<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 2000
Registration No. 333-91841
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
IPRINT.COM, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2750 77-0436465
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
1450 ODDSTAD DRIVE
REDWOOD CITY, CALIFORNIA 94063
(650) 298-8500
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
ROYAL P. FARROS
CHIEF EXECUTIVE OFFICER
IPRINT.COM, INC.
1450 ODDSTAD DRIVE
REDWOOD CITY, CALIFORNIA 94063
(650) 298-8500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
MARK F. RADCLIFFE, ESQ. GREGORY C. SMITH, ESQ.
BRADLEY J. ROCK, ESQ. THOMAS J. IVEY, ESQ.
Gray Cary Ware & Freidenrich LLP Skadden, Arps, Slate, Meagher & Flom LLP
400 Hamilton Avenue 525 University Avenue
Palo Alto, California, 94301-1825 Palo Alto, California 94301
(650) 833-2000 (650) 470-4500
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration 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 number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock ($0.001 par value)... 5,175,000 $ 10.00 $ 51,750,000 $ 13,662
</TABLE>
(1) Includes 675,000 shares which the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purposes of determining the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act.
(3) $13,200 has been previously paid.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting offers to buy these securities
in any state where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 11, 2000.
Shares
[IPRINT.COM LOGO]
Common Stock
---------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $8.00 and $10.00 per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol IPRT.
The underwriters have an option to purchase a maximum of 675,000 additional
shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 8.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS IPRINT.COM
----------------- ----------------- -----------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE>
INSIDE FRONT COVER GATEFOLD
Case Study: Designing Business Cards:
[Graphic depiction of the old way to print business cards and the iPrint.com
way. On the left side, a long series of steps employed in the traditional way to
print business cards. On the right side, graphic depiction of a series of
computer screen shots showing the design, proof and order simplicity of ordering
business cards at iPrint.com.]
INSIDE FRONT COVER
iPrint.com Makes Printing Easy:
[Graphic depiction of a series of personalized printed products surrounding a
computer screen shot of the iPrint.com homepage.]
INSIDE BACK COVER
[Graphic depiction of recent awards won by the iPrint.com website and a
representative list of third parties with whom iPrint.com does business.]
<PAGE>
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY................... 4
RISK FACTORS......................... 8
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS................. 18
USE OF PROCEEDS...................... 19
DIVIDEND POLICY...................... 19
CAPITALIZATION....................... 20
DILUTION............................. 21
SELECTED FINANCIAL DATA.............. 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS...................... 23
</TABLE>
<TABLE>
BUSINESS............................. 31
MANAGEMENT........................... 43
<CAPTION>
PAGE
----
<S> <C>
RELATED PARTY TRANSACTIONS........... 52
PRINCIPAL STOCKHOLDERS............... 55
DESCRIPTION OF CAPITAL STOCK......... 59
SHARES ELIGIBLE FOR FUTURE SALE...... 63
UNDERWRITING......................... 65
NOTICE TO CANADIAN RESIDENTS......... 68
LEGAL MATTERS........................ 69
EXPERTS.............................. 69
WHERE YOU CAN FIND MORE
INFORMATION........................ 69
INDEX TO FINANCIAL STATEMENTS........ F-1
</TABLE>
--------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 25 DAYS AFTER COMMENCEMENT OF THE OFFERING, ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER
AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THIS SUMMARY TOGETHER WITH THE ENTIRE PROSPECTUS, INCLUDING
THE MORE DETAILED INFORMATION IN OUR FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
APPEARING ELSEWHERE IN THIS PROSPECTUS. IN THIS PROSPECTUS, IPRINT.COM, WE, US
AND OUR REFER TO IPRINT.COM, INC. AND NOT TO THE UNDERWRITERS.
IPRINT.COM, INC.
iPrint.com is an online provider of print and private-labeled print services
focused on the business market.
Our online print shops offer customers a one-stop shop for addressing their
printing needs, allowing them to easily design and order thousands of
customized, primarily small-quantity printed products. By automating or
enhancing the print order process and electronically connecting our online
printing services to carefully selected commercial print vendors, we believe,
based on our experience in the printing industry, that we significantly reduce
the costs and inefficiencies associated with the traditional printing process.
Our online print services are designed to be much more convenient and
cost-effective than traditional printing alternatives provided through
traditional print channels.
Printing can be a significant area of expenditure for small businesses.
According to CAP Ventures, sales in the United States printing industry totaled
$292 billion in 1998, of which $58 billion was derived from commercial printing
operations.
The traditional process of purchasing printing can be time consuming and
error-prone. Businesses, particularly self-employed individuals and small
businesses, often lack the financial resources to create economies of scale when
purchasing printed products. Organizations and individuals have begun to take
advantage of the Internet to address these inefficiencies and to increase
convenience, broaden product selection and improve pricing. Based on information
provided by International Data Corporation, worldwide commerce over the Internet
conducted by businesses, including government and education organizations, is
expected to increase from approximately $36 billion in 1998 to $1.1 trillion in
2003.
Our online print services provide our customers with the following benefits:
- convenience;
- simplified design and ordering process;
- streamlined fulfillment process;
- significant cost savings;
- broad range of services and professionally printed products; and
- comprehensive customer service.
We simplify the design and ordering process in many ways, including replacing
the manual steps and handwritten forms used by traditional print shops. We
believe this allows us to significantly reduce reprint-due-to-error rates and
the associated print wastage of our commercial print vendors. At the same time
we lower costs and improve capacity utilization for our commercial print vendors
since we can electronically route orders to commercial print vendors that have
idle capacity. We believe that these efficiencies, together with our lower
overhead costs due to our online nature and automation, allow us to be more
cost-effective than traditional printing alternatives.
In addition to providing customers with online print services directly
through the iPrint.com website, we work with a variety of online organizations,
large commercial printers and office supply chains to deliver co-labeled,
private-labeled and affiliate printing services. Our co-labeled printing
business involves marketing arrangements that promote the iPrint.com brand and
our co-labeled party's
4
<PAGE>
brand. Our private-labeled printing business involves working with large
commercial printers and office supply chains to provide their customers with
online print services through websites and only promotes the private-labeled
party's brand. With our affiliate printing business, we work with approximately
3,000 third parties to provide links from their websites to the iPrint.com
website. These links bear only the iPrint.com brand. These relationships allow
us to efficiently leverage our technology and effectively expand our reach
across a range of customer segments.
We also offer specialized websites and print services in response to
customer requests for print items or quantities that are not generally offered
in our self-service print shop.
Our objective is to be the leading online provider of print and
private-labeled print services. As part of our strategy, we intend to:
- capitalize on being one of the first online print shops targeting the
business market by aggressively introducing new printing services and
promotions;
- build our brand recognition by promoting the iPrint.com brand through a
mixture of online advertising, public relations and participation in trade
shows;
- expand our marketing relationships by aggressively developing new
relationships with leading destination websites and media companies to
accelerate customer acquisition and increase usage of our online print
shop;
- build our customer base and stimulate repeat usage by exposing our
customers to products and services that most closely meet their needs;
- expand our specialized print services by creating a range of new online
printing services and aggressively marketing these services to our current
and future customer base;
- expand our private-labeled initiatives by entering into new relationships
with a variety of companies to increase our distribution and sales
channels, and increase usage of our print services; and
- leverage and extend our technology platform by enhancing the functionality
of our website and the technology that supports it to improve order flow
and reporting, expand our service offerings, facilitate more complete
integration with print vendors, expedite payment processing and improve
the efficiency of our system.
We were founded in August 1996 and began offering online services in January
1997. We have a history of significant losses. We incurred net losses of
$700,000 in 1997, $2.3 million in 1998 and $6.7 million in the nine months ended
September 30, 1999. As of September 30, 1999, we had an accumulated deficit of
$9.1 million. We anticipate incurring significant losses and negative operating
cash flow into the foreseeable future.
Our principal offices are located at 1450 Oddstad Drive, Redwood City,
California 94063. Our telephone number is (650) 298-8500. Our website address is
www.iPrint.com. The information on our website does not constitute a part of
this prospectus.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by iPrint.com................. 4,500,000 shares
Common stock to be outstanding..................... 28,906,748 shares
Use of proceeds.................................... For working capital, repayment of debt and
capital expenditures. See "Use of Proceeds" on
page 18.
Dividend policy.................................... We intend to retain all future earnings to fund
the development and growth of our business.
Therefore, we do not anticipate paying cash
dividends on our common stock in the foreseeable
future. See "Dividend Policy" on page 18.
Proposed Nasdaq National Market symbol............. IPRT
</TABLE>
The number of shares of our common stock outstanding after the offering is
based on shares outstanding as of December 31, 1999 and does not include:
- 1,593,348 shares of common stock issuable upon exercise of outstanding
stock options under our equity incentive plans as of December 31, 1999 at
a weighted average exercise price of $1.06;
- 2,520,485 shares of common stock reserved and available for issuance under
our equity incentive plans; and
- warrants to purchase an aggregate of 70,500 shares of common stock at a
weighted average exercise price of $0.85.
iPrint is a registered trademark and iKiosk is a trademark of iPrint.com.
This prospectus contains other trade names, trademarks and service marks of
iPrint.com and of other companies.
------------------------
UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS
ASSUMES:
- NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION,
- OUR REINCORPORATION INTO DELAWARE, AND
- THE CONVERSION OF ALL OF OUR REDEEMABLE CONVERTIBLE PREFERRED STOCK ON A
ONE-FOR-ONE BASIS INTO SHARES OF COMMON STOCK UPON THE CLOSING OF THIS
OFFERING.
6
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $ -- $ 168 $ 566 $ 306 $ 1,759
Cost of sales......................................... -- 85 331 172 1,205
------- ------- -------- -------- --------
Gross profit.......................................... -- 83 235 134 554
------- ------- -------- -------- --------
Operating expenses:
Research and development............................ 171 351 901 521 2,204
Sales and marketing................................. -- 181 970 629 3,636
General and administrative.......................... 64 249 710 407 1,199
Amortization of deferred compensation............... -- -- -- -- 309
------- ------- -------- -------- --------
Total operating expenses.......................... 235 781 2,581 1,557 7,348
------- ------- -------- -------- --------
Loss from operations.................................. (235) (698) (2,346) (1,423) (6,794)
Other income (expense), net........................... -- (1) 75 56 129
------- ------- -------- -------- --------
Net loss.............................................. $ (235) $ (699) $ (2,271) $ (1,367) $ (6,665)
======= ======= ======== ======== ========
Basic and diluted net loss per share.................. $ (0.15) $ (0.11) $ (0.38) $ (0.24) $ (0.86)
======= ======= ======== ======== ========
Shares used in computation of basic and diluted net
loss per share...................................... 1,573 7,001 7,007 7,006 7,169
======= ======= ======== ======== ========
Pro forma basic and diluted net loss per share
(unaudited)......................................... $ (0.24) $ (0.38)
======== ========
Shares used to compute pro forma basic and diluted net
loss per share (unaudited).......................... 11,090 16,092
======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $14,007 $14,007 $50,372
Working capital............................................. 20,167 20,167 56,532
Total assets................................................ 23,817 23,817 60,182
Long-term obligations, net of current portion............... 156 156 156
Redeemable convertible preferred stock...................... 30,810 -- --
Accumulated deficit......................................... (9,120) (9,120) (9,120)
Total stockholders' equity (deficit)........................ (9,425) 21,385 57,750
</TABLE>
The pro forma data give effect to the conversion of all outstanding shares
of our redeemable convertible preferred stock into common stock upon the closing
of this offering. The pro forma as adjusted data give effect to the foregoing
and to the sale of the 4,500,000 shares of common stock that we are offering
under this prospectus at an assumed initial public offering price of $9.00 per
share and after deducting the underwriting discounts and commissions and
estimated offering expenses. See "Capitalization" on page 19.
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS VERY RISKY. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW, TOGETHER WITH ALL OF THE OTHER INFORMATION
IN THIS PROSPECTUS, BEFORE BUYING SHARES IN THIS OFFERING.
RISKS RELATED TO OUR BUSINESS
OUR NEWLY INTRODUCED PRODUCTS AND SERVICES MAKE IT DIFFICULT TO EVALUATE OUR
FUTURE PROSPECTS.
iPrint.com was founded in August 1996, and to date we have generated limited
revenues. Most of our revenues were generated in the last two quarters. We began
Internet-enabled printing services for the short-run, mass market sector in
January 1997. Newly introduced products and print services represent a
significant source of our revenues. Therefore, have only a limited operating
history with our technology, process, logistics and customers. As a result, you
should not consider our recent revenue growth as an indication of our future
rate of revenue growth, if any. We will encounter risks and difficulties that
early stage companies frequently encounter in new and rapidly evolving and
competitive markets. These risks include expanding the number of certified
commercial print vendors and improving our technological and logistical
connections to these vendors. If we do not successfully address these risks, our
business will be seriously harmed.
