CA 95070
Walden Media and Information Technology
Fund, L.P. (3)....................... 4,059,072 12.54
c/o Walden Media, LLC
750 Battery Street, 7th Floor
San Francisco, CA 94111
Steven L. Eskenazi (4)................. 4,059,072 12.54
c/o Walden Media, LLC
750 Battery Street, 7th Floor
San Francisco, CA 94111
TGI Fund I, LC......................... 3,968,186 12.26
c/o Tredegar Investments, Inc.
6501 Columbia Center
701--5th Avenue
Seattle, WA 98104
HarbourVest Partners V-Direct Fund L.P.
(5).................................. 2,775,101 8.57
One Financial Center, 44th Floor
Boston, MA 02111
Devapratim Hazarika.................... 2,375,000 7.34
Frank T. Kang.......................... 2,375,000 7.34
Reuters Holdings Switzerland SA........ 1,665,063 5.14
Anne Perlman........................... 1,477,500 4.56
David Oller (6)........................ 62,500 *
Michelle Messina (7)................... 96,250 *
Arnold Waldstein (8)................... 50,000 *
All directors and executive officers as
a group (13 persons)................. 25,860,621 79.88% %
</TABLE>
- --------
*Less than one percent of the outstanding shares of common stock.
56
<PAGE>
(1) Includes 5,455,610 shares held by Redleaf Venture I, L.P., 741,158 shares
held by Redleaf Venture II, L.P., 67,760 shares held by Redleaf Associates
I, L.P. and 64,422 shares held by Redleaf Group, L.L.C.
(2) Includes 5,455,610 shares held by Redleaf Venture I, L.P., 741,158 shares
held by Redleaf Venture II, L.P., 67,760 shares held by Redleaf Associates
I, L.P. and 64,422 shares held by Redleaf Group, L.L.C. Mr. Mahaffey is a
general partner of the general partner of Redleaf Venture I, L.P., Redleaf
Venture II, L.P. and Redleaf Associates I, L.P and the chief executive
officer of Redleaf Group, L.L.C. He disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein.
(3) Includes 897,016 shares held by Walden-SBIC, L.P. and 299,025 shares held
by Walden Technology Ventures II, L.P.
(4) Includes 897,016 shares held by Walden-SBIC, L.P. and 299,025 shares held
by Walden Technology Ventures II, L.P. These funds are affiliated with
Walden Media and Information Technology Fund, L.P., of which Mr. Eskenazi
is a manager and general partner. Mr. Eskenazi disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.
(5) Includes 143,523 shares held by HarbourVest Partners LLC.
(6) Includes options to purchase 8,334 shares that are currently exercisable
within 60 days of February 29, 2000.
(7) Includes options to purchase 21,876 shares that are currently exercisable
within 60 days of February 29, 2000.
(8) Includes options to purchase 20,834 shares that are currently exercisable
within 60 days of February 29, 2000.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The number of shares beneficially owned by
a person includes shares of common stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of February 29,
2000. The shares issuable pursuant to these options are deemed outstanding for
purposes of computing the percentage ownership of the person holding these
options but are not deemed outstanding for purposes of computing the percentage
ownership of each other person. The number of shares listed in the table above
for all directors and executive officers as a group includes 362,074
outstanding shares and options to purchase 267,925 shares that are currently
exercisable within 60 days of February 29, 2000 held by executive officers not
named in the table. Unless otherwise indicated, the address of each person
named in the above table is c/o Moai Technologies, Inc., 25 Lusk Street, San
Francisco, CA 94107.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
150,000,000 shares of common stock, $0.0001 par value, and 10,000,000 shares of
undesignated preferred stock, $0.0001 par value. The following description of
our capital stock is intended to be a summary and does not describe all
provisions of our certificate of incorporation or bylaws or Delaware law
applicable to us. For a more thorough understanding of the terms of our capital
stock, you should refer to our certificate of incorporation and bylaws, which
are included as exhibits to the registration statement of which this prospectus
is a part.
Common Stock
As of February 29, 2000, there were 32,109,583 shares of common stock
outstanding held by approximately 87 stockholders, which reflects the issuance
of 1,872,659 shares of Series D preferred stock in March 2000 and the
conversion of all outstanding shares of preferred stock, including the shares
of Series D preferred stock issued in March 2000, into common stock. In
addition, as of February 29, 2000, there were options outstanding to purchase
2,842,413 shares of common stock and warrants outstanding to purchase 169,114
shares of common stock at an exercise price of $1.11 per share. Since February
29, 2000 through April 11, 2000, we have granted options to purchase an
aggregate of 1,804,446 shares of common stock at a weighted average exercise
price of $6.17 per share. Since February 29, 2000 through April 11, 2000, we
have issued warrants to purchase 292,266 shares of common stock at a weighted
average exercise price of $8.01 per share, 262,266 of which are expected to be
exercised prior to the closing of this offering. Upon completion of this
offering, there will be shares of common stock outstanding, assuming no
exercise of the underwriters' overallotment option and no additional exercise
of outstanding warrants and options under our stock plans.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, holders of common stock are
entitled to receive ratably dividends as may be declared by the board of
directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any outstanding preferred stock. The common
stock has no preemptive or conversion rights, other subscription rights, or
redemption or sinking fund provisions. All outstanding shares of common stock
are fully paid and non-assessable, and the shares of common stock to be issued
upon completion of this offering will be fully paid and non-assessable.
Preferred Stock
Upon the closing of this offering, all outstanding shares of preferred
stock, including the 1,872,659 shares of Series D preferred stock issued in
March 2000 and the 262,266 shares of series D preferred stock expected to be
issued upon exercise of warrants prior to the closing of this offering, will be
converted on a one-for-one basis into 24,568,988 shares of common stock and
automatically retired. Thereafter, the board of directors will have the
authority, without further action by the stockholders, to issue up to
10,000,000 shares of preferred stock in one or more series and to designate the
rights, preferences, privileges and restrictions of each series. The issuance
of preferred stock could have the effect of restricting dividends on the common
stock, diluting the voting power of the common stock, impairing the liquidation
rights of the common stock or delaying or preventing our change in control
without further action by the stockholders. We have no present plans to issue
any shares of preferred stock.
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<PAGE>
Registration Rights
The holders of 24,688,390 shares of common stock and warrants to purchase
465,107 shares of common stock are entitled to have their shares registered by
us under the Securities Act under the terms of an agreement between us and the
holders of these "registrable securities." Subject to limitations specified in
the agreement, these registration rights include the following:
The holders of at least 50% of the outstanding registrable securities may
require, on one occasion beginning six months after the date of this
prospectus, that we use our best efforts to register the registrable securities
for public resale, provided that the aggregate offering price for these
registrable securities is at least $10,000,000. This right is subject to the
ability of the underwriters to limit the number of shares included in that
offering in view of market conditions.
If we register any common stock, either for our own account or for the
account of other security holders, the holders of registrable securities are
entitled to include their shares of common stock in that registration. This
right is subject to the ability of the underwriters to limit the number of
shares included in this offering in view of market conditions.
The holders of at least 25% of the then outstanding registrable securities
may require us to register all or a portion of their registrable securities on
Form S-3 when use of this form becomes available to us, provided that the
proposed aggregate offering price is at least $1,000,000. The holders of
registrable securities may not exercise this right if we have already effected
one Form S-3 registration previously demanded by the holders of registrable
securities during the preceding twelve-month period.
We will bear all registration expenses other than underwriting discounts
and commissions, except in the case of registrations on Form S-3. All
registration rights terminate on the date seven years following the closing of
this offering, or, with respect to each holder of registrable securities, at
the time when the holder is entitled to sell all of its shares in any three
month period under Rule 144 of the Securities Act.
Delaware Anti-Takeover Law and Provisions of our Certificate of Incorporation
and Bylaws
Provisions of Delaware law and our certificate of incorporation and bylaws
could make it more difficult for a third party to acquire us or to remove 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 Moai 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 these 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 the person
became an interested stockholder prior to the date the interested
stockholder attained this status;
. upon consummation of the transaction that resulted in the person'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 after the date of the business combination, it is approved by the
board of directors and authorized at an annual or special meeting of
stockholders.
59
<PAGE>
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 two
classes, with staggered two-year terms. As a result, only one class of
directors will be elected at each annual meeting of stockholders, with the
other class continuing for the remainder of its two-year term.
In addition, our bylaws will provide that special meetings of stockholders
can be called only by the board of directors, the chairman of the board, if
any, and our Chief Executive Officer. Moreover, the business permitted to be
conducted at any special meeting of stockholders is limited to the business
brought before the meeting by the board of directors, the chairman of the
board, if any, or our Chief Executive Officer. The bylaws set forth an advance
notice procedure with regard to the nomination, other than by or at the
direction of the board of directors, of candidates for election as directions
and with regard to business to be brought before an annual meeting of our
stockholders.
These provisions, which require the vote of stockholders holding at least
two thirds 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 . The transfer
agent's address and telephone number is .
60
<PAGE>
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
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, based on 20,236,924 shares of common stock outstanding as of
February 29, 2000, as adjusted to include the 1,872,659 shares of Series D
preferred stock issued in March 2000 and 262,266 shares of Series D preferred
stock expected to be issued upon exercise of warrants prior to the closing of
this offering. Of these shares, the shares sold in this offering, plus any
shares issued upon exercise of the underwriters' overallotment 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 executive officers, directors or 10%
stockholders. Shares purchased by affiliates will remain subject to the resale
limitations of Rule 144.
The remaining 32,371,849 shares outstanding prior to the offering 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 restricted securities
in the public market, or the availability of these shares for sale, could
adversely affect the market price of the common stock.
Our directors, executive 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 owned by them for a period of 180 days after
the date of this prospectus without the prior written consent of FleetBoston
Robertson Stephens Inc. 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 these agreements expire or are waived by
FleetBoston Robertson Stephens Inc. These agreements are more fully described
in "Underwriting." Taking into account the lock-up agreements, and assuming
FleetBoston Robertson Stephens Inc. 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 effective date of this prospectus, only the shares
sold in this offering will be immediately available for sale in the
public market.
. Beginning 180 days after the effective date, about 7,801,986 shares
will be eligible for sale pursuant to Rule 701, of which 6,747,280 are
held by affiliates.
. Beginning 180 days after the effective date, about 115,440 shares will
be eligible for sale pursuant to Rule 144(k), none of which are held by
affiliates.
. Beginning 180 days after the effective date, about 19,862,630 shares
will be eligible for sale subject to volume, manner of sale and other
limitations under Rule 144, of which 13,498,524 are held by affiliates.
. The remaining 4,591,793 shares will be eligible for sale pursuant to
Rule 144 upon the expiration of various one-year holding periods during
the six months following 180 days after the effective date, 855,684 of
which are held by affiliates.
61
<PAGE>
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 about shares immediately after this offering; or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
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 at
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 his or her 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 these 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 their 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 registration statements under the Securities
Act as promptly as possible after the effective date of this offering to
register shares to be issued pursuant to our employee benefit plans. As a
result, any options or rights exercised under the 2000 stock plan, 1997 stock
plan, 2000 executive incentive plan, 2000 employee stock purchase plan, 2000
directors' stock option plan or any other benefit plan after the effectiveness
of the registration statements 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 February 29, 2000
there were outstanding options for the purchase of 2,842,413 shares of common
stock, of which options to purchase 147,951 shares were exercisable. Since
February 29, 2000 through April 11, 2000, we have granted, options to purchase
1,804,446 shares.
62
<PAGE>
UNDERWRITING
We are offering the shares of common stock described in this prospectus
through a number of underwriters. FleetBoston Robertson Stephens Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are the representatives of the underwriters. We
entered into an underwriting agreement with the representatives. Subject to the
terms and conditions of the underwriting agreement, we agreed to sell to the
underwriters, and each underwriter separately agreed to purchase from us, the
number of shares of common stock listed next to its name below at the public
offering price, less the underwriting discount described on the cover page of
this prospectus:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
---
Total...........................................................
===
</TABLE>
The underwriting agreement provides that the underwriters must buy all of
these shares from us if they buy any of them. The underwriters will sell these
shares to the public when and if the underwriters buy them from us. The
underwriters are offering the common stock subject to a number of conditions,
including:
. the underwriters' receipt and acceptance of the common stock from us;
and
. the underwriters' right to reject orders in whole or in part.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
Over-allotment option. We have granted the underwriters an option to buy up
to additional shares of our common stock at the same price per share as
they are paying for the shares shown in the table above. The underwriters may
exercise this option only to the extent that they sell more than the total
number of shares shown in the table above. The underwriters may exercise this
option at any time within 30 days after the date of this prospectus. To the
extent that the underwriters exercise this option, the underwriters will be
obligated to purchase the additional shares from us in the same proportions as
they purchased the shares shown in the table above. If purchased, these
additional shares will be sold by the underwriters on the same terms as those
on which the other shares are sold.
Stock market listing. We expect our common stock will be quoted on the
Nasdaq National Market under the symbol "MOAI."
Determination of offering price. Before this offering, there has been no
public market for our common stock. The initial public offering price will be
determined through negotiations between us and the representatives. In addition
to prevailing market conditions, the factors to be considered in determining
the initial public offering price will include:
. the valuation multiples of publicly-traded companies that the
representatives believe are comparable to us;
. our financial information;
. our history and prospects and the outlook for our industry;
. an assessment of our management, our past and present operations, and
the prospects for, and timing of, our future revenues;
63
<PAGE>
. the present state of our development and the progress of our business
plan; and
. the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for our shares may not develop. Even if an active
market does develop, the public price at which our shares trade in the future
may be below the offering price.
Underwriting discounts and commissions. The underwriting discount is the
difference between the price the underwriters pay to us and the price at which
the underwriters initially offer the shares to the public. The size of the
underwriting discount is determined through an arms-length negotiation between
us and the representatives. The following table shows the per share and total
underwriting discount we will allow to the underwriters. These amounts are
shown assuming no exercise and full exercise of the underwriters' over-
allotment option described above:
<TABLE>
<CAPTION>
Total
-------------------------
No Exercise Full Exercise
Per Share of Option of Option
--------- ----------- -------------
<S> <C> <C> <C>
Public offering price.................... $ $ $
Underwriting discount.................... $ $ $
Proceeds, before expenses, to us......... $ $ $
</TABLE>
The expenses of this offering, not including the underwriting discount, are
estimated to be approximately $ and will be paid by us. Expenses include
the SEC filing fee, the NASD filing fee, Nasdaq listing fees, printing
expenses, legal and accounting fees, transfer agent and registrar fees,
directors' and officers' insurance fees and other miscellaneous fees and
expenses.
Lock-up agreements. We and our executive officers, directors and all of our
stockholders, have agreed, with exceptions, not to sell or transfer any shares
of our common stock for 180 days after the date of this prospectus without
first obtaining the written consent of FleetBoston Robertson Stephens Inc.
Specifically, we and these other individuals have agreed not to, directly or
indirectly:
. offer to sell, contract to sell, or otherwise sell or dispose of any
shares of our common stock;
. loan, pledge or grant any rights with respect to any shares of our
common stock;
. engage in any hedging or other transaction that might result in a
disposition of shares of our common stock by anyone;
. execute any short sale, whether or not against the box; or
. purchase, sell or grant any put or call option or other right with
respect to our common stock or with respect to any security other than
a broad-based market basket or index that includes, relates to or
derives any significant part of its value from our common stock.
These lock-up agreements apply to shares of our common stock and also to
any options or warrants to purchase any shares of our common stock or any
securities convertible into or exchangeable for shares of our common stock.
These lock-up agreements generally apply to all such securities that are owned
or later acquired by the persons executing the agreements, except for
securities acquired on the open market. In addition, we have agreed with
FleetBoston Robertson Stephens Inc. that, to the extent that we have separate
lock-up agreements with some of our stockholders, we will not consent to the
stockholders' disposition of any shares subject to those separate lock up
agreements prior to the expiration of the lock-up period. However, FleetBoston
Robertson Stephens Inc. may release any of us from these agreements at any time
during the 180 day period, in its sole discretion and without notice, as to
some or all of the shares covered by these agreements. Currently, there are no
agreements between the representatives and us or any of our stockholders to
release any of us from the lock-up agreements during such 180 day period.
64
<PAGE>
Indemnification of the underwriters. We will indemnify the underwriters
against some civil liabilities, including liabilities under the Securities Act
and liabilities arising from breaches of our representations and warranties
contained in the underwriting agreement. If we are unable to provide this
indemnification, we will contribute to payments the underwriters may be
required to make in respect of those liabilities.
Dealers' compensation. The underwriters initially will offer our shares to
the public at the price specified on the cover page of this prospectus. The
underwriters may allow to selected dealers a concession of not more than
$ per share. The underwriters may also allow, and any other dealers may
reallow, a concession of not more than $ per share to some other dealers.
If all the shares are not sold at the public offering price, the underwriters
may change the public offering price and the other selling terms. A change in
the public offering price will not affect the amount of proceeds that we
receive.
Discretionary accounts. The underwriters have advised us that they do not
expect to sell more than 5% of the total number of shares in this offering to
accounts over which they exercise discretionary authority.
Directed share program. At our request, the underwriters have reserved for
sale, at the initial public offering price, up to shares, or 5%, of the
shares of our common stock offered by this prospectus for sale to some of our
directors, officers and employees and their family members, and other persons
with relationships with us. The number of shares of our common stock available
for sale to the general public will be reduced to the extent those persons
purchase the reserved shares. Any reserved shares which are not orally
confirmed for purchase within one day of the pricing of this offering may be
offered by the underwriters to the general public on the same terms as the
other shares offered by this prospectus.
Online activities. A prospectus in electronic format may be made available
on the Internet sites or through other online services maintained by one or
more of the underwriters of this offering, or by their affiliates. In those
cases, prospective investors may view offering terms online and, depending upon
the particular underwriter, prospective investors may be allowed to place
orders online. The underwriters may agree with us to allocate a specific number
of shares for sale to online brokerage account holders. Any such allocation for
online distributions will be made by the representatives on the same basis as
other allocations.
In particular, a copy of the prospectus in electronic format will be made
available on the internet web sites hosted by E*OFFERING Corp., E*TRADE
Securities, Inc., Merrill Lynch and DLJdirect Inc., an affiliate of Donaldson,
Lufkin & Jenrette Securities Corporation. E*TRADE will accept conditional
offers to purchase shares from all of its customers that pass and complete an
online eligibility profile. In the event that the demand for shares from the
customers of E*TRADE exceeds the amounts of shares allocated to it, E*TRADE
will use a random allocation methodology to distribute shares in even lots of
100 shares per customer. In addition, Merrill Lynch intends to allocate a
limited number of shares for sale to its online brokerage customers. Other than
the prospectus in electronic format, information on these web sites is not a
part of this prospectus and you should not rely on it in making a decision to
invest in our shares.
Stabilization and other transactions. The rules of the SEC generally
prohibit the underwriters from trading in our common stock on the open market
during this offering. However, the underwriters are allowed to engage in some
open market transactions and other activities during this offering that may
cause the market price of our common stock to be above or below that which
would otherwise prevail in the open market. These activities may include
stabilization, short sales and over-allotments, syndicate covering transactions
and penalty bids.
. Stabilizing transactions consist of bids or purchases made by the lead
representative for the purpose of preventing or slowing a decline in
the market price of our common stock while this offering is in
progress.
. Short sales and over-allotments occur when the representatives, on
behalf of the underwriting syndicate, sell more of our shares than they
purchase from us in this offering. In order to cover the resulting
short position, the representatives may exercise the over-allotment
option described above and/or they may engage in syndicate covering
transactions.
65
<PAGE>
. Syndicate covering transactions are bids for or purchases of our common
stock on the open market by the representatives on behalf of the
underwriters in order to reduce a short position incurred by the
representatives on behalf of the underwriters.
. A penalty bid is an arrangement permitting the representatives to
reclaim the selling concession that would otherwise accrue to an
underwriter if the common stock originally sold by that underwriter was
later repurchased by the representatives and therefore was not
effectively sold to the public by such underwriter.
If the underwriters commence these activities, they may discontinue them at
any time without notice. The underwriters may carry out these transactions on
the Nasdaq National Market, in the over-the-counter market or otherwise.
Passive market making. Following the pricing of this offering, and until
the commencement of any stabilizing bid, underwriters and dealers who are
qualified market makers on the Nasdaq National Market may engage in passive
market making transactions. Passive market making is allowed during the period
when the SEC's rules would otherwise prohibit market activity by the
underwriters and dealers who are participating in this offering. Passive market
makers must comply with applicable volume and price limitations and must be
identified as such. In general, a passive market maker must display its bid at
a price not in excess of the highest independent bid for our common stock; but
if all independent bids are lowered below the passive market maker's bid, the
passive market maker must also lower its bid once it exceeds specified purchase
limits. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in our common stock during a specified period and must be discontinued when
such limit is reached. Underwriters and dealers are not required to engage in
passive market making and may end passive market making activities at any time.
Some of the underwriters have in the past and may in the future perform
financial advisory services for us. In November 1999, we entered into an
engagement letter with BancBoston Robertson Stephens Inc., the predecessor of
FleetBoston Robertson Stephens Inc., to serve as the placement agent in
connection with our Series D preferred stock financing. In connection with the
engagement letter, we paid BancBoston Robertson Stephens Inc. an aggregate of
$1.5 million and issued Robertson Stephens & Company, an affiliate of
FleetBoston Robertson Stephens Inc., warrants to purchase an aggregate of
31,210 shares of Series D preferred stock. In addition, MLBC, Inc., an
affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, purchased
124,843 shares of Series D preferred stock from us in March 2000 for an
aggregate purchase price of $1.0 million on the same terms and conditions as
the other purchasers of our Series D preferred stock. Merrill Lynch, Pierce,
Fenner & Smith Incorporated did not act as a placement agent or in any similar
capacity in connection with our Series D financing.
66
<PAGE>
LEGAL MATTERS
The validity of the common stock in this offering will be passed upon by
Venture Law Group, A Professional Corporation, 2800 Sand Hill Road, Menlo Park,
California 94025. Donald M. Keller, Jr., a Director of Venture Law Group, is
our Secretary. Legal matters in connection with this offering will be passed
upon for the underwriters by O'Melveny & Myers LLP, Embarcadero Center West,
275 Battery Street, San Francisco, California 94111. As of the date of this
prospectus, attorneys of Venture Law Group and an investment partnership
controlled by Venture Law Group beneficially own an aggregate of 138,172 shares
of our common stock.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION AVAILABLE TO YOU
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the shares of common stock offered by
this prospectus. This prospectus does not contain all of the information set
forth in the registration statement and its exhibits and schedules. For further
information with respect to us and our common stock being offered, see the
registration statement and its exhibits and schedules. A copy of the
registration statement and its exhibits and schedules may be inspected without
charge at the public reference facilities maintained by the Securities and
Exchange Commission located at Room 1024, 450 Fifth Street, Washington, D.C.
20549 and at the Securities and Exchange Commission's regional offices located
at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of all or any part of the registration statement may be
obtained from these offices upon the payment of the fees prescribed by the
Securities and Exchange Commission. Information on the operation of the public
reference room may be obtained by calling the Securities and Exchange
Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains
a web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission.
67
<PAGE>
MOAI TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity (Deficit) .............................. F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Moai Technologies, Inc.
The reincorporation described in Note 11 to the financial statements has
not been consummated at April 12, 2000. When it has been consummated, we will
be in a position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, stockholders' equity (deficit) and cash flows
present fairly, in all material respects, the financial position of Moai
Technologies, Inc., (the "Company") at December 31, 1998 and 1999 and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States
of America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
April 12, 2000
F-2
<PAGE>
MOAI TECHNOLOGIES, INC.
BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
----------------- December 31,
1998 1999 1999
------- -------- -------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents................... $ 2,038 $ 5,158
Short-term investments...................... 1,154 1,233
Accounts receivable, less allowance for
doubtful accounts of $0 and $110 at
December 31, 1998 and 1999................ 162 1,368
Prepaid expenses and other current assets... 88 691
------- --------
Total current assets....................... 3,442 8,450
Property and equipment, net.................. 398 1,934
Other assets................................. 45 528
------- --------
Total assets............................... $ 3,885 $ 10,912
======= ========
Liabilities, mandatorily redeemable
convertible preferred stock and
stockholders' equity (deficit)
Current liabilities:
Accounts payable............................ $ 121 $ 851
Accrued liabilities......................... 92 1,679
Deferred revenue, current................... 150 1,924
Capital lease obligations, current.......... 48 276
------- --------
Total current liabilities.................. 411 4,730
Deferred revenue, long-term.................. 90 72
Capital lease obligations, long-term......... 68 355
------- --------
Total liabilities.......................... 569 5,157
------- --------
Mandatorily redeemable convertible preferred
stock, $0.0002 par value; 20,959 shares
authorized; 12,083 and 19,978 shares issued
and outstanding as at December 31, 1998 and
1999; no shares issued and outstanding pro
forma; liquidation value, $20,750.......... 5,714 20,645 $ --
------- -------- --------
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
Common stock: $0.0002 par value; 40,000
shares authorized; 7,181 and 7,533 shares
issued and outstanding as at December 31,
1998 and 1999; 27,511 shares issued and
outstanding pro forma..................... 2 2 6
Additional paid-in capital.................. 74 6,269 26,910
Deferred stock-based compensation........... -- (4,447) (4,447)
Note receivable from stockholder............ (44) (44) (44)
Accumulated deficit......................... (2,430) (16,670) (16,670)
------- -------- --------
Total stockholders' equity (deficit)....... (2,398) (14,890) $ 5,755
------- -------- ========
Total liabilities, mandatorily redeemable
convertible preferred stock and
stockholders' equity (deficit).......... $ 3,885 $ 10,912
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MOAI TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
License fees and support........................ $ 50 $ 38 $ 759
Services........................................ 10 22 405
------- -------- ---------
Total revenues................................. 60 60 1,164
------- -------- ---------
Costs of revenues:
License fees and support (excludes $137 of
stock-based compensation in 1999)............. -- -- 268
Services (excludes $202 of stock-based
compensation in 1999)......................... 6 29 1,208
Stock-based compensation........................ -- -- 339
------- -------- ---------
Total costs of revenues........................ 6 29 1,815
------- -------- ---------
Gross profit (loss).............................. 54 31 (651)
Operating expenses:
Sales and marketing (excludes $563 of stock-
based compensation in 1999)................... 26 930 7,119
Research and development (excludes $347 of
stock-based compensation in 1999)............. 92 816 3,552
General and administrative (excludes $301 of
stock-based compensation in 1999)............. 166 575 1,895
Stock-based compensation........................ -- -- 1,211
------- -------- ---------
Total operating expenses....................... 284 2,321 13,777
------- -------- ---------
Loss from operations............................. (230) (2,290) (14,428)
Interest income.................................. -- 59 306
Interest expense................................. -- -- (37)
Other income (expense), net...................... (5) (10) (81)
------- -------- ---------
Net loss......................................... $ (235) $ (2,241) $ (14,240)
======= ======== =========
Net loss per share:
Basic and diluted............................... $ (0.14) $ (0.75) $ (3.12)
======= ======== =========
Weighted average shares......................... 1,730 2,984 4,559
======= ======== =========
Pro forma net loss per share (unaudited):
Basic and diluted............................... $ (0.69)
=========
Weighted average shares......................... 20,633
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MOAI TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Note
Common Stock Additional Deferred Receivable Total
------------- Paid-In Stock-Based from Accumulated Stockholders'
Shares Amount Capital Compensation Stockholder Deficit Equity (Deficit)
------ ------ ---------- ------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997.................. 4,950 $ 1 $ 8 $ -- $-- $ 46 $ 55
Issuance of common stock
for cash and notes
receivable............ 2,183 -- 66 -- (44) -- 22
Net loss................ -- -- -- -- -- (235) (235)
----- ---- ------ ------- ---- -------- --------
Balance at December 31,
1997.................. 7,133 1 74 -- (44) (189) (158)
Exercise of common stock
options............... 48 1 -- -- -- -- 1
Net loss................ -- -- -- -- -- (2,241) (2,241)
----- ---- ------ ------- ---- -------- --------
Balance at December 31,
1998.................. 7,181 2 74 -- (44) (2,430) (2,398)
Exercise of common stock
options............... 332 -- 25 -- -- -- 25
Issuance of common stock
for services.......... 20 -- 173 -- -- -- 173
Deferred stock-based
compensation.......... -- -- 6,067 (6,067) -- -- --
Amortization of deferred
stock-based
compensation.......... -- -- -- 1,550 -- -- 1,550
Stock option
cancellations......... -- -- (70) 70 -- -- --
Net loss................ -- -- -- -- -- (14,240) (14,240)
----- ---- ------ ------- ---- -------- --------
Balance at December 31,
1999.................. 7,533 $ 2 $6,269 $(4,447) $(44) $(16,670) $(14,890)
===== ==== ====== ======= ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MOAI TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (235) $ (2,241) $ (14,240)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................... -- 74 351
Stock-based compensation........................ -- -- 1,550
Issuance of common stock for services........... -- -- 173
Provision for doubtful accounts................. -- -- 110
Changes in assets and liabilities:
Accounts receivable............................ 9 (135) (1,316)
Prepaid expenses and other current assets...... -- (88) (603)
Other assets................................... 13 (44) (483)
Accounts payable............................... 64 57 730
Accrued liabilities............................ 64 28 1,587
Deferred revenue............................... -- 240 1,756
------- -------- ---------
Net cash used in operating activities......... (85) (2,109) (10,385)
------- -------- ---------
Cash flows from investing activities:
Purchase of short-term investments............... -- (1,154) (1,233)
Proceeds from sale of short-term investments..... -- -- 1,154
Purchase of property and equipment............... (17) (312) (1,186)
------- -------- ---------
Net cash used in investing activities......... (17) (1,466) (1,265)
------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of mandatorily redeemable
convertible preferred stock, net of issuance
costs.......................................... 998 4,466 14,931
Proceeds from issuance of common stock........... 22 1 25
Proceeds from issuance of convertible promissory
note........................................... 250 -- --
Principal payments on capital lease obligations.. -- (27) (186)
------- -------- ---------
Net cash provided by financing activities..... 1,270 4,440 14,770
------- -------- ---------
Net increase in cash and cash equivalents........ 1,168 865 3,120
Cash and cash equivalents at beginning of
period......................................... 5 1,173 2,038
------- -------- ---------
Cash and cash equivalents at end of period....... $ 1,173 $ 2,038 $ 5,158
======= ======== =========
Supplemental cash flow disclosures:
Cash paid for interest........................... $ -- $ -- $ 37
======= ======== =========
Supplemental disclosure of non-cash activities:
Issuance of common stock for stockholder note
receivable..................................... $ 44 $ -- $ --
======= ======== =========
Property and equipment acquired under capital
leases......................................... $ -- $ 143 $ 701
======= ======== =========
Deferred stock-based compensation................ $ -- $ -- $ 6,067
======= ======== =========
Conversion of promissory note to mandatorily
redeemable convertible preferred stock......... $ 250 $ -- $ --
======= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 The Company and Summary of Significant Accounting Policies:
The Company
Moai Technologies, Inc. (the "Company") was incorporated in Colorado in
1995 and reincorporated in California in 1997. The Company is a provider of
negotiated eCommerce solutions for online auctions, online procurement and
eMarketplaces. The Company's LiveExchange solution is designed to enable
companies to create scalable, flexible trading exchanges and online auctions
with broad functionality to rapidly increase revenues, cut costs and strengthen
their competitive position. The LiveExchange solution provides strategic and
operational advantages to a variety of industries including computer/high tech,
transportation and logistics, wholesale distribution and manufacturing. The
Company sells primarily to end-user accounts through its own sales
representatives, who are teamed with technical sales engineers. See the
reincorporation described in Note 11.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue recognition
The Company's revenues are comprised of license fees and support and
services. The Company typically licenses its software for periods of one to
five years in exchange for annual licensing fees, which are generally due at
the beginning of each year of the arrangement. The license and support fee
comprises a fixed annual amount, a scalable fee or a combination thereof (the
"Subscription Arrangement"). Scalable fees are based on the value or volume of
transactions enabled or the number of web sites deployed by a customer. The
license and support fee entitles the customer to a license to the software,
telephone support, bug fixes and major and minor upgrades. The Company does not
sell support separately. Services revenues include fees for consulting,
training and hosting services.
Licenses
The Company recognizes the fixed annual fee related to its licenses and
support ratably over the term of the licensing arrangement from the date of
delivery of the software provided there is a signed contract, the fee is fixed
and determinable and collection is probable. The costs directly related to the
Subscription Arrangement, including third party royalties and sales
commissions, are deferred until delivery and then charged to cost of revenues
and sales and marketing expense ratably over the terms of the Subscription
Arrangement. A portion of the scalable fees, which have not been significant to
date, are recognized upon receipt based on the ratio of the elapsed portion of
the term of the licensing arrangement to the total term of the arrangement. The
remainder of the scalable fees is recognized ratably over the remaining term of
the Subscription Arrangement.
When a Subscription Arrangement includes a specified minor or major
upgrade, all of the Subscription Arrangement fee is deferred until the upgrade
is delivered. A portion of the fee is recognized upon delivery of the upgrade
based on the ratio of the elapsed portion of the term of the licensing
arrangement to the total term of the arrangement. The remainder of the
Subscription Arrangement fee is recognized ratably over the remaining term of
the Subscription Arrangement.
F-7
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Services
Revenues for hosting are recognized ratably over the life of the contract.
Revenues and related costs for consulting or training are recognized when the
related services are performed. When the Company's Subscription Arrangements
also include consulting, training or hosting services, the total arrangement
fee is allocated to the Subscription Arrangement and each service element based
on the price for which the Subscription Arrangement and services are sold
separately. The fees allocated to each element are recognized as revenue as
described above. Services revenues and related costs for significant
customization are deferred until the services are completed and then recognized
ratably over the term of the related license. Services rendered in conjunction
with scalable fees are recognized on the same basis as the scalable fees
described above.
Deferred revenue
Deferred revenues include the unamortized portion of the fees due or
received related to Subscription Arrangements and related services, which have
not been earned.
Financial instruments
Cash equivalents represent commercial paper, money market funds, cash and
certificates of deposit with original or remaining maturities at the date of
purchase of three months or less. The carrying amounts reported for cash and
cash equivalents are considered to approximate fair values based upon the short
maturities of those financial instruments.
Short-term investments are classified as available for sale and have
maturities of one year or less as of the date of the balance sheet. The
carrying amount of the Company's short term investments, which are comprised of
commercial paper, certificates of deposit, and corporate debt obligations,
approximates fair value. Realized gains and losses on short-term investments
are calculated using the specific identification method. There were no realized
gains and losses in 1997, 1998, and 1999, and no unrealized holding gains and
losses at December 31, 1997, 1998 and 1999 (see Note 2).
The carrying amounts of certain of the Company's other financial
instruments including accounts receivable, accounts payable and accrued
expenses approximate fair value due to their short maturities. The carrying
amounts of capital lease obligations approximate fair value based on the terms
of similar borrowing arrangements available to the Company.
Risks and uncertainties
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents, short-term
investments and accounts receivable. The Company deposits cash, cash
equivalents and short term-investments with financial institutions that
management considers credit worthy. The Company's accounts receivable are
derived primarily from revenue earned from customers located in the United
States of America. The Company evaluates customer ability to pay on a case-by-
case basis and, if appropriate, requires payment in advance for a portion of
the Subscription Arrangement. The Company maintains an allowance for doubtful
accounts receivable based upon the expected collectibility of accounts
receivable.
F-8
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes revenues from customers in excess of 10% of
total revenues:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Customer A................................................... 58% 60% --
Customer B................................................... 42% -- --
Customer C................................................... -- 13% 11%
</TABLE>
At December 31, 1998, Customer C accounted for 60% of total accounts
receivable, and a separate customer accounted for 15% of total accounts
receivable. At December 31, 1999, no individual customers accounted for more
than 10% of total accounts receivable.
The Company has derived all of its revenues from one product, LiveExchange.
The Company's LiveExchange products, rely on Java application server and
database connectivity technology licensed by a third party supplier. This
supplier is the sole provider to the Company for this technology. The agreement
expires June 30, 2000, but may be renewed upon mutual agreement of the parties.
If the third-party supplier does not renew the agreement, the Company will be
required to obtain similar technology from other parties, which may not be
available to the Company on commercially reasonable terms.
Research and development
Research and development costs are expensed as incurred.
Software development costs
Costs related to research and development of new software products are
charged to research and development expenses as incurred. Software development
costs are capitalized beginning when a product's technological feasibility has
been established, which to date has been when the Company has a working model
of the software, and ending when a product is available for general release to
customers. Substantially all development costs are incurred prior to
establishing a working model. As a result, the Company has not capitalized any
software development costs. Any costs that would be capitalized would be
amortized on a straight line basis over their expected useful lives.
Advertising costs
The Company expenses advertising costs as incurred. During 1998 and 1999,
the Company incurred $16,000 and $1,842,000 of advertising costs, respectively.
There were no advertising costs incurred in 1997.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets,
generally three to five years. Useful lives are as follows: computers three
years; equipment-five years; furniture-five years; software-three years;
leasehold improvements-five years, or the shorter of the lease term of the
respective assets. When assets are retired or otherwise disposed of, the cost
and accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in the period realized.
F-9
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Internal use software costs
Effective January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." During 1999, the Company capitalized $381,000 of software
purchased for internal use.
Long-lived assets
The Company reviews property and equipment for impairment whenever events
or changes in circumstance indicate that the carrying amount of an asset may
not be recoverable. Recoverability is measured by comparison of its carrying
amount to undiscounted future net cash flows the assets are expected to
generate. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value arising from the asset.
Stock-based compensation
The Company records deferred stock-based compensation related to the grant
of options to purchase its common stock to employees in an amount equal to the
excess of the fair value of its common stock over the exercise price of an
option at the date of grant. The deferred stock-based compensation is charged
to stock- based compensation expense over the vesting period the related
employee stock option becomes exercisable using the multiple option approach.
Options to purchase common stock granted to nonemployees and warrants to
purchase common or preferred stock granted to nonemployees or strategic
partners that are fully vested and exercisable are valued using the Black-
Scholes pricing model. The related stock-based compensation is charged to
operations immediately or ratably over the term of any related agreement. When
options or warrants to purchase the Company's common stock that are not vested
and exercisable are granted to nonemployees or strategic partners, the unvested
portion of the option or warrant is valued at the end of each accounting period
using the Black-Scholes pricing model. The related stock-based compensation is
charged to operations over the period the option or warrant vests and becomes
exercisable using the multiple option approach.
Income taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year
and deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. The measurement of current and deferred tax liabilities and assets are
based on provisions of the enacted tax law. The effects of future changes in
tax laws or rates are not anticipated. The measurement of deferred tax assets
is reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
Net loss per share
Basic net loss per share is computed by dividing the net loss for the
period by the weighted average shares of common stock outstanding during the
period. Diluted net loss per share is computed by dividing the net loss for the
period by the weighted average number of common and potential common shares
outstanding during the period. Potential common shares consist of the
incremental number of common shares issuable upon conversion of mandatorily
redeemable convertible preferred stock (using the "as-if converted method"),
common shares issuable upon the exercise of stock options (using the treasury
stock method) and common shares subject to repurchase by the Company. The
calculation of diluted net loss per share excludes potential common shares if
their effect is anti-dilutive.
F-10
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- --------
(in thousands, except
per share data)
<S> <C> <C> <C>
Net loss.......................................... $ (235) $(2,241) $(14,240)
------- ------- --------
Weighted average common shares.................... 5,080 7,146 7,213
Weighted average unvested common shares subject to
repurchase...................................... (3,350) (4,162) (2,654)
------- ------- --------
Denominator for basic and diluted calculation..... 1,730 2,984 4,559
------- ------- --------
Net loss per share--basic and diluted............. $ (0.14) $ (0.75) $ (3.12)
======= ======= ========
</TABLE>
The following table sets forth the weighted average potential common shares
that are excluded from the calculation of diluted net loss per share as their
effect is anti-dilutive:
<TABLE>
<CAPTION>
1997 1998 1999
----- ------ ------
(in thousands)
<S> <C> <C> <C>
Weighted average effect of anti-dilutive securities:
Mandatorily redeemable convertible preferred stock......... 199 8,164 16,074
Stock options.............................................. -- 980 2,507
Warrants................................................... 22 618 702
Common stock subject to repurchase......................... 3,350 4,162 2,654
----- ------ ------
3,571 13,924 21,937
===== ====== ======
</TABLE>
Pro forma stockholders' equity (unaudited)
Effective upon the closing of the Company's initial public offering, the
outstanding shares of mandatorily redeemable convertible preferred stock will
convert into 19,978,000 shares of common stock. The pro forma effect of this
transaction is unaudited and has been reflected in the accompanying pro forma
Stockholders' Equity as of December 31, 1999.
The Series D mandatorily redeemable convertible preferred stock (see Note
11) has not been reflected in the accompanying pro forma stockholders' equity
as of December 31, 1999. Also effective upon the closing of its initial public
offering, the Company will be authorized to issue 150,000,000 shares of common
stock and 10,000,000 shares of undesignated preferred stock.
Pro forma net loss per share (unaudited)
Pro forma net loss per share for the year ended December 31, 1999, is
computed using the weighted average number of common shares outstanding,
including the assumed automatic conversion of the Company's mandatorily
redeemable convertible preferred stock, into shares of the Company's common
stock effective upon the closing of an initial public offering, as if such
conversions occurred on January 1, 1999, or at the date of original issuance,
if later. The resulting unaudited pro forma adjustment includes an increase in
the weighted average shares used to compute basic and diluted net loss per
share of 16,074,000 for 1999. The calculation of pro forma diluted net loss per
share excludes other potential common shares as the effect is anti-dilutive.
Other pro forma potential common shares are comprised of incremental common
stock issuable upon the exercise of stock options, warrants and common stock
subject to repurchase. The pro forma effects of these transactions are
unaudited and have been reflected in the accompanying statement of operations
for 1999.
F-11
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Segment information
The Company provides information to its chief decision maker using one
measurement of profitability for its business and derives all its revenues from
its LiveExchange products and related services.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. There were no differences between net
loss for 1997, 1998 and 1999 and the comprehensive loss for each of these
periods.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including derivative instruments in other
contracts (collectively referred to as derivatives), and for hedging
activities. In June 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 137, "Accounting for
Derivatives Instruments and Hedging Activities-Deferral of Effective Date of
FASB Statement No. 133." SFAS No. 133, as amended by SFAS No. 137, is effective
for all fiscal quarters of all fiscal years beginning after June 15, 2000, with
earlier application encouraged. The Company does not currently, nor does it
intend in the future, to use derivative instruments. The Company is evaluating
the impact that the adoption of SFAS No. 133 will have on its financial
position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements."
SAB 101 provides guidance on the recognition, presentation, and disclosure of
revenue in financial statements filed with the SEC and is effective in the
second quarter of 2000. The Company complies with SAB 101.
NOTE 2 Balance Sheet Components:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1999
----------------- -----------------
Cost Fair Value Cost Fair Value
------ ---------- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents
Cash........................................ $ 217 $ 217 $ 146 $ 146
Certificates of deposit..................... -- -- 155 155
Money market................................ 1,374 1,374 4,857 4,857
Commercial paper............................ 447 447 -- --
------ ------ ------ ------
$2,038 $2,038 $5,158 $5,158
====== ====== ====== ======
Short-term investments
Certificates of deposit..................... $ 498 $ 498 $ 237 $ 237
Commercial paper............................ -- -- 996 996
Corporate bonds............................. 656 656 -- --
------ ------ ------ ------
$1,154 $1,154 $1,233 $1,233
====== ====== ====== ======
</TABLE>
F-12
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- --------
(in thousands)
<S> <C> <C>
Property and equipment, net:
Computers and equipment....................................... $ 272 $ 1,460
Furniture and fixtures........................................ 112 343
Internal-use software......................................... 81 455
Leasehold improvements........................................ 7 44
------ --------
472 2,302
Less: Accumulated depreciation and amortization............... (74) (368)
------ --------
$ 398 $ 1,934
====== ========
</TABLE>
Property and equipment includes $143,000 and $844,000 of computer equipment
under capital leases at December 31, 1998 and 1999, respectively. Accumulated
amortization of assets under capital leases totaled $24,000 and $213,000 at
December 31, 1998 and 1999, respectively.
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- --------
(in thousands)
<S> <C> <C>
Accrued liabilities:
Accrued compensation.......................................... $ 4 $ 643
Accrued consulting............................................ -- 497
Accrued marketing............................................. -- 336
Professional services......................................... 44 117
Sublease security deposit..................................... 28 --
Other......................................................... 16 86
------ --------
$ 92 $ 1,679
====== ========
NOTE 3 Income Taxes:
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are as follows:
<CAPTION>
December 31,
----------------
1998 1999
------- --------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards.............................. $ 930 $ 5,268
Allowance for doubtful accounts............................... -- 44
Accrued liabilities........................................... -- 67
------ --------
Total deferred tax assets..................................... 930 5,379
Less: Valuation allowance..................................... (930) (5,379)
------ --------
Net deferred tax asset....................................... $ -- $ --
====== ========
</TABLE>
The valuation allowance in 1997 was $70,000, which represented a $70,000
increase from 1996.
F-13
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The principal items accounting for the difference between the federal,
state and effective tax rates are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate..................................... (34)% (34)% (34)%
State taxes................................................ (5) (5) (5)
Valuation allowance........................................ 40 41 37
Stock-based compensation................................... -- -- 5
Other...................................................... (1) (2) (3)
--- --- ---
Effective.................................................. -- % -- % -- %
=== === ===
</TABLE>
Due to uncertainty surrounding the realization of the deferred tax assets,
the Company has placed a full valuation allowance against its deferred tax
assets. At such time as it is determined that it is more likely than not the
deferred tax assets are realizable, the valuation allowance will be reduced.
At December 31, 1999, the Company has federal and state net operating loss
carryforwards of approximately $13,300,000 available to reduce future taxable
income, which begin to expire in 2010 and 2001 and expire through 2014 and
2004, respectively.
The utilization of the NOLs is subject to annual limitations including
limitations arising from a greater than 50% change in the ownership of the
Company over a three year period. The amount of such limitations, if any, has
not yet been determined.
NOTE 4 Related Party Transactions:
One of the Company's outside legal firms is also a holder of Series B and C
mandatorily redeemable convertible preferred stock and common stock (less than
1% aggregate ownership). Fees paid to the firm during 1999 totaled $201,000 and
the amount payable at December 31, 1999 was $63,000.
At December 31, 1999, the Chief Executive Officer had a note payable to the
Company of approximately $44,000 for the purchase of the Company's common
stock. The note accrues interest at a rate of 6.10% per year and is due when
the Company's repurchase option with respect to the shares has lapsed in its
entirety or ten days following the Chief Executive Officer's termination.
NOTE 5 Lines of Credit:
As of December 31, 1999, the Company had two lines of credit with a bank
for borrowings up to an aggregate of $1.5 million. No borrowings were
outstanding at December 31, 1999. Borrowings under one of the lines of credit
are limited to 80% of eligible accounts receivable. Both lines bear interest at
the lending bank's prime rate plus 0.50% and are collateralized by the assets
of the Company. Under the terms of the line of credit agreement, the Company is
not permitted to pay any dividends on its capital stock.
NOTE 6 Commitments and contingencies:
Leases
The Company leases office space, computers and equipment under
noncancelable operating and capital leases with various expiration dates
through 2010. Rent expense, net of sublease income, for 1997, 1998 and 1999 was
$13,000, $72,000 and $357,000, respectively. Sublease income totaled $18,000
and $85,000 for
F-14
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
1998 and 1999, respectively. There was no sublease income in 1997. The Company
recognizes rent expense on a straight-line basis over the lease period.
One of the operating leases, which expires in September 2003, has a one-
time option to extend the term of the lease for an additional five years.
Future minimum lease payments under noncancelable capital and operating
leases, including leases entered into subsequent to December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
Years Ended Capital Operating
December 31, Leases Leases
- ------------ ------- ---------
(in thousands)
<S> <C> <C>
2000.......................................................... $ 324 $ 1,170
2001.......................................................... 287 2,104
2002.......................................................... 94 2,111
2003.......................................................... -- 1,920
2004.......................................................... -- 1,593
Thereafter.................................................... -- 7,396
----- -------
Total minimum lease payments.................................. 705 $16,294
=======
Less: Amount representing interest............................ (74)
-----
Present value of capital lease obligations.................... 631
Less: Current portion......................................... (276)
-----
Long-term portion of capital lease obligations................ $ 355
=====
</TABLE>
Employment agreements
The Company has offer letters with certain officers which entitles each of
these officers to accelerated vesting with respect to 50% of his or her
unvested stock options or restricted stock in the event of the Company's change
in control. In addition, each of these officers is entitled to receive a
severance payment equal to twelve months salary and full vesting of his or her
stock options and restricted stock if there is a change in control of the
Company and: (a) he or she is not offered continued employment, or terminated
without cause or resigns for good reason, (b) our offices are relocated outside
the San Francisco Bay area, or (c) he or she remains employed with the Company
or our successor for a period of at least one subsequent year.
The Company has a change in control agreement for every employee with a
title of Vice President or higher. The agreement allows the employee to receive
a severance payment equal to six months salary and six months acceleration of
all options and shares of restricted stock held by these employees in the event
they are terminated without cause or resign for good reason within twelve
months following a change of control of the Company.
Legal Proceedings
The Company is subject to legal proceedings and claims, which arise in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability, with respect to these actions, will not materially affect
the financial position of the Company.
F-15
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 7 Mandatorily Redeemable Convertible Preferred Stock:
The Company's Amended Articles of Incorporation designate and authorize
20,958,660 shares of $0.0002 per share par value Mandatorily Redeemable
Convertible Preferred Stock ("preferred stock"). The shares of preferred stock
at December 31, 1999 have been designated as follows:
<TABLE>
<CAPTION>
Shares Issued
and Outstanding
December 31, Proceeds
Shares --------------- Net of Issuance Liquidation
Authorized 1998 1999 Costs Amount
---------- ------- ------- --------------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Series A................. 6,454 5,833 5,833 $ 1,723 $ 1,750
Series B................. 6,360 6,250 6,250 3,991 4,000
Series C................. 8,145 -- 7,895 14,931 15,000
------ ------- ------- ------- -------
20,959 12,083 19,978 $20,645 $20,750
====== ======= ======= ======= =======
</TABLE>
Changes in the preferred stock during 1997, 1998 and 1999 were as follows:
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
Balance, January 1, 1997......................................... $ --
Issuance of Series A, net of issuance costs of $27............... 1,248
-------
Balance, December 31, 1997....................................... 1,248
Issuance of Series A............................................. 475
Issuance of Series B, net of issuance costs of $9................ 3,991
-------
Balance, December 31, 1998....................................... 5,714
Issuance of Series C, net of issuance costs of $69............... 14,931
-------
Balance, December 31, 1999....................................... $20,645
=======
</TABLE>
Refer to the subsequent sale of Series D mandatorily redeemable
convertible preferred stock in Note 11.
The preferred shareholders have certain rights with respect to dividends,
liquidation, conversion and voting as follows:
Voting
Each holder of preferred stock is entitled to a number of votes equal to
the number of shares of common stock into which the shares of preferred stock
could be converted.
Dividends
Holders of preferred stock are entitled to a non-cumulative dividend, when
and if declared by the Board of Directors, at the fixed rate of $0.024,
$0.0512 and $0.152 per share per annum for Series A, B and C, respectively,
prior and in preference to any distribution on the common stock. Through
December 31, 1999, no dividends on the preferred stock have been declared by
the Board of Directors or paid.
F-16
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A, B and C preferred stock shall be entitled to receive,
prior and in preference to any distribution to the holders of the common stock,
an amount per share equal to $0.30, $0.64 and $1.90 per share, respectively,
plus an amount equal to all accrued but unpaid dividends on such shares.
Through December 31, 1999, no dividends have been declared. Remaining assets
legally available to the Company shall be distributed to the holders of
preferred stock and common stock on a pro rata basis, subject to certain dollar
limitations. If, upon the occurrence of such liquidation, assets legally
available to the Company are insufficient to permit the payment to the Series
A, B and C holders, then the assets legally available to the Company shall be
distributed ratably among the holders of Series A, B and C.
A liquidation, dissolution or winding up, either voluntary or involuntary,
of the Company includes the acquisition of the Company by another person or
entity by means of any transaction excluding any merger effected exclusively
for the purpose of changing the domicile of the Company. As certain of these
events could be outside of the control of the Company, the preferred stock is
categorized as mandatorily redeemable in the Company's balance sheet.
Conversion
Each share of Series A, B and C preferred stock is convertible, at the
option of the holder, according to a conversion ratio, subject to adjustment
for dilution, issuances, splits and combinations. Each share of Series A, B and
C preferred stock automatically converts into the number of shares of common
stock into which such shares are convertible at the then effective conversion
ratio upon: (1) the closing of a public offering of common stock at a per share
price of at least $5.70 per share with gross proceeds of at least $20,000,000
or (2) the consent of the holders of the majority of preferred stock. At
December 31, 1999, each share of Series A, B and C preferred stock is
convertible into one share of common stock. The Company has reserved a total of
19,978,000 shares of common stock to satisfy the conversion of the preferred
stock.
Warrants for Mandatorily Redeemable Convertible Preferred Stock
In December 1997, the Company granted a warrant to a stockholder in
connection with the issuance of Series A preferred stock. the warrant enables
the holder to purchase 583,334 shares of Series A preferred stock at $0.30 per
share. The warrant is immediately exercisable and expires at the earlier of a
merger or initial public offering. Due to the variable nature of the warrant
expiration term, the warrant is accounted for using variable accounting with
the Company estimating the fair value of the warrant at each reporting date. At
December 31, 1997, the Company's estimated fair value of the warrant was
$119,000, using a Black-Scholes pricing method with the following assumptions:
dividend yield at 0%; weighted average expected option term of 10 years;
volatility of 50%; risk-free interest rate of 5.3% and is included in preferred
stock. At December 31, 1998, the Company remeasured this warrant and the fair
value is included in mandatorily redeemable convertible preferred stock. In
April 1999, the Company amended its December 1997 warrant issued to a
stockholder. The amendment provided the holder with a fully exercisable warrant
to purchase 583,334 shares of Series A preferred stock at $0.30 per share. The
amended warrant expires in December 2002. The fair value of the warrant
remeasured on the amendment date amounts to $379,000 and is included in
preferred stock. In January 2000, the warrant was exercised for total proceeds
of $175,000.
In January 1998 and April 1999, the Company, in connection with its capital
lease obligations, granted fully exercisable warrants to purchase 37,334 shares
of Series A and 29,296 shares of Series B preferred stock, respectively. The
estimated fair value of the warrants had an insignificant fair value on the
date of grant using
F-17
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
the Black-Scholes pricing method with the following assumptions: dividend yield
at 0%; weighted average expected option term of 10 years; volatility of 50%;
risk-free interest rate of 5.3%.
In April 1999, the Company granted a contingent warrant to purchase up to
90,000 shares of Series B preferred stock to a financial institution in
connection with two line of credit agreements (see Note 5). The number of
shares exercisable under this contingent warrant is determined as a percent of
the highest aggregate outstanding amount under the lines of credit and the
warrant is not exercisable until the Company borrows against the lines of
credit. At December 31, 1999, the fair value of the warrant assuming 100% of
the lines of credit were borrowed against totaled $1,138,000, using a Black-
Scholes pricing method with the following assumptions: dividend yield at 0%;
weighted average expected option term of seven years; volatility of 80%; risk-
free interest rate of 5.8%. When and if it becomes probable that the
performance criteria will be met, the Company will record the then fair value
associated with the warrant as a charge to interest expense recognized ratably
over the borrowing term.
NOTE 8 Common Stock:
The Company's Amended Articles of Incorporation authorize 40,000,000 shares
of $0.0002 per share par value common stock. Through December 31, 1999, no
dividends on the common stock have been declared by the Board of Directors or
paid.
The Company has the right to repurchase, at the original issue price, the
unvested portion of the common stock issued to employees in connection with
individual employment agreements. The vesting period ranges from one to five
years and 4,912,000, 3,406,000 and 1,900,630 shares with weighted average
repurchase prices of $0.01, $0.01 and $0.01 were subject to repurchase at
December 31, 1997, 1998 and 1999, respectively.
In December 1999, the Company issued 20,000 shares of common stock for
services in connection with an executive search. The Company's estimated fair
market value of the common stock was $173,000 and is included in additional
paid-in-capital. The amount has been charged to general and administrative
expense.
NOTE 9 Stock Option Plan:
In December 1997, the Company adopted the 1997 Stock Option Plan (the
"Plan"). The Plan provides for the granting of stock options to employees,
directors and consultants of the Company. Options granted under the Plan may be
either incentive stock options ("ISO") or nonqualified stock options ("NSO").
The Company has reserved 3,867,000 shares of common stock for issuance under
the Plan. In January 2000, the Company amended the authorized shares under the
Plan to 7,867,000.
Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date
of grant as determined by the Board of Directors, provided, however, that (i)
the exercise price of an ISO and NSO shall not be less than 100% and 85% of the
estimated fair value of the shares on the date of grant, respectively, and (ii)
the exercise price of an ISO and NSO granted to a 10% stockholder shall not be
less than 110% of the estimated fair value of the shares on the date of grant.
To date, options granted generally vest over four years (25% per year) and
expire ten years from the date of grant.
F-18
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes stock option activity under the Plan:
<TABLE>
<CAPTION>
1998 1999
----------------- -----------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------ --------- ------ ---------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Options outstanding at beginning of
period.................................. -- $ -- 1,090 $0.04
Options granted.......................... 1,505 0.04 2,279 0.45
Options exercised........................ (48) 0.03 (332) 0.08
Options canceled......................... (367) 0.03 (189) 0.09
----- -----
Outstanding at end of period.............. 1,090 0.04 2,848 0.36
===== =====
Options exercisable at end of period...... 66 0.03 286 0.07
===== =====
Weighted average minimum value of options
granted during the period............... $0.01 $2.69
===== =====
</TABLE>
There was no stock option activity during the year ended December 31, 1997.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding at Options Exercisable at
December 31, 1999 December 31, 1999
------------------------------------------ --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Outstanding Price
- -------- ----------- ----------- -------- ----------- --------
(in thousands, except per share and contractual life data)
<S> <C> <C> <C> <C> <C>
$0.03 644 8.359 $0.03 181 $0.03
0.07 124 8.847 0.07 8 0.07
0.15 1,119 9.315 0.15 96 0.15
0.75 821 9.761 0.75 1 0.75
1.50 140 9.958 1.50 -- --
----- ---
2,848 9.238 $0.36 286 $0.07
===== ===
</TABLE>
At December 31, 1999, the Company had recorded deferred compensation
related to these options in an amount of $5,997,000 (net of cancellations), of
which $1,550,000 had been amortized to expense during 1999. Assuming no
cancellations, future stock-based compensation expense from options granted
through December 31, 1999 is estimated to be $2,564,000, $1,219,000, $549,000
and $115,000 for 2000, 2001, 2002, and 2003, respectively.
During 1999, options to purchase 2,279,000 shares of the Company's common
stock were granted with exercise prices subsequently deemed to be at prices
below the estimated fair value at the date of grant. The options have a
weighted average exercise price of $0.45 per share when the deemed weighted
average fair value of the common stock under option was $3.03 per share,
respectively.
F-19
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1998 1999
------ ------- --------
(in thousands, except
per share data)
<S> <C> <C> <C>
Net loss:
As reported........................................ $ (235) $(2,241) $(14,240)
====== ======= ========
Pro forma.......................................... $ (235) $(2,243) $(14,260)
====== ======= ========
Basic and diluted net loss per share:
As reported........................................ $(0.14) $ (0.75) $ (3.12)
====== ======= ========
Pro forma.......................................... $(0.14) $ (0.75) $ (3.13)
====== ======= ========
</TABLE>
The Company calculated the minimum value of each option grant on the date
of grant using the minimum value method with the following assumptions:
dividend yield at 0%; weighted average expected option term of five years;
weighted average risk free interest rate of 5.1% and 5.63% for 1998 and 1999,
respectively. There was no stock option activity during 1997.
NOTE 10 Employee Benefit Plan:
The Company sponsors a 401(k) defined contribution plan covering all
employees. Contributions made by the Company are determined annually by the
Board of Directors. Through December 31, 1999, no employer contributions have
been made under this plan.
NOTE 11 Subsequent Events:
Reincorporation
In connection with the Company's initial public offering, the Company will
reincorporate into Delaware.
Stock Split
In January 2000, the Company's Board of Directors approved a 2-for-1 stock
split of the Company's outstanding shares. The stock split is effective
January 14, 2000. All share and per share information included in these
financial statements have been retroactively adjusted to reflect this stock
split.
2000 Employee Stock Purchase Plan
In April 2000, the 2000 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors and will be submitted to the
stockholders for their approval before the date of the Company's initial
public offering, to become effective on the date of the initial public
offering. The Purchase Plan permits participants to purchase common stock
through payroll deductions. A total of 2,000,000 shares of common stock will
be reserved for issuance under the Purchase Plan. The amount reserved under
the Purchase Plan will be subject to an automatic increase on the first day of
the fiscal years beginning in 2001 through 2010 equal to the lesser of
1,000,000 shares, 2% of outstanding common stock on the last day of the
immediately preceding fiscal year, or a lesser number of shares as the Board
of Directors determines.
F-20
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2000 Directors Stock Option Plan
In April 2000, the 2000 Directors Stock Option Plan (the "Director Plan")
was adopted by the Board of Directors and will be submitted to the stockholders
for their approval before the date of the Company's initial public offering, to
become effective on the date of the initial public offering. The Director Plan
provides for the automatic grant of a nonstatutory option to purchase 40,000
shares of common stock to each new non-employee director who becomes a director
after the date of the Company's initial public offering on the date that such
person becomes a director. Each current and future non-employee director will
automatically be granted an additional nonstatutory option to purchase shares
on the day after each of the Company's annual meetings of the stockholders.
Each director who is a member of a board committee who will continue serving on
the board following the meeting and who has been a director of Moai for at
least six months prior to the meeting date will be granted an option to
purchase 10,000 shares of common stock. A total of 600,000 shares of common
stock will be reserved for issuance under the Director Plan.
2000 Stock Plan
In April 2000, the 2000 Stock Plan (the "2000 Plan") was adopted by the
Board of Directors and will be submitted to the stockholders for their approval
before the date of the Company's initial public offering, to become effective
on the date of the initial public offering. The 2000 Plan provides for the
grant of incentive stock options to employees, including employee directors,
and of nonstatutory stock options and stock purchase rights to employees,
directors and consultants. The Company has reserved up to 5,750,000 shares of
common stock for issuance of options and purchase rights. The amount reserved
will automatically increase on the first day of each of the fiscal years
beginning 2001 and 2005 equal to the lesser of 2,500,000 shares, 5% of
outstanding stock on the last day immediately preceding fiscal year, or a
lesser number of shares as determined by the Board of Directors.
Incentive stock options granted under the 2000 Plan must have an exercise
price of at least 100% of the fair market value of the common stock on the date
of grant. The 2000 Plan does not impose restrictions on the exercise or
purchase price applicable to nonstatutory stock options and stock purchase
rights.
2000 Executive Stock Incentive Plan
In March 2000, the 2000 Executive Stock Incentive Plan (the "Incentive
Plan") was adopted by the Board of Directors and stockholders. The Incentive
Plan provides for the granting of incentive stock options, nonstatutory stock
options and stock purchase rights to executive officers of Moai. There are
1,500,000 shares reserved for issuance under the plan.
Stock Option Grants
From January 1, 2000 through April 11, 2000, the Company granted stock
options to purchase an aggregate of 2.1 million shares of common stock at a
weighted average exercise price of $5.92 per share. In connection with the
grant of these stock options the Company recognized deferred stock-based
compensation totaling approximately $12.6 million which will be amortized over
the four year vesting period of the stock options using the multiple option
approach. Assuming no cancellations, future stock-based compensation expense
from these options is estimated to be $7.1 million, $3.3 million, $1.6 million,
$581,000 and $23,000 for 2000, 2001, 2002, 2003 and 2004.
F-21
<PAGE>
MOAI TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Series D Mandatorily Redeemable Convertible Preferred Stock and Warrants
In January and February 2000, the Company issued Series D mandatorily
redeemable convertible preferred stock into common stock on a one for one
basis. Total shares issued were 1,872,659 with a par value of $0.0002 for
$8.01 per share for total cash proceeds of approximately $15 million. The
difference between the fair value of the Series D mandatorily redeemable
convertible preferred stock at the date of grant and the proceeds resulted in a
beneficial conversion feature, which under EITF 98-5, results in a preferred
stock dividend. The Company has used the mid-range of the initial public
offering price of the common stock as an approximation of fair value.
In March 2000, the Company issued additional shares of Series D mandatorily
redeemable convertible preferred stock. Total shares issued were 1,872,659 with
a par value of $0.0002 for $8.01 per share for total cash proceeds of
approximately $15 million. This round of preferred stock was issued to
investors with certain strategic alliance agreements with the Company. The
Series D mandatorily redeemable convertible preferred stock was recorded at
estimated fair value, which was determined on the same basis as noted above.
The differential from the fair value and the proceeds will, depending on the
nature of the strategic alliance agreement, be offset over the service period
against guaranteed revenues generated under the agreement, if any, or be
charged to cost of revenues, sales and marketing expense or research and
development expense.
The rights and preferences of the Series D mandatorily redeemable
convertible preferred stock are consistent with those described in Note 7
related to the Series A, B, and C mandatorily redeemable convertible preferred
stock.
In February 2000, the Company granted a fully exercisable warrant to
purchase the Series D mandatorily redeemable convertible preferred stock to a
company in connection with the placement of the Series D mandatorily redeemable
convertible preferred stock. The warrant enables the holder to purchase
31,210 shares of Series D mandatorily redeemable convertible preferred stock at
$8.01 per share. The fair value of the warrant, which was determined on the
same basis as noted above, was recorded as a reduction to the Series D
mandatorily redeemable convertible preferred stock proceeds.
In March 2000, the Company granted a fully exercisable warrant to purchase
the Series D mandatorily redeemable convertible preferred stock to companies in
connection with strategic alliance agreements. The warrants enable the holders
to purchase 93,633, 75,000 and 93,633 shares of Series D mandatorily redeemable
convertible preferred stock at $8.01 per share. The warrants will terminate, if
unexercised, upon the Company filing an underwritten initial public offering
pursuant to a registration statement under the Securities Act. The warrants
were recorded at fair value, which was determined on the same basis as noted
above. The differential from the fair value and the proceeds will be amortized
to either sales and marketing or research and development expense over the
service period.
In April 2000, the Company granted a warrant to purchase 30,000 shares of
Series D mandatorily redeemable convertible preferred stock at an exercise
price of $8.01 per share in connection with a noncancelable operating lease.
The warrant expires in five years. The fair value will be amortized to general
and administrative expense over the term of the operating lease. The future
minimum lease payments under this lease have been included at Note 6 within
operating leases.
F-22
<PAGE>
[MOAI LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount
to be
Paid
---------
<S> <C>
SEC registration fee................................................. $ 19,800
NASD filing fee...................................................... 8,000
Nasdaq National Market listing fee................................... 95,000
Printing and engraving expenses...................................... 200,000
Legal fees and expenses.............................................. 400,000
Accounting fees and expenses......................................... 550,000
Blue Sky qualification fees and expenses............................. 5,000
Transfer Agent and Registrar fees.................................... 5,000
Directors' and Officers' Insurance fees.............................. *
Miscellaneous fees and expenses...................................... *
---------
Total.............................................................. $ *
=========
</TABLE>
- --------
*to be filed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Our certificate of incorporation (Exhibit
3.2 hereto) and our bylaws (Exhibit 3.4 hereto) provide for indemnification of
our directors, officers, employees and other agents to the maximum extent
permitted by Delaware Law. In addition, we have entered into Indemnification
Agreements (Exhibit 10.4 hereto) with our officers and directors. The
Underwriting Agreement (Exhibit 1.1) also provides for cross-indemnification
among Moai and the underwriters with respect to certain matters, including
matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since June 15, 1997, we have sold and issued the following securities:
1. On June 15, 1997, we sold 4,500,000 shares of common stock for an
aggregate purchase price of $9,000 to two founders.
2. On June 25, 1997, we sold 250,000 shares of common stock for an
aggregate purchase price of $500 to two founders.
3. On October 22, 1997, we sold 200,000 shares of common stock for a
purchase price of $400 to an employee.
4. On December 9, 1997, we sold 1,477,500 shares of common stock for a
purchase price of $44,325 to an officer.
5. On December 9, 1997, we issued a promissory note in the principal
amount of $250,000 to an accredited investor.
II-1
<PAGE>
6. On December 10, 1997, we sold 459,834 shares of common stock for an
aggregate purchase price of $13,795.02 to six accredited investors.
7. On December 18, 1997, we sold 4,251,504 shares of Series A
preferred stock for an aggregate purchase price of $1,275,451.20,
including cancellation of the notes described in 5 above, to three
accredited investors.
8. On December 18, 1997, we issued warrants for the purchase of
583,334 shares of Series A preferred stock which have an aggregate
exercise price of $175,000.20 to two accredited investors.
9. On December 19, 1997, we sold 245,834 shares of common stock for an
aggregate purchase price of $7,375.02 to two accredited investors.
10. On January 15, 1998, we sold 1,581,828 shares of Series A
preferred stock for an aggregate purchase price of $474,548.40 to two
accredited investors.
11. On January 31, 1998, we issued warrants for the purchase of 37,334
shares of Series A preferred stock which have an aggregate exercise price
of $11,200.20 to two accredited investors.
12. On August 17, 1998, we sold 6,250,000 shares of Series B preferred
stock for an aggregate purchase price of $4,000,000 to 10 accredited
investors.
13. On April 28, 1999, we issued warrants for the purchase of 119,296
shares of Series B preferred stock which have an aggregate exercise price
of $76,349.44 to three accredited investors.
14. On July 21, 1999, we sold 7,894,738 shares of Series C preferred
stock for an aggregate purchase price of $15,000,002.20 to 15 accredited
investors.
15. On December 1, 1999, we sold 20,000 shares of common stock for a
purchase price of $10.00 to an accredited investor.
16. On January 18, 2000, we sold 583,334 shares of Series A preferred
stock pursuant to the exercise of warrants described in 8 above, to two
accredited investors.
17. On January 25, 2000, we sold 1,248,439 shares of Series D
preferred stock for an aggregate purchase price of $9,999,996.39 to three
accredited investors.
18. On January 25, 2000, we issued warrants for the purchase of 12,484
shares of Series D preferred stock which have an exercise price of
$99,996.84 to an accredited investor.
19. On February 11, 2000, we sold 624,220 shares of Series D preferred
stock for an aggregate purchase price of $5,000,002.20 to 12 accredited
investors.
20. On March 6, 2000, we sold 1,248,439 shares of Series D preferred
stock for an aggregate purchase price of $9,999,996.39 to 4 accredited
investors.
21. On March 6, 2000, we issued warrants for the purchase of 181,117
shares of Series D preferred stock which have an aggregate exercise price
of $1,450,747.17 to three accredited investors.
22. On March 10, 2000, we sold 624,220 shares of Series D preferred
stock for a purchase price of $5,000,002.20 to an accredited investor.
23. On March 10, 2000, we issued warrants for the purchase of 99,875
shares of Series D preferred stock which have an aggregated exercise price
of $799,998.75 to two accredited investors.
24. On April 12, 2000, we issued warrants for the purchase of 30,000
shares of Series D preferred stock which have an aggregate purchase price
of $240,300 to an accredited investor.
25. From December 4, 1997 to April 11, 2000, we issued options to
purchase an aggregate of 5,882,496 shares of common stock to employees,
directors and consultants pursuant to the 1997 Stock Plan and the 2000
Executive Stock Incentive Plan.
II-2
<PAGE>
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Item 2 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued
in such transactions. All recipients had adequate access, through their
relationships with us, to information about us.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of Moai.
3.2* Amended and Restated Certificate of Incorporation of Moai (as
proposed).
3.3* Bylaws of Moai.
3.4* Bylaws of Moai (as proposed).
4.1* Specimen Stock Certificate.
4.2 Warrant to purchase Series A preferred stock dated January 31, 1998
issued to William Kirsch.
4.3 Warrant to purchase Series A preferred stock dated January 31, 1998
issued to David Campbell.
4.4 Warrant to purchase Series B preferred stock dated December 5, 1998
issued to William Kirsch.