WE HAVE NOT BEEN PROFITABLE. WE HAVE AN ACCUMULATED DEFICIT OF $9.1 MILLION AS
OF SEPTEMBER 30, 1999 AND MAY NOT EVER BE ABLE TO ACHIEVE PROFITABILITY.
Our failure to significantly increase our revenues will seriously harm our
business and operating results. We incurred net losses of $700,000 in 1997, $2.3
million in 1998 and $6.7 million in the nine months ended September 30, 1999. As
of September 30, 1999, we had an accumulated deficit of $9.1 million. To become
profitable, we must significantly increase our revenues by obtaining new
customers and generating additional revenues from existing customers, control
our costs and improve our gross margins. We may not be able to sustain our
recent growth rates in revenues. For the nine months ended September 30, 1999,
shipping and handling fees and barter transactions accounted for approximately
32% of our revenues. In fact, we may not have any revenue growth, and our
revenues could decline. Moreover, we expect to significantly increase our
operating expenses in connection with:
- increasing our advertising and special promotions; and
- continuing to develop our services and technologies.
As a result, we expect to incur significant losses for the foreseeable future.
OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND 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 varied significantly in the past and
will likely vary significantly in the future. We compete primarily in the
short-run, mass market printing industry, which is characterized by individual
orders from relatively small customers rather than long-term contracts with
relatively large enterprises. We have recently begun offering special custom
quote printing services, which are characterized by small numbers of orders from
larger customers. These orders may vary widely in dollar amount. Repeat print
business depends on the customers' satisfaction with the services provided. As a
result, we cannot predict the amount and profitability of the print services we
will provide in a given period. 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. If securities analysts follow our stock, our
operating results will likely fall below their expectations in some future
quarter or quarters. Our failure to meet these expectations would likely
adversely affect the market price of our common stock.
8
<PAGE>
WE PLAN TO INCREASE OUR OPERATING EXPENSES AND IF OUR REVENUES DO NOT INCREASE,
OUR BUSINESS COULD BE SERIOUSLY HARMED.
We plan to increase our operating expenses to expand our sales and marketing
operations, fund greater levels of research and development, develop new
strategic relationships, expand our facilities and increase our professional
services and support capabilities. If our revenues do not increase along with
these expenses, our business could be seriously harmed. In addition, we incur
expenses based in part on expectations of our future revenues, and if our
expenses do not generate the revenues we anticipate, our operating results will
suffer.
IF WE FAIL TO INCREASE THE NUMBER OF OUR CUSTOMERS THROUGH SUCCESSFUL MASS
EMAILINGS, OR FAIL TO SATISFACTORILY FULFILL THEIR PRINT ORDERS, OUR BUSINESS
WILL SUFFER.
Our business depends on successful mass emailing to increase the number of
customers and on satisfactory fulfillment of print orders that our customers
place. Our operating results may fluctuate significantly if we are unable to
obtain quality email lists or deliver quality printed products in any given
quarter.
BARTER TRANSACTIONS HAVE ACCOUNTED FOR A SIGNIFICANT PORTION OF OUR REVENUES IN
1999 AND IF THESE REVENUES ARE DISCONTINUED OR DO NOT RECUR, THE PRICE OF OUR
STOCK MAY FALL.
For the nine months ended September 30, 1999, barter transactions accounted
for approximately 10% of our revenues. These revenues may be discontinued at any
time or may not recur in future periods, which could cause the price of our
stock to fall.
CHANGES IN OUR REVENUE RECOGNITION POLICIES AND PROCEDURES MAY ADVERSELY AFFECT
OUR OPERATING RESULTS.
Our operating results may be adversely affected by our revenue recognition
policies and procedures. These policies and procedures may evolve or change over
time based upon applicable accounting standards and how these standards are
interpreted. For example, in October 1999, the SEC asked the Emerging Issue Task
Force of the Financial Accounting Standards Board to address accounting issues
related to electronic commerce companies. These issues include accounting
treatments of barter transactions, free or heavily discounted products and
shipping and handling costs. Resolution of these issues could have a material
adverse effect on the presentation of our operating results.
ANY DECLINE IN REVENUES GENERATED FROM OUR IPRINT.COM, AFFILIATE AND CO-LABELED
WEBSITES OR FROM OUR SPECIALIZED PRINT SERVICES WOULD ADVERSELY AFFECT OUR
OPERATING RESULTS.
The printing services we offer on our iPrint.com, affiliate and co-labeled
websites and our specialized print services accounted for substantially all of
our revenues in 1998 and for the nine months ended September 30, 1999. We
anticipate that the services we offer on these websites will continue to
generate substantially all of our revenues for the foreseeable future.
Consequently, a decline in the price of, or demand for, the printing services we
offer on those websites and through custom quotes, or the failure of these
services to achieve broad market acceptance, would seriously harm our business.
BECAUSE THE MARKET FOR OUR INTERNET-ENABLED PRINTING SERVICES IS AT AN EARLY
STAGE, A LARGE NUMBER OF PRINT BUYING CUSTOMERS DO NOT KNOW ABOUT AND MAY NOT
USE OUR SERVICES.
Our success depends on a significant number of print buying customers
knowing about and regularly using our services. The market for Internet-enabled
printing services is at an early stage of development. Many of our customers
will be addressing issues such as quality, reliability, billing, delivery and
customer service, for the first time in a self service, Internet-based print
creation and
9
<PAGE>
ordering environment. We must educate these potential customers on the use and
benefits of our self service website. Educating potential customers is a
complex, time consuming and expensive process. In many cases, organizations must
change established business practices and conduct business in new ways to use
our services. If significant numbers of print buying customers are not willing
to change the method by which they use printing services, our business may fail.
IF WE ARE UNABLE TO ATTRACT CUSTOMERS WHO HAVE LONG-STANDING RELATIONSHIPS WITH
TRADITIONAL PRINT VENDORS TO OUR WEBSITES, OUR BUSINESS COULD BE HARMED.
To succeed, we must attract new customers, many of whom may have personal
and long-standing relationships with traditional print and design shops, catalog
vendors and office supply chain and stationery stores. If we are unable to
attract customers to our websites for their printing needs, our revenues will
not grow and our stock price will decline. Traditional print and design shops
have many advantages which we cannot offer our customers, including physical
proximity and the ability to store and maintain designs, negatives or print
plates on our premises. In addition, there are disadvantages relating to online
print services, including not speaking directly with a service representative,
needing a computer that is connected to the Internet, and the inability to have
products printed while the customer waits. Catalog vendors and office supply
chains may be more convenient for customers that also want to purchase
non-printed products, such as office furniture. Office supply chains and
stationery stores may also have better brand recognition than us.
IF OUR PROMOTIONAL EFFORTS ARE NOT SUCCESSFUL, OUR BUSINESS WILL FAIL.
Our success depends upon our ability to acquire customers through promotions
and convert them into repeat paying customers. If we cannot convert a
substantial number of these promotional customers into repeat paying customers,
our business will fail. Direct business promotions are the most important
vehicle we use to acquire customers. To date, a significant portion of our
revenues has been derived from customer orders generated from our business
promotions. These promotions may include providing a product, such as a mailing
label, to a customer for free, or only charging the customer a shipping and
handling fee, in order to introduce that customer to our products and services.
To expand our business and our customer base, we intend to continue to offer
business promotions.
Because we only recently began acquiring customers through aggressive
business promotions, we cannot assure you that our strategy of achieving
customer and revenue growth will be successful. For this strategy to succeed, we
must:
- create compelling business promotions;
- find qualified customer lists in sufficient quantities and at reasonable
prices; and
- process and fulfill orders for the products that the business promotions
generate.
We cannot predict whether using aggressive business promotions will allow us
to grow rapidly enough to recover the large investments we have made, and must
continue to make, in our promotional programs, systems and technologies. Our
business model depends on rapidly acquiring customers to grow our revenues and
achieve profitability. If our business promotions do not attract a substantial
number of new customers, our revenues may not grow and we may not be profitable.
ANY FAILURE ON THE PART OF OUR OUTSIDE COMMERCIAL PRINT VENDORS TO FULFILL OUR
ORDERS IN A TIMELY AND COST-EFFECTIVE MANNER COULD SERIOUSLY HARM OUR
BUSINESS.
We depend on outside commercial print vendors to print and fulfill our
customers' orders. Any failure on the part of these vendors to fulfill our
orders in a timely and cost-effective manner could seriously harm our business.
To date, we have only certified approximately 15 commercial print vendors to
fulfill our orders. Our certification process entails onsite evaluation and
analysis, including extensive
10
<PAGE>
testing, of the commercial print vendor's existing equipment, print processes,
print quality, workflow management systems and turnaround times. We do not have
long-term contracts with any of them. If one or more of our commercial print
vendors failed to satisfactorily fulfill our customers' orders, or if the
customer orders we receive significantly increased and our vendors did not have
the capacity to fulfill those orders, we would be required to find and qualify
additional commercial print vendors. In that event, because it typically takes
us between four and eight weeks to certify and integrate a commercial print
vendor into our business, we may be delayed in fulfilling our customers' orders,
which may cause us to lose customers and hurt our business. Furthermore, if our
commercial print vendors increase the prices they charge us, our selling prices
or our margins will be adversely affected, which may make us less competitive
and harm our business.
Because we do not own any inventory, we rely on our commercial print vendors
to maintain an adequate stock of raw materials needed to create our products.
Any failure of these commercial print vendors to maintain adequate inventory
could result in delays in product delivery and customer dissatisfaction. This in
turn could harm our business.
FOR SEVERAL PRODUCTS WE HAVE CERTIFIED ONLY ONE COMMERCIAL PRINT VENDOR, AND IF
THAT PRINT VENDOR STOPPED PRINTING THESE PRODUCTS, WE MIGHT NOT BE ABLE TO
FULFILL OUR CUSTOMERS' ORDERS.
For several of the products we offer, for example, full color business
cards, we have certified only one commercial print vendor. If that vendor were
to stop printing these products, and we were unable to certify a new vendor in a
timely manner, we would be unable to fulfill our customers' orders for these
products. Any failure to fulfill our customers' orders will harm our business.
A FAILURE BY OUTSIDE DELIVERY SERVICES TO TIMELY DELIVER OUR CUSTOMERS' ORDERS
COULD SERIOUSLY HARM OUR BUSINESS.
We depend on outside delivery services, including the United States postal
service, Federal Express and U.P.S., to deliver print orders to our customers.
These delivery services have failed in the past, and may fail in the future, to
deliver print orders to our customers on a timely basis. Any failure on the part
of these outside services to deliver our orders in a timely and cost-effective
manner could seriously harm our business.
IF WE ARE UNABLE TO ENHANCE OUR IPRINT.COM AND RELATED WEBSITES ON A TIMELY AND
COST-EFFECTIVE BASIS, OR IF THESE ENHANCEMENTS DO NOT ACHIEVE WIDESPREAD
MARKET ACCEPTANCE, WE WILL BE UNABLE TO GROW, WE WILL MISS MARKET
OPPORTUNITIES AND OUR BUSINESS WILL BE SERIOUSLY HARMED.
If we are unable to enhance our iPrint.com, affiliate, co-labeled or
private-labeled websites on a timely and cost-effective basis, or if these
enhancements do not achieve widespread market acceptance, we will be unable to
grow, we will miss market opportunities and our business will be seriously
harmed. Similarly, if we do not make timely and cost-effective improvements to
our other technologies and processes, our business will suffer. The life cycles
of our enhancements, and the rate at which our websites and processes must be
able to accomodate increased volume and products offered, are difficult to
predict because we operate in a new and emerging market that is characterized by
rapid technological change, changing customer needs and evolving industry
standards. The introduction of products and services, from both the traditional
printing industry and the Internet and software commerce sector, that employ new
technologies and standards could render our existing products or services
obsolete and unmarketable.
For example, our technology that enables our customers to compose their
printed designs in electronic format is written in the software language C++. If
a new software language, such as Java, becomes standard in the printing
industry, we may need to rewrite this technology in another software
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<PAGE>
language to remain competitive. Any need to rewrite our technology would be
costly and could result in significant interruptions to our business.
To be successful, we must offer products and services that keep pace with
technological developments and emerging industry standards, address the
ever-changing and increasingly sophisticated needs of our customers and achieve
broad market acceptance. In our efforts to develop these types of products and
services, we may:
- not be able to timely or cost-effectively develop and market them;
- 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; or
- experience difficulties that could delay or prevent the successful
development, introduction and adoption of these new products and services.
IF WE FAIL TO ADEQUATELY MAINTAIN AND ENHANCE THE COMPUTER AND
TELECOMMUNICATIONS INFRASTRUCTURE REQUIRED TO SUPPORT OUR IPRINT.COM AND
RELATED WEBSITES, OUR BUSINESS WILL SUFFER.
The performance of our iPrint.com and related websites depends on the
operation of our computer and telecommunications equipment. We are responsible
for the operation of this equipment and have not retained any third-party
companies to maintain or support our equipment. All of our network operations
equipment is located in our Redwood City, California facility, and we do not
have any backup or redundant equipment located at an offsite or third party
location. If we fail to adequately maintain and enhance our network operations
center, our iPrint.com and related websites may not be available to our
customers. Any system failure, including any network, software or hardware
failure, that interrupts or increases the response time on our websites could
decrease customer usage of our services and damage our reputation. In addition,
damage to our computer and telecommunications infrastructure from fire,
earthquakes, power loss, telecommunications failures, computer viruses, hacker
attacks, physical break-ins and similar events may seriously disrupt our service
and devastate our business, particularly since we do not have backup facilities
at another location. On one occasion, a telecommunications cable on which our
services depend was cut, which disrupted our services for a business day.
OUR WEBSITES AND THE SERVICES WE OFFER MAY NOT FUNCTION IF WE ARE UNABLE TO
OBTAIN AND MAINTAIN LICENSES TO THIRD-PARTY SOFTWARE AND APPLICATIONS.
We rely on technology that we license from third parties, including software
that is integrated with internally developed software and used in our iPrint.com
and other websites to perform key functions. The functionality of our websites
depends on our ability to integrate third-party software into our technology.
The third-party software may not continue to be available to us on commercially
reasonable terms, or at all, it may not be reliable or it may not support
emerging industry standards on which our technology relies. Our inability to
obtain reliable licensed software on commercially reasonable terms could disrupt
or delay our ability to offer key services and products or force us to limit the
features of our websites. Either alternative could seriously harm our business
and operating results.
OUR WEBSITES, TECHNOLOGIES AND PROCESSES MAY CONTAIN UNDETECTED ERRORS OR
DEFECTS WHICH COULD CAUSE OUR WEBSITES TO CRASH OR LIMIT THEIR CAPACITY.
Our websites, and the technologies and processes that support them, are
complex and may contain undetected errors or failures when we first introduce or
revise them. These errors or failures may cause our websites to fail and result
in loss of, or delay in, market acceptance of our products and services. We
routinely discover software errors in new releases of our technologies and
processes after their
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<PAGE>
introduction. We may in the future discover errors, including year 2000 errors
and limitations in the ability of our websites to handle increased volumes of
traffic, in current or future releases after the commencement of the commercial
release. In addition, a delay in the commercial release of any future version of
the iPrint.com, affiliate, co-labeled or private-labeled websites, technologies
or processes could seriously harm our business.
WE MUST INCREASE BRAND AWARENESS TO COMPETE EFFECTIVELY. WE MAY BE UNABLE TO
RAISE THE ADDITIONAL CAPITAL TO INCREASE OUR BRAND AWARENESS, AND THE COSTS OF
OUR EFFORTS MAY NOT EXCEED THE ASSOCIATED BENEFITS OF A STRONG BRAND.
We have not yet established a nationally-known brand and we believe that
establishing and maintaining a strong brand name is crucial to the success of
our business. Not only may a strong brand attract and expand our customer base,
it also provides important competitive advantages, especially as competition
increases. We will require substantial resources to promote our brand name, and
we cannot guarantee that we will succeed or that the benefits associated with
brand creation will outweigh the risks and costs associated with brand name
establishment. In addition, we may be unable to raise the additional capital
which may be necessary to effectively establish our brand name and the costs of
our efforts may not exceed the associated benefits of a strong brand. Any
failure to develop a strong brand name may materially hurt our chances of
success.
OUR SPECIALIZED PRINT SERVICES BUSINESS MAY HAVE A MORE VOLATILE REVENUE STREAM
THAN OUR SELF-SERVICE BUSINESS.
We are at an early stage in developing our specialized print services
business. Because of the unique nature of this business, our revenue from these
projects is unpredictable. This unpredictability may make forecasting revenue
more difficult. If we are unable to meet earnings expectations because of these
revenue fluctuations, our stock price may fall.
REPRINTS-DUE-TO-ERROR MAY HAVE A GREATER IMPACT ON OUR SPECIALIZED PRINT
SERVICES BUSINESS.
Because our specialized print services involves projects with may have
higher order values than is typical in our self-service businesses, any
reprint-due-to-error will have a greater impact on our results of operations
than a reprint-due-to-error from our self-service operations.
OUR LIMITED EXPERIENCE IN PROVIDING QUOTES FOR OUR SPECIALIZED PRINT SERVICES
COULD INCREASE OUR RISK OF COST OVERRUNS.
We have limited experience in providing quotes for our specialized print
services. We may not adequately reflect the costs of such printing services in
our quotes. If we fail to adequately assess the costs of these services, it
would harm our results of operations.
OUR PRIVATE-LABELED BUSINESS IS AT AN EARLY STAGE OF DEVELOPMENT AND ITS SUCCESS
DEPENDS ON OPTIMIZING THE MANAGEABILITY AND ENHANCING THE FEATURES AND
OFFERINGS OF OUR PRIVATE-LABELED WEBSITES, AND ON WORKING WITH THOSE COMPANIES
THAT ARE PART OF OUR PRIVATE-LABELED BUSINESS TO PROMOTE OUR SERVICES.
We have only recently developed our private-labeled website business
strategy. The terms of the relationships that we have entered into have been
heavily negotiated and are likely to vary significantly in the future. Our
future revenue growth from these websites depends on our ability to:
- optimize the manageability of our private-labeled websites;
- enhance the features and offerings of our private-labeled websites so that
these services achieve widespread commercial acceptance; and
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- work with those businesses with whom we have a private-labeled
relationship to promote our services on their websites.
If we are unable to accomplish any of the foregoing, our private-labeled
websites may not succeed, and our revenues from that source may not grow.
WE EXPECT REVENUES FROM OUR PRIVATE-LABELED BUSINESS TO BE CONCENTRATED IN A
RELATIVELY SMALL NUMBER OF COMMERCIAL AND QUICK PRINTERS AND THE LOSS OF ANY
SIGNIFICANT ONE COULD HARM OUR BUSINESS.
We may attract only a small number of commercial and quick printers to
participate in our private-labeled program. A significant decline in revenues
from any one of these printers will adversely affect the success of our
private-labeled business. The revenues we derive from our private-labeled
business may not be enough to maintain and enhance our private-labeled program,
which will cause it to fail.
IF WE ARE UNABLE TO RETAIN OUR CURRENT KEY PERSONNEL, OUR BUSINESS MAY BE
HARMED.
Our future performance depends on the continued service of our senior
management team, in particular Royal P. Farros, our president and chief
executive officer. The loss of the services of one or more of our senior
management team could seriously harm our business. We do not have employment
agreements with most of our senior management team. If one or more of our senior
management team were to resign, the loss could result in loss of sales, delays
in new product development and diversion of management resources.
BECAUSE COMPETITION FOR QUALIFIED PERSONNEL IS INTENSE, WE MAY NOT BE ABLE TO
RECRUIT OR RETAIN PERSONNEL, WHICH COULD IMPACT THE DEVELOPMENT AND ACCEPTANCE
OF OUR PRODUCTS AND SERVICES.
Our success depends on our continuing ability to attract, hire, train and
retain a substantial number of highly skilled managerial, technical, sales,
marketing and customer support personnel. Competition for qualified personnel in
these areas is intense. In addition, new hires frequently require extensive
training before they achieve desired levels of productivity. Many of our
existing management personnel have been employed at iPrint.com for less than a
year, including our chief financial officer and chief marketing officer. We may
fail to attract and retain qualified personnel, which could have a negative
impact on our business.
IF THE PROTECTION OF OUR INTELLECTUAL PROPERTY IS INADEQUATE, OUR COMPETITORS
MAY GAIN ACCESS TO OUR TECHNOLOGY, AND WE MAY LOSE CUSTOMERS.
We depend on our ability to develop and maintain the proprietary aspects of
our technology. When we enter into private-labeled relationships with third
parties, we enter into license agreements which impose restrictions on each
party's obligations rather than sell our iPrint.com website technology. Our
proprietary rights with respect to our iPrint.com and related websites may not
prove viable or of value in the future since the validity, enforceability and
type of protection of proprietary rights in Internet-related industries are
uncertain and still evolving.
Unauthorized parties may attempt to copy aspects of our products or to
obtain and use information that we regard as proprietary. Policing unauthorized
use of our products is difficult, and while we are unable to determine the
extent to which piracy of our software or code exists, software piracy can be
expected to be a persistent problem. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States. Our means of protecting our proprietary rights may
not be adequate and our competitors may independently develop similar
technology, duplicate our products or design around patents issued to us or our
other intellectual property.
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<PAGE>
OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US WHICH COULD BE TIME CONSUMING
AND EXPENSIVE FOR US TO DEFEND.
Other companies, including our competitors, may obtain patents or other
proprietary rights that would prevent, limit or interfere with our ability to
offer our printing services on our websites. For example, from time to time we
receive notices claiming that our technology infringes patents held by third
parties. When we receive these notices, we evaluate whether or not we believe
that we infringe a valid patent. Third parties could assert, and it may be
found, that our technologies infringe their proprietary rights. We could incur
substantial costs to defend any litigation, and intellectual property litigation
could force us to do one or more of the following:
- cease using key aspects of our technology that incorporates the challenged
intellectual property;
- obtain a license from the holder of the infringed intellectual property
right; and
- redesign some or all of our websites.
In the event of a successful claim of infringement against us and our failure or
inability to license the infringed technology, our business and operating
results would be significantly harmed.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, WHICH CAN CAUSE
DILUTION.
We expect that we will need to seek additional funding in the future. We may
need to raise additional funds in the next 12 months to fund additional
expansion, develop new or enhanced services, respond to competitive pressures or
make acquisitions. We do not know if we will be able to obtain additional
financing on favorable terms, if at all. In addition, if we issue equity
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of common stock. If we cannot raise funds on acceptable terms,
if and when needed, we may not be able to develop or enhance our products, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements, which could seriously harm our business.
RISKS RELATED TO THE PRINTING INDUSTRY AND THE INTERNET
THE PRINTING INDUSTRY IS VERY COMPETITIVE, AS IS THE NEWLY EMERGING ELECTRONIC
COMMERCE BUSINESS. WE FACE INTENSE COMPETITION FROM TRADITIONAL AND NEW
PLAYERS IN THIS INDUSTRY. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, OUR
BUSINESS WILL FAIL.
The printing industry is intensely competitive. Competitors in the
traditional printing industry are numerous and competitors in both the
traditional and online printing industries vary in size and scope and in the
breadth of the products and services they offer. Competition in the short-run
printing market is intense and we expect this intensity of competition to
dramatically increase in the future. While most of these traditional printers
are independent, some are owned by large consolidators such as Taylor
Corporation. In the online printing industry, we face direct competition from
traditional printing shops such as Taylor Corporation and Discount Labels, that
have developed online websites that provide many of the same services we
provide. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any one of which could seriously harm
our business. If we cannot compete successfully against our current and future
competitors, our business will fail.
ORDERING PRINTED PRODUCTS OVER THE INTERNET IS RELATIVELY NEW AND IF BUSINESSES
DO NOT ADOPT THE INTERNET AS A COMMERCE TOOL, OUR OPERATIONS WILL FAIL.
If businesses do not use the Internet as a commerce tool, our revenues will
not grow and our operating results will suffer. Because print procurement on the
Internet is in its infancy, it is difficult to
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<PAGE>
estimate the size and growth of this market, if any. To date, many businesses
have been deterred from using the Internet to procure goods and services for a
number of reasons, including concerns relating to:
- security,
- quality of service,
- product quality,
- reliability,
- billing,
- Internet connection, and
- delivery of products.