4.5 Warrant to purchase Series B preferred stock dated December 5, 1998
issued to David Campbell.
5.1* Opinion of Venture Law Group regarding the legality of the common stock
being registered.
10.1 Third Amended and Restated Investors' Rights Agreement dated January
25, 2000 among Moai and certain investors, as amended March 10, 2000.
10.2 Form of Indemnification Agreement between Moai and each of its
executive officers and directors.
10.3* 1997 Stock Plan (as amended) and form of Stock Option Agreement and
Restricted Stock Purchase Agreement.
10.4* 2000 Stock Plan and forms of Stock Option Agreement and Restricted
Stock Purchase Agreement.
10.5* 2000 Executive Incentive Stock Plan and form of Stock Option Agreement
and Restricted Stock Purchase Agreement.
10.6* 2000 Employee Stock Purchase Plan and form of Subscription Agreement.
10.7* 2000 Directors' Stock Option Plan and form of Stock Option Agreement.
10.8* 2000 Executive Incentive Stock Plan and form of Stock Option Agreement
and Restricted Stock Purchase Agreement.
10.9* Revised Offer Letter with Anne Perlman, as amended.
10.10* Revised Offer Letter with Devapratim Hazarika, as amended.
10.11* Revised Offer Letter with Frank T. Kang, as amended.
10.12 Offer Letter with Matthew R. Miller.
10.13 Form of Change of Control Agreement between Moai and Philip N. Smith,
David Oller, Arnold Waldstein, Michelle Messina, Joseph Collins and
Denis Concordel and Raymond T. Letulle, Jr.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.14 Stock Restriction Agreement dated December 19, 1997 between Moai and
Devapratim Hazarika.
10.15 Stock Restriction Agreement dated December 19, 1997 between Moai and
Frank T. Kang.
10.16 Common Stock Purchase Agreement dated December 9, 1997 between Moai and
Anne Perlman.
10.17 Letter Agreement dated July 21, 1999 between Moai and Reuters Holdings
Switzerland SA.
10.18* Amended and Restated Engagement Letter dated November 23, 1999 between
Moai and BancBoston Robertson Stephens Inc.
10.19* Lease dated August 5, 1998 between Moai and Jessie Properties, LLC.
10.20 Lease dated December 17, 1999 between Moai and 800 California, LLC.
23.1* Independent Accountants' Consent.
23.2* Consent of Attorney (see Exhibit 5.1).
24.1 Power of Attorney (see Part II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
(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 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 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San Francisco State of
California on April 13, 2000.
Moai Technologies, Inc.
/s/ Anne Perlman
By: _________________________________
Anne Perlman
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Anne
Perlman and Philip Smith, and each of them, as his attorney-in-fact, with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective
amendments), and any and all Registration Statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this Registration Statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Anne Perlman Chief Executive Officer April 13, 2000
______________________________________ and Director (Principal
Anne Perlman Executive Officer)
/s/ Philip N. Smith Chief Financial Officer April 13, 2000
______________________________________ (Principal Financial and
Philip N. Smith Accounting Officer)
/s/ Steven L. Eskenazi Director April 13, 2000
______________________________________
Steven L. Eskenazi
/s/ Devapratim Hazarika Director April 13, 2000
______________________________________
Devapratim Hazarika
/s/ C. Lloyd Mahaffey Director April 13, 2000
______________________________________
C. Lloyd Mahaffey
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of Moai.
3.2* Amended and Restated Certificate of Incorporation of Moai (as
proposed).
3.3* Bylaws of Moai.
3.4* Bylaws of Moai (as proposed).
4.1* Specimen Stock Certificate.
4.2 Warrant to purchase Series A preferred stock dated January 31, 1998
issued to William Kirsch.
4.3 Warrant to purchase Series A preferred stock dated January 31, 1998
issued to David Campbell.
4.4 Warrant to purchase Series B preferred stock dated December 5, 1998
issued to William Kirsch.
4.5 Warrant to purchase Series B preferred stock dated December 5, 1998
issued to David Campbell.
5.1* Opinion of Venture Law Group regarding the legality of the common stock
being registered.
10.1 Third Amended and Restated Investors' Rights Agreement dated January
25, 2000 among Moai and certain investors, as amended March 10, 2000.
10.2 Form of Indemnification Agreement between Moai and each of its
executive officers and directors.
10.3* 1997 Stock Plan (as amended) and form of Stock Option Agreement and
Restricted Stock Purchase Agreement.
10.4* 2000 Stock Plan and forms of Stock Option Agreement and Restricted
Stock Purchase Agreement.
10.5* 2000 Executive Incentive Stock Plan and form of Stock Option Agreement
and Restricted Stock Purchase Agreement.
10.6* 2000 Employee Stock Purchase Plan and form of Subscription Agreement.
10.7* 2000 Directors' Stock Option Plan and form of Stock Option Agreement.
10.8* 2000 Executive Incentive Stock Plan and form of Stock Option Agreement
and Restricted Stock Purchase Agreement.
10.9* Revised Offer Letter with Anne Perlman, as amended.
10.10* Revised Offer Letter with Devapratim Hazarika, as amended.
10.11* Revised Offer Letter with Frank T. Kang, as amended.
10.12 Offer Letter with Matthew R. Miller.
10.13 Form of Change of Control Agreement between Moai and Philip N. Smith,
David Oller, Arnold Waldstein, Michelle Messina, Joseph Collins and
Denis Concordel and Raymond T. Letulle, Jr.
10.14 Stock Restriction Agreement dated December 19, 1997 between Moai and
Devapratim Hazarika.
10.15 Stock Restriction Agreement dated December 19, 1997 between Moai and
Frank T. Kang.
10.16 Common Stock Purchase Agreement dated December 9, 1997 between Moai and
Anne Perlman.
10.17 Letter Agreement dated July 21, 1999 between Moai and Reuters Holdings
Switzerland SA.
10.18* Amended and Restated Engagement Letter dated November 23, 1999 between
Moai and BancBoston Robertson Stephens Inc.
10.19* Lease dated August 5, 1998 between Moai and Jessie Properties, LLC.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.20 Lease dated December 17, 1999 between Moai and 800 California, LLC.
23.1* Independent Accountants' Consent.
23.2* Consent of Attorney (see Exhibit 5.1).
24.1 Power of Attorney (see Part II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
<PAGE>
EXHIBIT 4.2
- -----------
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
SERIES A PREFERRED STOCK WARRANT
of
MOAI TECHNOLOGIES, INC.
THIS CERTIFIES THAT WILLIAM KIRSCH (the "Warrantholder") is entitled to
subscribe for and purchase from MOAI TECHNOLOGIES, INC., a California
corporation (the "Company") during the Exercise Period (as defined below) 13,234
fully-paid and non-assessable shares of the Company's Series A Preferred Stock
(the "Preferred"), at a price of $.60 per share (the "Warrant Price"), such
price and such number of shares being subject to adjustment upon the occurrence
of the contingencies set forth in this Warrant.
Upon delivery of this Warrant, together with payment of the Warrant Price
of the shares of the Preferred thereby purchased, at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Preferred so purchased.
The date at which the Company receives (i) the Warrant and (ii) payment for the
shares of Preferred, either by payment in cash or by check, or by notice of the
Warrantholder's intent to use the proceeds from the concurrent sale of shares at
a Public Offering (as defined below) or notice of intent to use shares of
Preferred as payment, both as described in Section 1 below, or such later date
as such notice shall specify, shall be referred to herein as the "Exercise
Date." All shares of Preferred which may be issued upon the exercise of this
Warrant will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: Subject to the terms and conditions set forth
-------------------
herein, this Warrant may be exercised in whole or in part, at any time on or
before January 31, 2008 by the surrender of this Warrant together with the
"Notice of Exercise" and "Investment Representation Statement" attached hereto
as Exhibits A and B, respectively, duly completed and executed at the principal
office of the Company and by the payment to the Company, in the manner provided
for in the following paragraph, of the Warrant Price for all of the Preferred
purchased. The Company shall, within 10 days after such delivery, prepare a
certificate for the shares of Preferred purchased in the name of the holder of
This Warrant, or as such holder may direct
<PAGE>
(subject to the restrictions upon transfer contained herein and upon payment by
such holder hereof of any applicable transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash
or check, or from the proceeds of the concurrent sale of shares of Common Stock
issued upon conversion of shares of Preferred issued upon exercise of this
Warrant sold by the Warrantholder pursuant to a Public Offering of an amount
equal to the aggregate Warrant Price of the shares being purchased. In lieu of
exercising this Warrant as described above, the Warrantholder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with notice of such election (which notice shall
include the number of shares being exercised hereunder), in which event the
Company shall issue to the Warrantholder a number of shares of Preferred (or
Common Stock if the Preferred has been converted into Common Stock) equal to the
quotient obtained by dividing (x) the value of the shares of Preferred being
exercised (the "Exercised Shares") on the Exercise Date, which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Exercised
Shares immediately prior to the exercise of the Warrant from (B) the aggregate
fair market value of the Exercised Shares on the Exercise Date, by (y) the fair
market value of one share of Preferred (or Common Stock if the Preferred has
been converted into Common Stock) as of the Exercise Date. No fractional shares
shall be issuable upon exercise of this Warrant 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 of this Warrant an amount in
cash equal to the fair market value of the resulting fractional share on the
Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the
closing of a Public Offering, (ii) the closing of any consolidation or merger of
the Company with or into any other unaffiliated corporation, entity or person,
or any other reorganization in which the Company shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (a "Merger"),
or (iii) the sale of all or substantially all of the assets of the Company (a
"Sale"). The Company shall notify the holder if an event or transaction of the
kind described in this section is proposed at least fifteen days prior to the
closing of such event or transaction; such notice shall also contain such
details of the proposed event or transaction as are reasonable in the
circumstances.
(a) Assumption of Warrant: If upon the closing of any Sale or Merger
---------------------
the successor entity assumes the obligations of this Warrant, then this Warrant
shall survive any Sale or Merger end be exercisable for the same securities,
cash, and property as would be payable for the Shares issuable upon exercise of
the unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Sale or Merger and subsequent closing. The Warrant Price
shall be adjusted accordingly.
(b) Nonassumption: If upon the closing of any Sale or Merger the
-------------
successor entity does not assume the obligations of this Warrant and the Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall expire upon such closing.
-2-
<PAGE>
Certificates for the shares issuable upon exercise of this
Warrant and, if applicable, a new Warrant evidencing the balance of the shares
remaining subject to this Warrant shall be issued as of the Exercise Date and
shall be delivered to the holder within thirty days following the Exercise Date.
For purposes of this Section 1, the fair market value of the
Preferred (or Common Stock if the Preferred has been converted into Common
Stock) shall be determined as follows:
(i) If this Warrant is exercised in connection with and
contingent upon a Public Offering, and if the Company's registration statement
relating to such Public Offering has been declared effective by the Securities
and Exchange Commission, then the fair market value shall be the initial "Price
to Public" specified in the final prospectus with respect to such offering.
(ii) If this Warrant is exercised in connection with any Sale
or Merger, then the fair market value per share shall be equal to the sum of all
cash, stock and other consideration received by the Company, divided by the
number of outstanding shares of the Company's capital stock (on an as-converted
into Common Stock basis) as of the closing of such transaction.
(iii) If this Warrant is not exercised in connection with and
contingent upon a Public Offering, a Sale or Merger, then the fair market value
shall be determined by the Company's Board of Directors acting in good faith in
such fashion as is reasonable and normal for companies in a similar stage of
development.
2. Transfer of Warrant. Except in accordance with the conditions
-------------------
contained in Section 3 hereof, this Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition
--------------------------------------------
to any transfer or exercise of this Warrant that the Company shall have
received, at the time of such transfer or exercise, a representation in writing
that this Warrant (or portion hereof transferred) or the shares of Preferred or
other securities being issued upon such exercise, as the case may be, are being
acquired for investment not with a view to any sale or distribution thereof, or
a statement of the pertinent facts covering any proposed distribution thereof.
It shall be a further condition to any transfer of this Warrant or of any or all
of the shares of Preferred issued upon exercise of this Warrant, or Common Stock
issued upon conversion of the Preferred, other than a transfer registered under
the Act, that the Company shall have received a legal opinion, in form and
substance satisfactory to the Company and its counsel reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. The
requirement of a legal opinion shall not apply to the transfer of this Warrant
or any part thereof to a partnership of which the Warrantholder is a partner or
to the beneficial owners of such partnership without further consideration, so
long as such transfer is in compliance with applicable securities laws and the
beneficial owners are accredited investors. Each certificate evidencing the
shares of Preferred issued upon exercise of this Warrant, or Common Stock issued
upon conversion of the Preferred, or upon any transfer of such shares (other
than a transfer registered under the Act or any subsequent transfer or shares so
-3-
<PAGE>
registered) shall, at the option of the Company, contain a legend, in form and
substance satisfactory to the Company and its counsel, restricting the transfer
of such shares to sales or other dispositions exempt from the requirements of
the Act.
It shall be a further condition to each such transfer of this Warrant
that the transferee shall receive and accept a Warrant, of like tenor and date,
executed by the Company.
4. Adjustment of Warrant Price and Number of Shares Purchasable
------------------------------------------------------------
Hereunder. The Warrant Price and the number of shares purchasable hereunder
- ---------
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Subdivisions or Combinations. In case the Company shall at any
----------------------------
time during the Exercise Period subdivide the outstanding shares of the
Preferred, the Warrant Price in effect immediately prior to such subdivision
shall be proportionately decreased, and in case the Company shall at any time
during the Exercise Period combine the outstanding shares of the Preferred, the
Warrant Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time during
---------------
the Exercise Period pay a dividend with respect to Preferred payable in
Preferred, then the Warrant Price in effect immediately prior to the record date
for distribution of such dividend shall be adjusted to that price determined by
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction (i) the numerator of which shall be the total number of shares of
Preferred outstanding immediately prior to such dividend and (ii) the
denominator of which shall be the total number of shares of Preferred
outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to subdivisions
----------------
(b) or (c) of this Section 4, the registered holder of this Warrant shall
thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Preferred, calculated to the
nearest full share, obtained by multiplying the number of shares of Preferred
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Price.
(d) Reclassification. In case of any reclassification, change or
----------------
conversion during the Exercise Period of securities of the class or series
issuable upon exercise of this Warrant (other than as a result of a merger,
subdivision or combination described above), or in case of any Merger where the
successor entity agrees to assume the obligations of this Warrant, 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 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 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
conversion by a holder of the number of shares of Preferred then purchasable
under this Warrant Such new warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to
-4-
<PAGE>
the adjustments provided for in this Section 4. The provisions of this
subparagraph (d) shall similarly apply to successive reclassifications, changes,
and conversions.
(e) Antidilution Rights. The antidilution rights applicable to the
-------------------
Preferred are set forth in its Articles of Incorporation (the "Articles"), as
amended from time to time, a true and complete copy in its current form which is
attached hereto as Exhibit C. Such rights shall not be restated, amended or
modified in any manner which adversely affects the Warrantholder differently
than the holders of Series A Preferred without such Warrantholder's prior
written consent. The Company shall promptly provide the Warrantholder hereof
with any restatement, amendment or modification to the Articles promptly after
the same has been made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company,
which notice shall state the Warrant Price as adjusted and the increased or
decreased number of shares purchasable upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to
effect an initial public offering of the Company's Common Stock pursuant to an
effective registration statement under the Act (a "Public Offering"), the
Company shall send to the Warrantholder at least fifteen days' prior written
notice of the closing date of the same; provided, however, that the failure to
give such notice shall not give the Warrantholder the right to delay or
otherwise restrain or affect the Public Offering. Such written notice may be in
lieu of the notice required under the third paragraph of Section 1 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 for the Warrantholder.
6. Registration. The Warrantholder shall be entitled to the registration
------------
rights as set forth in that certain Investors' Rights Agreement dated December
18, 1997, entered into by the Company and certain Investors (the "Registration
Rights Agreement"), provided that the Warrantholder hereby agrees to be bound by
such provisions.
7 Representations of Warrantholder. Concurrently with the receipt of
--------------------------------
this Warrant and, upon exercise of this Warrant, the holder of this Warrant
shall have executed the investment Representation Statement in the form attached
hereto as Exhibit B.
8. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Warrantholder, as of the Effective Date set forth below, 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 except as to (i) the effect of applicable bankruptcy
and similar laws affecting the rights of creditors, and (ii) the effect of rules
of law governing specific performance, injunctive relief and other equitable
remedies.
-5-
<PAGE>
(b) The Preferred has 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 non-assessable, and free from all taxes,
liens and charges with respect to the issue of such shares.
(c) The rights, preference, privileges and restrictions granted to
or imposed upon the Preferred and the holders thereof are as set forth in the
Articles and the Registration Rights Agreement, a true and complete copy of
which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant does not, and the
issuance of the Preferred upon exercise of this Warrant in accordance with the
terms hereof does not, conflict with the Company's Articles or Bylaws, does not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and does not conflict with or contravene any
provision of, or constitute a default under, any 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, other than state or
federal securities law filings.
(e) During the period within which this Warrant may be exercised,
the Company will at all times have authorized and reserved for the purpose of
the issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Preferred issued or issuable upon the exercise hereof,
and all of the obligations of the Company relating to the Preferred issuable
upon exercise of this Warrant shall survive the exercise of this Warrant
(b) No holder of this Warrant, as such, shall be entitled to vote
or receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Articles of
Incorporation 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 action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
-6-
<PAGE>
(e) 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 delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
date and tenor.
(f) This Warrant shall be governed by the internal laws of the
State of California.
(g) So long as this Warrant has not terminated, the Warrantholder
shall be entitled to receive such financial information as other holders of the
same series Preferred stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Effective Date of Warrant: January 31, 1998
COMPANY: MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
-----------------------------
Print Name: Anne Perlman
---------------------
Title: President and CEO
--------------------------
ACCEPTED AND AGREED:
WARRANTHOLDER: WILLIAM KIRSCH
By: /s/ William Kirsch
-----------------------------
Print Name: William Kirsch
---------------------
Title: Self
--------------------------
-7-
<PAGE>
EXHIBIT 4.3
- -----------
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT') AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
SERIES A PREFERRED STOCK WARRANT
of
MOAI TECHNOLOGIES, INC.
THIS CERTIFIES THAT DAVID CAMPBELL (the "Warrantholder") is entitled to
subscribe for and purchase from MOAI TECHNOLOGIES, INC., a California
corporation (the "Company") during the Exercise Period (as defined below) 5,433
fully-paid and non-assessable shares of the Company's Series A Preferred Stock
(the "Preferred"), at a price of $.60 per share (the "Warrant Price"), such
price and such number of shares being subject to adjustment upon the occurrence
of the contingencies set forth in this Warrant.
Upon delivery of this Warrant, together with payment of the Warrant Price
of the shares of the Preferred thereby purchased, at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Preferred so purchased.
The date at which the Company receives (i) the Warrant and (ii) payment for the
shares of Preferred, either by payment in cash or by check, or by notice of the
Warrantholder's intent to use the proceeds from the concurrent sale of shares at
a Public Offering (as defined below) or notice of intent to use shares of
Preferred as payment, both as described in Section 1 below, or such later date
as such notice shall specify, shall be referred to herein as the "Exercise
Date." All shares of Preferred which may be issued upon the exercise of this
Warrant will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant. Subject to the terms and conditions set forth
-------------------
herein, this Warrant may be exercised in whole or in part, at any time on or
before January 31, 2008 by the surrender of this Warrant together with the
"Notice of Exercise" and "Investment Representation Statement" attached hereto
as Exhibits A and B, respectively, duly completed and executed at the principal
office of the Company and by the payment to the Company, in the manner provided
for in the following paragraph, of the Warrant Price for all of the Preferred
purchased. The Company shall, within 10 days after such delivery, prepare a
certificate for the shares of Preferred purchased in the name of the holder of
this Warrant, or as such holder may direct
<PAGE>
(subject to the restrictions upon transfer contained herein and upon payment by
such holder hereof of any applicable transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the concurrent sale of shares of Common Stock
issued upon conversion of shares of Preferred issued upon exercise of this
Warrant sold by the Warrantholder pursuant to a Public Offering of an amount
equal to the aggregate Warrant Price of the shares being purchased. In lieu of
exercising this Warrant as described above, the Warrantholder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with notice of such election (which notice shall
include the number of shares being exercised hereunder), in which event the
Company shall issue to the Warrantholder a number of shares of Preferred (or
Common Stock if the Preferred has been converted into Common Stock) equal to the
quotient obtained by dividing (x) the value of the shares of Preferred being
exercised (the "Exercised Shares") on the Exercise Date, which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Exercised
Shares immediately prior to the exercise of the Warrant from (B) the aggregate
fair market value of the Exercised Shares on the Exercise Date, by (y) the fair
market value of one share of Preferred (or Common Stock if the Preferred has
been converted into Common Stock) as of the Exercise Date. No fractional shares
shall be issuable upon exercise of this Warrant, 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 of this Warrant an amount in
cash equal to the fair market value of the resulting fractional share on the
Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing of
a Public Offering, (ii) the closing of any consolidation or merger of the
Company with or into any other unaffiliated corporation, entity or person, or
any other reorganization in which the Company shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (a "Merger") ,
or (iii) the sale of all or substantially all of the assets of the Company (a
"Sale"). The Company shall notify the holder if an event or transaction of the
kind described in this section is proposed at least fifteen days prior to the
closing of such event or transaction; such notice shall also contain such
details of the proposed event or transaction as are reasonable in the
circumstances.
(a) Assumption of Warrant. If upon the closing of any Sale or
---------------------
Merger the successor entity assumes the obligations of this Warrant, then this
Warrant shall survive any Sale or Merger and be exercisable for the same
securities, cash, and property as would be payable for the Shares issuable upon
exercise of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Sale or Merger and subsequent closing.
The Warrant Price shall be adjusted accordingly.
(b) Nonassumption. If upon the closing of any Sale or Merger the
-------------
successor entity does not assume the obligations of this Warrant and the Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall expire upon such closing.
-2-
<PAGE>
Certificates for the shares issuable upon exercise of this Warrant
and, if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
For purposes of this Section 1, the fair market value of the Preferred
(or Common Stock if the Preferred has been converted into Common Stock) shall be
determined as follows:
(i) If this Warrant is exercised in connection with and
contingent upon a Public Offering, and if the Company's registration statement
relating to such Public Offering has been declared effective by the Securities
and Exchange Commission, then the fair market value shall be the initial "Price
to Public" specified in the final prospectus with respect to such offering.
(ii) If this Warrant is exercised in connection with any Sale
or Merger, then the fair market value per share shall be equal to the sum of all
cash, stock and other consideration received by the Company, divided by the
number of outstanding shares of the Company's capital stock (on an as-converted
into Common Stock basis) as of the closing of such transaction.
(iii) If this Warrant is not exercised in connection with and
contingent upon a Public Offering, a Sale or Merger, then the fair market value
shall be determined by the Company's Board of Directors acting in good faith in
such fashion as is reasonable and normal for companies in a similar stage of
development
2. Transfer of Warrant. Except in accordance with the conditions
-------------------
contained in Section 3 hereof, this Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a
--------------------------------------------
condition to any transfer or exercise of this Warrant that the Company shall
have received, at the time of such transfer or exercise, a representation in
writing that this Warrant (or portion hereof transferred) or the shares of
Preferred or other securities being issued upon such exercise, as the case may
be, are being acquired for investment not with a view to any sale or
distribution thereof, or a statement of the pertinent facts covering any
proposed distribution thereof. It shall be a further condition to any transfer
of this Warrant or of any or all of the shares of Preferred issued upon exercise
of this Warrant, or Common Stock issued upon conversion of the Preferred, other
than a transfer registered under the Act, that the Company shall have received a
legal opinion, in form and substance satisfactory to the Company and its
counsel, reciting the pertinent circumstances surrounding the proposed transfer
and stating that such transfer is exempt from the prospectus and the
registration requirements of the Act. The requirement of a legal opinion shall
not apply to the transfer of this Warrant or any part thereof to a partnership
of which the Warrantholder is a partner or to the beneficial owners of such
partnership without further consideration, so long as such transfer is in
compliance with applicable securities laws and the beneficial owners are
accredited investors. Each certificate evidencing the shares of Preferred issued
upon exercise of this Warrant, or Common Stock issued upon conversion of the
Preferred, or upon any transfer of such shares (other than a transfer registered
under the Act or any subsequent transfer or shares so registered) shall, at the
option of the Company, contain a legend, in form and substance
-3-
<PAGE>
satisfactory to the Company and its counsel, restricting the transfer of such
shares to sales or other dispositions exempt from the requirements of the Act
It shall be a further condition to each such transfer of this Warrant that
the transferee shall receive and accept a Warrant, of like tenor and date,
executed by the Company.
4. Adjustment of Warrant Price and Number of Shares Purchasable
------------------------------------------------------------
Hereunder. The Warrant Price and the number of shares purchasable hereunder
- ---------
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Subdivisions or Combinations. In case the Company shall at
----------------------------
any time during the Exercise Period subdivide the outstanding shares of the
Preferred, the Warrant Price in effect immediately prior to such subdivision
shall be proportionately decreased, and in case the Company shall at any time
during the Exercise Period combine the outstanding shares of the Preferred, the
Warrant Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time
---------------
during the Exercise Period pay a dividend with respect to Preferred payable in
Preferred, then the Warrant Price in effect immediately prior to the record date
for distribution of such dividend shall be adjusted to that price determined by
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction (i) the numerator of which shall be the total number of shares of
Preferred outstanding immediately prior to such dividend and (ii) the
denominator of which shall be the total number of shares of Preferred
outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to
----------------
subdivisions (b) or (c) of this Section 4, the registered holder of this Warrant
shall thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Preferred, calculated to the
nearest full share, obtained by multiplying the number of shares of Preferred
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Price.
(d) Reclassification. In case of any reclassification, change or
----------------
conversion during the Exercise Period of securities of the class or series
issuable upon exercise of this Warrant (other than as a result of a merger,
subdivision or combination described above), or in case of any Merger where the
successor entity agrees to assume the obligations of this Warrant, 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 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 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
conversion by a holder of the number of shares of Preferred then purchasable
under this Warrant. Such new warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to
-4-
<PAGE>
the adjustments provided for in this Section 4. The provisions of this
subparagraph (d) shall similarly apply to successive reclassifications, changes,
and conversions.
(e) Antidilution Rights. The antidilution rights applicable to
-------------------
the Preferred are set forth in its Articles of Incorporation (the "Articles"),
as amended from time to time, a true and complete copy in its current form which
is attached hereto as Exhibit C. Such rights shall not be restated, amended or
modified in any manner which adversely affects the Warrantholder differently
than the holders of Series A Preferred without such Warrantholder's prior
written consent. The Company shall promptly provide the Warrantholder hereof
with any restatement, amendment or modification to the Articles promptly after
the same has been made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company,
which notice shall state the Warrant Price as adjusted and the increased or
decreased number of shares purchasable upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to
effect an initial public offering of the Company's Common Stock pursuant to an
effective registration statement under the Act (a "Public Offering"), the
Company shall send to the Warrantholder at least fifteen days' prior written
notice of the closing date of the same; provided, however, that the failure to
give such notice shall not give the Warrantholder the right to delay or
otherwise restrain or affect the Public Offering. Such written notice may be in
lieu of the notice required under the third paragraph of Section 1 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 for the Warrantholder.
6. Registration. The Warrantholder shall be entitled the registration
------------
rights as set forth in that certain Investors' Rights Agreement dated December
18, 1997, entered into by the Company and certain Investors (the "Registration
Rights Agreement"), provided that the Warrantholder hereby agrees to be bound by
such provisions.
7. Representations of Warrantholder. Concurrently with the receipt of
--------------------------------
this Warrant and, upon exercise of this Warrant, the holder of this Warrant
shall have executed the Investment Representation Statement in the form attached
hereto as Exhibit B.
8. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Warrantholder, as of the Effective Date set forth
below, 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 except as to (i) the effect of applicable bankruptcy
and similar laws affecting the rights of creditors, and (ii) the effect of rules
of law governing specific performance, injunctive relief and other equitable
remedies.
-5-
<PAGE>
(b) The Preferred has 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 non-assessable, and free from all taxes,
liens and charges with respect to the issue of such shares.
(c) The rights, preference, privileges and restrictions granted to
or imposed upon the Preferred and the holders thereof are as set forth in the
Articles and the Registration Rights Agreement, a true and complete copy of
which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant does not, and the
issuance of the Preferred upon exercise of this Warrant in accordance with the
terms hereof does not, conflict with the Company's Articles or Bylaws, does not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and does not conflict with or contravene any
provision of, or constitute a default under, any 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, other than state or
federal securities law filings.
(e) During the period within which this Warrant may be exercised,
the Company will at all times have authorized and reserved for the purpose of
the issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the Preferred issued or issuable upon the
exercise hereof, and all of the obligations of the Company relating to the
Preferred issuable upon exercise of this Warrant shall survive the exercise of
this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to vote
or receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Articles of
Incorporation 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 action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment
-6-
<PAGE>
(e) 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 delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company, or in the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like date and tenor.
(f) This Warrant shall be governed by the internal laws of the
State of California.
(g) So long as this Warrant has not terminated, the Warrantholder
shall be entitled to receive such financial information as other holders of the
same series Preferred stock
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Effective Date of Warrant: January 31,1998
COMPANY: MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
-----------------------------------
Print Name: Anne Perlman
---------------------------
Title: President and CEO
--------------------------------
ACCEPTED AND AGREED:
WARRANTHOLDER: DAVID CAMPBELL
By: /s/ David Campbell
-----------------------------------
Print Name: ___________________________
Title: ________________________________
-7-
<PAGE>
EXHIBIT 4.4
- -----------
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
COMPANY, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
SERIES B PREFERRED STOCK WARRANT
of
MOAI TECHNOLOGIES, INC.
THIS CERTIFIES THAT WILLIAM KIRSCH (the "Warrantholder") is entitled to
subscribe for and purchase from MOAI TECHNOLOGIES, INC., a California
corporation (the "Company") during the Exercise Period (as defined below) 9,961
fully-paid and non-assessable shares of the Company's SERIES B Preferred Stock
(the "Preferred"), at a price of $1.28 per share (the "Warrant Price"), such
price and such number of shares being subject to adjustment upon the occurrence
of the contingencies set forth in this Warrant.
Upon delivery of this Warrant, together with payment of the Warrant Price
of the shares of the Preferred thereby purchased, at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Preferred so purchased.
The date at which the Company receives (i) the Warrant and (ii) payment for the
shares of Preferred, either by payment in cash or by check, or by notice of the
Warrantholder's intent to use the proceeds from the concurrent sale of shares at
a Public Offering (as defined below) or notice of intent to use shares of
Preferred as payment, both as described in Section 1 below, or such later date
as such notice shall specify, shall be referred to herein as the "Exercise
Date." All shares of Preferred which may be issued upon the exercise of this
Warrant will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: Subject to the terms and conditions set forth
-------------------
herein, this Warrant may be exercised in whole or in part, at any time on or
before October 5, 2008 by the surrender of this Warrant together with the
"Notice of Exercise" and "Investment Representation Statement" attached hereto
as Exhibits A and B, respectively, duly completed and executed at the principal
office of the Company and by the payment to the Company, in the manner provided
for in the following paragraph, of the Warrant Price for all of the Preferred
purchased. The Company shall, within 10 days after such delivery, prepare a
certificate for the shares of Preferred purchased in the name of the holder of
this Warrant, or as such holder may direct (subject to the restrictions upon
transfer contained herein and upon payment by such holder hereof of any
applicable transfer taxes).
<PAGE>
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the concurrent sale of shares of Common Stock
issued upon conversion of shares of Preferred issued upon exercise of this
Warrant sold by the Warrantholder pursuant to a Public Offering of an amount
equal to the aggregate Warrant Price of the shares being purchased. In lieu of
exercising this Warrant as described above, the Warrantholder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with notice of such election (which notice shall
include the number of shares being exercised hereunder), in which event the
Company shall issue to the Warrantholder a number of shares of Preferred (or
Common Stock if the Preferred has been converted into Common Stock) equal to the
quotient obtained by dividing (x) the value of the shares of Preferred being
exercised (the "Exercised Shares") on the Exercise Date, which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Exercised
Shares immediately prior to the exercise of the Warrant from (B) the aggregate
fair market value of the Exercised Shares on the Exercise Date, by (y) the fair
market value of one share of Preferred (or Common Stock if the Preferred has
been converted into Common Stock) as of the Exercise Date. No fractional shares
shall be issuable upon exercise of this Warrant, 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 of this Warrant an amount in
cash equal to the fair market value of the resulting fractional share on the
Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing of
a Public Offering, (ii) the closing of any consolidation or merger of the
Company with or into any other unaffiliated corporation, entity or person, or
any other reorganization in which the Company shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (a "Merger"),
or (iii) the sale of all or substantially all of the assets of the Company (a
"Sale"). The Company shall notify the holder if an event or transaction of the
kind described in this section is proposed at least fifteen days prior to the
closing of such event or transaction; such notice shall also contain such
details of the proposed event or transaction as are reasonable in the
circumstances.
(a) Assumption of Warrant: If upon the closing of any Sale or Merger the
---------------------
successor entity assumes the obligations of this Warrant, then this Warrant
shall survive any Sale or Merger and be exercisable for the same securities,
cash, and property as would be payable for the Shares issuable upon exercise of
the unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Sale or Merger and subsequent closing. The Warrant
Price shall be adjusted accordingly.
(b) Nonassumption: If upon the closing of any Sale or Merger the
-------------
successor entity does not assume the obligations of this Warrant and the Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall expire upon such closing.
Certificates for the shares issuable upon exercise of this Warrant
and, if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
-2-
<PAGE>
For purposes of this Section 1, the fair market value of the Preferred
(or Common Stock if the Preferred has been converted into Common Stock) shall be
determined as follows:
(i) If this Warrant is exercised in connection with and contingent
upon a Public Offering, and if the Company's registration statement relating to
such Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value shall be the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If this Warrant is exercised in connection with any Sale or
Merger, then the fair market value per share shall be equal to the sum of all
cash, stock and other consideration received by the Company, divided by the
number of outstanding shares of the Company's capital stock (on an as-converted
into Common Stock basis) as of the closing of such transaction.
(iii) If this Warrant is not exercised in connection with and
contingent upon a Public Offering, a Sale or Merger, then the fair market value
shall be determined by the Company's Board of Directors acting in good faith in
such fashion as is reasonable and normal for companies in a similar stage of
development.
2. Transfer of Warrant. Except in accordance with the conditions
-------------------
contained in Section 3 hereof, this Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition
--------------------------------------------
to any transfer or exercise of this Warrant that the Company shall have
received, at the time of such transfer or exercise, a representation in writing
that this Warrant (or portion hereof transferred) or the shares of Preferred or
other securities being issued upon such exercise, as the case may be, are being
acquired for investment not with a view to any sale or distribution thereof, or
a statement of the pertinent facts covering any proposed distribution thereof.
It shall be a further condition to any transfer of this Warrant or of any or all
of the shares of Preferred issued upon exercise of this Warrant, or Common Stock
issued upon conversion of the Preferred, other than a transfer registered under
the Act, that the Company shall have received a legal opinion, in form and
substance satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. The
requirement of a legal opinion shall not apply to the transfer of this Warrant
or any part thereof to a partnership of which the Warrantholder is a partner or
to the beneficial owners of such partnership without further consideration, so
long as such transfer is in compliance with applicable securities laws and the
beneficial owners are accredited investors. Each certificate evidencing the
shares of Preferred Issued upon exercise of this Warrant, or Common Stock issued
upon conversion of the Preferred, or upon any transfer of such shares (other
than a transfer registered under the Act or any subsequent transfer or shares so
registered) shall, at the option of the Company, contain a legend, in form and
substance satisfactory to the Company and its counsel, restricting the transfer
of such shares to sales or other dispositions exempt from the requirements of
the Act.
It shall be a further condition to each such transfer of this Warrant
that the transferee shall receive and accept a Warrant, of like tenor and date,
executed by the Company.