Even if the Internet becomes a standard tool that businesses regularly use,
it may not be effective or reach broad market acceptance for obtaining printing
services.
TECHNOLOGY ADVANCEMENTS COULD ADVERSELY AFFECT OR REDUCE THE DEMAND FOR OUR
PRODUCTS AND SERVICES, WHICH WOULD HARM OUR BUSINESS.
Technological innovations are common in the printing industry, especially
given the rapid advancement of computer and communications technologies. Home
printing systems are yielding more professional results which may reduce demand
for offset and thermographic, or raised ink, professional printing. Information
previously distributed on paper is now being distributed electronically in an
almost effortless fashion. As technology further enables and enhances these
alternative communication methods, our business may suffer if we experience a
corresponding decrease in demand for our products and services.
POTENTIAL IMPOSITION OF GOVERNMENTAL REGULATION ON ELECTRONIC COMMERCE AND LEGAL
UNCERTAINTIES COULD LIMIT OUR GROWTH.
The adoption of new laws or the adaptation of existing laws to the Internet
may decrease the growth in the use of the Internet, which could in turn decrease
the demand for our services, increase our cost of doing business or otherwise
have a material adverse effect on our business, financial condition and
operating results. Few laws or regulations currently directly apply to access to
commerce on the Internet. Federal, state, local and foreign governments are
considering a number of legislative and regulatory proposals relating to
Internet commerce. As a result, a number of laws or regulations may be adopted
regarding Internet user privacy, taxation, pricing, quality of products and
services, and intellectual property ownership. The application of existing laws
to the Internet in areas such as property ownership, copyright, trademark, trade
secret, obscenity and defamation is uncertain. Numerous state and local
representatives have expressed a desire to impose taxes on sales over the
Internet to consumers and businesses in their jurisdictions. The Internet Tax
Freedom Act of 1998 has generally imposed a moratorium through October 2001 on
the imposition of some kinds of consumer-related taxes, other than sales or use
taxes, in connection with Internet access and Internet-related sales. After this
moratorium expires and if no further legislation is adopted by Congress, state
and local taxing authorities will be free to impose these taxes on sales of
goods and services over the Internet, which could substantially hinder the
growth of Internet-based commerce, including sales of our products and services.
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RISKS RELATED TO THE OFFERING
OUR STOCK PRICE MAY BE VOLATILE WHICH MAY LEAD TO LOSSES BY INVESTORS.
Before this offering, there has not been a public market for our common
stock and the trading price of our common stock may decline below the initial
public offering price. The initial public offering price will be determined by
negotiations between us and the representatives of the underwriters. If you
purchase shares of common stock, an active trading market may not develop and
you may not be able to resell those shares at or above the initial public
offering price. In addition, the stock market has, and the market prices of
securities of electronic commerce companies in particular have, experienced
extreme volatility. These market fluctuations may cause our stock price to fall
regardless of our performance.
WE HAVE NO SPECIFIC PLAN FOR ANY SIGNIFICANT PORTION OF THE NET PROCEEDS AND OUR
INVESTMENT OF THE NET PROCEEDS MAY NOT YIELD A FAVORABLE RETURN.
We plan to use the proceeds from this offering for working capital and other
general corporate purposes. We may use the proceeds in ways with which you do
not agree or that prove to be disadvantageous to our stockholders. We may not be
able to invest the proceeds of this offering in our operations or external
investments to yield a favorable return.
AFTER THIS OFFERING WE WILL CONTINUE TO BE CONTROLLED BY OUR EXECUTIVE OFFICERS,
DIRECTORS AND MAJOR STOCKHOLDERS WHOSE INTERESTS MAY CONFLICT WITH YOURS.
Upon completion of this offering, our executive officers, directors and
principal stockholders will beneficially own approximately 69.7% 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 or merging with us. We also plan to reserve up to 5% of the shares
offered in this offering under a directed share program in which our executive
officers, directors, principal stockholders, employees, business associates and
related persons may be able to purchase shares in this offering at the initial
public offering price. This program may further increase the amount of stock
held by persons whose interests are closely aligned with management's interests.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL, WHICH COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing a change of control or changes in our
management. In addition, provisions of Delaware law may discourage, delay or
prevent someone from acquiring or merging with us. These provisions could limit
the price that investors might be willing to pay in the future for shares of our
common stock.
THERE ARE A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of substantial numbers of shares of our common stock in the public
market after this offering, or the perception that sales may be made, could
cause the market price of our common stock to decline. In addition, the sale of
these shares could impair our ability to raise capital through the sale of
additional equity securities. Based on shares outstanding as of December 31,
1999, following this offering, we will have 28,906,748 shares of common stock
outstanding or 29,581,748 shares if the underwriters' over-allotment is
exercised in full. Of these, 18,453,258 shares will become available for sale
180 days following the date of this prospectus upon the expiration of lock-up
agreements, subject to the restrictions imposed by the federal securities laws
on sales by affiliates. Credit Suisse First
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Boston Corporation, however, may waive the lock-up restrictions at its sole
discretion without notice. In addition, another 5,953,490 shares will be
available for sale, subject to the restrictions of Rule 144, after
September 30, 2000.
WE HAVE GRANTED STOCK OPTIONS AT A SIGNIFICANTLY LOWER PRICE THAN THE OFFERING
PRICE OF OUR COMMON STOCK, WHICH MAY CAUSE AN INVESTOR TO SUFFER IMMEDIATE AND
SUBSTANTIAL DILUTION.
We have granted options that are outstanding to purchase an aggregate of
1,593,348 shares of common stock at exercise prices between $0.01 and $4.86 per
share, which is significantly lower than the issue price of the common stock
sold in this offering. If you purchase common stock in this offering and these
options are exercised, you will suffer substantial dilution in the book value
per share of your shares of our common stock.
WE RECENTLY SOLD STOCK AT A SIGNIFICANTLY LOWER PRICE THAN THE OFFERING PRICE OF
OUR COMMON STOCK.
In September 1999, we sold 5.9 million shares of preferred stock at a price
per share of $3.36. Accordingly, if you purchase common stock in this offering,
you will pay significantly more per share than the price at which we most
recently sold our preferred stock.
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.
In some cases, you can identify forward-looking statements by terms such as may,
will, should, expect, plan, intend, forecast, anticipate, believe, estimate,
predict, potential, continue or the negative of these terms or other comparable
terminology. The forward-looking statements contained in this prospectus involve
known and unknown risks, uncertainties and situations that may cause our or our
industry's actual results, level of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. These factors include
those listed under "Risk Factors" and elsewhere in this prospectus.
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. You should not place undue reliance on
these forward-looking statements.
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USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 4,500,000 shares of
common stock we are offering will be approximately $36.4 million, at an assumed
initial public offering price of $9.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $42.0 million.
The principal reasons for this offering are to obtain additional capital, to
create a public market for our common stock, to enhance our ability to acquire
other businesses, products or technologies, and to facilitate future access to
public equity markets. We currently have no specific plans for the net proceeds
from this offering. We are evaluating the need to obtain additional facilities
if we expand our network operations center or build out a second facility. If we
build out a second facility we estimate we would spend between $1.0 million and
$3.0 million over the next 12 months. We plan to use the remaining proceeds from
this offering to fund operating activities, including sales and marketing,
research and development and general and administrative services. We may also
use a portion of the net proceeds from this offering to acquire or invest in
businesses, technologies or products that are complementary to our business. We
currently have no commitments or agreements with respect to any acquisitions.
Pending our use of the net proceeds, we intend to invest them in cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds, government and non-government debt
securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and do
not anticipate paying such cash dividends in the foreseeable future. We
currently anticipate that we will retain all of our future earnings for use in
the development and expansion of our business and for general corporate
purposes. Any determination to pay dividends in the future will be at the
discretion of our board of directors and will depend upon our financial
condition, operating results and other factors as determined by our board of
directors. Additionally, we have entered into a loan agreement with a creditor
that restricts our ability to pay dividends.
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CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999
on the following three bases:
- On an actual basis;
- On a pro forma basis to reflect the conversion of all outstanding shares
of our redeemable convertible preferred stock into shares of common stock;
and
- On a pro forma as adjusted basis to reflect (1) the sale of 4,500,000
shares of common stock in this offering at an assumed initial public price
of $9.00 per share and the application of the net proceeds, after
deducting underwriting discounts and commissions and estimated offering
expenses, and (2) the conversion of all outstanding shares of our
redeemable convertible preferred stock into shares of common stock upon
the closing of this offering.
This table should be read in conjunction with our financial statements and
the related notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Current portion of long-term obligations.................... $ 284 $ 284 $ 284
Long-term obligations, net of current portion............... 156 156 156
Redeemable convertible preferred stock, no par value,
32,806,164 shares authorized; 16,070,581 shares issued and
outstanding, actual; 2,000,000 shares authorized, no
shares issued and outstanding, pro forma and pro forma as
adjusted:................................................. 30,775 -- --
Value ascribed to redeemable convertible preferred stock
warrants.................................................. 35 -- --
------- ------- -------
Total redeemable convertible preferred stock............ 30,810 -- --
Stockholders' equity (deficit):
Common stock, no par value, 30,000,000 shares authorized;
8,001,817 shares issued and outstanding, actual;
62,806,164 shares authorized, 24,072,398 shares issued
and outstanding, pro forma; 100,000,000 shares
authorized, 28,572,398 shares issued and outstanding,
pro forma as adjusted................................... 713 31,488 67,853
Value ascribed to common stock warrants................... -- 35 35
Deferred stock compensation............................... (1,018) (1,018) (1,018)
Accumulated deficit....................................... (9,120) (9,120) (9,120)
------- ------- -------
Total stockholders' equity (deficit).................... (9,425) 21,385 57,750
------- ------- -------
Total capitalization.................................. $21,825 $21,825 $58,190
======= ======= =======
</TABLE>
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DILUTION
If you invest in our common stock, your interest will be diluted in an
amount equal to the difference between:
- the public offering price per share of our common stock, and
- the pro forma net tangible book value per share of our common stock after
this offering.
The pro forma net tangible book value per share after this offering equals:
- the net tangible book value, which is tangible assets less total
liabilities, divided by
- the number of outstanding shares of common stock after the offering, which
will include the conversion of all outstanding shares of redeemable
convertible preferred stock into shares of common stock.
Our pro forma net tangible book value as of September 30, 1999 was
approximately $21.4 million or $0.89 per share of common stock. The pro forma as
adjusted net tangible book value per share takes into account the estimated net
proceeds from this offering. Based upon an assumed initial public offering price
of $9.00 per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma as adjusted net
tangible book value as of September 30, 1999 would have been approximately $57.8
million, or $2.02 per share. This represents an immediate increase in pro forma
as adjusted net tangible book value of $1.13 per share to existing stockholders
and an immediate dilution of $6.98 per share to investors purchasing common
stock in this offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 9.00
Pro forma net tangible book value per share as of
September 30, 1999...................................... $ 0.89
Increase per share attributable to new investors.......... $ 1.13
--------
Pro forma as adjusted net tangible book value per share
after the offering........................................ $ 2.02
--------
Dilution per share to new investors......................... $ 6.98
========
</TABLE>
The following table summarizes as of September 30, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by investors purchasing shares of common stock in this
offering, before deducting the underwriting discounts and commissions and
estimated offering expenses. Additionally, as detailed below, new investors
purchasing shares in this offering at the initial public offering price will
contribute 57% of the total consideration paid to us but will own only 16% of
our shares.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE
---------- -------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......................... 24,072,398 84% $30,949,000 43% $1.29
New investors................................. 4,500,000 16% 40,500,000 57% 9.00
---------- --- ----------- ---
Total....................................... 28,572,398 100% $71,449,000 100% $2.50
========== === =========== ===
</TABLE>
Except as noted above, the foregoing discussion and tables assume no
exercise of any stock options or warrants outstanding at September 30, 1999. As
of September 30, 1999, there were options outstanding to purchase 1,146,099
shares of common stock at a weighted average exercise price of $0.20 and
warrants to purchase 70,500 shares of common stock at a weighted average
exercise price of $0.85. To the extent that any of these options and warrants
are exercised, there will be further dilution to investors purchasing our common
stock.
21
<PAGE>
SELECTED FINANCIAL DATA
You should read the selected financial data set forth below in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Financial Statements and the Notes thereto included
elsewhere in this prospectus. The statement of operations data for the years
ended December 31, 1996, 1997 and 1998 and for the nine months ended
September 30, 1999 and the balance sheet data at December 31, 1997 and 1998 and
at September 30, 1999 are derived from, and are qualified by reference to, the
audited financial statements and notes thereto appearing elsewhere in this
prospectus. The balance sheet data as of December 31, 1996 are derived from, and
are qualified by reference to, financial statements not appearing in this
prospectus. The statement of operations data for the nine months ended
September 30, 1998 are unaudited. In the opinion of management, all necessary
adjustments, consisting only of normal recurring adjustments, have been included
to present fairly the unaudited nine months results when read in conjunction
with the audited financial statements and the notes thereto appearing elsewhere
in this prospectus. Historical results are not necessarily indicative of results
that may be expected for any future period.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................... $ -- $ 168 $ 566 $ 306 $ 1,759
Cost of sales.................................... -- 85 331 172 1,205
------ ------ ------- ------- -------
Gross profit..................................... -- 83 235 134 554
------ ------ ------- ------- -------
Operating expenses:
Research and development....................... 171 351 901 521 2,204
Sales and marketing............................ -- 181 970 629 3,636
General and administrative..................... 64 249 710 407 1,199
Amortization of deferred compensation.......... -- -- -- -- 309
------ ------ ------- ------- -------
Total operating expenses..................... 235 781 2,581 1,557 7,348
------ ------ ------- ------- -------
Loss from operations............................. (235) (698) (2,346) (1,423) (6,794)
Other income (expense), net...................... -- (1) 75 56 129
------ ------ ------- ------- -------
Net loss......................................... $ (235) $ (699) $(2,271) $(1,367) $(6,665)
====== ====== ======= ======= =======
Basic and diluted net loss per share............. $(0.15) $(0.11) $ (0.38) $ (0.24) $ (0.86)
====== ====== ======= ======= =======
Shares used in computation of basic and diluted
net loss per share............................. 1,573 7,001 7,007 7,006 7,169
====== ====== ======= ======= =======
Pro forma basic and diluted net loss per share
(unaudited).................................... $ (0.24) $ (0.38)
======= =======
Shares used to compute pro forma basic and
diluted net loss per share (unaudited)......... 11,090 16,092
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
-------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 2 $2,322 $ 299 $14,007
Working capital (deficit)............................... (75) 2,266 (497) 20,167
Total assets............................................ 31 2,396 914 23,817
Long-term obligations, net of current portion........... 167 -- -- 156
Redeemable convertible preferred stock.................. -- 3,331 3,723 30,775
Accumulated deficit..................................... (235) (262) (2,925) (9,120)
Total stockholders' equity (deficit).................... (215) (992) (3,655) (9,425)
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING IS A DISCUSSION OF OUR OPERATIONS AND SHOULD BE READ IN
CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF FACTORS INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are an online provider of print and private-labeled print services
focused on the business market. Our online print shops offer customers a
one-stop shop for addressing their printing needs.
We were incorporated in August 1996 and we officially launched the
iPrint.com website and commenced online sales of printed products in January
1997. For the year ended December 31, 1996, we had no revenues. Our operating
activities during this period consisted of developing software and hardware
infrastructure, recruiting personnel and raising capital. Since January 1997, we
have added new products and improved the ease-of-use of our iPrint.com website
by adding new features, including the ability to track orders, certified an
increasing number of commercial print vendors to fulfill orders for our
customers, increased the breadth of products we offer and attracted new
customers through a series of direct and indirect marketing campaigns. Beginning
in 1998, we entered into affiliate, co-labeled and private-labeled relationships
and in the third quarter of 1999, we began offering our specialized print
services.
Since our inception, we have incurred significant net losses primarily as a
result of costs associated with developing our websites and our marketing
efforts. From inception through September 30, 1999, we accumulated net losses of
$9.1 million. As we seek to aggressively expand our business, we expect that our
operating expenses will significantly increase as a result of financial
commitments related to expanded advertising and promotional campaigns, the
development of additional marketing channels, strategic relationships,
enhancements to our iPrint.com and related websites and other capital
expenditures. We expect that we will incur losses and generate negative cash
flow from operations for the foreseeable future. Our ability to achieve
profitability depends upon our ability to substantially increase our sales.
Because we are an Internet company engaged in electronic commerce, our business
is subject to significant changes in technology and marketing techniques. In
view of our limited operating history, we believe that period-to-period
comparisons of our operating results, including our operating expenses as a
percentage of sales, are not necessarily meaningful and should not be relied
upon as an indication of our future performance.
We generate revenues from the sale of a variety of printed products to end
user customers. Our products and services are available to our customers through
our iPrint.com website, our managed iPrint.com affiliate and co-labeled
websites, and our private-labeled websites. We do not recognize revenues until
the product has shipped, collection of the receivable is probable, and our
commercial print vendors have fulfilled all of our contractual obligations to
the customer. We take title to all products that we instruct our commercial
print vendors to produce. We believe that purchases by businesses account for a
majority of our revenues and purchases by consumers account for a significant
portion of our revenues. For the nine months ended September 30, 1999,
approximately 22% of our revenues were derived from, and approximately 23% of
our cost of sales related to, shipping and handling fees. We record sales net of
discounts. We have recorded the cost of promotional products that we give away
for free as a sales and marketing expense. A significant portion of our revenue
is generated through barter transactions with participants in our co-labeled
program in which we sell printed products in exchange for online advertising.
Barter transaction revenues and related advertising costs are recorded at the
fair value of the goods or services provided or received, whichever is more
readily determinable in the circumstances. We derived $175,000, which
represented approximately 10% of our revenues, from barter transactions for the
nine months ended September 30, 1999. We derived
23
<PAGE>
no revenue from barter transactions in 1996, 1997 or 1998. Substantially all of
our revenues are generated from sources within the United States and all sales
to date have been in United States dollars.
Cost of sales consists primarily of direct expenses relating to printing
products, rework and reprinting charges, shipping and handling fees, royalties
on software licenses and credit card processing fees.
We categorize our operating expenses into research and development, sales
and marketing, general and administrative and amortization of deferred
compensation.
Research and development expenses consist primarily of personnel and related
costs, including costs related to consultants and outside contractors.
Sales and marketing expenses consist of the cost of free promotional
products, the cost of marketing programs including advertisements, costs to
acquire email lists, personnel and related costs for our marketing staff and
customer support groups and participation in trade shows.
General and administrative expenses consist primarily of personnel and
related costs for corporate functions, including finance, accounting, legal,
human resources, facilities and management of commercial print vendor
relationships.
Deferred compensation represents the aggregate difference, at the date of
grant, between the respective exercise price of stock options and the estimated
fair value of the underlying stock. Deferred stock-based compensation is
amortized over the vesting period of the underlying options based on an
accelerated vesting method, generally four years. Through September 30, 1999, we
had recorded unearned stock-based compensation of $1.3 million. For the nine
months ended September 30, 1999, we recorded stock-based compensation of
$309,000.
The total unearned stock-based compensation recorded for all option grants
through September 30, 1999 will be amortized as follows: $172,000 for the
remainder of the year ending December 31, 1999, $460,000 for the year ending
December 31, 2000, $244,000 for the year ending December 31, 2001, $116,000 for
the year ending December 31, 2002 and $26,000 for the year ending December 31,
2003. The amount of deferred stock compensation expense to be recorded in future
periods could decrease if options for which accrued but unvested compensation
has been recorded are forfeited.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- ----------------------
1997 1998 1998 1999
-------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS DATA:
Revenues............................................ 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales....................................... 50.6 58.5 56.2 68.5
------- ------- -------- --------
Gross profit........................................ 49.4 41.5 43.8 31.5
------- ------- -------- --------
Operating expenses:
Research and development.......................... 208.9 159.2 170.3 125.3
Sales and marketing............................... 107.7 171.4 205.6 206.7
General and administrative........................ 148.2 125.4 133.0 68.2
Amortization of deferred compensation............. -- -- -- 17.6
------- ------- -------- --------
Total operating expenses........................ 464.8 456.0 508.9 417.8
------- ------- -------- --------
Loss from operations................................ (415.4) (414.5) (465.1) (386.3)
Other income (expense), net......................... (0.6) 13.3 18.3 7.3
------- ------- -------- --------
Net loss............................................ (416.0)% (401.2)% (446.8)% (379.0)%
======= ======= ======== ========
</TABLE>
24
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
REVENUES. Revenues increased from $306,000 for the nine months ended
September 30, 1998, to $1.8 million for the nine months ended September 30,
1999. The increase was primarily due to a higher number of orders, substantially
all of which resulted from our promotional offers, as well as increased customer
activity on our co-labeled and private-labeled websites.
COST OF SALES. Cost of sales increased from $172,000 for the nine months
ended September 30, 1998 to $1.2 million for the nine months ended September 30,
1999. The increase was primarily due to increased orders that our customers
placed on our iPrint.com and related websites. Gross margins decreased from
43.8% for the nine months ended September 30, 1998 to 31.5% for the nine months
ended September 30, 1999. This decrease was primarily the result of a shift in
product mix to lower margin items, increased promotional discounts and increased
sales of promotional items at cost.
RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$521,000 for the nine months ended September 30, 1998 to $2.2 million for the
nine months ended September 30, 1999. The increase was primarily due to an
increase in personnel costs of $1.2 million and increases in consultant and
outside contractor costs of $147,000 as we increased the functionality of our
iPrint.com and related websites and broadened our product offerings. We continue
to invest substantially in research and development and we expect research and
development expenses to increase on an absolute dollar basis in future periods.
SALES AND MARKETING. Sales and marketing expenses increased from $629,000
for the nine months ended September 30, 1998 to $3.6 million for the nine months
ended September 30, 1999. The increase was primarily a result of an increase in
promotional spending and related costs of $1.7 million for promotional products
given away for free. Also contributing to this increase was growth in our direct
marketing, business development and customer support staffs, with
personnel-related costs increasing by $904,000. We expect our sales and
marketing expenses to significantly increase on an absolute dollar basis as we
continue to expand our customer acquisition and brand awareness activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $407,000 for the nine months ended September 30, 1998 to $1.2 million for
the nine months ended September 30, 1999. The increase was due primarily to
increases in personnel-related costs and legal and accounting fees. We expect
general and administrative expenses to increase on an absolute dollar basis in
future periods, in part as we incur costs related to operating as a public
company.
AMORTIZATION OF DEFERRED COMPENSATION. We recorded unearned stock-based
compensation of $1.3 million during the nine months ended September 30, 1999,
which is being amortized over the period during which the options vest,
generally four years. Stock-based compensation expense recognized during the
nine months ended September 30, 1999 was $309,000.
OTHER INCOME (EXPENSE), NET. Other income (expense), net increased from
$56,000 for the nine months ended September 30, 1998 to $129,000 for the nine
months ended September 30, 1999. The increase was primarily due to higher
interest income earned based on higher average cash balances during 1999.
NET LOSS. Net loss increased from $1.4 million for the nine months ended
September 30, 1998 to $6.7 million for the nine months ended September 30, 1999.
YEARS ENDED DECEMBER 31, 1997 AND 1998
REVENUES. Revenues increased from $168,000 for the year ended December 31,
1997 to $566,000 for the year ended December 31, 1998. The increase was
primarily due to a higher number of orders from customers that visited our
iPrint.com website and an increase in promotional offers.
25
<PAGE>
COST OF SALES. Cost of sales increased from $85,000 for the year ended
December 31, 1997 to $331,000 for the year ended December 31, 1998. The increase
was primarily due to increased orders placed by customers through all of our
distribution channels. Gross margins decreased from 49.4% for the year ended
December 31, 1997 to 41.5% for the year ended December 31, 1998. This decrease
was primarily the result of non-recurring custom engineering work for which we
charged third-party customers in 1997 but not in 1998, and an increase in
promotional items that we sold at cost.
RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$351,000 for the year ended December 31, 1997 to $901,000 for the year ended
December 31, 1998. The increase was primarily due to an increase in personnel
costs of $434,000 and an increase in consultant and outside contractor costs of
$105,000 to further develop the functionality of our websites and broaden our
product offerings.
SALES AND MARKETING. Sales and marketing expenses increased from $181,000
for the year ended December 31, 1997 to $970,000 for the year ended
December 31, 1998. The increase was primarily a result of an increase in
promotional spending and related costs of $385,000 for promotional products
given away for free. Also contributing to this increase was a growth in the
number of our marketing, business development and customer support staffs, with
personnel related costs increasing by $309,000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $249,000 for the year ended December 31, 1997 to $710,000 for the year
ended December 31, 1998. The increase was due to increases in personnel-related
costs, recruiting fees, depreciation expense and legal and accounting services.