-3-
<PAGE>
4. Adjustment of Warrant Price and Number of Shares Purchasable
------------------------------------------------------------
Hereunder. The Warrant Price and the number of shares purchasable hereunder
- ---------
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Subdivisions or Combinations. In case the Company shall at any
----------------------------
time during the Exercise Period subdivide the outstanding shares of the
Preferred, the Warrant Price in effect immediately prior to such subdivision
shall be proportionately decreased, and in case the Company shall at any time
during the Exercise Period combine the outstanding shares of the Preferred, the
Warrant Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time during the
---------------
Exercise Period pay a dividend with respect to Preferred payable in Preferred,
then the Warrant Price in effect immediately prior to the record date for
distribution of such dividend shall be adjusted to that price determined by
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction (i) the numerator of which shall be the total number of shares of
Preferred outstanding immediately prior to such dividend and (ii) the
denominator of which shall be the total number of shares of Preferred
outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to subdivisions
----------------
(b) or (c) of this Section 4, the registered holder of this Warrant shall
thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Preferred, calculated to the
nearest full share, obtained by multiplying the number of shares of Preferred
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Price.
(d) Reclassification. In case of any reclassification, change or
----------------
conversion during the Exercise Period of securities of the class or series
issuable upon exercise of this Warrant (other than as a result of a merger,
subdivision or combination described above), or in case of any Merger where the
successor entity agrees to assume the obligations of this Warrant, 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 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 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
conversion by a holder of the number of shares of 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 (d) shall similarly apply
to successive reclassifications, changes, and conversions.
(e) Antidilution Rights. The antidilution rights applicable to the
-------------------
Preferred are set forth in its Articles of Incorporation (the "Articles"), as
amended from time to time, a true and complete copy in its current form which is
attached hereto as Exhibit C. Such rights shall not be restated, amended or
modified in any manner which adversely affects the Warrantholder
-4-
<PAGE>
differently than the holders of SERIES B Preferred without such Warrantholder's
prior written consent. The Company shall promptly provide the Warrantholder
hereof with any restatement, amendment or modification to the Articles promptly
after the same has been made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company,
which notice shall state the Warrant Price as adjusted and the increased or
decreased number of shares purchasable upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to effect
an initial public offering of the Company's Common Stock pursuant to an
effective registration statement under the Act (a "Public Offering"), the
Company shall send to the Warrantholder at least fifteen days' prior written
notice of the closing date of the same; provided, however, that the failure to
give such notice shall not give the Warrantholder the right to delay or
otherwise restrain or affect the Public Offering. Such written notice may be in
lieu of the notice required under the third paragraph of Section 1 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 for the Warrantholder.
6. Registration. The Warrantholder shall be entitled to the registration
------------
rights as set forth in that certain Investors' Rights Agreement dated December
18, 1997, entered into by the Company and certain Investors (the "Registration
Rights Agreement"), provided that the Warrantholder hereby agrees to be bound by
such provisions.
7. Representations of Warrantholder. Concurrently with the receipt of
--------------------------------
this Warrant and, upon exercise of this Warrant, the holder of this Warrant
shall have executed the Investment Representation Statement in the form attached
hereto as Exhibit B.
8. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Warrantholder, as of the Effective Date set forth below, 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 except as to (i) the effect of applicable bankruptcy and similar
laws affecting the rights of creditors, and (ii) the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies.
(b) The Preferred has 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 non-assessable, and free from all taxes, liens
and charges with respect to the issue of such shares.
-5-
<PAGE>
(c) The rights, preference, privileges and restrictions granted to or
imposed upon the Preferred and the holders thereof are as set forth in the
Articles and the Registration Rights Agreement, a true and complete copy of
which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant does not, and the
issuance of the Preferred upon exercise of this Warrant in accordance with the
terms hereof does not, conflict with the Company's Articles or Bylaws, does not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and does not conflict with or contravene any
provision of, or constitute a default under, any 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, other than state or
federal securities law filings.
(e) During the period within which this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Preferred issued or issuable upon the exercise hereof,
and all of the obligations of the Company relating to the Preferred issuable
upon exercise of this Warrant shall survive the exercise of this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Articles of
Incorporation 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 action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
(e) 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 delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or in the case of any
such mutilation, upon surrender and cancellation
-6-
<PAGE>
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like date and tenor.
(f) This Warrant shall be governed by the internal laws of the State
of California.
(g) So long as this Warrant has not terminated, the Warrantholder
shall be entitled to receive such financial information as other holders of the
same series Preferred stock.
-7-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Effective Date of Warrant: December 5, 1998
COMPANY: MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
---------------------------------
Print Name: Anne Perlman
-------------------------
Title President and CEO
------------------------------
ACCEPTED AND AGREED:
WARRANTHOLDER: WILLIAM KIRSCH
By: ________________________________
Print Name: ________________________
Title: _____________________________
-8-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
Ladies and Gentlemen:
The undersigned Warrantholder (the "Warrantholder') hereby elects to exercise
that certain SERIES B Preferred Stock Warrant (the "Warrant") by and between the
Warrantholder and ______________ (the "Company) dated ______, by surrendering
the Warrant at the principal office of the Company, in exchange for ____________
shares of SERIES B Preferred Stock of the Company (or, _____ shares of Common
Stock of the Company if such SERIES B Preferred Stock has been converted into
Common Stock).
The Warrantholder hereby confirms and acknowledges the investment
representations and warranties made in Section 7 of the Warrant, a copy of which
is available from the Company, and accepts such shares subject to the
restrictions of the Warrant.
Dated: ______________________________
WARRANTHOLDER:
_____________________________________
(Signature)
_____________________________________
(Typed or Printed Name)
_____________________________________
(Title)
Address:
_____________________________________
_____________________________________
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
Warrants to Purchase
____ Shares of SERIES B Preferred
Stock of ________________
In connection with the purchase of the above-listed securities the
undersigned hereby represents to _____________________ (the "Company") as
follows:
Receipt of Information. The undersigned has received all the information
----------------------
it considers necessary or appropriate for deciding whether to purchase the
Company's SERIES B Preferred Stock issuable upon exercise of the Warrant dated
___________________ (the "Warrant") issued by the Company to the undersigned,
and it has examined any information furnished to it by the Company in connection
therewith.
Investment Representation.
-------------------------
(a) The Warrant and the shares of stock to be received by the undersigned
upon the exercise of the Warrant (the "Securities") will be acquired for
investment for its own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof, and the undersigned has no
present intention of selling, granting participation in or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of its property shall at all times be within its control. By
executing this Statement, the undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participations to such person or to any third person,
with respect to any Securities.
(b) The undersigned understands that the Securities may not be registered
under the Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws, on the ground that the issuance of such Securities is exempt
pursuant to Section 4(2) of the Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein. The undersigned is an "Accredited Investor" as such term is defined in
Rule 501 of the Securities and Exchange Commission.
(c) The undersigned agrees that in no event will it make a disposition of
any Securities unless and until (i) it shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) it shall have
furnished the Company with an opinion of counsel satisfactory to the Company and
the Company's counsel to the effect that (a) appropriate action necessary for
compliance with the Act and any applicable state securities laws has been taken
or an exemption from the registration requirements of the Act and such laws is
available, and (B) that the proposed transfer will not violate any of said laws.
<PAGE>
(d) The undersigned represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or an exemption from
such registration is available. The undersigned is aware of the provisions of
Rule 144 promulgated under the Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three-month period
not exceeding specified limitations. The undersigned is aware that the
conditions for resale set forth in Rule 144 have not been satisfied.
(f) The undersigned represents that at no time was it presented with or
solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Securities.
(g) The undersigned, if it is the original holder of the Warrant,
represents that it has a preexisting business or personal relationship with the
Company or any of its officers, directors or controlling persons, or by reason
of its business or financial experience or the business or financial experience
of its professional advisors who are unaffiliated with and who are not
compensated by the Company or any affiliate or selling agent of the Company,
directly or indirectly, has, and could be reasonably assumed to have, the
capacity to protect its own interests in connection with the purchase of the
Securities.
Dated: ________________________
_______________________________
(Signature)
_______________________________
(Typed or Printed Name)
_______________________________
(Title)
<PAGE>
EXHIBIT 4.5
- -----------
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY,
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
SERIES B PREFERRED STOCK WARRANT
of
MOAI TECHNOLOGIES, INC.
THIS CERTIFIES THAT DAVID CAMPBELL (the "Warrantholder") is entitled to
subscribe for and purchase from MOAI TECHNOLOGIES, INC., a California
corporation (the "Company") during the Exercise Period (as defined below) 4,687
fully-paid and non-assessable shares of the Company's SERIES B Preferred Stock
(the "Preferred"), at a price of $1.28 per share (the "Warrant Price"), such
price and such number of shares being subject to adjustment upon the occurrence
of the contingencies set forth in this Warrant.
Upon delivery of this Warrant, together with payment of the Warrant Price
of the shares of the Preferred thereby purchased, at the principal office of the
Company or at such other office or agency as the Company may designate by notice
in writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the shares of Preferred so purchased.
The date at which the Company receives (i) the Warrant and (ii) payment for the
shares of Preferred, either by payment in cash or by check, or by notice of the
Warrantholder's intent to use the proceeds from the concurrent sale of shares at
a Public Offering (as defined below) or notice of intent to use shares of
Preferred as payment, both as described in Section 1 below, or such later date
as such notice shall specify, shall be referred to herein as the "Exercise
Date." All shares of Preferred which may be issued upon the exercise of this
Warrant will, upon issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: Subject to the terms and conditions set forth
-------------------
herein, this Warrant may be exercised in whole or in part, at any time on or
before October 5, 2008 by the surrender of this Warrant together with the
"Notice of Exercise" and "Investment Representation Statement" attached hereto
as Exhibits A and B, respectively, duly completed and executed at the principal
office of the Company and by the payment to the Company, in the manner provided
for in the following paragraph, of the Warrant Price for all of the Preferred
purchased. The Company shall, within 10 days after such delivery, prepare a
certificate for the shares of Preferred purchased in the name of the holder of
this Warrant, or as such holder may direct (subject to the restrictions upon
transfer contained herein and upon payment by such holder hereof of any
applicable transfer taxes).
<PAGE>
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the concurrent sale of shares of Common Stock
issued upon conversion of shares of Preferred issued upon exercise of this
Warrant, sold by the Warrantholder pursuant to a Public Offering of an amount
equal to the aggregate Warrant Price of the shares being purchased. In lieu of
exercising this Warrant as described above, the Warrantholder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with notice of such election (which notice shall
include the number of shares being exercised hereunder), in which event the
Company shall issue to the Warrantholder a number of shares of Preferred (or
Common Stock if the Preferred has been converted into Common Stock) equal to the
quotient obtained by dividing (x) the value of the shares of Preferred being
exercised (the "Exercised Shares") on the Exercise Date, which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Exercised
Shares immediately prior to the exercise of the Warrant from (B) the aggregate
fair market value of the Exercised Shares on the Exercise Date, by (y) the fair
market value of one share of Preferred (or Common Stock if the Preferred has
been converted into Common Stock) as of the Exercise Date. No fractional shares
shall be issuable upon exercise of this Warrant, 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 of this Warrant an amount in
cash equal to the fair market value of the resulting fractional share on the
Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing of
a Public Offering, (ii) the closing of any consolidation or merger of the
Company with or into any other unaffiliated corporation, entity or person, or
any other reorganization in which the Company shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (a "Merger"),
or (iii) the sale of all or substantially all of the assets of the Company (a
"Sale"). The Company shall notify the holder if an event or transaction of the
kind described in this section is proposed at least fifteen days prior to the
closing of such event or transaction; such notice shall also contain such
details of the proposed event or transaction as are reasonable in the
circumstances.
(a) Assumption of Warrant: If upon the closing of any Sale or Merger the
---------------------
successor entity assumes the obligations of this Warrant, then this Warrant
shall survive any Sale or Merger and be exercisable for the same securities,
cash, and property as would be payable for the Shares issuable upon exercise of
the unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Sale or Merger and subsequent closing. The Warrant Price
shall be adjusted accordingly.
(b) Nonassumption: If upon the closing of any Sale or Merger the successor
-------------
entity does not assume the obligations of this Warrant and the Holder has not
otherwise exercised this Warrant in full, then the unexercised portion of this
Warrant shall expire upon such closing.
Certificates for the shares issuable upon exercise of this Warrant and,
if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
-2-
<PAGE>
For purposes of this Section 1, the fair market value of the Preferred
(or Common Stock if the Preferred has been converted into Common Stock) shall be
determined as follows:
(i) If this Warrant is exercised in connection with and contingent
upon a Public Offering, and if the Company's registration statement relating to
such Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value shall be the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If this Warrant is exercised in connection with any Sale or
Merger, then the fair market value per share shall be equal to the sum of all
cash, stock and other consideration received by the Company, divided by the
number of outstanding shares of the Company's capital stock (on an as-converted
into Common Stock basis) as of the closing of such transaction.
(iii) If this Warrant is not exercised in connection with and
contingent upon a Public Offering, a Sale or Merger, then the fair market value
shall be determined by the Company's Board of Directors acting in good faith in
such fashion as is reasonable and normal for companies in a similar stage of
development.
2. Transfer of Warrant. Except in accordance with the conditions
-------------------
contained in Section 3 hereof, this Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition
--------------------------------------------
to any transfer or exercise of this Warrant that the Company shall have
received, at the time of such transfer or exercise, a representation in writing
that this Warrant (or portion hereof transferred) or the shares of Preferred or
other securities being issued upon such exercise, as the case may be, are being
acquired for investment not with a view to any sale or distribution thereof, or
a statement of the pertinent facts covering any proposed distribution thereof.
It shall be a further condition to any transfer of this Warrant or of any or all
of the shares of Preferred issued upon exercise of this Warrant, or Common Stock
issued upon conversion of the Preferred, other than a transfer registered under
the Act, that the Company shall have received a legal opinion, in form and
substance satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. The
requirement of a legal opinion shall not apply to the transfer of this Warrant
or any part thereof to a partnership of which the Warrantholder is a partner or
to the beneficial owners of such partnership without further consideration, so
long as such transfer is in compliance with applicable securities laws and the
beneficial owners are accredited investors. Each certificate evidencing the
shares of Preferred Issued upon exercise of this Warrant, or Common Stock issued
upon conversion of the Preferred, or upon any transfer of such shares (other
than a transfer registered under the Act or any subsequent transfer or shares so
registered) shall, at the option of the Company, contain a legend, in form and
substance satisfactory to the Company and its counsel, restricting the transfer
of such shares to sales or other dispositions exempt from the requirements of
the Act.
It shall be a further condition to each such transfer of this Warrant
that the transferee shall receive and accept a Warrant, of like tenor and date,
executed by the Company.
-3-
<PAGE>
4. Adjustment of Warrant Price and Number of Shares Purchasable
------------------------------------------------------------
Hereunder. The Warrant Price and the number of shares purchasable hereunder
- ---------
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Subdivisions or Combinations. In case the Company shall at any
----------------------------
time during the Exercise Period subdivide the outstanding shares of the
Preferred, the Warrant Price in effect immediately prior to such subdivision
shall be proportionately decreased, and in case the Company shall at any time
during the Exercise Period combine the outstanding shares of the Preferred, the
Warrant Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time during the
---------------
Exercise Period pay a dividend with respect to Preferred payable in Preferred,
then the Warrant Price in effect immediately prior to the record date for
distribution of such dividend shall be adjusted to that price determined by
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction (i) the numerator of which shall be the total number of shares of
Preferred outstanding immediately prior to such dividend and (ii) the
denominator of which shall be the total number of shares of Preferred
outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to subdivisions
----------------
(b) or (c) of this Section 4, the registered holder of this Warrant shall
thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Preferred, calculated to the
nearest full share, obtained by multiplying the number of shares of Preferred
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Price.
(d) Reclassification. In case of any reclassification, change or
----------------
conversion during the Exercise Period of securities of the class or series
issuable upon exercise of this Warrant (other than as a result of a merger,
subdivision or combination described above), or in case of any Merger where the
successor entity agrees to assume the obligations of this Warrant, 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 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 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
conversion by a holder of the number of shares of 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 (d) shall similarly apply to
successive reclassifications, changes, and conversions.
(e) Antidilution Rights. The antidilution rights applicable to the
-------------------
Preferred are set forth in its Articles of Incorporation (the "Articles"), as
amended from time to time, a true and complete copy in its current form which is
attached hereto as Exhibit C. Such rights shall not be restated, amended or
modified in any manner which adversely affects the Warrantholder
-4-
<PAGE>
differently than the holders of SERIES B Preferred without such Warrantholder's
prior written consent. The Company shall promptly provide the Warrantholder
hereof with any restatement, amendment or modification to the Articles promptly
after the same has been made.
5. Notices.
-------
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company,
which notice shall state the Warrant Price as adjusted and the increased or
decreased number of shares purchasable upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to effect
an initial public offering of the Company's Common Stock pursuant to an
effective registration statement under the Act (a "Public Offering"), the
Company shall send to the Warrantholder at least fifteen days' prior written
notice of the closing date of the same; provided, however, that the failure to
give such notice shall not give the Warrantholder the right to delay or
otherwise restrain or affect the Public Offering. Such written notice may be in
lieu of the notice required under the third paragraph of Section 1 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 for the Warrantholder.
6. Registration. The Warrantholder shall be entitled to the registration
------------
rights as set forth in that certain Investors' Rights Agreement dated December
18, 1997, entered into by the Company and certain Investors (the "Registration
Rights Agreement"), provided that the Warrantholder hereby agrees to be bound by
such provisions.
7. Representations of Warrantholder. Concurrently with the receipt of
--------------------------------
this Warrant and, upon exercise of this Warrant, the holder of this Warrant
shall have executed the Investment Representation Statement in the form attached
hereto as Exhibit B.
8. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Warrantholder, as of the Effective Date set forth below, 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 except as to (i) the effect of applicable bankruptcy and similar
laws affecting the rights of creditors, and (ii) the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies.
(b) The Preferred has 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 non-assessable, and free from all taxes, liens
and charges with respect to the issue of such shares.
-5-
<PAGE>
(c) The rights, preference, privileges and restrictions granted to or
imposed upon the Preferred and the holders thereof are as set forth in the
Articles and the Registration Rights Agreement, a true and complete copy of
which has been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant does not, and the
issuance of the Preferred upon exercise of this Warrant in accordance with the
terms hereof does not, conflict with the Company's Articles or Bylaws, does not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and does not conflict with or contravene any
provision of, or constitute a default under, any 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, other than state or
federal securities law filings.
(e) During the period within which this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of the
issue upon exercise of this Warrant a sufficient number of shares of its
Preferred to provide for the exercise of this Warrant and a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred into
Common Stock.
9. Miscellaneous.
-------------
(a) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Preferred issued or issuable upon the exercise hereof,
and all of the obligations of the Company relating to the Preferred issuable
upon exercise of this Warrant shall survive the exercise of this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Articles of
Incorporation 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 action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
(e) 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 delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or in the case of any
such mutilation, upon surrender and cancellation
-6-
<PAGE>
of such Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like date and tenor.
(f) This Warrant shall be governed by the internal laws of the State
of California.
(g) So long as this Warrant has not terminated, the Warrantholder
shall be entitled to receive such financial information as other holders of the
same series Preferred stock.
-7-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Effective Date of Warrant: December 5, 1998
COMPANY: MOAI TECHNOLOGIES, INC.
By:/s/ Anne Perlman
------------------------------------
Print Name: Anne Perlman
----------------------------
Title President and CEO
---------------------------------
ACCEPTED AND AGREED:
WARRANTHOLDER: DAVID CAMPBELL
By:____________________________________
Print Name:____________________________
Title:_________________________________
-8-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
Ladies and Gentlemen:
The undersigned Warrantholder (the "Warrantholder') hereby elects to exercise
that certain SERIES B Preferred Stock Warrant (the "Warrant") by and between the
Warrantholder and ______________ (the "Company) dated ______, by surrendering
the Warrant at the principal office of the Company, in exchange for ____________
shares of SERIES B Preferred Stock of the Company (or, _____ shares of Common
Stock of the Company if such SERIES B Preferred Stock has been converted into
Common Stock).
The Warrantholder hereby confirms and acknowledges the investment
representations and warranties made in Section 7 of the Warrant, a copy of which
is available from the Company, and accepts such shares subject to the
restrictions of the Warrant.
Dated:_________________________________
WARRANTHOLDER:
_______________________________________
(Signature)
_______________________________________
(Typed or Printed Name)
_______________________________________
(Title)
Address:
_______________________________________
_______________________________________
-9-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
Warrants to Purchase
____ Shares of SERIES B Preferred
Stock of ___________
In connection with the purchase of the above-listed securities the
undersigned hereby represents to _____________________ (the "Company") as
follows:
Receipt of Information. The undersigned has received all the information
----------------------
it considers necessary or appropriate for deciding whether to purchase the
Company's SERIES B Preferred Stock issuable upon exercise of the Warrant dated
___________________ (the "Warrant") issued by the Company to the undersigned,
and it has examined any information furnished to it by the Company in connection
therewith.
Investment Representation.
-------------------------
(a) The Warrant and the shares of stock to be received by the undersigned
upon the exercise of the Warrant (the "Securities") will be acquired for
investment for its own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof, and the undersigned has no
present intention of selling, granting participation in or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of its property shall at all times be within its control. By
executing this Statement, the undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participations to such person or to any third person,
with respect to any Securities.
(b) The undersigned understands that the Securities may not be registered
under the Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws, on the ground that the issuance of such Securities is exempt
pursuant to Section 4(2) of the Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein. The undersigned is an "Accredited Investor" as such term is defined in
Rule 501 of the Securities and Exchange Commission.
(c) The undersigned agrees that in no event will it make a disposition of
any Securities unless and until (i) it shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) it shall have
furnished the Company with an opinion of counsel satisfactory to the Company and
the Company's counsel to the effect that (a) appropriate action necessary for
compliance with the Act and any applicable state securities laws has been taken
or an exemption from the registration requirements of the Act and such laws is
available, and (B) that the proposed transfer will not violate any of said laws.
-10-
<PAGE>
(d) The undersigned represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or an exemption from
such registration is available. The undersigned is aware of the provisions of
Rule 144 promulgated under the Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being through a "broker's
transaction" or in transactions directly with a "market maker" (as provided by
Rule 144(f)) and the number of shares being sold during any three-month period
not exceeding specified limitations. The undersigned is aware that the
conditions for resale set forth in Rule 144 have not been satisfied.
(f) The undersigned represents that at no time was it presented with or
solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Securities.
(g) The undersigned, if it is the original holder of the Warrant,
represents that it has a preexisting business or personal relationship with the
Company or any of its officers, directors or controlling persons, or by reason
of its business or financial experience or the business or financial experience
of its professional advisors who are unaffiliated with and who are not
compensated by the Company or any affiliate or selling agent of the Company,
directly or indirectly, has, and could be reasonably assumed to have, the
capacity to protect its own interests in connection with the purchase of the
Securities.
Dated:_________________________________
_______________________________________
(Signature)
_______________________________________
(Typed or Printed Name)
_______________________________________
(Title)
-11-
<PAGE>
EXHIBIT 10.1
- ------------
MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
January 25, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<C> <S> <C>
1. REGISTRATION RIGHTS.............................................................. 1
1.1 Definitions................................................................ 1
1.2 Demand Registration........................................................ 3
1.3 Company Registration....................................................... 3
1.4 Form S-3 Registration...................................................... 4
1.5 Underwritings.............................................................. 5
1.6 Obligations of the Company................................................. 6
1.7 Furnish Information........................................................ 7
1.8 Expenses of Registration................................................... 8
1.9 Delay of Registration...................................................... 9
1.10 Indemnification............................................................ 9
1.11 Reports Under Securities Exchange Act of 1934.............................. 11
1.12 Assignment of Registration Rights.......................................... 12
1.13 Limitations on Subsequent Registration Rights.............................. 12
1.14 Market Stand-Off Agreement................................................. 12
1.15 Termination of Registration Rights......................................... 13
2. COVENANTS OF THE COMPANY......................................................... 13
2.1 Delivery of Financial Statements........................................... 13
2.2 Inspection................................................................. 14
2.3 Right to Maintain Interest................................................. 14
2.4 Board Observer Rights...................................................... 16
2.5 Accounting Firm............................................................ 16
2.6 Vesting of Restricted Stock and Stock Options.............................. 16
2.7 Proprietary Information Agreements......................................... 16
2.8 Use of Proceeds............................................................ 17
2.9 Accounts and Records....................................................... 17
2.10 Availability of Common Stock for Conversion................................ 17
2.11 Key Employee Insurance..................................................... 17
2.12 Right of First Refusal and Co-Sale Agreement............................... 17
2.13 Termination of Covenants................................................... 17
2.14 Aggregation of Stock....................................................... 18
2.15 Transactions with Affiliates............................................... 18
3. MISCELLANEOUS.................................................................... 18
3.1 Additional Parties......................................................... 18
3.2 Successors and Assigns..................................................... 18
3.3 Governing Law.............................................................. 18
3.4 Counterparts............................................................... 19
3.5 Titles and Subtitles....................................................... 19
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.6 Notices.................................................................. 19
3.7 Prevailing Party......................................................... 19
3.8 Amendments and Waivers................................................... 19
3.9 Severability............................................................. 20
3.10 Delays or Omissions...................................................... 20
3.11 Entire Agreement......................................................... 20
3.12. AMENDMENTS OF PRIOR RIGHTS AGREEMENT; WAIVER OF RIGHT OF FIRST OFFER......... 20
</TABLE>
-ii-
<PAGE>
MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------------
This Third Amended and Restated Investors' Rights Agreement (this
"Agreement") is entered into as of January 25, 2000 among Moai Technologies,
- ----------
Inc., a California corporation (the "Company"), the holders of the Company's
-------
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
warrants to purchase Series A Preferred Stock and warrants to purchase Series B
Preferred Stock listed on Exhibit A hereto (each, an "Existing Investor"), the
--------- -----------------
holders of the Company's Series D Preferred Stock and warrants to purchase
Series D Preferred Stock listed on Exhibit A hereto, as may be amended from time
-------
to time (each, a "Series D Holder" and together with the Existing Investors, the
---------------
"Investors"), Deva Hazarika, Frank Kang and Raymond Letulle (each, a "Founder")
--------- -------
and Anne Perlman ("Perlman").
-------
RECITAL
The Company, the Founders, Perlman and the Existing Investors entered into
an Amended and Restated Investors' Rights Agreement dated July 21, 1999 (the
"Original Agreement"). Concurrently with the execution and delivery of this
- -------------------
Agreement, the Company is issuing shares of its Series D Preferred Stock to the
Series D Holders pursuant to a Series D Preferred Stock Purchase Agreement , as
may be amended from time to time (the "Purchase Agreement"). A condition to the
------------------
Series D Holders' obligations under the Purchase Agreement is that the Company,
the Existing Investors, Perlman and the Founders enter into this Agreement. The
Company, the Existing Investors, Perlman and the Founders desire to induce the
Series D Holders to purchase shares of Series D Preferred Stock pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth herein.
Accordingly, the Company, the Existing Investors, Perlman and the Founders wish
to amend and restate the Original Agreement in its entirety as set forth herein.
AGREEMENT
1. Registration Rights.
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and "registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
--------------
registration statement or document;
(b) The term "Registrable Securities" means:
----------------------
(i) the shares of Common Stock issuable or issued upon
conversion of the Series A, Series B, Series C or Series D Preferred Stock of
the Company (including Series D Preferred Stock issued after the date of this
Agreement pursuant to an
<PAGE>
addendum or amendment to the Purchase Agreement) either held by the Investors or
issuable to the Investors upon exercise of outstanding warrants to purchase
Series A, Series B or Series D Preferred Stock;
(ii) the shares of Common Stock issued to the Founders or
Perlman (the "Founders' Stock"), provided, however, that for the purposes of
--------------- -------- -------
Section 1.2, 1.4, 1.13 and 3.1 the Founders' Stock shall not be deemed
Registrable Securities and none of the Founders or Perlman shall be deemed
Holders;
(iii) the shares of Common Stock issued in the names of
Richard Miller and Marco DeMiroz on or prior to the date of this Agreement;
(iv) up to 250,000 shares of Common Stock issued or
issuable upon conversion of Series D Preferred Stock issued or issuable upon
exercise of warrants to purchase Series D Preferred Stock issued after the date
hereof to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings or similar transactions, the terms of which
approved are by the Board of Directors of the Company, which entities are added
as parties hereto pursuant to Section 3.1; and
(v) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the shares listed in (i), (ii),
(iii), (iv) and (v); provided, however, that the foregoing definition shall
-------- -------
exclude in all cases any Registrable Securities sold by a person in a
transaction in which his or her rights under this Agreement are not assigned.
Notwithstanding the foregoing, Common Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been (A) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then outstanding"
---------------------------------------
shall be determined by the number of shares of Common Stock outstanding which
are Registrable Securities and the number of shares of Registrable Securities
that are shares of Common Stock issuable pursuant to then exercisable and/or
convertible securities;
(d) The term "Holder" means any person owning or having the right to
------
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.12 hereof;
(e) The term "Form S-3" means such form under the Securities Act as in
--------
effect on the date hereof or any successor form under the Securities Act; and
(f) The term "SEC" means the U.S. Securities and Exchange Commission.
---
-2-
<PAGE>
1.2 Demand Registration.
-------------------
(a) If the Company shall receive at any time after the earlier of
(i) August 17, 2002 or (ii) six (6) months after the effective date of the first
registration statement under the Securities Act for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request from the Holders of at least a majority of the Registrable
Securities then outstanding that the Company file a registration statement under
the Securities Act covering the registration of Registrable Securities in which
the anticipated aggregate offering price, net of underwriting discounts and
commissions, would equal or exceed $10,000,000, then the Company shall, within
ten (10) days of the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of Section 1.2(b), use its best
efforts to effect as soon as practicable, and in any event within ninety (90)
days of the receipt of such request, the registration under the Securities Act
of all Registrable Securities which the Holders request to be registered within
twenty (20) days of the mailing of such notice by the Company in accordance with
Section 3.6.
(b) Notwithstanding the foregoing, if the Company shall furnish
to the Initiating 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 and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; provided, however, that the
-------- -------
Company may not utilize this right more than once in any twelve-month period.
(c) In addition, the Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected one (1) registration
pursuant to this Section 1.2 and such registration has been declared or ordered
effective;
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred fifty (150) days after the effective date of, a
registration described in Section 1.3; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.4.
1.3 Company Registration. If (but without any obligation hereunder
--------------------
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its securities under the Securities Act in
-3-
<PAGE>
connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan or a transaction covered by Rule 145 under the Securities
Act), the Company shall, at such time, promptly give each Holder written notice
of such registration. Upon the written request of each Holder given within
twenty-five (25) days after mailing of such notice by the Company in accordance
with Section 3.6, the Company shall, subject to the provisions of Section 1.8,
cause to be registered under the Securities Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders of not less than twenty-five percent (25%) of the
Registrable Securities then outstanding a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4: (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate offering price, net of underwriting
discounts and commissions, of less than $1,000,000; (iii) if the Company shall
furnish to the 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 Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 1.4; provided, however, that
the Company shall not utilize this right more than once in any twelve month
period; (iv) if the Company has, within the twelve (12) month period preceding
the proposed effective date of the registration so requested, already effected
one registration on Form S-3 for the Holders pursuant to this Section 1.4; or
(v) in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected
-4-
<PAGE>
pursuant to this Section 1.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.5 Underwritings.
-------------
(a) If the Holders initiating a registration request pursuant to
Section 1.2 or 1.4 ("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 such Section and
the Company shall include such information in the written notice referred to in
Section 1.2(a) or 1.4(a), as the case may be. The underwriter will be selected
by a majority in interest of the Initiating Holders and shall be reasonably
acceptable to the Company. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
1.6(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of
Section 1.2 or 1.4, if the underwriter advises the Initiating Holders in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(b) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required under
Section 1.3 to include any of the Holders' securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of Registrable Securities then outstanding owned
by each Holder or in such other proportions as shall mutually be agreed to by
such selling Holders) but in no event shall (i) the amount of securities of the
selling Holders included in the offering be reduced below twenty percent (20%)
of the total amount of securities
-5-
<PAGE>
included in such offering, unless such offering is the initial public offering
of the Company's securities in which case the selling Holders may be excluded if
the underwriters make the determination described above and no other
shareholder's securities are included; (ii) any shares being sold by a
shareholder other than a Holder be included in such offering; or (iii) any
securities held by a Founder or Perlman be included if any securities held by
any selling Investor are excluded. For purposes of the preceding parenthetical
concerning apportionment, for any selling Holder which is a partnership or
corporation, the partners, retired partners and shareholders or other entities
controlled by, controlling or under common control with, of such holder, or the
estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling Holder," and any pro-rata reduction with respect to such
--------------
"selling Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling Holder," as defined in this sentence.
1.6 Obligations of the Company. Whenever required under this
--------------------------
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days;
provided however, that such 120 day period shall be extended for a period of
- -------- -------
time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for up to one hundred twenty (120) days.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the
-6-
<PAGE>
managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days.
(g) Cause all such Registrable Securities registered pursuant
hereto to be listed on each securities exchange on which similar securities
issued by the Company are then listed, or, in the case of a registration
pursuant to Section 1.2, to list such Registrable Securities on the Nasdaq
National Market or the New York Stock Exchange.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities provided that, in the event, securities are not being
sold through an underwriter such letter shall be reasonably acceptable to a
majority in interest of the Holders requesting registration.
1.7 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of the application of the preceding sentence, the number of
shares or the anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the number of
-7-
<PAGE>
shares or the anticipated aggregate offering price required to originally
trigger the Company's obligation to initiate such registration as specified in
Section 1.2(a) or Section 1.4(b)(ii), whichever is applicable.
1.8 Expenses of Registration.
------------------------
(a) Demand Registration. All expenses other than underwriting
-------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them with the
approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, (i) the Holders have
learned of a material adverse change in the condition or business of the Company
from that known or reasonably foreseeable to the Holders at the time of their
request and have withdrawn the request with reasonable promptness following
disclosure by the Company of such material adverse change, or (ii) the Holders
have provided the Company with a written opinion of legal counsel to the Holders
advising the Holders that the registration statement, or any prospectus
contained therein, contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
were made, then, in each case, the Holders shall not be required to pay any of
such expenses and shall retain their rights pursuant to Section 1.2.
(b) Company Registration. All expenses other than underwriting
--------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 1.3, including
(without limitation) all registration, filing, and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders selected by them with the approval of the Company, which approval shall
not be unreasonably withheld, shall be borne by the Company.
-8-
<PAGE>
(c) Registration on Form S-3. All expenses other than
------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
Section 1.4, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of one
counsel for the Company and the reasonable fees and disbursements of one counsel
for the selling Holder or Holders selected by them with the approval of the
Company, which approval shall not be unreasonably withheld, shall be borne by
the Company.
1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable to a Holder, underwriter or controlling person in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder,
severally but not jointly, will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the
-9-
<PAGE>
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay (based on such Holder's pro rata portion of the number of
Registrable Securities included in such offering), as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no event
shall any indemnity under this subsection 1.10(b) exceed the net proceeds from
the offering received by such Holder, except in the case of willful fraud by
such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified 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. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of its liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 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
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
-10-
<PAGE>
considerations; provided, that, in no event shall any contribution by a Holder
under this Subsection 1.10(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. 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. Notwithstanding the foregoing,
no Investor shall be required to assume any liability that such Investor would
not have been liable to assume had the indemnifications provisions contained in
this Section 1.10 been enforceable.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act;
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), or that it
-11-
<PAGE>
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form;
and
(e) upon the written request of a Major Investor (as defined in
Section 2.1 below), such information with Major Investor shall reasonably
request, provided that the Company shall not be required to provide any Major
Investor with information that could cause competitive harm to the Company.
1.12 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least ten percent (10%) of a Holder's Registrable Securities set
forth on Exhibit A (or all of such Holder's Registrable Securities if such
---------
Holder holds less than ten percent (10%) of such amount) provided that (a) the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned, (b) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act, (c) such transferee agrees in writing to be
bound by the provisions of this Agreement, and (d) such transferee is not an
actual or potential competitor of the Company, as determined in good faith by
the Company's Board of Directors. Notwithstanding the foregoing, any Holder may
transfer its rights to cause the Company to register Registrable Securities
pursuant to this Section 1 without regard to the minimum number of Registrable
Securities described in the first sentence of this Section 1.12 if the
transferee is a constituent partner or member of such Holder or an entity
controlling, controlled by or under common control with such Holder.
1.13 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 a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in Section 1.2(a) or within one hundred
twenty (120) days of the effective date of any registration effected pursuant to
Section 1.2. To the extent any consent granted pursuant to this Section 1.13
adversely affects one Investor in a manner different from every other Investor,
the consent of such adversely affected Investor shall be required.