OTHER INCOME (EXPENSE), NET. Other income (expense), net increased from an
expense of $1,000 for the year ended December 31, 1997 to income of $75,000 for
the year ended December 31, 1998. The increase was due to higher interest income
earned based on higher average cash balances during 1998.
INCOME TAXES. No provision for federal and state income taxes was recorded
as we incurred net operating losses from inception through September 30, 1999.
As of September 30, 1999, we had $8.8 million of federal and state net operating
loss carryforwards which expire in varying amounts through the year 2019. Due to
uncertainty regarding the ultimate utilization of the net operating loss
carryforwards, we have not recorded any benefit for losses and a valuation
allowance has been recorded for the entire amount of the net deferred tax asset.
Under applicable tax regulations, sales of our stock, including shares sold in
this offering, may further restrict our ability to utilize our net operating
loss carryforwards.
NET LOSS. Net loss increased from $699,000 for the year ended December 31,
1997 to $2.3 million for the year ended December 31, 1998.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our quarterly results of operations for each of
the seven quarters ended September 30, 1999, as well as the same data expressed
as a percentage of our total revenues for the periods indicated. The information
for each of these quarters is unaudited and we have prepared it on the same
basis as the audited financial statements appearing elsewhere in this
prospectus. In the opinion of management, all necessary adjustments, consisting
only of normal recurring adjustments, have been included to present fairly the
unaudited quarterly results. You should read this section in
26
<PAGE>
conjunction with our audited financial statements and notes thereto appearing
elsewhere in this prospectus. These operating results are not necessarily
indicative of the results of any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
---------- --------- --------- --------- ---------- ----------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT AS A PERCENTAGE OF REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................... $ 103 $ 111 $ 92 $ 260 $ 286 $ 467 $ 1,006
Cost of sales...................... 51 67 54 159 188 308 709
------- ------- ------- --------- --------- --------- ---------
Gross profit....................... 52 44 38 101 98 159 297
------- ------- ------- --------- --------- --------- ---------
Operating expenses:
Research and development......... 117 154 250 380 555 677 972
Sales and marketing.............. 92 192 345 341 555 987 2,094
General and administrative....... 101 133 173 303 283 310 606
Amortization of deferred
compensation................... -- -- -- -- 21 124 164
------- ------- ------- --------- --------- --------- ---------
Total operating expenses....... 310 479 768 1,024 1,414 2,098 3,836
------- ------- ------- --------- --------- --------- ---------
Loss from operations............... (258) (435) (730) (923) (1,316) (1,939) (3,539)
Other income (expense), net........ 27 23 6 19 19 72 38
------- ------- ------- --------- --------- --------- ---------
Net loss........................... $ (231) $ (412) $ (724) $ (904) $ (1,297) $ (1,867) $ (3,501)
======= ======= ======= ========= ========= ========= =========
PERCENTAGE OF TOTAL REVENUES:
Revenues........................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales...................... 49.5 60.4 58.7 61.2 65.7 66.0 70.5
------- ------- ------- --------- --------- --------- ---------
Gross margin....................... 50.5 39.6 41.3 38.8 34.3 34.0 29.5
------- ------- ------- --------- --------- --------- ---------
Operating expenses:
Research and development......... 113.6 138.7 271.7 146.2 194.1 145.0 96.6
Sales and marketing.............. 89.3 173.0 375.0 131.2 194.1 211.3 208.2
General and administrative....... 98.1 119.8 188.0 116.5 99.0 66.4 60.2
Amortization of deferred
compensation................... -- -- -- -- 7.3 26.6 16.3
------- ------- ------- --------- --------- --------- ---------
Total operating expenses....... 301.0 431.5 834.7 393.9 494.5 449.3 381.3
------- ------- ------- --------- --------- --------- ---------
Loss from operations............... (250.5) (391.9) (794.4) (355.1) (460.2) (415.3) (351.8)
Other income (expense), net........ 26.2 20.7 6.5 7.3 6.6 15.4 3.8
------- ------- ------- --------- --------- --------- ---------
Net loss........................... (224.3)% (371.2)% (786.9)% (347.8)% (453.6)% (399.9)% (348.0)%
======= ======= ======= ========= ========= ========= =========
</TABLE>
Revenues have increased in each consecutive quarter presented, exclusive of
the third quarter of 1998. During that quarter we commenced an aggressive
customer acquisition program and began to offer discounted products and free
promotional products to the public. The growth in revenues during the second and
third quarters of 1999 was driven by substantial increases in order growth,
predominately due to promotional offers and increased activity at our co-labeled
and private-labeled websites.
We have recorded sequential declines in gross margin since the first quarter
of 1998. The reduction in gross margin during the second quarter of 1998 was due
to a shift in the mix of products that our customers bought. The reduction in
gross margin during the third and fourth quarters of 1998 was due to our
customer acquisition programs, which include shipping a substantial number of
promotional orders at no margin. During the second and third quarters of 1999
the reduction in gross margin was due to a shift in product mix to lower margin
items and increased promotional discounts.
Our research and development expenses have increased in absolute dollars in
each quarter presented primarily as a result of increases in our
personnel-related costs. Sales and marketing
27
<PAGE>
expenses have increased in absolute dollars in each quarter presented. The
increase in the third and fourth quarters of 1998 was primarily due to increased
promotional spending. These expenses also increased significantly in the second
and third quarters of 1999 due to increases in promotional spending and related
cost of promotional products shipped. Our general and administrative expenses
have increased in absolute dollars in all but one of the quarters presented
primarily as a result of increases in our personnel-related costs.
As a result of our limited operating history and the evolving nature of
conducting business on the Internet, we are unable to accurately forecast our
revenue or expenses. Our success is dependent upon our ability to enter into and
maintain strategic relationships and to develop and maintain volume usage of our
products by our customers. Our revenues have fluctuated and our quarterly
operating results will continue to fluctuate based on the timing of our
promotional activity. Our revenues historically have been dependent upon our
ability to attract additional customers to the iPrint.com and our related
websites. Unless and until we have developed a significant and recurring revenue
stream from repeat paying customers, our revenue will continue to fluctuate
significantly. We have experienced, and expect to continue to experience,
fluctuations in revenues and operating results from quarter-to-quarter for other
reasons which are more fully set forth under the caption "Risk Factors -- Our
quarterly operating results are volatile and 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." As a result of these factors,
we believe that quarter-to-quarter comparisons of our revenues and operating
results are not necessarily meaningful, and that these comparisons may not be
accurate indicators of future performance. Our staffing and operating expenses
are based on anticipated growth in revenues. If we are unable to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall, any
significant revenue shortfall would likely have an immediate negative effect on
our operating results. Moreover, if securities analysts follow our stock, our
operating results in one or more future quarters may fail to meet their
expectations. If this occurs, we would expect to experience an immediate and
significant decline in the trading price of our stock.
LIQUIDITY AND CAPITAL RESOURCES
From our inception in 1996 to September 30, 1999, we funded our operations
primarily with $32.3 million raised through the sale of our equity securities.
As of September 30, 1999, we had cash and cash equivalents of $14.0 million, and
a receivable from a redeemable convertible preferred stockholders of $8.0
million, which converted to cash on October 6, 1999. As of September 30, 1999,
we also had $297,000 available under a $750,000 loan and security agreement with
Silicon Valley Bank. Amounts outstanding under this agreement bear interest at
the bank's prime rate. At September 30, 1999, $440,000 was outstanding under
this agreement. The bank has a senior security interest in substantially all of
our assets. Our credit line with Silicon Valley Bank expired on November 8, 1999
and we elected to repay $200,000, which was the working capital component of the
amount outstanding. As of December 1, 1999, the balance of $240,000 remained
outstanding as a term loan payable in equal monthly installments through
May 2002.
Net cash used in operating activities was $683,000 for the year ended
December 31, 1997 and $2.0 million for the year ended December 31, 1998,
primarily the result of net losses of $699,000 for the year ended December 31,
1997 and $2.3 million for the year ended December 31, 1998. Net cash used in
operating activities was $5.0 million for the nine months ended September 30,
1999, primarily the result of net losses of $6.7 million, adjusted for
depreciation and amortization of deferred stock compensation, and an increase in
accounts payable and accrued liabilities, partially offset by an increase in
prepaid expenses and other current assets.
Net cash used in investing activities was $59,000 for the period ended
December 31, 1997, $289,000 for the year ended December 31, 1998 and $918,000
for the nine months ended September 30, 1999. The cash used in investing
activities was related to purchases of property and equipment.
28
<PAGE>
Net cash provided by financing activities was $3.1 million for the period
ended December 31, 1997 and $218,000 for the year ended December 31, 1998. Net
cash provided by financing activities was $19.7 million for the nine months
ended September 30, 1999. Cash provided by financing activities was primarily
from proceeds of the sale of our preferred stock, a note payable issued to a
stockholder as well as draws against our loan and security agreement with
Silicon Valley Bank.
At September 30, 1999, we had operating lease obligations of $65,000 for the
remaining three months of 1999, $274,000 for the year ending December 31, 2000,
$245,000 for the year ending December 31, 2001, $122,000 for the year ending
December 31, 2002 and $95,000 for the year ending December 31, 2003. These
leases are for 24,100 square feet of office space for our headquarters in
Redwood City, California.
We believe that the net proceeds from this offering, together with our
current cash and cash equivalents will be sufficient to meet our anticipated
cash needs for working capital, repayment of debt and capital expenditures for
at least the next twelve months. We are evaluating the need to obtain additional
facilities if we expand our network operations center or build out a second
facility. If we build out a second facility we estimate we would spend between
$1.0 million and $3.0 million over the next 12 months. We plan to use the
remaining proceeds from this offering to fund operating activities, including
sales and marketing, research and development and general and administrative
services. We may also use a portion of the net proceeds from this offering to
acquire or invest in businesses, technologies or products that are complementary
to our business. After twelve months, we may need additional capital. However,
we may need to raise additional funds sooner to fund additional expansion,
develop new or enhanced services, respond to competitive pressures or make
acquisitions. We cannot be certain that additional financing will be available
to us on favorable terms, if at all. If adequate funds are not available on
acceptable terms, our business will be harmed.
YEAR 2000 READINESS DISCLOSURE
To date, we have not experienced any disruption in our services as a result
of, nor has any third-party vendor on which we depend been affected by, the
commencement of the year 2000. Although we do not anticipate that our websites
will be affected by the year 2000, if we, or third-party providers of hardware,
software and communications services fail to remedy any year 2000 issues, the
result could be lost revenues, increased operating expenses, the loss of
customers and other business interruptions, any of which could harm our
business. The failure to adequately address year 2000 compliance issues in the
delivery of products and services to our customers could result in claims
against us of misrepresentation or breach of contract and related litigation,
any of which could be costly and time consuming to defend.
In light of our experiences to date, we have not developed any specific
contingency plans for year 2000 issues. Our worst case scenario for year 2000
problems would be our inability to execute our clients' orders and a resultant
decline in order volumes and revenues.
MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk of loss. Some of the securities that we
may invest in may be subject to market risk. This means that a change in
prevailing interest rates may cause the market value of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the market value of our investment will probably decline. To minimize
this risk in the future, we intend to maintain our portfolio of cash equivalents
and short-term investments in a variety of securities, including commercial
paper, money market funds, government and non-government debt securities. We
maintained our portfolio of cash equivalents in money market and checking funds
as of September 30, 1999. In general, the fair value of money market funds is
not
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subject to market risk because the interest paid on such funds fluctuates with
prevailing market rates. A hypothetical increase or decrease in market interest
rates by 1% from the market interest rates at September 30, 1999 would cause the
interest income from our cash and cash equivalents and a receivable from a
holder of preferred stock to increase or decrease by $220,000 per year based on
the balance of cash and cash equivalents and a receivable from a holder of
preferred stock at September 30, 1999. This amount will change based on the
actual cash and cash equivalents available for investment.
We have operated primarily in the United States and all sales to date have
been made in United States dollars. Accordingly, we have not had any material
exposure to foreign currency rate fluctuations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards, requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 is effective for fiscal years beginning
after June 30, 2000. Because we do not currently hold any derivative instruments
and do not engage in hedging activities, we do not believe that the adoption of
SFAS No. 133 will have a material impact on our financial position or results of
operations.
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BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN
THESE FORWARD-LOOKING STATEMENTS.
OVERVIEW
iPrint.com is an online provider of print and private-labeled print services
focused on the business market.
Our online print shops offer customers a one-stop shop for addressing their
printing needs, allowing them to easily design and order thousands of
customized, primarily small-quantity printed products. By automating or
enhancing the print order process and electronically connecting our online
printing services to carefully selected commercial print vendors, we believe,
based on our experience in the printing industry, that we significantly reduce
the costs and inefficiencies associated with the traditional printing process.
Our online print services are designed to be much more convenient and
cost-effective than traditional printing alternatives provided through
traditional print channels.
INDUSTRY BACKGROUND
THE GROWTH OF INTERNET COMMERCE AND ITS IMPACT ON BUSINESSES
The explosive growth of the Internet as a tool for global communications has
enabled millions of people to interact electronically. International Data
Corporation, or IDC, estimates that there were 142 million web users worldwide
at the end of 1998, and expects this number will grow to approximately 502
million by the end of 2003. Rapid acceptance of the Internet as a communications
platform by both businesses and consumers has created the foundation for
significant growth in electronic commerce. Based on information provided by IDC,
worldwide commerce over the Internet conducted by businesses, including
government and education organizations, is expected to increase from
approximately $36 billion in 1998 to $1.1 trillion in 2003.
The Small Business Administration estimates that more than 98% of all
businesses in the United States have fewer than 100 employees. These businesses,
particularly self-employed individuals and small businesses, often lack the size
and financial resources to create economies of scale. These organizations
typically do not maintain dedicated procurement departments and often do not
achieve significant purchasing leverage. The Internet can provide these
businesses with a number of advantages when making purchases, including:
- convenience,
- wider selection of products and services, and
- competitive pricing.
This widespread adoption of the Internet as a purchasing vehicle for
businesses has created significant opportunities for companies that offer
business products and services online.
THE TRADITIONAL PRINTING INDUSTRY AND ITS LIMITATIONS
Printing can be a major area of expenditure for small businesses. Based on
data from CAP Ventures, Inc., an independent print research firm, sales in the
United States printing industry totaled $292 billion in 1998, of which
$58 billion was derived from commercial printing operations. Short-run,
customized items, which are items that a customer orders in relatively small
quantities and which can be printed in a short time, include a wide range of
business, promotional and general office and consumer items and comprise a
significant portion of these commercial printing operations. This
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market is highly fragmented, with an estimated 50,000 local and regional
commercial printers in the United States.
The process of purchasing printed goods consists of two phases: design and
order fulfillment. Typically, designing and ordering is initiated at a
traditional print shop or through a print broker or mail order catalog and
involves manually completing a text-based order form with design and order
attributes, including in many instances, chosen layout, graphic, color, typeface
enhancements, and credit card and shipping information. These order forms are
often transferred via phone, fax or courier to a commercial print vendor for
fulfillment. The actual time spent preparing the order, printing the order, and
delivering the order constitutes the fulfillment process.
Both the order and fulfillment processes contain a number of inefficiencies
and present numerous challenges for both purchasers of print services, including
short-run print services, and the commercial print vendors that serve this
market, including:
TIME CONSUMING. Traveling to the local print shop or design house and
possibly waiting in line to speak with a store representative takes time. A
customer ordering through a print catalog may be put on hold for an extended
period of time in order to speak with a representative. In either case,
correctly filling out the forms and paperwork necessary to successfully complete
a print order can take an extended amount of time. If the finished product fails
to satisfy the customer, the material may be returned to the vendor to be
printed again, which is referred to as a reprint-due-to-error or a re-do, adding
to the overall process time.
LACK OF CONTROL AND GUESSWORK. A text-based order form is non-visual, which
means that a print customer usually does not see what the overall design will
look like prior to printing. Without a proof, a customer can only guess what the
final product will look like, resulting in an uncomfortable buying situation.
Due to the constraints of a form-based creative process, a customer has limited
control over creative design iterations.
ERROR-PRONE. The print order and fulfillment process is typically a manual
process, which makes the potential for human error high. Some of the factors
that can affect this error rate include incorrectly completed forms, illegible
handwriting, and forms that are difficult to read because of poor-quality fax
equipment and paper. Information is typically manually entered into the
printer's systems multiple times, greatly increasing the chances for typographic
errors. Because an order is not usually accompanied by a visual proof, aesthetic
interpretations are at times necessary and can contribute to design variations
that differ from customer expectations.
COST-INEFFICIENT AND LABOR INTENSIVE. The process by which an order is
readied for printing by the commercial print vendor, known as prepress or
pre-production, is generally manually-oriented and labor intensive. Short-run
print orders are generally low dollar transactions that can require the same
amount of time, labor and service as large print orders. As such, they are less
desirable and discourage process innovation and investment. Information is
generally redundantly entered into various accounting, batching and composition
systems. As a result, manual proofing and physical movement of operating
paperwork must be repeated throughout the printing process.
INCOMPLETE PRODUCT OFFERINGS. Because traditional print shops generally
offer a limited selection of customizable products, customers may have to
contact several shops or design houses to fulfill even basic printing needs.
LIMITED PRODUCT AND ORDER INFORMATION. Custom printing can be complicated,
and as a result, the traditional print shop or catalog customer representative
may lack knowledge concerning product offering, pricing, and timing of delivery.
After a print order is placed, customers often have limited interaction with the
print shop and no direct interaction with the commercial print vendor, making it
difficult to track changes in the order's status and estimated delivery time.
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We believe that customers seek a more efficient and effective means to
purchase printing services. We similarly believe that commercial print vendors
would like to take advantage of the efficiency and the interactivity of the
Internet to improve order management and increase sales but the vast majority
have not been able to justify the resources required to independently build and
maintain their own system.
THE IPRINT.COM SOLUTION
Through our online print shops and specialized print services, we offer
businesses a single place to satisfy many of their printing needs. We have
developed an easy to use, self-service design and ordering website for obtaining
professional quality, mass-market printed products, providing our customers with
a compelling alternative to traditional print channels. We also offer
specialized websites and print services in response to customer requests for
print items or quantities that are not generally offered in our self-service
print shop. By automating or enhancing the print order process and
electronically connecting our online print services to carefully selected and
certified commercial print vendors, we believe that we significantly reduce the
costs and inefficiencies associated with the traditional printing process. While
our primary focus is on business customers, our ability to print in small
quantities allows us to service the printing needs of individuals as well.
We offer our customers the following benefits:
CONVENIENCE. We endeavor to make our online print shops and specialized
print services user-friendly, using a self-service approach to designing and
printing products. The iPrint.com website is available 24 hours a day, seven
days a week and may be reached from any Internet-enabled personal computer.
Products can be shipped to the location the customer selects, enabling the
entire process to be managed from the comfort of the office or home.
SIMPLIFIED DESIGN AND ENHANCED ORDERING PROCESS. For products created at
our website, our technology empowers the customer to design and view printed
items prior to purchasing these products. We believe our
what-you-see-is-what-you-get approach is superior to the non-visual, forms-based
process traditionally used by print shops and office supply catalogs, increases
reliability and customer satisfaction, and reduces the time it takes to complete
an order. At the website, our interactive design tools alert the customer to
common mistakes and missing information, further reducing the possibility of an
incomplete or inaccurate order. Regardless of where a product is created, we
route orders to the optimal printing plant given quantity, equipment, raw
material and geographic considerations.
STREAMLINED FULFILLMENT PROCESS. After an order is placed, we
electronically send a ready-to-print graphic file and, where appropriate, a job
ticket file, which is a data file containing all of the attributes of an order
including information like paper codes, ink codes and shipping information, to
one of our certified commercial print vendors located throughout the United
States. Our specialized print services enhance, and our online self-service
print shop virtually eliminates, the prepress process for our commercial print
vendors. We believe this significantly improves the accuracy of the order and
substantially reduces the amount of time and effort required for the commercial
printer to complete it.
SIGNIFICANT COST SAVINGS. Our print shop operates online and is highly
automated, enabling us to eliminate the costs of building and managing a
physical print shop or printing and distributing catalogs. Based on internal
studies we have conducted, we believe that through automation and aggregation,
we are able to pass additional savings on to our customers, offering printed
goods for up to 50% less than typical traditional print shops and design houses.
Further, we believe that we compete favorably on price with mail order catalogs
but have a superior offering of customized printed products.
BROAD RANGE OF SERVICES AND PROFESSIONALLY PRINTED PRODUCTS. We provide a
one-stop shop for a wide range of printed products and services, with a print
product selection that we believe is superior to most traditional print shops
and office supply catalogs. In our self-service print shops, we offer
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thousands of print items in 45 product categories, including business cards,
stationery, checks, business forms, labels, rubber stamps, invitations,
personalized Post-It Notes-Registered Trademark-, photo mouse pads, t-shirts and
coffee mugs. Customers can design, view and modify a design, and either
immediately place their order or save their work-in-progress and order at a
later date. Customers can also send free custom electronic greeting cards and
electronic stationery, and event reminders directly from our iPrint.com website.
For print items or quantities not offered in our self-service selection, we
respond to customer requests for specialized projects with individualized
quotations.
COMPREHENSIVE CUSTOMER SERVICE. We offer a broad range of customer services
during all phases of the ordering and fulfillment process. After each
self-service order is placed, an email message is automatically sent to the
customer that itemizes the order and cost and reiterates the estimated delivery
time. We electronically receive order confirmation, printing and delivery
information from our commercial print vendors and make this information
accessible to our customers through a password-protected mechanism, enabling the
customer to easily check an order's status online or even cancel the order if it
has not yet been printed. An additional email is also sent after the customer's
order has been shipped. Customers who have questions that cannot be answered
directly on our website may email or telephone their questions to our customer
services support team. For specialized print services, we provide customer
service through a combination of electronic and personal assistance.
In addition to the benefits we provide to our customers, we also provide
significant advantages to our commercial print vendors. Based on our experience
with commercial print vendors, we believe by integrating our technologies into
the systems of our commercial print vendors and utilizing our what-
you-see-is-what-you-get approach, we significantly reduce reprint-due-to-error
rates and, therefore, print wastage. We believe that our specialized print
services enhance and our online print shop self-service orders virtually
eliminate the prepress process, thus reducing the actual cost of printing while
improving overall capacity utilization. All of these factors facilitate cost
savings for our commercial print vendors.
THE IPRINT.COM STRATEGY
Our objective is to be the leading online provider of print and
private-labeled print services to the business market.
To achieve this objective, our strategy includes the following key elements:
CAPITALIZE ON FIRST MOVER ADVANTAGES THROUGH STRATEGIC PROMOTIONS. From our
experience in the printing industry, we believe we are one of the first
companies to offer an easy-to-use, convenient online print shop targeting the
business market and we intend to aggressively introduce new printing services
and promotions to build our market position. To date, we have effectively
employed a range of direct marketing and promotional initiatives to increase the
number of website visitors and expand usage of our services.
INCREASE BRAND RECOGNITION. We aim to develop the most well-known and
trusted brand for printing services on the Internet. To expand our customer base
and to extend the iPrint.com image, we intend to aggressively promote the
iPrint.com brand through a mixture of online and traditional media advertising,
public relations and participation in trade shows. We also plan to expand our
affiliate and co-branded online website strategies through agreements with a
range of destination websites.
EXPAND OUR MARKETING RELATIONSHIPS. We have marketing relationships with a
number of companies, including Excite@Home, Intel, MyPoints, Netcentives,
Petstore.com and Xoom.com. For example, through a co-branded website, we fulfill
personalized business card orders for new Excite@Home email customers. We intend
to develop relationships with leading destination websites and media companies
in order to increase traffic to our website. By aggressively developing new
relationships, we believe we can accelerate customer acquisition and increase
usage of our online print store.
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BUILD OUR CUSTOMER BASE AND STIMULATE REPEAT USAGE. We seek to build our
customer base and stimulate repeat usage by exposing our customers to our
products and services that most closely meet their needs. In addition, since
many of the products may be routinely purchased over the lifetime of our
relationship with the customer, for example, business cards and stationery, we
aim to create lasting relationships with our customers that increase in value
over time and produce recurring revenue streams.
EXPAND OUR SPECIALIZED PRINT SERVICES. We will create a range of new online
printing services and aggressively market these services to our current and
future customer base. We intend to create and capitalize on our technology and
company infrastructure to enhance the print buying process.
EXPAND OUR PRIVATE-LABELED INITIATIVES. We have entered into
private-labeled initiatives with a variety of companies, including 3M,
OfficeMax, Inc., PostNet International Franchise Corporation and SirSpeedy.