1.14 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period of duration (up to, but not exceeding, one hundred eighty
(180) days) specified
-12-
<PAGE>
by the Company and an underwriter of Common Stock or other securities of the
Company, following the effective date of the Company's first registration
statement filed under the Securities Act for the sale of its securities to the
public, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except securities purchased in the initial public offering or acquired pursuant
to an open market transaction with a third party other than the Company,
provided that all Founders, all officers and directors of the Company, all one
percent security holders and all other persons with registration rights (whether
or not pursuant to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.14.
1.15 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after the earlier of (a)
seven (7) years following the effective date of the Company's first registration
statement filed under the Securities Act for the sale of its securities to the
public or (b) such time as Rule 144 or another similar exemption under the
Securities Act is available for the sale of all of such Holder's shares during a
three (3)-month period without registration provided that such Holder owns less
than one percent of the Company's outstanding capital stock.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor holding, and to transferees of, at least 200,000 shares of
Registrable Securities (each, a "Major Investor"):
--------------
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of shareholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
----
and certified by an independent public accounting firm of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, a statement of cash
flows for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
-13-
<PAGE>
(c) within thirty (30) days of the end of each month, an
unaudited income statement and a statement of cash flows and balance sheet for
and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event no later than the
beginning of each fiscal year, a budget and business plan for such fiscal year,
prepared on a monthly basis, including balance sheets and sources and
applications of funds statements for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company; and
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such financial
statements were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that maybe
required by GAAP) and fairly present the condition of the Company and its
results of operation for the period specified, subject to year end audit
adjustments.
2.2 Inspection. The Company shall permit each Major Investor, at
----------
such Major Investor's expense, to visit and inspect the Company's properties,
to examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by such Major Investor; provided, however, that the Company
shall not be obligated pursuant to this Section 2.2 to provide access to any
information which it reasonably considers to be a trade secret or similar
confidential information.
2.3 Right to Maintain Interest.
--------------------------
(a) Mechanics. Each time the Company proposes to offer any
---------
shares of, or securities convertible into or exercisable for any shares of, any
class of its capital stock ("Shares"), the Company shall notify each Major
Investor thereof and permit each Major Investor to participate in such offering
in order to maintain its percentage ownership interest in the Company in
accordance with the following provisions:
(i) The Company shall deliver a notice ("Notice") to each
------
Major Investor stating (A) its bona fide intention to offer such Shares; (B) the
number of such Shares to be offered; and (C) the price and terms, if any, upon
which it proposes to offer such Shares.
(ii) Within fifteen (15) days after delivery of the Notice,
each Major Investor may submit to the Company an irrevocable commitment to
purchase or obtain, within thirty-five (35) days after receipt of the Notice, at
the price and on the terms specified in the Notice, up to that portion of such
Shares which equals the proportion that the number of shares of Common Stock and
Preferred Stock then held by such Major Investor bears to the total number of
shares of Common Stock and Preferred Stock then outstanding. In the event one or
more Major Investors do not elect to exercise its or their right to purchase
Shares pursuant to this Section 2.3(a), such right shall be reallocated to each
Major Investor, if any, exercising its right, such reallocation to be on a pro
rata basis (based upon the proportion that the number of shares of Common Stock
and Preferred Stock then held by such Major Investor bears to the total number
-14-
<PAGE>
of shares of Common Stock and Preferred Stock then outstanding), provided that
the Company shall have offered such reallocation right to the participating
Major Investors at least five (5) days prior to the expiration of such 35-day
period and provided further that such right to purchase Shares must be
exercised, if at all, prior to the expiration of such 35-day period.
(iii) The Company may, during the 60-day period following the
expiration of the 35-day period provided in Section 2.3(a)(ii), offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within sixty (60) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless the Investors are permitted to maintain their percentage ownership
interest in the Company in such offering in accordance with this Section 2.3.
(b) Exclusions. The right to maintain interest in this Section 2.3
----------
shall not be applicable to the issuance of:
(i) shares of Common Stock (or options or warrants therefor)
referenced in Section 4(d)(ii)(B) of the Company's Fourth Amended and Restated
Articles of Incorporation;
(ii) shares of Common Stock in connection with the Company's
first registration statement filed under the Securities Act for the sale of its
securities to the public;
(iii) securities pursuant to the conversion or exercise of
securities;
(iv) securities in connection with the acquisition by the
Company of another entity, whether by merger, consolidation, sale of assets,
sale or exchange of stock or otherwise;
(v) up to 250,000 shares of Series D Preferred Stock and up to
1,000,000 shares of Common Stock to financial institutions or lessors in
connection with commercial credit arrangements, equipment financings or similar
transactions approved by the Board of Directors;
(vi) securities to any person or entity in which such issuance
is approved by the Board of Directors (including all directors designated by the
holders of the Company's Preferred Stock) in connection with a strategic
business relationship between the Company and such person or entity also
involving material marketing, distribution, product development or technology
licensing rights, as determined in good faith by the Board of Directors of the
Company; or
(vii) up to 3,745,318 shares of Series D Preferred Stock.
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<PAGE>
(c) Assignment of Right. Each Major Investor shall be permitted
-------------------
to assign the right to maintain interest in this Section 2.3 to constituent
partners or members of such Major Investor or any entity controlling, controlled
by or under common control with such Major Investor.
(d) Waiver of Right to Maintain Interest. The Existing Investors
------------------------------------
hereby waive their right to maintain interest, including the notice provisions
thereof, set forth in Section 2.3 of the Original Agreement, with respect to the
issuance of up to 3,745,318 shares of Series D Preferred Stock.
2.4 Board Observer Rights. Tredegar Investments, HarbourVest Partners
---------------------
V-DirectFund L.P. ("HarbourVest"), UPS General Services Co. ("UPS"), Reuters
Holdings Switzerland SA and Vortex Partners MTI, L.P. (each, a "Strategic
---------
Investor") shall each be entitled to designate a non-voting observer to attend
- --------
and participate in, and receive all notices and materials provided to the
members of the Board of Directors of the Company at all meetings of the Board of
Directors of the Company (in each case, a "Non-voting Observer"). In the event
-------------------
the Board of Directors determines in good faith that the presence of any Non-
voting Observer (i) would violate the Company's attorney-client privilege or
(ii) could cause competitive harm to the Company, such Non-voting Observer shall
be excluded from such portion of the meeting as the Board of Directors shall
designate. Notwithstanding the foregoing, no Strategic Investor shall be
entitled to designate a Non-Voting Observer at any time during which a designee
of such Strategic Investor serves as a director of the Company.
2.5 Accounting Firm. The Company shall retain the services of a
---------------
national accounting firm until such time as the Board of Directors determines
otherwise, such determination to include the affirmative vote of either (a) a
majority of the directors nominated by the holders of Series A and Series B
Preferred Stock, or (b) director(s) representing, in the aggregate, a majority
in interest of the outstanding Series A and Series B Preferred Stock (or Common
Stock issuable upon conversion thereof).
2.6 Vesting of Restricted Stock and Stock Options. The Company shall
---------------------------------------------
ensure that all future grants of restricted stock or options to purchase Common
Stock to any officer or employee of the Company vest at a rate no faster than
1/48th per month and shall not accelerate without affirmative vote of either (a)
a majority of the directors nominated by the holders of Series A and Series B
Preferred Stock or (b) director(s) representing, in the aggregate, a majority in
interest of the outstanding Series A and Series B Preferred Stock (or Common
Stock issuable upon conversion thereof).
2.7 Proprietary Information Agreements. Each person employed by the
----------------------------------
Company in a technical or management position shall, as a condition to the
commencement and continuation of their employment with the Company, execute a
proprietary information agreement in a form satisfactory to the Company's Board
of Directors.
2.8 Use of Proceeds. The Company will use the proceeds from the sale
---------------
of Series D Preferred Stock pursuant to the Series D Preferred Stock Purchase
Agreement of even date herewith for general corporate purposes.
-16-
<PAGE>
2.9 Accounts and Records. The Company will keep true records and
--------------------
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
2.10 Availability of Common Stock for Conversion. The Company will
-------------------------------------------
not issue or agree to issue any shares of Common Stock or options, rights or
warrants to purchase Common Stock or securities convertible into or exchangeable
for Common Stock or take any other action if, after giving effect thereto, the
number of shares of Common Stock remaining unissued and duly reserved for
issuance upon conversion of shares of the Company's Preferred Stock then
outstanding shall be insufficient to permit conversion of all the then
outstanding shares of the Company's Preferred Stock after giving effect to any
adjustment pursuant to the Company's Fourth Amended and Restated Articles of
Incorporation.
2.11 Key Employee Insurance. The Company will use its best efforts
----------------------
following the closing to cause to be maintained, with sound and reputable
insurers, term life insurance and on the life of Anne Perlman in the amount of
$2,000,000 and on the lives of Deva Hazarika and Frank Kung in the amount of
$500,000 each. Such policy shall be owned by the Company and all benefits
thereunder shall be payable to the Company.
2.12 Right of First Refusal and Co-Sale Agreement. Unless the Board
--------------------------------------------
of Directors determines it is not necessary, the Company shall use commercially
reasonable efforts to cause each shareholder of the Company holding in excess of
(10%) of the Company's Common Stock to become a party to the Third Amended and
Restated Right of First Refusal and Co-Sale Agreement, as amended from time to
time, dated as of the date hereof, among the Company and the other parties
thereto.
2.13 Termination of Covenants. The covenants set forth in Sections
------------------------
2.1 through Section 2.12 shall terminate and be of no further force or effect
upon the earliest of (a) the effective date of the Company's first registration
statement filed under the Securities Act for the sale of its securities to the
public; (b) the closing of the sale, conveyance, or other disposition or
encumbrance of all or substantially all of the Company's assets or business or
the merger into or consolidation with any other entity (other than a wholly-
owned subsidiary corporation) or any other transaction or series of related
transactions in which at least fifty percent (50%) of the voting power of the
Company is disposed of (other than a merger effected exclusively for the purpose
of changing the domicile of the Company). The covenants set forth in Sections
2.1 and 2.2 shall terminate and be of no further force or effect upon when the
Company first becomes subject to the periodic reporting requirements of Sections
13 or 15(d) of the Exchange Act.
2.14 Aggregation of Stock. For purposes of the share threshold used
--------------------
in determining which Investors are "Major Investors" under this Agreement, (i)
all shares of Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together and (ii) if any investment company together
with other investment companies advised
-17-
<PAGE>
by the same investment adviser owns the minimum number of shares required to be
a "Major Investor," each such investment company shall have the rights of a
Major Investor hereunder.
2.15 Transactions with Affiliates. The Company shall not, without the
----------------------------
approval of the disinterested members of the Company's Board of Directors,
engage in any loans, leases, contracts or other transactions with any director,
officer or key employee of the Company, or any member of any such person's
immediate family, including the parents, spouse, children and other relatives of
any such person, or any entity controlled by the Company, its officers or
directors or, to the Company's knowledge, any entity controlled by any member of
such person's immediate family, including the parents, spouse, children and
other relatives of such person, on terms less favorable than the Company would
obtain in a transaction with an unrelated party, as determined in good faith by
the Board of Directors.
3. Miscellaneous.
-------------
3.1 Additional Parties. In the event of (a) an additional closing or
------------------
closings of the purchase of shares of Series D Preferred Stock pursuant to an
addendum or amendment to the Purchase Agreement or (b) the issuance of up to
250,000 shares of Series D Preferred Stock to financial institutions or lessors
in connection with commercial credit arrangements, equipment financings or
similar transactions, the terms of which approved are by the Board of Directors,
then upon execution of a signature page counterpart hereto by any such purchaser
and without need for an amendment hereto except to add such purchaser's name to
Exhibit A hereto (which addition shall not require the consent of any party
- ---------
hereto other than the Company), such purchaser shall become a party to this
Agreement, shall be deemed an "Investor" and a "Series D Holder" for purposes of
this Agreement, and shall have the identical rights and obligations hereunder as
the other Investors, in each case as of the date of execution of such
counterpart signature page.
3.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties
(including transferees of any of the Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.3 Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
3.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-18-
<PAGE>
3.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.6 Notices. Unless otherwise provided, any notice required or
-------
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address or fax number as set forth on
the signature pages hereto or on Exhibit A hereto or as subsequently modified by
---------
written notice, and if to the Company, with a copy to Donald M. Keller, Jr.,
Venture Law Group, 2800 Sand Hill Road, Menlo Park, CA 94025.
3.7 Prevailing Party. If any action at law or in equity is necessary
----------------
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.8 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding, not including the
Founders' Stock; provided that if such amendment has the effect of affecting the
Founders' Stock (a) in a manner different than securities issued to the
Investors and (b) in a manner adverse to the interests of the holders of the
Founders' Stock, then such amendment shall require the consent of the holder or
holders of a majority of the Founders' Stock, provided further that any
amendment or waiver that affects any Investor in a manner different from all
other Investors shall not be binding upon such adversely affected Investor
without such Investor's written consent, provided further that any amendment of
Section 1.14 shall require the consent of each holder of greater than 1,000,000
shares of Series D Preferred Stock (after application of the aggregation
principles provided in Section 2.14 hereof). Any waiver, permit, consent or
approval of any kind or character on the part of any party to this Agreement of
any breach or default under this Agreement, or any waiver on the part of any
party to this Agreement of any provisions or conditions of this Agreement must
be made in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not
alternative. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.
3.9 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of
-19-
<PAGE>
the Agreement shall be interpreted as if such provision were so excluded and (c)
the balance of the Agreement shall be enforceable in accordance with its terms.
3.10 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any party to this Agreement upon any breach
or default of any other party under this Agreement shall impair any such right,
power or remedy of such party nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring.
3.11 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
3.12. Amendments of Prior Rights Agreement; Waiver of Right of First
--------------------------------------------------------------
Offer. Effective and contingent upon execution of this Agreement by the
- -----
Company and the holders of a majority of the Registrable Securities, as that
term is defined in the Original Agreement, not including the Founders Stock, as
that term is defined in the Original Agreement, and upon closing of the
transactions contemplated by the Purchase Agreement, the Original Agreement is
hereby amended and restated in its entirety to read as set forth in this
Agreement, and the Company, the Founders, and the Investors hereby agree to be
bound by the provisions hereof as the sole agreement of the Company, the
Founders and the Investors with respect to registration rights of the Company's
securities and certain other rights, as set forth herein. Each of the Existing
Investors, to the extent such Existing Investor holds the right to maintain
interest set forth in Section 2.3 of the Original Agreement, hereby waives, on
behalf of itself and all other holders of such right, such right to maintain
interest with respect to the sale of Series D Preferred Stock pursuant to the
Purchase Agreement or any addendum or amendment thereto.
[Signature Pages Follow]
-20-
<PAGE>
The parties have executed this Third Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY: FOUNDERS:
MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman /s/ Deva Hazarika
------------------------------- ------------------------------------
Anne Perlman, President and CEO Deva Hazarika
Address: 25 Lusk Street Address: c/o Moai Technologies, Inc.
San Francisco, CA 94107 25 Lusk Street
Fax: (415) 625-1200 San Francisco, CA 94107
/s/ Anne Perlman /s/ Frank Kang
- ------------------------------------ ------------------------------------
Anne Perlman Frank Kang
Address: [ADDRESS]
Address: c/o Moai Technologies, Inc.
25 Lusk Street
San Francisco, CA 94107
/s/ Raymond Letulle
------------------------------------
Raymond Letulle
Address: c/o Moai Technologies, Inc.
25 Lusk Street
San Francisco, CA 94107
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
AC VENTURES, B.V.
By: /s/ Michael L. Emmons
------------------------------------
Name: Michael L. Emmons
---------------------------------
Title: Managing Director
--------------------------------
Address: c/o Anderson Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
Attn: Chief Financial Officer
Fax:
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
EASTMAN CHEMICAL COMPANY
By: /s/ Roger K. Mowen, Jr.
----------------------------------
Name: Roger K. Mowen, Jr.
--------------------------------
Title: VP Customer First and CIO
-------------------------------
Address: 100 N. Eastman Road
Kingsport, TN 37662
Attn: Sean Bowen
Fax:
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
INTEL 64 FUND, LLC
By: INTEL 64 FUND OPERATIONS, INC.,
its Coordinating Member
By: /s/ Noel Lazo
----------------------------------
Name: Noel Lazo
--------------------------------
Title: Assistant Treasurer
-------------------------------
Address: Intel 64 Fund Operations, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Portfolio Manager
Fax: (408) 765-6038
INTEL CORPORATION
By: /s/ Noel Lazo
----------------------------------
Name: Noel Lazo
--------------------------------
Title: Assistant Treasurer
-------------------------------
Address: 2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Portfolio Manager
Fax:
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
HEWLETT-PACKARD COMPANY
By: /s/ Nicholas J. Earle
---------------------
Name: Nicholas J. Earle
Title: Vice President and Chief Marketing Officer
Enterprise and Commercial Business
Address: Hewlett-Packard Company
19111 Pruneridge Avenue
Building 44 - MS UT
Cupertino CA 95014
Fax: (408) 447-6992
With copy to:
Attn: General Counsel
Hewlett-Packard Company
3000 Hanover Street, MS 20BQ
Palo Alto, CA 94304
Fax: (650) 857-4392
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
MLBC, INC.
By: /s/ Greg Philips
-----------------------------------
Name: Greg Philips
---------------------------------
Title: Board Member
--------------------------------
Address: c/o Merrill Lynch & Co., Inc.
222 Broadway, 17/th/ Floor
New York, NY 10038
Fax: (212) 670-4517
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
SELIGMAN COMMUNICATIONS AND
INFORMATION FUND, INC.
By: J. & W. Seligman & Co. Incorporated,
its investment advisor
By: /s/ Richard R. Schmaltz
-----------------------------------
Name: Richard R. Schmaltz
---------------------------------
Title: Managing Director
--------------------------------
SELIGMAN NEW TECHNOLOGIES
FUND, INC.
By: J. & W. Seligman & Co. Incorporated,
its investment advisor
By: /s/ Richard R. Schmaltz
-----------------------------------
Name: Richard R. Schmaltz
---------------------------------
Title: Managing Director
--------------------------------
SELIGMAN INVESTMENT OPPORTUNITIES
(MASTER) FUND - NTV PORTFOLIO
By: J. & W. Seligman & Co. Incorporated,
its investment advisor
By: /s/ Richard R. Schmaltz
-----------------------------------
Name: Richard R. Schmaltz
---------------------------------
Title: Managing Director
--------------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
[ROBERTSON STEPHENS & CO.]
By:
Its:
/s/ [illegible]
---------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
HARBOURVEST PARTNERS V-DIRECT FUND L.P.
By: HVP V-Direct Associates LLC
Its: General Partner
By: HarbourVest Partners LLC
Its: Managing Member
/s/ Ofer Nemirovsky
----------------------------------
Ofer Nemirovsky, Managing Director
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
UPS GENERAL SERVICES CO.
By: /s/ Vern D. Higberg
----------------------------------
Vern D. Higberg, Vice President
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
REDLEAF VENTURE I, L.P.
By: Redleaf Venture Management, L.L.C.
By: /s/ C. Lloyd Mahaffey
-----------------------------------
Name: C. Lloyd Mahaffey
---------------------------------
Title: Managing Director
--------------------------------
REDLEAF ASSOCIATES I, L.P.
By: Redleaf Venture Management, L.L.C.
By: /s/ C. Lloyd Mahaffey
------------------------------------
Name: C. Lloyd Mahaffey
-----------------------------------
Title: Managing Director
----------------------------------
REDLEAF VENTURE II, L.P.
By: Redleaf Venture Management II, L.L.C.
By: /s/ C. Lloyd Mahaffey
------------------------------------
Name: C. Lloyd Mahaffey
---------------------------------
Title: Managing Director
--------------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
REDLEAF GROUP, LLC
By: /s/ C. Lloyd Mahaffey
-------------------------------------
Name: C. Lloyd Mahaffey
-----------------------------------
Title: CEO
----------------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
WALDEN MEDIA & INFORMATION
TECHNOLOGY FUND, L.P.
By: Walden Media, LLC
By: /s/ Steven Eskenazi
-----------------------------
Name: Steve Eskenazi
----------------------------
Title: Manager
---------------------------
WALDEN-SBIC, L.P.
By: Walden GP Corporation
By: /s/ George Sarlo
----------------------------------
Name: George Sarlo
--------------------------------
Title: General Partner
------------------------------
WALDEN TECHNOLOGY VENTURES II, L.P.
By: Walden Technology Partners, L.P.
By: /s/ George Sarlo
----------------------------------
Name: George Sarlo
--------------------------------
Title: General Partner
--------------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
TGI FUND I, LC
By: Tredegar Investments, Inc.
Its: Manager
/s/ John E. Parkey
- ---------------------------------------
John E. Parkey, Vice President
Address: 6501 Columbia Center
701 - 5th Avenue
Seattle, WA 98104
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
By: /s/ Richard Miller
----------------------------
Title:
-------------------------
By: /s/ Christopher O'Neill
----------------------------
Title: General Partner, Vortex Partners MTI, L.P.
-------------------------------------------
S.I. VENTURE FUND, LLC
By: /s/ J.F. Halligan
----------------------------
Title: Managing Director
-------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
HUNT TECHNOLOGY VENTURES, L.P.
By: D.S. Hunt Corp, ITS
General Partner
By: /s/ David S. Hunt
---------------------------
Title: President
------------------------
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
REUTERS HOLDING SWITZERLAND SA
By: /s/ J. Taysom
------------------------------
Title: CEO [illegible]
---------------------------
Address: 153 route de Thono
1245 Collonge Bellerive
Switzerland
BROADVISION, INC.
By: /s/ PeHong Chen
------------------------------
Name: PeHong Chen
Title: CEO
SIGNATURE PAGE TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
---------
INVESTORS
---------
<TABLE>
<CAPTION>
Series A Series A Series B Series B Series C Series D
Common Preferred Preferred Preferred Preferred Preferred Preferred
Name/Address Stock Stock Warrants Stock Warrants Stock Stock
------------ ----- ----- -------- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Walden-SBIC, L.P. 734,308 116,316 46,392
Attn: Steve Eskenazi
750 Battery Street, 7th Floor
San Francisco, CA 94111
Walden Media & Information 2,343,750 371,210 148,071
Technology Fund, L.P.
Attn: Steve Eskenazi
750 Battery Street, 7th Floor
San Francisco, CA 94111
Walden Technology Ventures II, 244,770 38,790 15,465
L.P.
Attn: Steve Eskenazi
750 Battery Street, 7th Floor
San Francisco, CA 94111
Redleaf Venture I, L.P. 3,868,618 1,586,992
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
Redleaf Associates I, L.P. 48,048 19,712
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
Redleaf Venture II, L.P. 741,158
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
Redleaf Group, LLC 62,422
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
<CAPTION>
Series D
Preferred
Warrants
--------
<S> <C>
Walden-SBIC, L.P.
Attn: Steve Eskenazi
750 Battery Street, 7th Floor
San Francisco, CA 94111
Walden Media & Information
Technology Fund, L.P.
Attn: Steve Eskenazi
750 Battery Street, 7th Floor
San Francisco, CA 94111
Walden Technology Ventures II,
L.P.
Attn: Steve Eskenazi
750 Battery Street, 7th Floor
San Francisco, CA 94111
Redleaf Venture I, L.P.
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
Redleaf Associates I, L.P.
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
Redleaf Venture II, L.P.
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
Redleaf Group, LLC
Attn: Nancy Calderon
14395 Saratoga Avenue, Suite
130
Saratoga, CA 95070
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series A Series A Series B Series B Series C Series D
Common Preferred Preferred Preferred Preferred Preferred Preferred
Name/Address Stock Stock Warrants Stock Warrants Stock Stock
------------ ----- ----- -------- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
TGI Fund I, L.C. 2,500,000 1,205,028 263,158
c/o Tredegar Investments, Inc.
Attn: John Parkey
6501 Columbia Center
701 - 5th Avenue
Seattle, WA 98104
Richard Miller 145,834 70,294 22,000 7,413
c/o Telematica
471 Emerson Street, Suite 201
Palo Alto, CA 94301
Marco DeMiroz 145,834 20,000
948 Durlston Road
Redwood City, CA 94062
VLG Investments 1998 17,602 18,420
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Donald M. Keller, Jr. 7,896
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
James L. Brock 7,544
Amicus LLC
188 The Embarcadero, Third
Floor
San Francisco, CA 94105
HarbourVest Partners, LLC 2,631,578 143,523
Attn: Ofer Nemirovsky
One Financial Center, 44th
Floor
Boston, MA 02111
Vortex Partners MTI, L.P. 326,316 17,797
Attn: Christopher O'Neill
2626 Cole Avenue, Suite 700
Dallas, TX 75204
Hunt Technology Ventures, L.P. 200,000 10,908
Attn: David Hunt
1601 Elm Street, Suite 3900
Dallas, TX 75201
<CAPTION>
Series D
Preferred
Name/Address Warrants
------------ --------
<S> <C>
TGI Fund I, L.C.
c/o Tredegar Investments, Inc.
Attn: John Parkey
6501 Columbia Center
701 - 5th Avenue
Seattle, WA 98104
Richard Miller
c/o Telematica
471 Emerson Street, Suite 201
Palo Alto, CA 94301
Marco DeMiroz
948 Durlston Road
Redwood City, CA 94062
VLG Investments 1998
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Donald M. Keller, Jr.
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
James L. Brock
Amicus LLC
188 The Embarcadero, Third
Floor
San Francisco, CA 94105
HarbourVest Partners, LLC
Attn: Ofer Nemirovsky
One Financial Center, 44th
Floor
Boston, MA 02111
Vortex Partners MTI, L.P.
Attn: Christopher O'Neill
2626 Cole Avenue, Suite 700
Dallas, TX 75204
Hunt Technology Ventures, L.P.
Attn: David Hunt
1601 Elm Street, Suite 3900
Dallas, TX 75201
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Series A Series A Series B Series B Series C Series D
Common Preferred Preferred Preferred Preferred Preferred Preferred
Name/Address Stock Stock Warrants Stock Warrants Stock Stock
------------ ----- ----- -------- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
S.I. Venture Fund, LLC 526,316 28,705
Attn: John F. Halligan
1200 Gateway Blvd
Ft. Meyers, FL 33913
UPS General Services Co. 789,474 43,057
Attn: John Cayce
55 Glenview Parkway, N.E.
Atlanta, Georgia 30328
Reuters Holdings Switzerland SA 1,578,948 86,115
Attn: John Taysom
153 route de Thonon
1245 Collonge Bellerive
Switzerland
BroadVision, Inc. 263,158 14,352
Attn: Peter Downs
585 Broadway
Redwood City, CA 94063
William Kirsch 26,468 19,922
C/o Costella-Kirsch
873 Santa Cruz Avenue, Suite
207
Menlo Park, CA 94025
David Campbell 10,866 9,374
C/o Costella-Kirsch
873 Santa Cruz Avenue, Suite
207
Menlo Park, CA 94025
Silicon Valley Bank 90,000
3003 Tasman Drive
Santa Clara, CA 95054
Seligman Communications and 249,687
Information Fund, Inc.
Attn: James M. Curtis
100 Park Avenue, 8/th/ Floor
New York, NY 10017
Seligman New Technologies 789,014
Fund, Inc.
Attn: James M. Curtis
100 Park Avenue, 8th Floor
New York, NY 10017
<CAPTION>
Series D
Preferred
Name/Address Warrants
------------ --------
<S> <C>
S.I. Venture Fund, LLC
Attn: John F. Halligan
1200 Gateway Blvd
Ft. Meyers, FL 33913
UPS General Services Co.
Attn: John Cayce
55 Glenview Parkway, N.E.
Atlanta, Georgia 30328
Reuters Holdings Switzerland SA
Attn: John Taysom
153 route de Thonon
1245 Collonge Bellerive
Switzerland
BroadVision, Inc.
Attn: Peter Downs
585 Broadway
Redwood City, CA 94063
William Kirsch
C/o Costella-Kirsch
873 Santa Cruz Avenue, Suite
207
Menlo Park, CA 94025
David Campbell
C/o Costella-Kirsch
873 Santa Cruz Avenue, Suite
207
Menlo Park, CA 94025
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Seligman Communications and
Information Fund, Inc.
Attn: James M. Curtis
100 Park Avenue, 8/th/ Floor
New York, NY 10017
Seligman New Technologies
Fund, Inc.
Attn: James M. Curtis
100 Park Avenue, 8th Floor
New York, NY 10017
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Series A Series A Series B Series B Series C Series D
Common Preferred Preferred Preferred Preferred Preferred Preferred
Name/Address Stock Stock Warrants Stock Warrants Stock Stock
------------ ----- ----- -------- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Seligman Investment 209,738
Opportunities (Master) Fund -
NTV Portfolio
Attn: James M. Curtis
100 Park Avenue, 8/th/ Floor
New York, NY 10017
Robertson Stephens & Co.
AC Ventures B.V. 249,688
C/o Anderson Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
Attn: Chief Financial Officer
With a copy to:
Legal Department
Anderson Consulting
100 South Wacker Drive
Chicago, IL 60606
Anderson Consulting
100 South Wacker Drive
Chicago, IL 60606
Eastman Chemical Company 249,688
100 N. Eastman Road
Kingsport, TN 37662
Attn: Sean Bowen
Intel 64 Fund, LLC 624,220
Intel 64 Fund Operations, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Portfolio Manager
Fax Number: (408) 765-6038
With a copy to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
<CAPTION>
Series
Preferred
Name/Address Warrants
------------ --------
<S> <C>
Seligman Investment
Opportunities (Master) Fund -
NTV Portfolio
Attn: James M. Curtis
100 Park Avenue, 8th Floor
New York, NY 10017
Robertson Stephens & Co. 31,211
AC Ventures B.V.
C/o Anderson Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
Attn: Chief Financial Officer
With a copy to:
Legal Department
Anderson Consulting
100 South Wacker Drive
Chicago, IL 60606
Anderson Consulting 75,000
100 South Wacker Drive
Chicago, IL 60606
Eastman Chemical Company 15,000
100 N. Eastman Road
Kingsport, TN 37662
Attn: Sean Bowen
Intel 64 Fund, LLC
Intel 64 Fund Operations, Inc.
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Portfolio Manager
Fax Number: (408) 765-6038
With a copy to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Series A Series A Series B Series B Series C Series D
Common Preferred Preferred Preferred Preferred Preferred Preferred
Name/Address Stock Stock Warrants Stock Warrants Stock Stock
------------ ----- ----- -------- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
Hewlett-Packard Company 624,220
19111 Pruneridge Avenue
Building 44 - MS UH
Cupertino CA 95014
With a copy to:
Attention: General Counsel
Hewlett-Packard Company
3000 Hanover Street, MS 20BQ
Palo Alto, CA 94304
MLBC, Inc. 124,843
C/0 Merrill Lynch & Co.
222 Broadway, 17/th/ Floor
New York, NY 10038
Fax Number: (212) 670-4517
----------------------------------------------------------------------------------------------
TOTALS: 291,668 6,416,666 37,334 6,250,000 119,296 7,894,738 3,745,318
----------------------------------------------------------------------------------------------
<CAPTION>
Series D
Preferred
Warrants
--------
<S> <C>
Intel Corporation 93,633
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
Hewlett-Packard Company 93,633
19111 Pruneridge Avenue
Building 44 - MS UH
Cupertino CA 95014
With a copy to:
Attention: General Counsel
Hewlett-Packard Company
3000 Hanover Street, MS 20BQ
Palo Alto, CA 94304
MLBC, Inc.
C/0 Merrill Lynch & Co.
222 Broadway, 17/th/ Floor
New York, NY 10038
Fax Number: (212) 670-4517
-------------
TOTALS: 308,477
-------------
</TABLE>
-5-
<PAGE>
EXHIBIT 10.1
- ------------
FIRST AMENDMENT TO THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT AND WAIVER
--------------------------------------
This First Amendment to Third Amended and Restated Investors' Rights
Agreement (this "Amendment") is made and entered into as of March 10, 2000 by
---------
and among Moai Technologies, Inc., a California corporation (the "Company"),
-------
Andersen Consulting LLP ("Andersen"), Hewlett-Packard Company ("HP"), Intel
-------- --
Corporation ("Intel") and Eastman Chemical Company ("Eastman" and, collectively
----- -------
with AC Ventures, HP and Intel, the "Warrantholders"), the holders of the
--------------
Company's Series A, Series B, Series C and Series D Preferred Stock listed on
the signature pages hereto (the "Investors"), and Deva Hazarika ("Founder") and
--------- -------
Anne Perlman ("Perlman").
-------
RECITALS
--------
A. The Company, Investors, Founder, Perlman and certain other
shareholders of the Company are parties to a Third Amended and Restated
Investors' Rights Agreement dated January 25, 2000 (the "Rights Agreement").
----------------
B. On March 6, 2000, the Company issued Andersen a warrant (the "AC
--
Warrant") exercisable for 75,000 shares of the Company's Series D Preferred
- -------
Stock (the "AC Shares").
---------
C. Concurrently herewith, the Company is issuing HP a warrant (the "HP
--
Warrant") exercisable for 93,633 shares of the Company's Series D Preferred
- -------
Stock (the "HP Shares").
---------
D. On March 6, 2000, the Company issued Intel Corporation a warrant (the
"Intel Warrant") exercisable for 93,633 shares of the Company's Series D
-------------
Preferred Stock (the "Intel Shares").
------------
E. On March 6, 2000, the Company entered into a Memorandum of
Understanding to issue Eastman a warrant (the "Eastman Warrant" and,
---------------
collectively with the AC Warrant, HP Warrant and Intel Warrant, the "Warrants")
--------
exercisable for 15,000 shares of the Company's Series D Preferred Stock (the
"Eastman Shares" and, collectively with the AC Shares, HP Shares and Intel
--------------
Shares, the "Shares").
------
F. Pursuant to Section 2.3 of the Rights Agreement, the Company granted a
right of first offer to certain investors with respect to certain issuances of
the Company's capital stock (the "Right to Maintain Interest").
--------------------------
G. The Company, Investors, Founder and Perlman desire to amend the Rights
Agreement pursuant to Section 3.8 thereof so that Andersen, HP, Intel and
Eastman shall be entitled to the registration rights set forth in Section 1 of
the Restated Agreement with respect to the Shares.
E. The Investors desire to waive the Right to Maintain Interest, on
behalf of themselves and all other holders of Registrable Securities under the
Rights Agreement who are
<PAGE>
entitled to the Right to Maintain Interest, to permit the issuance of the
Warrants and the Series D Preferred Stock issuable upon exercise thereof
(collectively, the "Securities").
----------
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Amendment. The first sentence of Section 1.1(b)(i) of the Rights
---------
Agreement is hereby amended and restated in its entirety to read as follows:
"(i) the shares of Common Stock issuable or issued upon conversion of the
Series A, Series B, Series C or Series D Preferred Stock of the Company
(including Series D Preferred Stock issued after the date of this Agreement
pursuant to an addendum or amendment to the Purchase Agreement) either held
by the Investors or issuable to the Investors upon exercise of outstanding
warrants to purchase Series A Preferred Stock issued to William Kirsch and
David Campbell, outstanding warrants to purchase Series B Preferred Stock
issued to Silicon Valley Bank, William Kirsch and David Campbell, or
outstanding warrants to purchase Series D Preferred Stock issued to
Robertson Stephens, Consulting LLP, Hewlett-Packard Company, Intel
Corporation and Eastman Chemical Company, or affiliates thereof, including
such warrants to purchase Series D Preferred Stock issued after the date
hereof;"
2. Waiver. The Investors hereby waive the Right to Maintain Interest, on
------
behalf of themselves and all other holders of Registrable Securities under the
Rights Agreement who are entitled to the Right to Maintain Interest, with
respect to the issuance of the Securities.
3. General Provisions.
------------------
3.1 Governing Law. This Amendment and all acts and transactions
-------------
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
3.2 Counterparts. This Amendment 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.
[Signature Page Follows]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Third Amended and Restated Investors' Rights Agreement as of the date and
year first above written.
COMPANY:
MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
---------------------------------------------------
Anne Perlman, President and Chief Executive Officer
ANDERSEN CONSULTING LLP
By:______________________________
Name:____________________________
Title:___________________________
Address: Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
EASTMAN CHEMICAL COMPANY
By: /s/ Roger K. Mower, Jr.
-------------------------------
Name: Roger K. Mower, Jr.
-----------------------------
Title: Vice President
----------------------------
Address: 100 N. Eastman Road
Kingsport, TN 37662
SIGNATURE PAGE TO FIRST AMENDMENT TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
AC VENTURES, B.V.
By: /s/ Michael L. Emmons
-----------------------------------------------------------------------------
Name: Michael L. Emmons
---------------------------------------------------------------------------
Title: Managing Director
--------------------------------------------------------------------------
Address: c/o Anderson Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
SIGNATURE PAGE TO FIRST AMENDMENT TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INTEL CORPORATION
By: /s/ Noel Lazo
------------------------------------
Name: Noel Lazo
----------------------------------
Title: Assistant Treasurer
---------------------------------
Address: 2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
HEWLETT-PACKARD COMPANY
By: /s/ Illegible
------------------------------------
Name: Bob Pearse
Title: Business development Manager
Address: 1911 Pruneridge Avenue
Building 44 - MS UH
Cupertino, CA 95014
With a copy to: Hewlett-Packard Company
Attn: General Counsel
3000 Hanover Street, MS 20BQ
Palo Alto, CA 94304
SIGNATURE PAGE TO FIRST AMENDMENT TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
INVESTORS:
SELIGMAN COMMUNICATIONS AND
INFORMATION FUND, INC.
By: J. & W. Seligman & Co. Incorporated,
ITS INVESTMENT ADVISOR
By: /s/ Richard R. Schmaltz
----------------------------
Name: Richard R. Schmaltz
--------------------------
Title: Managing Director
-------------------------
SELIGMAN NEW TECHNOLOGIES
FUND, INC.
By: J. & W. Seligman & Co. Incorporated,
ITS INVESTMENT ADVISOR
By: /s/ Richard R. Schmaltz
-----------------------------
Name: Richard R. Schmaltz
---------------------------
Title: Managing Director
--------------------------
SELIGMAN INVESTMENT OPPORTUNITIES
(MASTER) FUND - NTV PORTFOLIO
By: J. & W. Seligman & Co. Incorporated,
ITS INVESTMENT ADVISOR
By: /s/ Richard R. Schmaltz
-----------------------------
Name: Richard R. Schmaltz
---------------------------
Title: Managing Director
--------------------------
SIGNATURE PAGE TO FIRST AMENDMENT TO MOAI TECHNOLOGIES, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT 10.2
- ------------
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of ((Date)), by and
between Moai Technologies, a Delaware corporation (the "Company"), and ((Name))
("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the 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, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with
<PAGE>
respect to any criminal action or proceeding, had reasonable cause to believe
that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, 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
suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company 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 adjudged 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 suit 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.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1 or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. No Employment Rights. Nothing contained in this Agreement is intended
--------------------
to create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. Subject to the terms and conditions of
-----------------------
this Agreement, the Company shall advance all expenses incurred by Indemnitee in
connection with the investigation, defense, settlement or appeal of any civil or
criminal action, suit or proceeding referenced in Section l(a) or (b) hereof
(including amounts actually paid in settlement of any such action, suit 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. Any advances
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
-2-
<PAGE>
writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). Notice shall be deemed
received three 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 shall be made no later than forty-five (45) days after receipt of the
written request of Indemnitee. If a claim under this Agreement, under any
statute, or under any provision of the Company's Articles of Incorporation or
Bylaws providing for indemnification, is not paid in full by the Company within
forty-five (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees and interest, at the Bank
of America prime rate in effect on the date of Indemnitee's written request, on
the unpaid amount of the claim) of bringing such action. It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in connection with any action, suit or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct which
make it permissible under applicable law for the Company to indemnify Indemnitee
for the amount claimed. Indemnitee shall be entitled to receive interim payments
of expenses pursuant to Subsection 3(a) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(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.
-3-
<PAGE>
(e) Selection of Counsel. In the event the Company shall be
--------------------
obligated under Section 3(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, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ his counsel in any such proceeding at
Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
4. 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 in
any applicable law, statute or rule which narrows the right of a California
corporation to indemnify a member of its board of directors or an officer, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement shall have no effect on this Agreement or the parties'
rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's 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.
5. 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, suit 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.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from
-4-
<PAGE>
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.
7. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. 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
necessary or 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. However, the Company's
decision whether or not to adopt and maintain such insurance shall not affect in
any way its obligations to indemnify its officers and directors under this
Agreement or otherwise. 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.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California Corporation Law, but such indemnification or
advancement
-5-
<PAGE>
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.
(b) 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.
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) 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.
(d) 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.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
include 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.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
-6-
<PAGE>
12. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys, Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys, fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, 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 an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and 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.
15. 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.
16. 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.
17. Modification. This Agreement constitutes the entire agreement between
------------
the parties hereto with respect to the subject matter hereof. All prior
negotiations, agreements and understandings between the parties with respect
thereto are superseded hereby. This Agreement may not be modified or amended
except by an instrument in writing signed by or on behalf of the parties hereto.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MOAI TECHNOLOGIES
By: _______________________________
Title ______________________________
AGREED TO AND ACCEPTED:
INDEMNITEE:
____________________________________
((Name))
-8-
<PAGE>
EXHIBIT 10.12
- -------------
March 17, 2000
Matthew R. Miller
[ADDRESS]
Dear Matt:
On behalf of Moai Technologies, Inc. (the "Company"), I am pleased to offer
-------
you employment with the Company on the terms set forth below.
The terms of your new position with the Company are as set forth below:
1. Position. You will become President and Chief Operating Officer of the
--------
Company and have overall operational responsibility for the Company, reporting
to the Chief Executive Officer. You will be an officer of the Company. You
will work at the Company's main location, or at other locations from time to
time based on your manager's approval.
You will be invited to participate in all Board of Directors meetings.
2. Start Date. Your start date will be April 11, 2000.
----------
3. Salary. You will be paid a monthly salary of $20,833.33, which is
------
equivalent to $250,000.00 on an annualized basis, payable in accordance with the
Company's regular payroll policy. In addition, this position will be eligible
for performance-based bonuses, which will be determined according to the company
bonus plan.
4. Stock Option. In connection with the commencement of your employment,
------------
the Company will grant you an option to purchase 1,200,000 shares of the
Company's Common Stock (approximately 3% of outstanding shares in the company)
with an exercise price equal to the fair market value on the date of the grant.
The number of shares subject to purchase shall be increased by all stock split
related adjustments in the Company's shares in order to maintain the percentage
of outstanding Company shares included in the option grant as of the start date.
The option exercise price will be subject to approval by the Board of Directors.
The option will vest at the rate of 1/5th on April 11, 2000 and 1/48th of the
remaining shares per month thereafter (so that the option is fully vested after
four years). Vesting will, of course, depend on your continued employment with
the Company. The option will be an incentive stock option to the maximum extent
allowed by the tax code and will be subject to the terms of the Company's 1997
or 2000 Stock Plan and the Stock Option Agreement between you and the Company.
<PAGE>
5. Benefits in the Event of Acquisition.
------------------------------------
a. Acceleration of Vesting. In the event of an Acquisition of the
-----------------------
Company (as defined below), (x) fifty percent of all unvested stock options or
restricted stock held by you or committed to be issued to you will become vested
on the closing of the Acquisition, and (y) all remaining unvested stock options
or restricted stock held by you or committed to be issued to you will become
vested upon the earliest to occur of: (i) the first anniversary of the closing
of the Acquisition, assuming your continued service as an employee to the
surviving company; (ii) the closing of the Acquisition, if you are not offered a
position with the surviving company with at least the same salary and benefits
and without any material diminution of responsibility, or if you are required to
relocate your place of employment outside of San Francisco, California, to any
location more than 35 miles from Redwood City, California, or if the surviving
company fails to assume the Company's obligations under this Agreement, or if
the Company or a successor to the Company materially breaches this Agreement
(which breach remains uncured thirty (30) days after you provide written notice
thereof); or (iii) after the Acquisition, the date on which your employment with
the surviving company is terminated without Cause (as defined below) or you
voluntarily terminate your employment with good reason (i.e., the reasons set
forth in (ii) above).
b. Severance. If the circumstances set forth in Section
---------
5(a)(y)(ii) or (iii) shall occur, you will also be entitled to receive within
two weeks thereafter a lump sum payment equal to twelve months of salary, as
well as continuation of all benefits described in Section 6(a) (other than
incentive compensation) for twelve months from the date of termination.
c. Definitions.
-----------
(i) An "Acquisition" means, at any time after the date of this
-----------
letter, the sale of all or substantially all of the Company's assets or any
merger or similar transaction or series of transactions which result in the
holders of the Company's capital stock immediately prior to such transaction
owning less than 50% of the outstanding shares of the Company's capital stock
following such transaction.
(ii) "Cause" will exist at any time after the happening of one or
-----
more of the following events:
(A) Your willful misconduct or gross negligence in
performance of your duties hereunder, including your refusal to comply in any
material respect with the legal directives of the Company's Board of Directors
so long as such directives are not inconsistent with your position and duties,
and such refusal to comply is not remedied within 10 working days after written
notice from the Board of Directors, which written notice shall state that
failure to remedy such conduct may result in termination for Cause;
(B) Dishonest or fraudulent conduct, a deliberate attempt to
do an injury to the Company, or conduct that materially discredits the Company
or is materially detrimental to the reputation of the Company, including
(without limitation) conviction of a felony; or
-2-
<PAGE>
(C) Your incurable material breach of any element of the
Company's Confidential Information and Invention Assignment Agreement, including
without limitation, Employee's theft or other misappropriation of the Company's
proprietary information.
6. Benefits.
--------
a. Insurance Benefits. The Company will provide you with a variety
------------------
of benefits, including medical, dental, vision, AD&D, and life insurance
benefits, which you will be enrolled in at the time you become employed.
b. Vacation. You will be entitled to 3 weeks paid vacation per
--------
year, pro-rated for the remainder of this calendar year. Vacation accrues
according to the Company's regular accrual schedule.
7. Confidential Information and Invention Assignment Agreement. Your
-----------------------------------------------------------
acceptance of this offer and commencement of employment with the Company is
contingent upon the execution, and delivery to an officer of the Company, of the
Company's Confidential Information and Invention Assignment Agreement, a copy of
which is enclosed for your review and execution (the "Confidentiality
---------------
Agreement"), prior to or on your Start Date.
- ---------
8. Confidentiality of Terms. You agree to follow the Company's strict
------------------------
policy that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding salary,
bonuses, or stock option allocations to any person, including other employees of
the Company; provided, however, that you may discuss such terms with members of
your immediate family and any legal, tax or accounting specialists who provide
you with individual legal, tax or accounting advice ,or as may be required by
law or in furtherance of your or your family's personal financial or business
activities.
9. At-Will Employment. Your employment with the Company will be on an
------------------
"at will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason, without further obligation
or liability.
10.10. Proof of Right to Work. For purposes of federal immigration law,
----------------------
you will be required to provide to the Company documentary evidence of your
identity and eligibility for employment in the United States. Such
documentation must be provided to us within three (3) business days of your date
of hire, or our employment relationship with you may be terminated.
We are all delighted to be able to extend you this offer and look forward
to working with you. To indicate your acceptance of the Company's offer, please
sign and date this letter in the space provided below and return it to me, along
with a signed and dated copy of the Confidentiality Agreement. This letter,
together with the Confidentiality Agreement, sets forth the
-3-
<PAGE>
terms of your employment with the Company and supersede any prior
representations or agreements, whether written or oral. This letter may not be
modified or amended except by a written agreement, signed by the Company and by
you.
This offer expires on close of business, Thursday, March 23.
Very truly yours,
MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
-------------------------------
Anne Perlman, CEO and President
ACCEPTED AND AGREED:
MATTHEW R. MILLER
/s/ Matthew R. Miller
- ---------------------------
Signature
___________________________
Date
Enclosure: Confidential Information and Invention Assignment Agreement
-4-
<PAGE>
EXHIBIT 10.13
- -------------
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered into
effective as of __________, by and between "Employee" (the "Employee") and Moai
Technologies, Inc., a California corporation (the "Company").
RECITALS
A. It is understood that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board has identified the Employee, as a key
employee whose continued employment with the Company is critical to the
Company's future success. The Board recognizes that the possibility of a change
in control can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board recognizes that there is increasing competitive pressure in
the Silicon Valley to hire and retain key personnel in senior management
positions. As a result, the Board believes that it is in the best interests of
the Company and its shareholders to provide the Employee with an incentive to
continue his or her employment with the Company. For purposes of this Agreement,
this shall include Employee's employment in a majority-owned subsidiary or other
surviving entity of an acquiring Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient income and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in Section
4 below.
In consideration of the mutual covenants contained in this Agreement, and
in consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
<PAGE>
1. At-Will Employment. The Company and the Employee acknowledge
------------------
that the Employee's employment is and shall continue to be at-will, as defined
under applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of the Company's established employee plans and written policies at
the time of termination. The terms of this Agreement shall terminate upon the
earlier of (i) the date on which Employee ceases to be employed by the Company,
other than as a result of an involuntary termination by the Company without
Cause (ii) the date that all obligations of the parties hereunder have been
satisfied, or (iii) twelve (12) months after a Change of Control. A termination
of the terms of this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall not affect the
payment or provision of compensation or benefits on account of a termination of
employment occurring prior to the termination of the terms of this Agreement.
2. Change of Control.
-----------------
(a) Termination Following A Change of Control. Subject to
-----------------------------------------
Section 4 below, If the Employee's employment with the Company is terminated at
any time within twelve (12) months after a Change of Control, then the Employee
shall be entitled to receive severance benefits and acceleration of vesting as
follows:
(i) Voluntary Resignation. If the Employee voluntarily
---------------------
resigns from the Company (other than as an Involuntary Termination (as defined
below), then the Employee shall not be entitled to receive severance payments or
accelerated vesting under this Agreement. The Employee's benefits will be
terminated under the Company's then-existing benefit plans and policies in
accordance with such plans and policies in effect on the date of termination or
as otherwise determined by the Board of Directors of the Company.
(ii) Involuntary Termination. If the Employee's employment
-----------------------
is terminated as a result of an Involuntary Termination other than for Cause,
(A) the Employee shall be entitled to receive a lump sum severance payment equal
to the equivalent of six (6) months of the Employee's then current "target
compensation", which payment shall be paid within ten (10) business days of the
termination date; and (B) the vesting schedule with respect to all stock options
(the "Option") for the Company's securities granted to the Employee shall be
accelerated by six months so that the number of shares of the Company's
securities that would have vested over the six month period following the
Involuntary Termination of Employee had Employee continued to be employed by the
Company (the "Six Month Period") shall be deemed fully vested and immediately
exercisable in accordance with the provisions of the Option Agreement and Plan
pursuant to which such Option was granted and the repurchase rights of the
Company with respect to Restricted Stock that would have vested over the Six
Month Period shall immediately terminate. For purposes of this Agreement, the
term "target compensation" shall mean the sum of Employee's base salary, bonus
and commission payments payable as if fully earned under the applicable criteria
for such payments.
-2-
<PAGE>
(iii) Involuntary Termination for Cause. If the Employee's
---------------------------------
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance payments or accelerated vesting under this Agreement. The
Employee's benefits will be terminated under the Company's then existing benefit
plans and policies in accordance with such plans and policies in effect on the
date of termination or as otherwise determined by the Board of Directors of the
Company.
(b) Termination Apart from A Change of Control. In the event
------------------------------------------
the Employee's employment terminates for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12) month period
following the effective date of a Change of Control, then the Employee shall not
be entitled to receive any severance payments or accelerated vesting under this
Agreement. The Employee's benefits will be terminated under the terms of the
Company's then existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination or as otherwise determined by
the Board of Directors of the Company.
3. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
-----------------
consummation of any of the following events:
(i) Ownership. Any "Person" (as such term is used in
---------
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) Merger/Sale of Assets. A merger or consolidation of
---------------------
the Company whether or not approved by the Board of Directors of the Company,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(b) Cause. "Cause" shall mean (i) gross negligence or willful
-----
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries, including,
without limitation, Employee's refusal to comply in any material respect with
the legal directives of the Company's Board of Directors so long as such
directives are not inconsistent with the Employee's position and duties, and
such refusal to comply is not remedied within 10 business days after written
notice from the
-3-
<PAGE>
Company, which written notice shall state that failure to remedy such conduct
may result in termination for Cause, (ii) repeated unexplained or unjustified
absence from the Company, (iii) a material and willful violation of any federal
or state law; (iv) commission of any act of fraud with respect to the Company;
or (v) conviction of a felony or a crime involving moral turpitude causing
material harm to the standing and reputation of the Company, in each case as
determined in good faith by the Board of Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination" shall
-----------------------
include any termination by the Company other than for Cause and the Employee's
voluntary termination, upon 30 days prior written notice to the Company,
following a material reduction or change in job duties, responsibilities and
requirements inconsistent with the Employee's position with the Company and the
Employee's prior duties, responsibilities and requirements, taking into account
the differences in job title and duties that are normally occasioned by reason
of an acquisition of one company by another and that do not actually result in a
material change in duties, responsibilities and requirements inconsistent with
an employee's prior position with the acquired company, which reduction or
change results in a reduction of more than 10% of the Employee's base
compensation.
4. Certain Business Combinations. In the event it is determined by
-----------------------------
the Board, upon consultation with Company management and the Company's
independent auditors, that the enforcement of any Section of this Agreement,
including, but not limited to, Section 2 hereof, which allows for the
acceleration of vesting of Option shares and termination of Repurchase Rights
upon the Involuntary Termination of Employee, would preclude accounting for any
proposed business combination of the Company involving a Change of Control as a
pooling of interests, and the Board otherwise desires to approve such a proposed
business transaction which requires as a condition to the closing of such
transaction that it be accounted for as a pooling of interests, then any such
Section of this Agreement shall be null and void. For purposes of this Section
4, the Board's determination shall require the unanimous approval of the non-
Employee Board members.
5. Successors. Any successor to the Company (whether direct or
----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. Notice. Notices and all other communications contemplated by
------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the
-4-
<PAGE>
case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
7. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified,
------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
---------------
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void.
(d) Choice of Law. The validity, interpretation, construction
-------------
and performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement
------------
or the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in
-----------
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of San Francisco, California, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
Punitive damages shall not be awarded.
-5-
<PAGE>
(g) Legal Fees and Expenses. The parties shall each bear their
-----------------------
own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
-------------------------
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
----------------
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by the Company. The Company may assign its
-------------------------
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a section of this Agreement shall mean the corporation that actually employs the
Employee.
(k) Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
MOAI TECHNOLOGIES, INC. ((EMPLOYEE))
By: ______________________________ _____________________________
Title:____________________________
-7-
<PAGE>
EXHIBIT 10.14
- -------------
STOCK RESTRICTION AGREEMENT
---------------------------
This Stock Restriction Agreement (this "Agreement") is entered into as of
---------
December 19, 1997 (the "Effective Date"), between Moai Technologies, Inc., a
--------------
California corporation (the "Company"), and Deva Hazarika (the "Shareholder").
------- -----------
RECITALS
--------
A. Moai Technologies, Inc., a Colorado corporation ("Moai Colorado"),
-------------
sold 450,000 shares of its Common Stock to the Shareholder pursuant to a
Common Stock Purchase Agreement dated June 15, 1997 (the "First Agreement").
---------------
Such 450,000 shares of Common Stock were exchanged for 4,500,000 shares of the
Company's Common Stock as part of Moai Colorado's reincorporation into
California on June 30, 1997.
B. The Company sold 250,000 shares of its Common Stock to the Shareholder
pursuant to a Founder Common Stock Purchase Agreement dated June 25, 1997 (the
"Second Agreement"). On December 5, 1997, each outstanding share of the
----------------
Company's Common Stock was split up into 0.25 shares of Common Stock. The
1,187,500 shares of the Company's Common Stock (post-split) purchased by the
Shareholder pursuant to the First Agreement and the Second Agreement are
referred to collectively in this Agreement as the "Shares."
------
C. In connection with the Company's sale of Series A Preferred Stock and
in consideration of the purchasers' purchase of such Series A Preferred Stock,
the Company and the Shareholder wish to provide for certain additional
restrictions with respect to certain of the Shares in accordance with the terms
of this Agreement.
AGREEMENT
---------
1. Limitations on Transfer. The Shareholder shall not assign, encumber or
-----------------------
dispose of any interest in the Vesting Shares (as defined below) while the
Vesting Shares are subject to the Company's Repurchase Option (as defined
below). After any Vesting Shares have been released from the Repurchase Option,
the Shareholder shall not assign, encumber or dispose of any interest in the
Shares except in compliance with the provisions below and applicable securities
laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination
of the Shareholder's employment or consulting relationship with the Company
for any reason (including death or disability), with or without cause, the
Company shall upon the date of such termination (the "Termination Date") have
----------------
an irrevocable, exclusive option (the "Repurchase Option") for a period of
-----------------
sixty (60) days from such date to repurchase all or any portion of the Shares
held by the Shareholder as of the Termination Date which have not yet been
released from the Company's Repurchase Option at the original purchase price
of such Shares (adjusted for share exchanges, stock splits, stock dividends and
the like); provided, however, that the Repurchase Option shall continue for a
-------- -------
period of up to one year from the Termination Date to the
<PAGE>
extent that the Company reasonably determines that such an extension of time is
necessary to prevent the repurchase of such Shares from causing other capital
stock of the Company to lose its status as "qualified small business stock"
under Section 1202 of the Internal Revenue Code of 1986, as amended.
(ii) The Repurchase Option shall be exercised by the Company by
written notice to the Shareholder or the Shareholder's executor and, at the
Company's option, (A) by delivery to the Shareholder or the Shareholder's
executor with such notice of a check in the amount of the purchase price for the
Shares being purchased, or (B) in the event the Shareholder is indebted to the
Company, by cancellation by the Company of an amount of such indebtedness equal
to the purchase price for the Shares being repurchased, or (C) by a combination
of (A) and (B) so that the combined payment and cancellation of indebtedness
equals such purchase price. Upon delivery of such notice and payment of the
purchase price in accordance with the foregoing, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interest therein or related thereto, and the Company shall have the right to
transfer to its own name the number of Shares being repurchased by the Company,
without further action by the Shareholder.
(iii) 795,625 of the Shares (the "Vesting Shares") shall
--------------
initially be subject to the Repurchase Option. 1/36th of the Vesting Shares
shall be released from the Repurchase Option on each monthly anniversary of the
Effective Date, until all Vesting Shares are released from the Repurchase Option
(provided in each case that the Shareholder's employment or consulting
relationship with the Company has not been terminated prior to the date of such
release). Fractional shares shall be rounded to the nearest whole share.
(b) Right of First Refusal. All of the Shares shall be subject to
----------------------
the Right of First Refusal set forth in Section 3 of the Second Agreement.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding in the case of death a transfer to the Shareholder's spouse, lineal
descendant or antecedent, father, mother, brother or sister, or a trust for the
benefit of any of the foregoing) of all or a portion of the Shares by the record
holder thereof, the Company shall have an option to purchase all of the Shares
transferred. The purchase price of the Shares which have not been released from
the Repurchase Option shall be the original purchase price of such Shares
(adjusted for share exchanges, stock splits, stock dividends and the like); the
purchase price of the Shares which have been released from the Repurchase Option
shall be the greater of the original purchase price of such Shares (adjusted for
share exchanges, stock splits, stock dividends and the like) and the fair market
value of such Shares on the date of transfer. Upon such a transfer, the person
acquiring the Shares shall promptly notify the Secretary of the Company of such
transfer. The right to purchase such
-2-
<PAGE>
Shares shall be provided to the Company for a period of thirty (30) days
following receipt by the Company of written notice by the person acquiring the
Shares.
(ii) Price for Involuntary Transfer. With respect to any Shares
------------------------------
which have been released from the Repurchase Option to be transferred pursuant
to Section 1(c)(i), the fair market value per Share shall be a price set by the
Board of Directors of the Company that will reflect the current value of the
stock in terms of present earnings and future prospects of the Company. The
Company shall notify the Shareholder or his or her executor of the price so
determined within thirty (30) days after receipt by it of written notice of the
transfer or proposed transfer of Shares. However, if the Shareholder does not
agree with the valuation as determined by the Board of Directors of the Company,
the Shareholder shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Shareholder and whose fees shall be borne equally by the Company and the
Shareholder.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations.
(e) Restrictions Binding on Transferees. All transferees of Shares
-----------------------------------
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. Notwithstanding anything in the Second
---------------------
Agreement to the contrary, the Right of First Refusal and the option to
repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 1(c) shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act (the "IPO"). The Repurchase Option shall not be affected by the
---
IPO.
(g) Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, the
Shareholder agrees not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
2. Escrow. For purposes of facilitating the enforcement of the
------
provisions of Section 1(a), the Shareholder shall promptly deliver the
certificate(s) for the Shares, together with an Assignment Separate from
Certificate in the form attached to this Agreement as
-3-
<PAGE>
Attachment A executed by the Shareholder and by the Shareholder's spouse (if
- ------------
required for transfer), in blank, to the Secretary of the Company, or the
Secretary's designee, to hold such certificate(s) and Assignment Separate from
Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are required in accordance with the terms of this
Agreement. The Shareholder hereby acknowledges that the Secretary of the
Company, or the Secretary's designee, is so appointed as the escrow holder with
the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly
irrevocable. The Shareholder agrees that said escrow holder shall not be liable
to any party hereof (or to any other party). The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time. The Shareholder agrees that if the Secretary
of the Company, or the Secretary's designee, resigns as escrow holder for any or
no reason, the Board of Directors of the Company shall have the power to appoint
a successor to serve as escrow holder pursuant to the terms of this Agreement.
3. Legends. The certificate or certificates representing the Shares
-------
shall be endorsed with the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Upon termination of the Right of First Refusal and the expiration or
exercise of the Repurchase Option, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without
such legend and delivered to the Shareholder.
4. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate the Shareholder's employment, for any reason, with
or without cause.
5. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Amendment; Enforcement of Rights. This
--------------------------------------------------
Agreement, the First Agreement, the Second Agreement, the Shareholder's
employment letter dated as of the Effective Date and the Right of First Refusal
and Co-Sale Agreement dated as of the Effective Date and entered into in
connection with the Company's sale of Series A Preferred Stock constitute the
entire agreement among the parties hereto pertaining to the subject matter
-4-
<PAGE>
hereof, and any and all other written or oral agreements existing between or
among any of the parties hereto are expressly canceled. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
shall be effective unless in writing signed by the parties to this Agreement.
The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party's address as set forth below or as subsequently modified by written
notice.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Successors and Assigns. The rights and benefits of this
----------------------
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of the Shareholder under this
Agreement may be assigned only with the prior written consent of the Company.
[Signature Page Follows]
-5-
<PAGE>
The parties hereto have executed this Stock Restriction Agreement as of the
Effective Date.
MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
---------------------------------
Anne Perlman, President and CEO
ADDRESS:
650 Townsend Street, Suite 2117
San Francisco, CA 94103
THE SHAREHOLDER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 1 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. THE SHAREHOLDER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON THE SHAREHOLDER ANY
RIGHT WITH RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP
WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH THE SHAREHOLDER'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE THE SHAREHOLDER'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
THE SHAREHOLDER:
Deva Hazarika
/s/ Deva Hazarika
-------------------------------------
ADDRESS:
[ADDRESS]
-------------------------------------
-------------------------------------
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Restriction Agreement
between the undersigned (the "Shareholder") and Moai Technologies, Inc. (the
-----------
"Company") dated December ___, 1997 (the "Agreement"), the Shareholder hereby
------- ---------
sells, assigns and transfers unto the Company ________ shares of the Company's
Common Stock standing in the Shareholder's name on the books of said corporation
represented by Certificate No. __________ herewith and does hereby irrevocably
constitute and appoint Venture Law Group to transfer said stock on the books of
the Company with full power of substitution in the premises. THIS ASSIGNMENT
MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated: December ___, 1997
Signature:
/s/ Deva Hazarika
-----------------------------------
Deva Hazarika
___________________________________
[Spouse Name]
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option set forth in the Agreement without requiring additional
signatures on the part of the Shareholder.
<PAGE>
ATTACHMENT B
------------
CONSENT OF SPOUSE
-----------------
I, _____________, spouse of Deva Hazarika, have read and hereby
approve the foregoing Stock Restriction Agreement (the "Agreement"). In
---------
consideration of the Company's enhanced potential to raise additional capital
for the benefit of all shareholders, including my spouse, provided by the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other interest I may have in the Shares
shall be subject to the Agreement. I hereby appoint my spouse as my attorney-
in-fact with respect to any amendment to or exercise of any rights I may have
under the Agreement.
_____________________________________
[Spouse Name]
<PAGE>
EXHIBIT 10.15
- -------------
STOCK RESTRICTION AGREEMENT
---------------------------
This Stock Restriction Agreement (this "Agreement") is entered into as of
---------
December 19, 1997 (the "Effective Date"), between Moai Technologies, Inc., a
--------------
California corporation (the "Company"), and Frank Kang (the "Shareholder").
------- -----------
RECITALS
--------
A. Moai Technologies, Inc., a Colorado corporation ("Moai Colorado"),
-------------
sold 450,000 shares of its Common Stock to the Shareholder pursuant to a Common
Stock Purchase Agreement dated June 15, 1997 (the "First Agreement"). Such
---------------
450,000 shares of Common Stock were exchanged for 4,500,000 shares of the
Company's Common Stock as part of Moai Colorado's reincorporation into
California on June 30, 1997.
B. The Company sold 250,000 shares of its Common Stock to the Shareholder
pursuant to a Founder Common Stock Purchase Agreement dated June 25, 1997 (the
"Second Agreement"). On December 5, 1997, each outstanding share of the
----------------
Company's Common Stock was split up into 0.25 shares of Common Stock. The
1,187,500 shares of the Company's Common Stock (post-split) purchased by the
Shareholder pursuant to the First Agreement and the Second Agreement are
referred to collectively in this Agreement as the "Shares."
------
C. In connection with the Company's sale of Series A Preferred Stock and
in consideration of the purchasers' purchase of such Series A Preferred Stock,
the Company and the Shareholder wish to provide for certain additional
restrictions with respect to certain of the Shares in accordance with the terms
of this Agreement.
AGREEMENT
---------
1. Limitations on Transfer. The Shareholder shall not assign, encumber or
-----------------------
dispose of any interest in the Vesting Shares (as defined below) while the
Vesting Shares are subject to the Company's Repurchase Option (as defined
below). After any Vesting Shares have been released from the Repurchase Option,
the Shareholder shall not assign, encumber or dispose of any interest in the
Shares except in compliance with the provisions below and applicable securities
laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
the Shareholder's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") for a period of sixty (60) days from
-----------------
such date to repurchase all or any portion of the Shares held by the Shareholder
as of the Termination Date which have not yet been released from the Company's
Repurchase Option at the original purchase price of such Shares (adjusted for
share exchanges, stock splits, stock dividends and the like); provided, however,
-------- -------
that the Repurchase Option shall continue for a period of up to one year from
the Termination Date to the
<PAGE>
extent that the Company reasonably determines that such an extension of time is
necessary to prevent the repurchase of such Shares from causing other capital
stock of the Company to lose its status as "qualified small business stock"
under Section 1202 of the Internal Revenue Code of 1986, as amended.
(ii) The Repurchase Option shall be exercised by the Company
by written notice to the Shareholder or the Shareholder's executor and, at the
Company's option, (A) by delivery to the Shareholder or the Shareholder's
executor with such notice of a check in the amount of the purchase price for the
Shares being purchased, or (B) in the event the Shareholder is indebted to the
Company, by cancellation by the Company of an amount of such indebtedness equal
to the purchase price for the Shares being repurchased, or (C) by a combination
of (A) and (B) so that the combined payment and cancellation of indebtedness
equals such purchase price. Upon delivery of such notice and payment of the
purchase price in accordance with the foregoing, the Company shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interest therein or related thereto, and the Company shall have the right to
transfer to its own name the number of Shares being repurchased by the Company,
without further action by the Shareholder.
(iii) 795,625 of the Shares (the "Vesting Shares") shall
--------------
initially be subject to the Repurchase Option. 1/36th of the Vesting Shares
shall be released from the Repurchase Option on each monthly anniversary of the
Effective Date, until all Vesting Shares are released from the Repurchase Option
(provided in each case that the Shareholder's employment or consulting
relationship with the Company has not been terminated prior to the date of such
release). Fractional shares shall be rounded to the nearest whole share.
(b) Right of First Refusal. All of the Shares shall be subject to the
----------------------
Right of First Refusal set forth in Section 3 of the Second Agreement.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding in the case of death a transfer to the Shareholder's spouse, lineal
descendant or antecedent, father, mother, brother or sister, or a trust for the
benefit of any of the foregoing) of all or a portion of the Shares by the record
holder thereof, the Company shall have an option to purchase all of the Shares
transferred. The purchase price of the Shares which have not been released from
the Repurchase Option shall be the original purchase price of such Shares
(adjusted for share exchanges, stock splits, stock dividends and the like); the
purchase price of the Shares which have been released from the Repurchase Option
shall be the greater of the original purchase price of such Shares (adjusted for
share exchanges, stock splits, stock dividends and the like) and the fair market
value of such Shares on the date of transfer. Upon such a transfer, the person
acquiring the Shares shall promptly notify the Secretary of the Company of such
transfer. The right to purchase such
-2-
<PAGE>
Shares shall be provided to the Company for a period of thirty (30) days
following receipt by the Company of written notice by the person acquiring the
Shares.
(ii) Price for Involuntary Transfer. With respect to any
------------------------------
Shares which have been released from the Repurchase Option to be transferred
pursuant to Section 1(c)(i), the fair market value per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify the Shareholder or his or her executor of the price so
determined within thirty (30) days after receipt by it of written notice of the
transfer or proposed transfer of Shares. However, if the Shareholder does not
agree with the valuation as determined by the Board of Directors of the Company,
the Shareholder shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Shareholder and whose fees shall be borne equally by the Company and the
Shareholder.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations.
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. Notwithstanding anything in the Second
---------------------
Agreement to the contrary, the Right of First Refusal and the option to
repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 1(c) shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act (the "IPO"). The Repurchase Option shall not be affected by the
---
IPO.
(g) Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, the
Shareholder agrees not to sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
2. Escrow. For purposes of facilitating the enforcement of the
------
provisions of Section 1(a), the Shareholder shall promptly deliver the
certificate(s) for the Shares, together with an Assignment Separate from
Certificate in the form attached to this Agreement as
-3-
<PAGE>
Attachment A executed by the Shareholder and by the Shareholder's spouse (if
- ------------
required for transfer), in blank, to the Secretary of the Company, or the
Secretary's designee, to hold such certificate(s) and Assignment Separate from
Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are required in accordance with the terms of this
Agreement. The Shareholder hereby acknowledges that the Secretary of the
Company, or the Secretary's designee, is so appointed as the escrow holder with
the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly
irrevocable. The Shareholder agrees that said escrow holder shall not be liable
to any party hereof (or to any other party). The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time. The Shareholder agrees that if the Secretary
of the Company, or the Secretary's designee, resigns as escrow holder for any or
no reason, the Board of Directors of the Company shall have the power to appoint
a successor to serve as escrow holder pursuant to the terms of this Agreement.
3. Legends. The certificate or certificates representing the Shares
-------
shall be endorsed with the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
Upon termination of the Right of First Refusal and the expiration or
exercise of the Repurchase Option, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without
such legend and delivered to the Shareholder.
4. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate the Shareholder's employment, for any reason, with
or without cause.
5. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Amendment; Enforcement of Rights. This
--------------------------------------------------
Agreement, the First Agreement, the Second Agreement, the Shareholder's
employment letter dated as of the Effective Date and the Right of First Refusal
and Co-Sale Agreement dated as of the Effective Date and entered into in
connection with the Company's sale of Series A Preferred Stock constitute the
entire agreement among the parties hereto pertaining to the subject matter
hereof, and any and all other written or oral agreements existing between or
among any of the
-4-
<PAGE>
parties hereto are expressly canceled. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by the parties to this Agreement. The failure by either
party to enforce any rights under this Agreement shall not be construed as a
waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party's address as set forth below or as subsequently modified by written
notice.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of the Shareholder under this Agreement
may be assigned only with the prior written consent of the Company.
[Signature Page Follows]
-5-
<PAGE>
EXHIBIT 10.15
- -------------
The parties hereto have executed this Stock Restriction Agreement as of the
Effective Date.
MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
----------------------------------
Anne Perlman, President and CEO
ADDRESS:
650 Townsend Street, Suite 2117
San Francisco, CA 94103
THE SHAREHOLDER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 1 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. THE SHAREHOLDER FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON THE SHAREHOLDER ANY
RIGHT WITH RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP
WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH THE SHAREHOLDER'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE THE SHAREHOLDER'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
THE SHAREHOLDER:
Frank Kang
/s/ Frank Kang
--------------------------------------
ADDRESS:
[ADDRESS]
--------------------------------------
--------------------------------------
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Restriction Agreement
between the undersigned (the "Shareholder") and Moai Technologies, Inc. (the
-----------
"Company") dated December ___, 1997 (the "Agreement"), the Shareholder hereby
- -------- ---------
sells, assigns and transfers unto the Company ________ shares of the Company's
Common Stock standing in the Shareholder's name on the books of said corporation
represented by Certificate No. __________ herewith and does hereby irrevocably
constitute and appoint Venture Law Group to transfer said stock on the books of
the Company with full power of substitution in the premises. THIS ASSIGNMENT
MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated: December ___, 1997
Signature:
/s/ Frank Kang
--------------------------------
Frank Kang
--------------------------------
[Spouse Name]
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option set forth in the Agreement without requiring additional
signatures on the part of the Shareholder.
<PAGE>
ATTACHMENT B
------------
CONSENT OF SPOUSE
-----------------
I, _____________, spouse of Frank Kang, have read and hereby approve
the foregoing Stock Restriction Agreement (the "Agreement"). In consideration
---------
of the Company's enhanced potential to raise additional capital for the benefit
of all shareholders, including my spouse, provided by the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other interest I may have in the Shares shall be subject
to the Agreement. I hereby appoint my spouse as my attorney-in-fact with
respect to any amendment to or exercise of any rights I may have under the
Agreement.
--------------------------------
[Spouse Name]
<PAGE>
EXHIBIT 10.16
- -------------
MOAI TECHNOLOGIES, INC.
COMMON STOCK PURCHASE AGREEMENT
-------------------------------
This Common Stock Purchase Agreement ("Agreement") is entered into as of
---------
December 9, 1997 between Moai Technologies, Inc., a California corporation (the
"Company"), and Anne Perlman ("Purchaser").
------- ---------
1. Sale of Stock. On the Purchase Date (as defined below) the Company
-------------
will issue and sell to Purchaser, and Purchaser will purchase from the Company,
738,750 shares of the Company's Common Stock (the "Shares") at a purchase price
------
of $0.06 per Share for a total purchase price of $44,325.00. The term "Shares"
refers to the purchased shares of Common Stock and all securities received in
replacement of or in connection with such shares pursuant to stock dividends or
splits, all securities received in replacement of such shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of such shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement by the parties, or at such other time and place as
the Company and Purchaser shall agree (the "Purchase Date"). On the Purchase
-------------
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by delivery of a
promissory note in the form attached as Exhibit A to this Agreement and a Pledge
---------
and Security Agreement in the form attached as Exhibit B to this Agreement.
---------
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below). After any Shares have
been released from the Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") for a period of 60 days from such
-----------------
date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company's Repurchase
Option at the original purchase price per Share specified in Section 1 (adjusted
for any stock splits, stock dividends and the like); provided, however, that the
-------- -------
Repurchase Option shall continue for a period of up to one year from the
Termination Date to the extent that the Company reasonably determines that such
an extension of time is necessary to prevent the repurchase of
<PAGE>
the Shares from causing other capital stock of the Company to lose its status as
"qualified small business stock" under Section 1202 of the Internal Revenue Code
of 1986, as amended.
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Shares shall initially be
subject to the Repurchase Option. 1/8th of the Shares shall be released from
the Repurchase Option on the date that is six months after the Vesting
Commencement Date (as set forth on the signature page of this Agreement), and
1/48th of the total number of Shares shall be released from the Repurchase
Option at the end of each month thereafter, until all Shares are released from
the Repurchase Option (provided in each case that Purchaser's employment or
consulting relationship with the Company has not been terminated prior to the
date of such release). Fractional shares shall be rounded to the nearest whole
share.
(iv) Notwithstanding Section 3(a)(iii), the Repurchase Option
shall lapse in accordance with paragraph 6 of Purchaser's employment letter with
the Company dated December 9, 1997 (the "Employment Letter").
-----------------
(b) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "Notice") stating: (A) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("Proposed Transferee"); (C)
-------------------
the number of Shares to be transferred to each Proposed Transferee; and (D) the
terms and conditions of each proposed sale or transfer. The Holder shall offer
the Shares at the same price (the "Offered Price") and upon the same terms (or
-------------
terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred
-2-
<PAGE>
to any one or more of the Proposed Transferees, at the purchase price determined
in accordance with subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within sixty (60) days after the date of the Notice and
provided further that any such sale or other transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that the provisions of this Section 3 shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, or if
the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) Exception for Certain Transfers. Anything to the contrary
-------------------------------
contained in this Section 3(b) notwithstanding, the donative transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to the San Jose Children's Discovery Museum or to Purchaser's
Immediate Family or a trust for the benefit of Purchaser's Immediate Family
shall be exempt from the provisions of this Section 3(b). "Immediate Family" as
----------------
used herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall
receive and hold the Shares so transferred subject to the provisions of this
Agreement, and there shall be no further transfer of such Shares except in
accordance with the terms of this Agreement.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(b)(vi)) of
all or a portion of the Shares by the record holder thereof, the Company shall
have an option to purchase all of the Shares transferred. The
-3-
<PAGE>
purchase price for Shares which have not been released from the Repurchase
Option shall be the original purchase price per share specified in Section 1
(adjusted for any stock splits, stock dividends and the like); the purchase
price for Shares which have been released from the Repurchase Option shall be
the greater of the purchase price specified in Section 1 (adjusted for any stock
splits, stock dividends and the like) and the fair market value of the Shares on
the date of transfer. Upon such a transfer, the person acquiring the Shares
shall promptly notify the Secretary of the Company of such transfer. The right
to purchase such Shares shall be provided to the Company for a period of thirty
(30) days following receipt by the Company of written notice by the person
acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any shares
------------------------------
which have not been released from the Repurchase Option to be transferred
pursuant to Section 3(c)(i), the price per Share shall be a price set by the
Board of Directors of the Company that will reflect the current value of the
stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by it of written notice of the transfer or
proposed transfer of Shares. However, if the Purchaser does not agree with the
valuation as determined by the Board of Directors of the Company, the Purchaser
shall be entitled to have the valuation determined by an independent appraiser
to be mutually agreed upon by the Company and the Purchaser and whose fees shall
be borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations.
(e) Restrictions Binding on Transferees. All transferees of Shares
-----------------------------------
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Company's Shares shall be void
unless the provisions of this Agreement are met.
(f) Termination of Rights. The Right of First Refusal and the option
---------------------
to repurchase the Shares in the event of an involuntary transfer granted the
Company by Section 3(c) shall terminate upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act") (the "IPO"). The
-------------- ---
Repurchase Option shall not be affected by the IPO.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3, Purchaser agrees, immediately upon
receipt of the certificate(s) for the Shares subject to the Repurchase Option,
to deliver such certificate(s), together with an Assignment Separate from
Certificate in the form attached to this Agreement as Exhibit C executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser
-4-
<PAGE>
hereby acknowledges that the Secretary of the Company, or the Secretary's
designee, is so appointed as the escrow holder with the foregoing authorities as
a material inducement to make this Agreement and that said appointment is
coupled with an interest and is accordingly irrevocable. Purchaser agrees that
said escrow holder shall not be liable to any party hereof (or to any other
party). The escrow holder may rely upon any letter, notice or other document
executed by any signature purported to be genuine and may resign at any time.
Purchaser agrees that if the Secretary of the Company, or the Secretary's
designee, resigns as escrow holder for any or no reason, the Board of Directors
of the Company shall have the power to appoint a successor to serve as escrow
holder pursuant to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
-5-
<PAGE>
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends.
-------
(i) The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(A) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
(B) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(C) Any legend required to be placed thereon by the
California Commissioner of Corporations.
(ii) Upon termination of the Right of First Refusal and the
expiration or exercise of the Repurchase Option, a new certificate or
certificates representing the Shares not repurchased shall be issued, on
request, without the legend referred to in Section 6(a)(i)(B) and delivered to
Purchaser.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
-6-
<PAGE>
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
----
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In
this context, "restriction" means the right of the Company to buy back the
-----------
Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) Election") of the
--------------
Code with the Internal Revenue Service within 30 days from the date of purchase.
A blank 83(b) election is attached hereto as Exhibit D. Even if the fair market
---------
value of the Shares at the time of the execution of this Agreement equals the
amount paid for the Shares, the election must be made to avoid income under
Section 83(a) in the future. Purchaser understands that failure to file such an
election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
election form should be filed with his or her federal income tax return for the
calendar year in which the date of this Agreement falls. Purchaser acknowledges
that the foregoing is only a summary of the effect of United States federal
income taxation with respect to purchase of the Shares hereunder, and does not
purport to be complete. Purchaser further acknowledges that the Company has
directed Purchaser to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or
foreign country in which Purchaser may reside, and the tax consequences of
Purchaser's death.
9. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement and the
---------------------------------------
Employment Letter set forth the entire agreement and understanding of the
parties relating to the subject matter herein and therein and merge all prior
discussions between them. No modification
-7-
<PAGE>
of or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
SIGNATURE PAGE FOLLOWS
-8-
<PAGE>
The parties have executed this Common Stock Purchase Agreement as of the
date first set forth above.
MOAI TECHNOLOGIES, INC.
By: /s/ Devapratim Hazarika
------------------------------------------------
Devapratim Hazarika, Chief Technical Officer
Address:
650 Townsend Street, Suite 2117
San Francisco, CA 94103
PURCHASER ACKNOWLEDGES AND AGREES THAT, SUBJECT TO THE EMPLOYMENT LETTER,
THE VESTING OF SHARES PURSUANT TO SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER
FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON
PURCHASER ANY RIGHT WITH RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR
CONSULTING RELATIONSHIP WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH
PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR
CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
ANNE PERLMAN
/s/ Anne Perlamn
----------------------------------------------------
(Signature)
Address:
[ADDRESS]
------------------------------------------
------------------------------------------
Vesting Commencement
Date: December 1, 1997
I, _________________, spouse of Anne Perlman, have read and hereby approve the
foregoing Agreement. In consideration of the Company's granting my spouse the
right to purchase the Shares as set forth in the Agreement, I hereby agree to be
irrevocably bound by the Agreement and further agree that any community property
or other such interest shall be similarly bound by the Agreement. I hereby
appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
_____________________________________
Signature of spouse
<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
$44,325.00 San Francisco, California
December 9, 1997
For value received, the undersigned promises to pay Moai Technologies,
Inc., a California corporation (the "Company"), at its principal office the
-------
principal sum of $44,325.00 with interest from the date hereof at a rate of
6.10% per annum, compounded annually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable on the earlier of (a)
such time as the Company's repurchase option with respect to the shares of the
Company's Common Stock purchased by the undersigned with the principal amount of
this Note has lapsed in its entirety and (b) ten (10) days following termination
of the undersigned's employment relationship for any reason or no reason.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
undersigned hereby waives presentment for payment, protest, notice of protest,
and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
/s/ Anne Perlman
----------------------------
Anne Perlman
<PAGE>
EXHIBIT B
---------
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (this "Agreement") is entered into as of
---------
December 9, 1997 between Moai Technologies, Inc., a California corporation (the
"Company"), and Anne Perlman ("Purchaser").
------- ---------
RECITALS
--------
In connection and simultaneously with Purchaser's purchase of certain
shares of the Company's Common Stock (the "Shares") pursuant to a Common Stock
------
Purchase Agreement dated as of the date hereof between Purchaser and the
Company, Purchaser is delivering a promissory note (the "Note") in full payment
----
of the purchase price for the Shares. The Company requires that the Note be
secured by a pledge of the Shares on the terms set forth below.
AGREEMENT
---------
1. Grant of Security Interest. Purchaser hereby assigns, pledges and
--------------------------
grants to the Company, a lien on and security interest in all of Purchaser's
right, title and interest in and to the 738,750 shares of the Company's Common
Stock represented by certificate number C-0012 (the "Collateral") to secure the
----------
full payment and performance of the obligations of Purchaser to the Company
under the Note and all amendments, extensions, or renewals of the Note (the
"Obligations").
-----------
2. Delivery of Collateral. Concurrently with the Purchaser's
----------------------
delivery to the Company of the Note, Purchaser shall deliver the Collateral to
the Company, along with an Assignment Separate from Certificate in the form
attached hereto as Attachment A. The Company or its legal counsel shall hold
------------
the Collateral as security for Purchaser's obligations under the Note and shall
not release the Collateral until such obligations are discharged in full to the
satisfaction of the Company.
3. Representations and Warranties. Purchaser hereby represents and
------------------------------
warrants to the Company that:
(a) Purchaser is the registered owner of the Collateral. No other
person or entity has any right, title claim or interest (by way of lien, charge
or otherwise) in, against or to the Collateral.
(b) Purchaser has not assigned any rights or interest in the
Collateral except as granted herein and the rights set forth in the First
Refusal and Co-Sale Agreement dated as of the date hereof.
-11-
<PAGE>
4. Covenants. Purchaser hereby covenants and agrees as follows:
---------
(a) Purchaser will do all acts that may be necessary to maintain,
preserve, and protect the Collateral.
(b) Purchaser will keep the Collateral free of all other liens or
charges except those provided herein. Purchaser will not sell, transfer, redeem,
exchange, convey, pledge or otherwise dispose or surrender (other than to the
Company) the Collateral or any interest therein.
(c) Purchaser will defend any proceeding which may affect its title
to or the Company's interest in the Collateral.
5. Authorized Action by the Company. Purchaser hereby irrevocably
--------------------------------
appoints the Company as its attorney-in-fact to do at any time prior to or
subsequent to an Event of Default (as defined below) any act which Purchaser is
obligated by this Agreement to do (but the Company shall not be obligated to nor
shall it incur any liability to Purchaser or any third parties for failure so to
do), and, in addition, at any time after the occurrence of an Event of Default,
the Company is authorized:
(a) to exercise such rights and powers as Purchaser might exercise
with respect to the Collateral;
(b) to make any compromise and take any action the Company deems
advisable with respect to the Collateral;
(c) to transfer the Collateral to its own name or its nominee's
name in accordance with applicable law. In such event, the Company shall
transfer such number of shares of the Collateral as are necessary to satisfy all
of the Obligations and all other amounts due under this Agreement.
The appointment granted herein is irrevocable and coupled with an interest.
6. Voting Rights. In the absence of an Event of Default, Purchaser shall
-------------
be entitled to exercise all voting and or consensual powers pertaining to the
Collateral for all purposes not inconsistent with this Agreement.
7. Event of Default. At the option of the Company, the following shall
----------------
constitute an "Event of Default" under this Agreement:
(a) Failure by Purchaser to pay when due any amount owed under the
Note.
(b) Breach by Purchaser of any provision of this Agreement.
(c) If Purchaser makes an assignment for the benefit of creditors.
-12-
<PAGE>
(d) If Purchaser (i) becomes insolvent or (ii) files any
application or petition in any tribunal for the appointment of a trustee or
receiver, or (iii) commences any proceeding under any bankruptcy or
reorganization statute, or under any provision of the United States Bankruptcy
Code, or under any insolvency law, or under any dissolution or liquidation law
whether now or hereafter in effect.
(e) If any petition or application of the type described in
subparagraph (d) above is commenced against Purchaser and is not dismissed
within sixty (60) days of filing, or an order is entered appointing a trustee or
receiver for Purchaser, or an order is entered appointing a trustee or receiver
for Purchaser, or an order for relief is issued in any bankruptcy.
8. Remedies Upon Default. Upon the occurrence of any Event of Default,
---------------------
the Company shall have the rights specified in Article Eight and Nine of the
California Commercial Code and any other rights provided by law by virtue of
this Agreement or by virtue of any judgment obtained by the Company.
9. Waivers and Authorizations.
--------------------------
(a) Purchaser waives any right to require the Company to: (i)
proceed against any guarantor or any other person; (ii) proceed against or
exhaust any Collateral; or (iii) pursue any other remedy in the Company's power.
(b) Until all the Obligations secured by this Agreement shall have
been paid and performed in full, Purchaser shall have no right of subrogation;
Purchaser hereby waives any right to enforce any remedy which the Company now
has or may hereafter have against any other person and hereby waives any benefit
of and any right to participate in any collateral, guaranty, or security now or
hereafter held by the Company.
(c) Purchaser further authorizes the Company, without notice or
demand and without affecting its liability hereunder or on the Obligations, from
time to time, to: (i) upon the occurrence of an Event of Default, direct the
order or manner of sale of the Collateral, or (ii) add, release, or substitute
any endorsers or guarantors of the Obligations.
10. Application of Proceeds. The proceeds of any sale or other
-----------------------
disposition of the Collateral following the occurrence of an Event of Default
shall be applied by the Company as follows:
(a) First, to the reasonable expenses of redeeming, collecting,
retaking, holding, preparing for sale, selling and the like and the reasonable
attorneys' fees and legal expenses incurred by the Company.
(b) Thereafter, to the satisfaction of the Obligations.
(c) Thereafter, any remaining proceeds shall be delivered to
Purchaser.
-13-
<PAGE>
11. Termination.
-----------
(a) This Agreement, except for the representations and warranties
herein, shall terminate when all the Obligations have been fully paid.
(b) Upon full payment by Purchaser of all amounts due under the
Note, the Company shall deliver to Purchaser the Collateral, and the Company
shall thereupon be discharged of all further obligations under this Agreement;
provided, however, that the Company shall nevertheless retain the Collateral as
- -------- -------
escrow agent if at the time of full payment by Purchaser said Shares are still
subject to a repurchase option in favor of the Company.
(c) In the event that Purchaser prepays all or a portion of the
Note, in accordance with the provisions thereof, Purchaser intends, unless
written notice to the contrary is delivered to the Company, that the Shares
represented by the portion of the Note so repaid, including annual interest
thereon, shall continue to be so held by the Company, to serve as independent
collateral for the outstanding portion of the Note for the purpose of commencing
the holding period set forth in Rule 144(d) promulgated under the Securities Act
of 1933, as amended (the "Securities Act").
--------------
12. General Provisions.
------------------
(a) Binding Agreement; Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties hereto and their successors and
assigns, except that Purchaser shall not be permitted to assign this Agreement
herein or any obligation hereunder.
(b) No Waiver. the Company shall not by any act or omission be
---------
deemed to have waived any rights, powers or remedies hereunder unless such
waiver be in writing and signed by the Company and then only to the extent
specifically set forth therein; a waiver of one event shall not be construed as
a bar to or waiver of such right or remedy on a subsequent event.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(e) Amendment. This Agreement may be altered, amended or repealed,
---------
in whole or in part, only by the written consent of all the parties to this
Agreement at the time of such amendment.
-14-
<PAGE>
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Notices. All notices, demands, or requests from one party to
-------
another shall, unless otherwise specified herein, be delivered in the manner and
to the addresses set forth in the Common Stock Purchase Agreement dated as of
the date hereof.
SIGNATURE PAGE FOLLOWS
-15-
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
MOAI TECHNOLOGIES, INC.
By: /s/ Devapratim Hazarika
---------------------------------------------
Devapratim Hazarika, Chief Technical Officer
Address:
650 Townsend Street, Suite 2117
San Francisco, CA 94103
PURCHASER:
ANNE PERLMAN
/s/ Anne Perlman
-------------------------------------
(Signature)
Address:
[ADDRESS]
------------------------------------
------------------------------------
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Moai Technologies, Inc. (the
---------
"Company") dated December ___, 1997 (the "Agreement"), Purchaser hereby sells,
------- ---------
assigns and transfers unto the Company _______________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. _____, and hereby
irrevocably appoints _______________________ to transfer said stock on the books
of the Company with full power of substitution in the premises. THIS ASSIGNMENT
MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.
Dated: ____________
Signature:
/s/ Anne Perlman
------------------------------------------
Anne Perlman
__________________________________________
Spouse of Anne Perlman (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to perfect the security interest of the Company
pursuant to the Pledge and Security Agreement.
<PAGE>
EXHIBIT C
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and Moai Technologies, Inc. (the
---------
"Company") dated December ___, 1997 (the "Agreement"), Purchaser hereby sells,
------- ---------
assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. ______, and does
hereby irrevocably constitute and appoint _____________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE
AGREEMENT AND THE EXHIBITS THERETO.
Dated: ______________________
Signature:
/s/ Anne Perlman
-------------------------------------------
Anne Perlman
___________________________________________
Spouse of Anne Perlman (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Company to exercise its repurchase
option set forth in the Agreement without requiring additional signatures on the
part of Purchaser.
<PAGE>
EXHIBIT D
---------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: Anne Perlman
NAME OF SPOUSE: Not applicable
ADDRESS: [ADDRESS]
IDENTIFICATION NO. OF TAXPAYER: _________________
IDENTIFICATION NO. OF SPOUSE: Not applicable
TAXABLE YEAR: 1997
2. The property with respect to which the election is made is described as
follows:
738,750 shares of the Common Stock $0.004 par value, of Moai Technologies,
Inc., a California corporation (the "Company").
3. The date on which the property was transferred is: December 9, 1997
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $44,325.00.
6. The amount (if any) paid for such property: $44,325.00
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ ____________________________
Taxpayer
Dated: ______________________ ____________________________
Spouse of Taxpayer
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. C-0012 for 738,750 shares of Common Stock of Moai Technologies, Inc. (the
"Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Common Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
/s/ Anne Perlman
-----------------------------
Anne Perlman
<PAGE>
EXHBIT 10.17
------------
MOAI TECHNOLOGIES, INC.
25 Lusk Street
San Francisco, CA 94107
July 21, 1999
Reuters Holdings Switzerland SA
153 route de Thonon
1245 Collonge-Bellerive
Switzerland
In consideration of the purchase by Reuters Holdings Switzerland SA
(together with any affiliates with respect to which Reuters Holdings Switzerland
SA owns, directly or indirectly, 50% or more of the outstanding voting power and
which Reuters Holdings Switzerland SA may designate from time to time,
"Reuters") of 789,474 shares of Series C Convertible Preferred Stock of Moai
Technologies, Inc. (the "Company"), pursuant to a Stock Purchase Agreement dated
July 21, 1999, the Company and Reuters agree to the terms and obligations of
this letter agreement ("Agreement").
1. PRODUCT AND TECHNOLOGY RIGHTS
-----------------------------
1.1 Development Plans. Upon the request of Reuters given from time to
-----------------
time and at reasonable intervals, the Company shall provide Reuters with a
written summary of current and future development plans and product and
technology roadmaps of the Company and each of its subsidiaries in existence
from time to time ("Subsidiaries"); provided, however, that the Company shall be
obligated to provide such information only to the extent the Company provides
such information generally to licensees of its beta or full customer release
products.
1.2 Technology Call/MFN Pricing.
---------------------------
The Company and each of its Subsidiaries shall provide Reuters with the
right and opportunity to license the Company's and each of its Subsidiary's beta
and full customer release products (including without limitation any new
versions or releases of such products) at the same time as the Company and its
Subsidiaries commence licensing such products to third parties; provided,
however, that the Company shall not be obligated to license any beta versions of
the Company's products to Reuters unless Reuters qualifies as a beta customer
using the Company's generally applicable criteria.
In providing Reuters with the opportunity to license such products, the
Company and its Subsidiaries shall offer and make available to Reuters terms in
respect thereof that are no less favorable as a whole to Reuters than those
previously extended by the Company and its Subsidiaries to any other person
similarly situated and using the product, for a business purpose, in a manner
and on a scale similar to the use contemplated by Reuters.
<PAGE>
2. MOST FAVORED BIDDER.
-------------------
Each of the Company and Reuters agrees that in the event the Company or any
of its Subsidiaries seeks to obtain news or data feeds of the type currently
provided by Reuters to its customers which news or data feeds are intended for
use by the Company or any of its Subsidiaries internally or as part of a
commercial web site operated by the Company or any of its Subsidiaries, the
Company agrees to approach Reuters and negotiate in good faith an arrangement
under which the Company or any of its Subsidiaries would obtain such news or
data feeds from Reuters. The objective of these discussions will be to have the
Company and its Subsidiaries obtain such news and data feeds from Reuters to the
extent such news and data feeds satisfy the Company's requirements and can be
obtained on terms that are as competitive as other commercially available
sources.
3. STRATEGIC PARTNER.
-----------------
Except with respect to any partner or investor who, together with its
affiliates, is engaged primarily in the business of providing debt or equity
financing, the Company agrees that Reuters shall have a right of first offer
with respect to: (a) the issuance and sale for financing purposes to any person
(including any strategic or financial investor) other than the Company, and any
employees, officers, consultants or directors of any such subsidiary, of
securities of any subsidiary formed by the Company for the purpose of expanding
the Company's or any subsidiary's activities or operations into Europe or Asia,
or any part of either of the foregoing, and (b) the issuance and sale for
financing purposes to any person (including any strategic or financial investor)
other than the Company of any equity interest in any joint venture entity
(regardless of the form of such entity) formed by the Company for the purpose of
expanding the Company's or any subsidiary's activities or operations into Europe
or Asia (each an "Expansion Transaction"). The foregoing right of first offer
shall expire as to the issuance and sale of securities or equity interests by a
given subsidiary or joint venture entity if the Company and Reuters shall have
failed to reach agreement on mutually acceptable terms therefor within twenty
(20) days after the commencement of good faith negotiations thereof (which
negotiations shall commence within five days after the Company notifies Reuters
of the proposed Expansion Transaction), provided that the Company shall have
continued to negotiate in good faith with Reuters during the entirety of such
twenty (20) day period and provided further that each such twenty (20) day
period shall be reduced to five business days in the event the Company wishes to
explore the possibility of a similar arrangement with any third party in which
such third party has approached the Company and indicated its interest in
exploring such an arrangement (provided that such reduction in time shall not
apply if any such interest expressed by any third party was preceded by
solicitation by the Company of such interest).
4. TERMINATION.
-----------
This Agreement shall terminate upon the earlier of (a) June 30, 2002, (b)
the closing of the sale, conveyance, or other disposition or encumbrance of all
or substantially all of the Company's assets or business or the merger into or
consolidation with any other entity (other than a wholly-owned subsidiary
corporation) or any other transaction or series of related transactions in which
at least fifty percent (50%) of the voting power of the Company is disposed
-2-
<PAGE>
of (other than a merger effected exclusively for the purpose of changing the
domicile of the Company), (c) the date on which Reuters no longer owns at least
two percent of the Company's outstanding shares of Common Stock calculated
assuming the conversion and exercise of all outstanding convertible and
exercisable securities (without regard to any vesting requirements), and (d)
with respect to Section 3 only, the effective date of the Company's registration
statement filed under the Securities Act of 1933, as amended, for the sale of
its securities to the public at a public offering price of not less than $11.40
per share and which results in gross aggregate cash proceeds to the Company of
at least $20,000,000.
5. CONFIDENTIALITY.
---------------
Reuters agrees to comply and cause all of its affiliates to comply with the
following confidentiality obligations.
5.1. Definition of Confidential Information. "Confidential Information"
--------------------------------------
means any oral, written, graphic or machine-readable information including, but
not limited to, that which relates to patents, patent applications, research,
product plans, products, developments, inventions, processes, designs, drawings,
engineering, formulae, markets, software (including source and object code),
hardware configuration, computer programs, algorithms, future development plans
and product and technology roadmaps, business plans, agreements with third
parties, services, customers, marketing or finances of the Company or any
Subsidiary, which Confidential Information is designated in writing to be
confidential or proprietary, or if given orally, is confirmed in writing as
having been disclosed as confidential or proprietary within a reasonable time
(not to exceed thirty (30) days) after the oral disclosure, or which information
would, under the circumstances, appear to a reasonable person to be confidential
or proprietary. Notwithstanding any failure to so identify it, all information
provided pursuant to Section 1 above shall be Confidential Information.
5.2. Nondisclosure of Confidential Information.
------------------------------------------
(a) Reuters agrees not to use any Confidential Information disclosed
to it by the Company or any of the Company's Subsidiaries for its own use or for
any purpose other than to determine whether or not to license the Company's
products. Reuters shall not disclose or permit disclosure of any Confidential
Information of the Company to third parties or to employees of Reuters, other
than directors, officers, employees, consultants and agents of Reuters who are
required to have the information in order to determine whether or not to license
the Company's products. Reuters agrees that it shall take all reasonable
measures to protect the secrecy of and avoid disclosure or use of Confidential
Information of the Company and its Subsidiaries in order to prevent it from
falling into the public domain or the possession of persons other than those
persons authorized under this Agreement to have any such information. Such
measures shall include, but not be limited to, the highest degree of care that
Reuters utilizes to protect its own Confidential Information of a similar
nature, which shall be no less than reasonable care. Reuters further agrees to
notify the Company in writing of any actual or suspected misuse,
misappropriation or unauthorized disclosure of the Company's or any of its
Subsidiaries Confidential Information which may come to Reuters's attention.
-3-
<PAGE>
(b) Exceptions. Notwithstanding the above, Reuters shall not have
----------
liability to the Company or any of its Subsidiaries with regard to any
Confidential Information which:
(i) was in the public domain at the time it was disclosed by the
Company or any of its Subsidiaries or has entered the public domain through no
fault of Reuters;
(ii) was known to Reuters, without restriction, at the time of
disclosure, as demonstrated by files in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the
Company;
(iv) is independently developed by Reuters without use of any of
the Confidential Information; or
(v) is disclosed pursuant to applicable laws or regulations or
the order or requirement of a court, administrative agency, or other
governmental body; provided, however, that Reuters shall provide prompt notice
of such court order or requirement to the Company to enable the Company to seek
a protective order or otherwise prevent or restrict such disclosure.
5.3. No Duplication; Return of Materials. Reuters agrees, except as
-----------------------------------
otherwise expressly authorized by the Company, not to make any copies or
duplicates of any Confidential Information.
5.4. No Rights Granted. Nothing in this Agreement shall be construed as
-----------------
granting any rights under any patent, copyright or other intellectual property
right of the Company or any of its Subsidiaries, nor shall this Agreement grant
Reuters any rights in or to the Company's or any of its Subsidiaries'
Confidential Information.
6. MISCELLANEOUS.
-------------
6.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California.
6.2 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.3 Amendments and Waivers. This Agreement may not be amended or modified
----------------------
without the written consent of Reuters and the Company, nor shall any waiver be
effective against any party unless in a writing executed on behalf of such
party.
6.4. Severability. If any provision of this Agreement shall be declared
------------
void or unenforceable by any judicial or administrative authority, the validity
of any other provision and of the entire Agreement shall not be affected
thereby.
6.5 Other Obligations. The Company represents and warrants that it has
-----------------
not undertaken and covenants that neither it nor any subsidiary will undertake
any obligation to any
-4-
<PAGE>
third party which would prohibit or conflict with the obligations undertaken to
Reuters in this clause.
6.6 Equitable Relief. Each of the Company and Reuters acknowledges that
----------------
a breach by it of its obligations hereunder will cause irreparable harm to the
other. Accordingly, each of Reuters and the Company acknowledges that the
remedy at law for a breach of its obligations hereunder will be inadequate and
agrees, in the event of a breach or threatened breach by the other of the
provisions contained herein, that nonbreaching party shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate performance hereunder, without the necessity of
showing economic loss and without any bond or other security being required.
-5-
<PAGE>
If the foregoing accurately sets forth the agreements that the Company and
Reuters have reached with respect to the subject matter hereof, please indicate
your agreement to the terms contained herein by countersigning in the place
indicated below.
Sincerely,
MOAI TECHNOLOGIES, INC.
By: /s/ Anne Perlman
----------------------------------
Name: Anne Perlman
--------------------------------
Title: President and CEO
-------------------------------
AGREED AND ACCEPTED:
REUTERS HOLDINGS SWITZERLAND SA
By: _____________________________
Name:____________________________
Title:___________________________
-6-
<PAGE>
Exhibit 10.20
STANDARD OFFICE LEASE GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposes only, December 17,
1999 is made by and between 800 California, LLC , (herein called "Lessor") and
N/A, doing business under the name of Moai Technologies, Inc. , (herein called
"Lessee").
1.2 Premises: Suite Number(s) 200, ____________ floors, consisting of
approximately 6,095 feet, more or less, as defined in paragraph 2and as known on
Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 800 California
Street, in the City of Mountain View, County of Santa Clara, State of
California, as more particularly described in Exhibit A hereto, and as defined
in paragraph 2.
1.4 Use: Office Sales, Administrative, Software Engineering and
development and any other legal uses approved by Lessor, subject to paragraph 6.
1.5 Term: See supplemental terms commencing see supplemental terms
("Commencement Date") and ending see supplemental, as defined in paragraph 3.
1.6 Base Rent: see supplemental terms per month, payable on the 1st day of
each month, per paragraph 4.1 ________________________________________.
1.7 Base Rent Increase: On each anniversary of the commencement date the
monthly Base Rent payable under paragraph 1.6 above shall be adjusted as
provided in paragraph 4.3 below.
1.8 Rent Paid Upon Execution: $25,903.73 for first full month's rent.
1.9 Security Deposit: see supplemental terms.
1.10 Lessee's Share of Operating Expense Increase: 31% as defined in
paragraph 4.2.
2. Premises, Parking and Common Areas.
2.1 Premises: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, the
"Premises", including rights to the Common Areas as hereinafter specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use ________ parking spaces
in the Office Building Project at the monthly rate applicable from time to time
for monthly parking as set by Lessor and/or its licensee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 The monthly parking rate per parking space will be $_________
per month at the commencement of the term of this Lease, and is subject to
change upon five (5) days prior written notice to Lessee. Monthly parking fees
shall be payable one month in advance prior to the first day of each calendar
month.
2.3 Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 Common Areas - Rules and Regulations. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be a part of the Common Areas, provided that
such other land and improvements have a reasonable and functional relationship
to the Office Building Project;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Office Building Project as Lessor
may, in the exercise of sound business judgment deem to be appropriate.
FULL SERVICE-GROSS Initials: AP
REVISED -----
Page 1 of 12 JHW
-----
<PAGE>
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay in Possession. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease or
the obligations of Lessee hereunder or extend the term hereof; but in such case,
Lessee shall not be obligated to pay rent or perform any other obligation of
Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties will be discharged from all obligations hereunder; provided, however,
that, as to Lessee's obligations, Lessee first reimburses Lessor for all costs
incurred for Non-Standard Improvements and, as to Lessor's obligations, Lessor
shall return any money previously deposited by Lessee (less any offsets due
Lessor for Non-Standard Improvements); and provided further, that if such
written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be of
no further force or effect.
3.2.1 Possession Tendered - Defined. Possession of the Premises
shall be deemed tendered to Lessee ("Tender of Possession") when (1) the
improvements to be provided by Lessor under this Lease are substantially
completed, (2) the Building utilities are ready for use in the Premises, (3)
Leases has reasonable access to the Premises, and (4) ten (10) days shall have
expired following advance written notice to Lessee of the occurrence of the
matters described in (1), (2) and (3), above of this paragraph 3.2.1.
3.2.2 Delays Caused by Lessee. There shall be no abatement of rent,
and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.
3.3 Early Possession. Lessee may occupy the Premises prior to said
Commencement Date, to construct its tenant improvements such occupancy shall be
subject to all provisions of this Lease, such occupancy shall not change the
termination date, Lessee shall have no obligation to pay rent for such
occupancy.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.6 of
the Basic Lease Provisions, without offset or deduction. Lessee shall pay
Lessor upon execution hereof the advance Base Rent described in paragraph 1.8 of
the Basic Lease Provisions. Rent for any period during the term hereof which is
for less than one month shall be prorated based upon the actual number of days
of the calendar month involved. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or to such other persons or
at such other places as Lessor may designate in writing.
4.2 Operating Expense increase. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter defined,
for each Comparison Year exceeds the amount of all Operating Expenses for the
Base Year, such excess being hereinafter referred to as the "Operating Expense
Increase", in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of the rentable space contained
in the Office Building Project. It is understood and agreed that the square
footage figures set forth in the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
except in connection with an actual change in the size of the Premises or a
change in the space available for lease in the Office Building Project.
(b) "Base Year" is defined as the calendar year 2000.
(c) "Comparison Year" is defined as each calendar year during the
term of this Lease subsequent to the Base Year; provided, however, Lessee shall
have no obligation to pay a share of the Operating Expense Increase applicable
to the first twelve (12) months of the Lease Term (other than such as are
mandated by a governmental authority, as to which government mandated expenses
Lessee shall pay Lessee's Share, notwithstanding they occur during the first
twelve (12) months). Lessee's Share of the Operating Expense Increase for the
first and last Comparison Years of the Lease Term shall be prorated according to
that portion of such Comparison Year as to which Lessee is responsible for a
share of such increase.
(d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:
(i) The operation, repair, maintenance, and replacement, in
neat, clean, safe, good order and condition, of the Office Building Project,
including but not limited to, the following:
(aa) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, building exteriors and
roofs, fences and gates;
(bb) All heating, air conditioning, plumbing, electrical
systems, life safety equipment, telecommunication and other equipment used in
common by, or for the benefit of, lessees or occupants of the Office Building
Project, including elevators and escalators, tenant directories, fire detection
systems including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(iii) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;
(v) The amount of the real property taxes to be paid by Lessor
under paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;
(vii) Labor, salaries, and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Office
Building Project and accounting and a management fee attributable to the
operation of the Office Building Project;
(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to Federal income tax regulations or guidelines
for depreciation thereof (including interest on the unamortized balance as is
then reasonable in the judgment of Lessor's accountants);
(ix) Replacement of equipment or improvements that have a
useful life for depreciation purposes according to Federal income tax guidelines
of five (5) years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of replacements of
equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d) (viii), in which case their cost shall be included as above
provided.
(f) Operating Expenses shall not include any expenses paid by any
lessee directly to third parties, or as to which Lessor is otherwise reimbursed
by any third party, other tenant, or by insurance proceeds.
Initials: AP
-----
Page 2 of 12 JHW
-----
<PAGE>
(g) Lessee's Share of Operating Expense Increase shall be payable by
Lessee within ten (10) thirty (30) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option, however,
an amount may be estimated by Lessor from time to time in advance of Lessee's
Share of the Operating Expense Increase for any Comparison Year, and the same
shall be payable monthly or quarterly, as Lessor shall designate, during each
Comparison Year of the Lease term, on the same day as the Base Rent is due
hereunder. In the event that Lessee pays Lessor's estimate of Lessee's Share of
Operating Expense Increase as aforesaid, Lessor shall deliver to Lessee within
thirty (30) sixty (60) days after the expiration of each Comparison Year a
reasonably detailed statement showing Lessee's Share of the actual Operating
Expense Increase incurred during such year. If Lessee's payments under this
paragraph 4.2(g) during said Comparison Year exceed Lessee's Share as indicated
on said statement, Lessee shall be entitled to credit the amount of such
overpayment against Lessee's Share of Operating Expense Increase next falling
due. If Lessee's payments under this paragraph during said Comparison Year were
less than Lessee's Share as indicated on said statement, Lessee shall pay to
Lessor the amount of the deficiency within ten (10) days after delivery by
Lessor to Lessee of said statement. Lessor and Lessee shall forthwith adjust
between them by cash payment any balance determined to exist with respect to
that portion of the last Comparison Year for which Lessee is responsible as to
Operating Expense Increases, notwithstanding that the Lease term may have
terminated before the end of such Comparison Year.
4.3 Rent increase.
4.3.4 Lessee shall continue to pay the rent at the rate previously in
effect until the increase, if any, is determined. Within five (5) days
following the date on which the increase is determined, Lessee shall make such
payment to Lessor as will bring the increased rental current, commencing with
the effective date of such increase through the date of any rental installments
then due. Thereafter the rental shall be paid at the increased rate.
4.3.5 At such time as the amount of any change in the rental required
by this Lease is known or determined, Lessor and Lessee shall execute an
amendment to this Lease setting forth such change.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof the security deposit set forth in paragraph 1.9 of the Basic Lease
Provisions as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charge in default for the payment of any other sum to which Lessor may
become obligated by reason of Lessee's default, or to compensate Lessor for any
loss or damage which Lessor may suffer thereby. If Lessor so uses or applies
all or any portion of said deposit, Lessee shall within ten (10) days after
written demand therefor deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount then required of Lessee said deposit, or
so much thereof as has not heretofore been applied by Lessor, shall be returned,
without payment of interest or other increment for its use, to Lessee (or, at
Lessor's option, to the last assignee, if any, of Lessee's interest hereunder)
at the expiration of the term hereof, and after Lessee has vacated the Premises.
No trust relationship is created herein between Lessor and Lessee with respect
to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the state existing
on the date that the Lease term commences, but without regard to alterations or
improvements made by Lessee or the use for which Lessee will occupy the
Premises, does not violate any covenants or restrictions of record, or any
applicable building code, regulation or ordinance in effect on such Lease term
Commencement Date. In the event it is determined that this warranty has been
violated, then it shall be the obligation of the Lessor, after written notice
from Lessee, to promptly, at Lessor's sole cost and expense, rectify any such
violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fire insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Lessee of the Premises.
Lessee shall conduct its business in a lawful manner and shall not use or permit
the use of the Premises or the Common Areas in any manner that will tend to
create waste or a nuisance or shall tend to disturb other occupants of the
Office Building Project.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) and
Lessor warrants to Lessee that the plumbing, lighting, air conditioning, and
heating system in the Premises shall be in good operating condition. In the
event that it is determined that this warranty has been violated, then it shall
be the obligation of Lessor, after receipt of written notice from Lessee setting
forth with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Premises and the Office Building Project in their condition existing as of
the Lease Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
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7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas, and
the equipment whether used exclusively for the Premises or in common with other
promises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any statute now or hereafter
in effect which would otherwise afford Lessee the right to make repairs at
Lessor's expense or to terminate this Lease because of Lessor's failure to keep
the Premises in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
servos only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
7.3 Alterations and Additions.
(b) Any alterations, improvements, additions or Utility installations
in or about the Premises or the Office Building Project that Lessee shall desire
to make shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in the Premises by Lessee, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises or the
Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lion claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee
to pay Lessor's reasonable attorneys fees and costs in participating in such
action if Lessor shall decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made to the Premises by Lessee, including but not limited to, floor
coverings, panelings, doors, drapes, built-ins, moldings, sound attenuation, and
lighting and telephone or communication systems, conduit, wiring and outlets,
shall be made and done in a good and workmanlike manner and of good and
sufficient quality and materials and shall be the property of Lessor and remain
upon and be surrendered with the Premises at the expiration of the Lease term,
unless Lessor requires their removal pursuant to paragraph 7.3(a). Provided
Lessee is not in default, notwithstanding the provisions of this paragraph
7.3(e), Lessee's personal property and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises or the Building, and other than Utility Installations, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions of
paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and specifications
for any alterations, improvements, additions or Utility Installations.
7.4 Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Comprehensive
Commercial General Liability insurance utilizing an Insurance Services Office
standard form with Broad Form General Liability Endorsement (GL0404), or
equivalent, in an amount of not less than $1,000,000 per occurrence of bodily
injury and property damage combined or in a greater amount as reasonably
determined by Lessor and shall insure Lessee with Lessor as an additional
insured against liability arising out of the use, occupancy or maintenance of
the Premises. Compliance with the above requirement shall not, however, limit
the liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Building Project in an amount not less than $5,000,000.00 per
occurrence.
8.3 Property Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake
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sprinkler leakage endorsements, in an amount sufficient to cover not less than
100% of the full replacement cost, as the same may exist from time to time, of
all of Lessee's personal property, fixtures, equipment and tenant improvements.
8.4 Property Insurance- Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Office Building Project improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass, and such other perils as
Lessor deems advisable or may be required by a lender having a lien on the
Office Building Project. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be cancelable
or subject to reduction of coverage or other modification except after thirty
(30) days prior written notice to Lessor. Lessee shall, at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with renewals
thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees, if necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid
any such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of ________ the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
8.9 No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified In
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost of
the Building.
(c) "Premises Building Total Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the extent
that the cost to repair is fifty percent (50%) or more of the then Replacement
Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
The fact that an Insured Loss has a deductible amount shall not make the loss an
uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.
9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Damage
or Premises Building Partial Damage, then Lessor shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Lessor expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements originally
paid for by Lessee) to its condition existing at the time of the damage, and
this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.
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9.3 Premises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total Destruction,
then Lessor may at Lessor's option either (i) repair such damage or destruction
as soon as reasonably possible at Lessor's expense (to the extent the required
materials are readily available through usual commercial channels) to its
condition existing at the time of the damage, but not Lessee's fixtures,
equipment or tenant improvements, and this Lease shall continue in full force
and effect, or (ii) give written notice to Lessee within thirty (30) days after
the date of occurrence of such damage of Lessor's intention to cancel and
terminate this Lease, in which case this Lease shall terminate as of the date of
the occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the last twelve
(12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than twenty (20) days after the occurrence of an
Insured Loss falling within the classification of Premises Damage during the
last twelve (12) months of the term of this Lease. If Lessee duly exercises
such option during said twenty (20) day period, Lessor shall, at Lessor's
expense, repair such damage, but not Lessee's fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect. If Lessee fails to exercise such option during said
twenty (20) day period, then Lessor may at Lessor's option terminate and cancel
this Lease as of the expiration of said twenty (20) day period by giving written
notice to Lessee of Lessor's election to do so within ten (10) days after the
expiration of said twenty (20) day period, notwithstanding any term or provision
in the grant of option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) in the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the rent payable hereunder (including Lessee's Share of Operating Expense
Increase) for the period during which such damage, repair or restoration
continues shall be abated, provided (1) the damage was not the result of the
negligence of Lessee, and (2) such abatement shall only be to the extent the
operation and profitability of Lessee's business as operated from the Premises
is adversely affected. Except for said abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
(b) if Lessor shall be obligated to repair or restore the Premises or
the Building under the provisions of this Paragraph 9 and shall not commence
such repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months after
such occurrence, Lessee may at Lessee's option cancel and terminate this Lease
by giving Lessor written notice of Lessee's election to do so at any time prior
to the commencement or completion, respectively, of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any such
restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 Termination - Advance Payments. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project or in any
portion thereof, as against Lessor's right to rent or other income therefrom,
and as against Lessor's business of leasing the Office Building Project. The
term "real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax", or (ii) the nature of which was hereinbefore included within the
definition of "real property tax", or (iii) which is imposed for a service or
right not charged prior to June 1,1978 or, if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a result of a change
in ownership, as defined by applicable local statutes for property tax purposes,
of the Office Building Project or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such change of
ownership, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. Utilities.
11.1 Services Provided by Lessor. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
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11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's
Share or a reasonable proportion to be determined by Lessor of all charges
jointly metered with other promises in the Building.
11.3 Hours of Service. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Lessee to Lessor of the
cost thereof.
11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion,
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall
include the transfer or transfers aggregating: (a) if Lessee is a corporation,
more than twenty-five percent (25%) of the voting stock of such corporation, or
(b) if Lessee is a partnership, more than twenty-five percent (25%) of the
profit and loss participation in such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate";
provided that before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and (b) Lessor shall
be given written notice of such assignment and assumption. Any such assignment
shall not, in any way, affect or limit the liability of Lessee under the terms
of this Lease even if after such assignment or subletting the terms of this
Lease are materially changed or altered without the consent of Lessee, the
consent of whom shall not be necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, no assignment or subletting shall
release Lessee of Lessee's obligation hereunder or alter the primary liability
of Lessee to pay the rent and other sums due Lessor hereunder including Lessee's
Share of Operating Expense Increase, and to perform all other obligations to be
performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such assignment
or subletting, nor the acceptance of rent, shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for the breach of any of the terms or
conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligation under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent
and such action shall not relieve such persons from liability under this Lease
or said sublease; however, such persons shall not be responsible to the extent
any such amendment or modification enlarges or increases the obligations of the
Lessee or sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or anyone else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied upon
by Lessor in giving its consent to an assignment or subletting was materially
false shall, at Lessor's election, render Lessor's said consent null and void.
12.4 Additional Terms and Conditions Applicable to Subletting. Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly incorporated
therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without an
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any sublease,
Lessee shall use only such form of sublease as is satisfactory to Lessor, and
once approved by Lessor, such sublease shall not be changed or modified without
Lessor's prior written consent. Any sublease shall, by reason of entering into a
sublease under this Lease, be deemed for the benefit of Lessor, to have assumed
and agreed to conform and comply with each and every obligation herein to be
performed by Lessee other than such obligations as are contrary to or
inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such
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sublease from the time of the exercise of said option to the termination of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to Lessee or for any other prior
defaults of Lessee under such sublease.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee.
12.5 Lessor's Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon the Lessor's determination that (a) the
proposed assignee or sublesses shall conduct a business on the Premises of a
quality substantially equal to that of Lessee and consistent with the general
character of the other occupants of the Office Building Project and not in
violation of any exclusives or rights then held by other tenants, and (b) the
proposed assignee or sublessee be at least as financially responsible as Lessee
was expected to be at the time of the execution of this Lease or of such
assignment or subletting whichever is grater.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The abandonment of the Premises by Lessee.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(d) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee
other than those referenced in subparagraphs (b) and (c), above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Lessee shall not be doomed to be in default if Lessee
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. (S)101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was intentionally made materially false.
13.2 Remedies. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee all damages incurred
by Lessor by reason of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
Unpaid installments of rent and other unpaid monetary obligations of Lessee
under the terms of this Lease shall bear interest from the date duo at the
maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledge that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any
installment of Base Rent, Operating Expense Increase, or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs;
provided that is so much of the Premises or the Office Building Project are
taken by such condemnation as would substantially and adversely affect the
operation and profitability of Lessee's business conducted from the Premises,
Lessee shall have the option, to be exercised only in writing within thirty (30)
days after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession), to terminate this Lease as of the date
the condemning authority takes such possession. If Lessee does not terminate
this Lease in accordance with the foregoing, this
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Lease shall remain in full force and effect as to the portion of the Premises
remaining, except that the rent and Lessee's Share of Operating Expense Increase
shall be reduced in the proportion that the floor area of the Premises taken
bears to the total floor area of the Premises. Common Areas taken shall be
excluded from the Common Areas usable by Lessee and no reduction of rent shall
occur with respect thereto or by reason thereof. Lessor shall have the option in
its sole discretion to terminate this Lease as of the taking of possession by
the condemning authority, by giving written notice to Lessee of such election
within thirty (30) days after receipt of notice of a taking by condemnation of
any part of the Premises or the Office Building Project. Any award for the
taking of all or any part of the Premises or the Office Building Project under
the power of eminent domain or any payment made under threat of the exercise of
such power shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any separate award for loss of or damage to Lessee's trade fixtures,
removable personal property and unamortized tenant improvements that have been
paid for by Lessee. For that purpose the cost of such improvements shall be
amortized over the original term of this Lease excluding any options. In the
event that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of severance damages received by Lessor in connection with
such condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the condemning
authority. Lessee shall pay any amount in excess of such severance damages
required to complete such repair.
15. Broker's Fee.
(a) The brokers involved in this transaction are none as "listing broker"
and Cornish & Carey Commercial as "cooperating broker," licensed real estate
broker(s). A "cooperating broker" is defined as any broker other than the
listing broker entitled to a share of any commission arising under this Lease.
Upon execution of this Lease by both parties, Lessor shall pay to said brokers
jointly, or in such separate shares as they may mutually designate in writing, a
fee as set forth in a separate agreement between Lessor and said broker(s), or
in the event there is no separate agreement between Lessor and said broker(s),
the sum of $________ for brokerage services rendered by said broker(s) to Lessor
in this transaction.
(b) Lessor further agrees that (i) if Lessee exercises any Option, as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or (ii) if Lessee acquires any rights
to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (iii) if Lessee remains in possession of
the Premises after the expiration of the term of this Lease after having failed
to exercise an Option, or (iv) if said broker(s) are the procuring cause of any
other lease or sale entered into between the parties pertaining to the Premises
and/or any adjacent property in which Lessor has an interest, or (v) if the Base
Rent is increased, whether by agreement or operation of an escalation clause
contained herein, then as to any of said transactions or rent increases, Lessor
shall pay said broker(s) a fee in accordance with the schedule of said broker(s)
in effect at the time of execution of this Lease. Said fee shall be paid at the
time of such increased rental is determined.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this paragraph 15. Each listing and cooperating
broker shall be a third party beneficiary of the provisions of this paragraph 15
to the extent of their interest in any commission arising under this Lease and
may enforce that right directly against Lessor; provided, however, that all
brokers having a right to any part of such total commission shall be a necessary
party to any suit with respect thereto.
(d) Lessee and Lessor each represent and warrant to the other that neither
has had any dealings with any person, firm, broker or finder (other than the
person(s), if any, whose names are set forth in paragraph 15(a), above) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only
the owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such title
or interest, Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time end the
grantee shall assume in writing the obligations of Lessor of such transfer, in
which Lessee has an interest, shall be delivered to the grantee. The
obligations contained in this Lease to be performed by Lessor shall, subject as
aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at the
maximum rate then allowable by law or judgments from the date due. Payment of
such interest shall not excuse or cure any default by Lessee under this Lease;
provided, however, that interest shall not be payable on late charges incurred
by Lessee nor on any amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mention herein. No prior or
contemporaneous agreement or understanding pertaining to any such matter shall
be effective. This Lease may be modified in writing only, signed by the parties
in interest at the time of the modification. Except as otherwise stated in this
Lease, Lessee hereby acknowledges that neither the real estate broker listed in
paragraph 15 hereof nor any cooperating broker on this transaction nor the
Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representa____ to Lessee relative to the condition or use
by Less___ the Premises or
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Office Building Project and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or two business days following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor or Lessee of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Lessee of the same or any other provision. Lessor's consent to, or approval of,
any act shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of
any provision hereof, other than the failure of Lessee to pay the particular
rent so accepted, regardless of Lessor's knowledge of such preceding breach at
the time of acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the base rent payable
shall be two hundred one hundred fifty percent (150%) (200%) of the rent payable
immediately preceding the termination date of this Lease, and all Options, if
any, granted under the terms of this Lease shall be deemed terminated and be of
no further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provision of paragraph 17,
this Lease shall bind the parties, their personal representatives, successors
and assign. This Lease shall be governed by the laws of the State where the
Office Building Project is located and any litigation concerning this Lease
between the parties hereto shall be initiated in the county in which the Office
Building Project is located.
30. Subordination.
(a) This Lease, and any Option or right of first refusal granted hereby,
at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
Office Building Project and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet possession
of the Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms. If
any mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Option shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby
make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and
in Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30(b).
31. Attorneys' Fees.
31.1 If either party the named herein bring an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action,
trial, or appeal thereon, shall be entitled to his reasonable attorneys' fees to
be paid by the losing party as fixed by the court in the same or separate suit,
and whether or not such action is pursued to decision or judgment.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notices of default
and consultations in connection therewith, whether or not a legal transaction is
subsequently commenced in connection with such default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forceable or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease except to
the extent that Lessee is engaged in the business of manufacturing dynamic
pricing software; conducting electronic auctions in behalf of its Licensees; and
servicing such software and such licenses. The parties agree that Lessee may
continue such business on such premises.
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<PAGE>
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof the roof or exterior walls of the Office
Building Project.
35. Merger. The voluntary or other surrender of ______ Lease by Lessee, or a
mutual cancellation thereof, _______ termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor; operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder subject to applicable
notice and cure periods, Lessee shall have quiet possession of the Premises for
the entire term hereof subject to all of the provisions of this Lease. The
individuals executing this Lease on behalf of Lessor represent and warrant to
Lessee that they are fully authorized and legally capable of executing this
Lease on behalf of Lessor and that such execution is binding upon all parties
holding an ownership interest in the Office Building Project.
39. Options.
39.1 Definition. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
who does so without the intent of thereafter assigning this Lease or any portion
thereof, and may not be exercised or be assigned, voluntarily or involuntarily,
by or to any person or entity other than Lessee; provided, however, that an
Option may be exercised by or assigned to any Lessee Affiliate as defined in
paragraph 12.2 of this Lease. The Options, if any, herein granted to Lessee are
not assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the time
commencing from the date Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(c) or 13.1(d) and continuing until the noncompliance alleged in
said notice of default is cured, or (ii) during the period of time commencing on
the day after a monetary obligation to Lessor is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee) and continuing until the
obligation is paid, or (iii) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(c), or paragraph 13.1(d),
whether or not the defaults are cured, during the 12 month period of time
immediately prior to the time that Lessee attempts to exercise the subject
Option, (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, or
(iii) Lessor gives to Lessee three or more notices of default under paragraph
13.1(c), or paragraph 13.1(d), whether or not the defaults are cured, or (iv) if
Lessee has committed any non-curable breach, including without limitation those
described in paragraph 13.1(b), or is otherwise in default of any of the terms,
covenants and conditions of this Lease.
40. Security Measures - Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Office Building Project or
any part thereof, in which event the cost thereof shall be included within the
definition of Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90 days
prior written notice; provided Lessor pays Lessee for Lessee's cost reasonably
incurred in connection therein.
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;
(d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas;
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the roof
of the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
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<PAGE>
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, by or third parties, shall in no way
affect this Lease or impose any liability upon Lessor.
42. Performance Under Protest. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment `under protest' and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or
Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project. Provided such modifications do not increase the rent payable
by Lessee hereunder, effect the Lease Term, increase any other obligations of
Lessee or materially adversely effect Lessee's rights under the Lease.
47. Multiple Parties. If more than one person or entity is named as
either Lessor or Lessee herein, except as otherwise expressly provided herein,
the obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
Supplemental Terms and Conditions to Lease dated December 17, 1999, between 800
California, LLC, and Moai Technologies, Inc.
Exhibit A - Standard Office Lease Floor Plan
Exhibit B
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING
THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
<TABLE>
LESSOR LESSEE
<S> <C>
800 California, LLC Moai Technologies, Inc.
- -------------------------------------------------------- --------------------------------
________________________________________________________ ________________________________
By: /s/ Jeffrey H. Wong, President, MV Development, Inc. By: /s/ Anne Perlman
----------------------------------------------------- ---------------------------------
Its: Manager Its: President
---------------------------------------------------- --------------------------------
By:_____________________________________________________ By:__________________________________
Its:____________________________________________________ Its:_________________________________
Executed at 375 Distel Cir., Ste. A168, Los Altos, CA Executed at San Francisco, CA 94107
-------------------------------------------- -------------------------
on 12/28/99 on 12/27/99
------------------------------------------------------ ----------------------------------
Address_________________________________________________ Address 25 Lusk St.
------------------------------
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing
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Page 12 of 12
<PAGE>
STANDARD OFFICE LEASE
FLOOR PLAN
EXHIBIT A
[Floor Plan]
<PAGE>
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated: 12/27/99
------------
By and Between 800 California LLC and Moai Technologies
----------------------------------------
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safely reputation, or property of the
Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee snail not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities, No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises
or Building that causes excessive vibration or floor loading in any pert of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work
to be performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays.
Sundays and legal holidays, and on other days between the hours of _____ PM. and
____ A.M. of the following day. If Lessee uses the Premises during such periods.
Lessee shell be responsible for securely locking any doors It may have opened
for entry.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking
or food preparation.
20. Lessee shall comply with al; safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer
than full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking spaces
from floor to floor, within one floor, and/or to reasonably adjacent offsite
location(s), and to reasonably allocate them between compact and standard size
spaces, as long as the same compiles with applicable laws, ordinances and
regulations.
6. Users of the parking area will obey all posted signs and park only in
the areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking areas is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, wilt be permissible only by such method or
methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements,
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a license
only and no bailment is intended or shall be created hereby.
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EXHIBIT B JHW
<PAGE>
SUPPLEMENTAL TERMS AND CONDITIONS TO LEASE DATED DECEMBER 17, 1999 BETWEEN 800
CALIFORNIA, LLC, AND MOAI TECHNOLOGIES, INC.
The parties intend that the following terms supplement and modify the
Standard Office Lease-Gross between Moai Technologies, Inc., dated December 17,
1999, and 800 California, LLC. If the terms of this supplement are inconsistent
with the terms of the Standard Office Lease-Gross, the terms of this supplement
shall control.
1. Paragraph 1.2 is modified to provide that the Premises consists of
approximately 5,300 usable square feet and that the base rent will be
based upon 6,095 rentable square feet which represents usable square
footage plus a loading factor representing an amount of common area
space that is allocable to the Premises.
2. Paragraph 1.5 is modified to provide that the lease commencement date
shall be the earlier of (a) the date an occupancy permit is obtained
for the Premises or (b) ninety (90) days after the date that the lease
is executed. The lease termination date will be the last day of the
month during which the fifth anniversary of the commencement date
occurs.
3. Paragraph 1.6 is replaced by the following: The initial monthly Base
Rent shall be Twenty-Five Thousand, Nine Hundred Three Dollars and
75/100 ($25,903.75) payable on the first day of each month per
paragraph 4.1. If the lease commences or terminates on a date other
than the first day of each month, Lessee will pay rent prorated to
reflect the number of days between the first day of the month and
either the commencement or termination date.
4. Paragraph 1.9 is replaced by the following: Upon mutual execution of
the Lease, Lessee shall provide security in the amount of Twenty-Nine
Thousand One Hundred Fifty and no/100 Dollars ($29,150). In addition
and upon subsequent to execution of the Lease but not later than
Friday, December 31, 1999, Lessee shall provide an additional security
deposit in the form of cash or letter of credit in the amount of One
Hundred Fifty-Five Thousand Four Hundred Twenty-Two and 50/100 Dollars
($155,422.50). Upon completion of Lessee's Initial Public Offering,
Lessor will release and return the additional security deposit to
Lessee.
5. There are no parking facilities, structures or areas associated with
the building at 800 California. Therefore, all references to parking,
parking structures, parking areas, and the like, are deleted. This
includes, without limitation, such references found in sections 2.1,
2.2, 2.3 and 2.5.
6. Notwithstanding the provisions of paragraph 2.3, Lessee shall not be
required to comply with any new rule or regulation imposed by Lessor
unless the same applies in a non-discriminatory manner to all office
space tenants at 800 California.
7. Regarding paragraph 4.2, if the amount of Operating Expenses in the
Base Year is not based on twelve (12) months' actual operation of the
Office Building Project at full capacity, then such amount shall be
adjusted to reflect a fully-leased project.
8. Paragraphs 4.3.1, 4.3.2, 4.3.3, 4.3.4, and 4.3.5 are replaced by the
following: At the times set forth in paragraphs 1.7 of the Basic
Lease Provisions, the monthly Base Rent payable under paragraph 4.1 of
the Lease shall be increased by three percent (3%) annually.
<PAGE>
9. Paragraph 6.3(a) is modified to provide that Lessor shall deliver the
Premises as shell space in the condition detailed in the construction
drawings approved by the City of Mountain View in connection with its
issuance of owner's building permit and warrants that the space and
systems detailed in said construction drawings will comply with all
building codes and that there is no pre-existing environmental
contamination that violate environmental law or regulations. Tenant
shall be responsible for the design and installation of all other
improvements to the Premises, including, without limitation, the
interior drywalls, partition walls, electrical systems, data lines,
HVAC outlets and controls and kitchen systems. Lessor will provide a
Lessee improvement allowance in the amount of $91,425 to Lessee for
Lessee improvements. This improvement allowance shall be payable by
Lessor to Lessee in increments equal to one-third (1/3) of a draw
request submitted by Lessee's contractor until the allowance is
exhausted, within fifteen (15) days of Lessee's submission to Lessor
of a copy of the draw request from Lessee's general contractor.
Lessee will bear all other Lessee improvement costs.
10. Paragraph 7.2(b) is replaced by the following: On the last day of the
term hereof, or on any sooner termination. Lessee shall surrender the
Premises to Lessor in the same configuration as the completed floor
plan that has been approved by Landlord in writing with all
improvements in operating order, ordinary wear and tear and repairs
for which Lessor is responsible under paragraph 7.2 of the Lease,
excepted, clean and fee of debris. Any damage or deterioration of the
Premises shall not be deemed ordinary wear and tear if the same could
have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation
or removal of Lessee's trade fixtures, alterations, furnishings and
equipment. Except as otherwise stated in this Lease, Lessee shall
leave the air lines, power panels, electrical distribution systems,
lighting fixtures, air conditioning, window coverings, wall coverings,
carpets, wall paneling, ceilings and plumbing on the Premises and in
good operating condition.
11. Paragraph 7.3(a) is replaced by the following: Lessee shall not,
without Lessor's prior written consent make any alterations,
improvements, additions, utility installations or repairs in, on or
about the Premises, or the Office Building Project, which consent
shall not be unreasonably withheld. As used in this paragraph 7.3 the
term "Utility Installation" shall mean carpeting, window and wall
covering, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and
telecommunication wiring and equipment. At the expiration of the
term, Lessor may require the removal of any or all of said alteration,
improvements, additions or utility installations, and the restoration
of the Premises and the Office building Project to the same
configuration as the completed floor plan that has been approved by
Landlord in writing, at Lessee's expense. Should Lessor permit Lessee
to make its own alterations, improvements,
<PAGE>
additions or Utility Installations, Lessee shall use only such
contractor as has been expressly approved by Lessor (which approval
shall not be unreasonably withheld). Lessee shall pay when due all
charges incurred by Lessee as a result of the construction of such
alterations, improvements, additions or Utility Installations, and
shall also be responsible for keeping the project free of mechanics'
liens recorded by the Contractor or under the contractor's
subcontractors and suppliers of any tier as a result of such
alterations, improvements, additions or Utility Installations. If
Lessee fails to make any payments required under this paragraph, or if
Lessee fails to keep the project free of such mechanics' liens, Lessor
may settle such claims or procure statutory lien release bonds and
Lessee shall on demand reimburse Lessor for such claims and such bonds
so paid plus reasonable, attorney fees. Should Lessee make any
alterations, improvements, additions or Utility Installations without
the prior approval of Lessor, or use a contractor not expressly
approved by Lessor, Lessor may, at any time during the term of this
Lease, require that Lessee remove any part or all of the same. Except
as provided herein, Lessee's trade fixtures, furniture, equipment and
other personal property installed in the Premises ("Lessee's
Property") shall at all times be and remain Lessee's property, and
Lessor shall have no lien in any item of Lessee's Property. Except for
items that cannot be removed without structural injury to the
premises, at any time Lessee may remove Lessee's Property from the
premises, provided that Lessee repairs all damage caused by such
removal.
12. Lessee must obtain Lessor's written approval of the general contractor
who will be constructing the Tenant Improvements prior to entering
into a contract for Tenant Improvements which approval will not be
unreasonably withheld. Lessee's general contractor shall obtain and
maintain at all times a Commercial General liability Insurance that
provides for Bodily Injury and Property Damage Liability with coverage
limits of not less than $5,000,000.00 general aggregate and
$1,000,000.00 personal and advertising injury, with limits of
$1,000,000.00 per occurrence. Lessee's general contractor also shall
maintain Worker's Compensation insurance as required by law. All
subcontractors shall obtain and maintain at all times a Commercial
General Liability Insurance with identical coverage limits.
800 California, LLC, and MV Development, Inc. (800 California, LLC's
manager) shall be named as additional insured in the Lessee's general
contractor's and all subcontractor's Commercial General Liability
policies as to all operations or other work performed by or on behalf
of the general contractor or subcontractor. Lessee shall require
Lessee's contractor to add Lessor and MV Development, Inc., as
additional named insureds on Lessee's contractor's general commercial
liability policy. Lessee shall provide to Lessor certificates of
insurance evidencing such coverage before commencing construction of
its tenant improvements.
13. Lessee shall have one (1) option to extend the lease for an additional
five (5) year period upon the same terms and conditions of this
agreement as of the date of the initial term's expiration. The rent
for the option period will begin at the greater of the last month's
rent paid or fair market rent. Lessee must exercise this option by
notifying Lessor in writing of its exercise no later than 180 days
before expiration of the initial term. For the purpose of this
paragraph, the term "fair market rent" shall be the net effective fair
market rental rate based on comparable lease transactions in
comparable projects located in the Mountain View market area, all
based on the best information available at the time of determination
of the fair market rent. The fair market rent shall be based on
prevailing rentals then being charged to tenants in other comparable
buildings in the Mountain View market area, for space of equivalent
quality, size and location (or adjusting the rental rate as
appropriate for difference therein), taking into such account the
length of the option term during which such rate will apply, and
differences in terms and provisions of the applicable leases, such as
pass-throughs of operating expenses and taxes, and the fact that no
<PAGE>
tenant improvement allowance will be provided. If Lessee timely
exercises Lessee's renewal option, then, during the thirty (30) day
period following Lessor's receipt of Lessee's notice of exercise,
Lessor and Lessee shall endeavor in good faith to agree upon the fair
market rent. If Lessor and Lessee are unable to agree upon the fair
market rent prior to the expiration of said thirty (30) day period,
then the fair market rent for the Premises shall be determined as
follows: Lessor and Lessee shall each appoint one (1) real estate
appraiser, and the two so appointed shall select a third. Said real
appraisers shall be licensed real estate brokers and have at least
five (5) years experience appraising similar space located in
commercial projects in the vicinity of the building complex. Lessor
and Lessee agree to make their appointments promptly. The two
appraisers selected by Lessor and Lessee shall promptly select a third
appraiser within five (5) days after they both have been appointed,
and each appraiser, within twenty (20) days after the third appraiser
is selected, shall submit his or her determination of the then fair
market rent for the premises. The fair market rent shall be the mean
of the two closest rental determinations. Each party shall bear the
fees and expenses of the appraiser it selects and one-half of the fees
and expenses of the third appraiser.
14. Lessee shall have access to the building on a twenty-four (24) hour
per day, seven (7) days per week access to the building; however,
Lessor will include in base rent utilities during reasonable business
hours. "Reasonable business hours" shall be between 7 AM and 9 PM,
Monday through Friday, recognized holidays excepted. Lessee shall
bear the cost of all utilities used outside the reasonable business
hours.
15. In the event that Lessor approves, under the terms of this agreement,
a sublease of this lease, Lessor and Lessee shall split 50/50 any net
difference between the rent amount payable under this lease and the
rent payable under the sublease if the rent payable under the sublease
is greater than the rent under this lease. Lessee shall bear any
difference between the rent amount payable under this lease and the
rent payable under the sublease if the rent payable under the sublease
is less than the rent under this lease. For the purposes of this
paragraph, "net difference" is the remainder of the difference between
the rent amount payable under this lease and the rent payable under
the sublease after deduction of its reasonable subleasing costs.
For the purpose of this Lease, a sale of Lessee's capital stock in an
Initial Public Offering shall not be deemed an assignment, subletting
or other transfer of the Lease or the Premises requiring Lessor's
consent.
16. In the event Lessor fails to perform any of its obligations under the
Lease within the time period set forth in Section 13.3 of the Lease,
Lessee may reasonably cure any default of Lessor at Lessor's cost and
demand reimbursement by Lessor of the reasonable cost of such cure.
17. Paragraph 15 is modified to provide that the Broker's commission
payable to Cornish & Carey Commercial, Inc., shall be as provided in a
separate commission agreement between Lessor and Cornish & Carey
Commercial, Inc.
18. Regarding paragraph 32, Lessor and Lessor's agents, except in the case
of emergency or regularly scheduled services (such as janitorial
service), shall provide Lessee with twenty-four (24) hours' notice
prior to entry of
<PAGE>
the Premises. For any such entry, Lessor and Lessor's agents will
comply with Lessee's reasonable security measures and shall not impair
Lessee's operations more than reasonably necessary. Lessor shall not
show the Premises to prospective lessees prior to the last one
hundred-eighty (180) days of the Lease term.
19. Any expenditure by a party permitted or required under the Lease, for
which such party is entitled to demand and does demand reimbursement
from the other party, shall be limited to the fair market value of the
good and services involved and shall be reasonably incurred after the
party seeing reimbursement has made reasonable attempts to minimize
the expenditure for which reimbursement is being sought. Any request
for reimbursement shall be substantiated by documentary evidence
available for inspection and review by the other party or its
representatives during regular business hours.
AGREED AGREED:
800 CALIFORNIA, LLC, Lessor MOAI TECHNOLOGIES,INC.
By MV Development, Inc., Its Manager
/s/ Jeffrey H. Wong, President
- ----------------------------------------
Jeffrey H. Wong, President By /s/ Anne Perlman
---------------------------
Title President & CEO
------------------------
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<PAGE>
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<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
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5,714 20,645
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