These private-labeled initiatives enable us to expand our distribution and sales
channels, and to increase usage of our print services. Expanding our
private-labeled initiatives allows us to create revenue opportunities in
customer segments that would otherwise be difficult for us to realize because of
pre-existing relationships between these companies and their customers.
LEVERAGE AND EXTEND OUR TECHNOLOGY PLATFORM. Based on our experience in the
printing industry, we believe that we have a technology advantage over current
competitors and future entrants in our market because of the flexibility of our
technology platform and its ability to handle an increasing number of visitors.
We intend to enhance the functionality of our website and the technology that
supports it to improve order flow and reporting, expand our service offerings,
facilitate more complete integration with print vendors, expedite payment
processing, and improve the overall efficiency and throughput of our system.
PRODUCTS AND SERVICES
Through our online print shops, our customers can design, modify, proof and
order over 3,500 printed products across 45 product categories. Through our
specialized print services, we can supply customers with additional printed
items or with special quantities that are not generally offered in our
self-service print shop.
Using our iPrint.com online Design Studio, our customers can personalize
products using a wide range of graphics, fonts and other customization options.
Online design and proofing significantly enhances the print buying experience.
Our automated process also shortens and simplifies the order process for
customers and integrates with the systems of our commercial print vendor
services and virtually eliminates the costly prepress of traditional printing.
The following is a representative list of printable items that we offer
through our self-service print shop:
<TABLE>
<CAPTION>
BUSINESS AND STATIONERY GIFTS AND APPAREL PROMOTIONAL
- ----------------------- -------------------- -----------------------------------
<S> <C> <C>
Business cards Luggage tags Caps
Business checks Mugs Golf balls
Labels Polo shirts Key chains
Letterhead Sweatshirts Mousepads
Memo pads T-Shirts Pens
Rubber stamps Tote bags Post-it Notes-Registered Trademark-
</TABLE>
Within a given category, there can be hundreds of different products and
product options from which a customer can choose. For example, within the labels
category customers may select from a broad range of address, shipping, business
and other types of labels. After the type of label is selected, customers can
then choose the size, design, text, fonts, layout and color of the ink to be
printed on the
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label. Once they have personalized their label and proofed the exact design
online, they only need to enter their payment and shipping information to
complete the order.
The following graphic represents the steps involved in the iPrint.com
ordering process:
[Graphic depiction of a series of computer screen shots showing the step-by
step process of creating a label. Empasis on designing, proofing, and ordering.]
Customers can access our print services through the following channels:
THE IPRINT.COM WEBSITE. Customers can order a wide array of short-run
printed products directly from the iPrint.com website. We generate revenues from
these orders based on the value of the products that a customer orders. To date,
we have derived a substantial portion of our revenues from orders placed through
our iPrint.com website. Using the iPrint.com Design Studio, customers can create
a design using online tools with features that are similar to basic desktop
publishing software. In-process work can be saved on our website for future
editing and ordering, and orders are saved for two years for future
modifications and re-orders. Any design created at our online print shop can be
sent electronically to a single email address or to multiple email addresses at
no extra charge. Customers can also request special email reminders to be sent
in advance of important dates and events. We believe providing these free
event-based services enables us to offer additional targeted promotions to our
customer base.
Our website has won numerous awards and recognition, including:
- As shown below, a ranking of seventh in PC Data's December 1999 list of
Top 40 electronic commerce businesses in the United States based on order
volume:
1. Amazon.com
2. Americangreetings.com
3. eToys.com
4. BarnesandNoble.com
5. Buy.com
6. JCPenney.com
7. iPRINT.COM
8. DrugStore.com
9. More.com
10. Ticketmaster.com
- a top 10 ranking in Netmarketing Magazine's list of top
business-to-business websites in 1999. Netmarket Magazine targets
executives in business-to-business commerce and based its rankings on
various criteria, including design, ease of navigation, electronic
commerce capabilities and presentation of information;
- a ranking of 15(th) in Information Week's e-business 100 in 1999.
Companies were selected based on their ability to effectively integrate
business and technology, meet objectives and achieve an overall innovation
in electronic commerce;
- the Print on Demand Innovative Leadership Award for 1999. The annual
Print-on-Demand Industry Awards were established by CAP Ventures to
recognize emerging companies who make technological advances in on-demand
printing;
- an Upside Magazine 1999 Hot 100 Award in the category of electronic
commerce. The Upside staff and a large group of industry advisors select
companies that they believe are the best private technology companies in
their fields; and
- the WebMaster 50/50 Award for 1999. CIO Web Business Magazine, targeted
for chief information officers and senior executives, named iPrint.com one
of the top 50 Internet websites
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for 1999. The criteria used by CIO included innovation in design,
technology, content and functionality.
We use comprehensive email and telephone-based support to aid our customers
in the design and order process if appropriate. Our customer service
professionals utilize proprietary software to access a customer's current and
past order history, making customer contacts much more efficient. We also have a
comprehensive frequently asked questions facility that documents each step of
our processes, enabling customers to more easily complete their designs and
orders and take advantage of our services.
AFFILIATE WEBSITES. We have recently begun focusing on our affiliate
business where we work with various businesses to offer our online printing
services to their existing and future customer base. Approximately 3,000
third-parties provide links from their websites to the iPrint.com website,
enabling us to attract a broader array of potential customers. As we develop
this business, we will be obligated to pay a commission of approximately 4% to
8% for each order shipped to a customer that entered the iPrint.com website from
the affiliate's link. To date, these arrangements have not generated material
revenues for us.
CO-LABELED WEBSITES. We also provide our online print services to a variety
of online organizations, including the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Excite@Home Netcentives
Intel Petstore.com
MyPoints Xoom.com
</TABLE>
These websites promote both the iPrint.com brand and the co-labeled party's
brands. Customers access these co-labeled print shops directly on the co-labeled
party's website. We provide fulfillment and customer service for orders placed
through these websites, and we maintain a secure extranet reporting environment
to help these partners monitor and manage website activity.
SPECIALIZED PRINT SERVICES. Within the broad scope of mass market printing
services, organizations often have special printing needs. These unique,
projected-oriented print jobs may vary only in quantity from our existing
website offering, or they may involve printed items that are not generally
offered in our self-service print shop, such as multi-paged color brochures,
specialized banner production, color photocopying, or bound documentation. We
promote these specialized services at our iPrint.com websites. These orders
often represent higher revenues than a typical short-run print job. Our customer
service representatives review and respond to these requests on a case by case
basis. We may fulfill special projects through our existing commercial print
vendors, or we may select other print vendors beyond those we ordinarily use. We
generate revenues from these orders based on the value of the products that a
customer orders. By their nature, the specifics and dollar amounts of these
projects vary widely. We believe we are in a favorable position to provide these
additional specialized services to our current customer base.
PRIVATE-LABELED WEBSITES. We work with large commercial printers and office
supply chains, such as 3M, OfficeMax, PostNet International Franchise
Corporation and SirSpeedy, to provide their customers with our online print
services. These websites run on our web servers and utilize our technology, but
each one is accessed from within the private-labeled party's website and
displays only the private-labeled party's brand. We offer the same range of
services and products that we provide on our affiliate and co-labeled websites,
but we also allow our private-labeled parties to manage pricing and product
selection. Depending on the specifics of the arrangement, we may generate
revenue either from orders placed on these websites based on the wholesale price
of the products sold, from a fee based on revenue generated from the website, or
some combination of product and transaction fees. Where we receive all of the
revenue from orders placed on the third-party website, we may pay a small
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commission to the third party. In some circumstances, our private-labeled
parties may determine who will provide print and order fulfillment.
TECHNOLOGY
An online print shop faces challenges that other electronic commerce vendors
do not face. We have designed our online print shop to address the challenges of
selling custom printed products and to handle potentially large order volumes.
The computer software architecture of our iPrint.com and related websites and of
our design and order processing technologies integrates high-performance,
proprietary software modules with technology that we license from third parties.
The challenges for an online print shop which are not typically faced by
other electronic commerce vendors include:
CUSTOMER-DRIVEN PRODUCT CREATION. Our customers do not order from a static,
pre-set electronic product catalog. Rather, customers can create sophisticated
desktop publishing design projects, requiring the ability to freely mix text,
graphic images, fonts, styles and colors on printed items.
COMPUTATIONALLY-INTENSIVE CUSTOMER INTERACTION. Our websites are also not
presenting static, or largely static, informational or content pages. Our
customers are engaged in computationally-intensive design activities which
require constant system monitoring and optimization as visitor traffic grows.
EXACTING NATURE OF TYPESETTING AND INTEGRATION WITH PROCESSES OF COMMERCIAL
PRINT VENDORS. Typesetting is a precision science. We must automatically turn a
customer's onscreen design into resolution independent electronic files that can
be successfully produced by a variety of commercial print vendors with different
printing processes and order management requirements.
POINT-OF-ORDER PRICING. Because each product created is custom designed
based on different ink, paper, design and quantity attributes, we must be able
to provide accurate, real-time pricing information to our customers calculated
instantaneously from tens of thousands of price point combinations.
INTELLIGENT ORDER ROUTING. Each of the commercial print vendors we work
with has different capabilities and a unique set of requirements that we take
into account when determining how to fulfill an order. By taking into account
product type, pricing, geography and shipping options, we strive to route each
order individually to the vendor with the best combination of quality, delivery
time and price.
We believe the ability of our technology to address these challenges while
also scaling to handle large numbers of customer design sessions and orders
represents a competitive advantage for us.
The following diagram depicts the iPrint.com software architecture:
[Graphic flow chart depiction of the iPrint.com software architecture, starting
with customer input at the top, moving through iPrint.com internal processes,
and finishing with data flowing through to commercial print vendors.]
We designed the software supporting our online printshop as a collection of
integrated software modules, enabling us to more easily and quickly create,
maintain, modify or replace individual components. We created our proprietary
software modules using generally accepted development and technical standards
and practices and without significant dependencies on specific operating system,
database or web server technologies. As a result, we are able to move portions
of our software between different commercially-available database, operating
system and web server products to upgrade capacity or take advantage of price or
performance improvements as they become available.
The following is a description of the key software modules within our
iPrint.com operating website:
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DESIGN STUDIO incorporates features found in desktop publishing software to
enable our customers to easily create a wide variety of custom printed products.
The Design Studio takes into account font, size, and color, paper or other
material, graphic size and positioning, and other factors to produce on-screen
images that are consistent with the final printed product. Because our customers
are able to view and proof their orders before they are printed, from our
experience in the printing industry we believe the percentage of orders that
must be reprinted due to error is significantly reduced.
The following illustrates how a customer would use the Design Studio to
create a customized business card:
[Graphic depiction of a series of computer screen shots showing the step-by-step
process of creating a business card. Emphasis on designing, proofing, and
ordering.]
PRODUCT AND PRICING DATABASES contain a wide range of product design,
feature and pricing information. To support the broad array of product
variations and customization options we offer, we designed these databases to be
highly flexible and to allow us to add, delete or modify product and pricing
information as market conditions change or dictate.
SECURE SHOPPING CART provides a customized order basket designed to store
and securely process orders for multiple, unique design items. Our Secure
Shopping Cart integrates with the software systems of our commercial print
vendors, removing many of the manual steps necessary to produce and fulfill a
variety of popular printed items. We believe this technology facilitates the
order and fulfillment process in a way that is more efficient and less
error-prone than traditional processes.
SYSTEM REPORTING AND DIAGNOSTICS enables us and our affiliates, and
participants in our co-labeled and private-labeled programs to remotely track a
wide range of customer actions and information on our websites, providing
detailed audit trails in a highly secure, password-protected environment. By
choice, this technology does not collect demographic information about our
customers.
PRINT CENTER BUILDER allows participants in our private-labeled program to
customize and control their own print shops without the need for costly and
time-consuming programming efforts. We allow these participants to directly
manage product prices, configurations and sales tax assignments which decreases
customization and maintenance expenses for us.
We also use hardware and software components from well-established vendors,
including Cisco Systems, Dell Computers, Intel Corporation, Microsoft
Corporation, America Online/Netscape Communications and Sun Microsystems. The
software supporting our online printshop can run on a single machine or be
distributed across multiple servers, depending on capacity requirements. Servers
can be added or removed while the system continues to operate, allowing us to
adjust capacity in a controlled manner while reacting quickly to market
requirements. Currently, we physically host the servers for our iPrint.com,
affiliate, co-labeled and private-labeled websites at our headquarters in
Redwood City, California. We have initiated work to develop remote websites to
allow for the uninterrupted operation of the iPrint.com and related websites in
the event of a major system failure.
MARKETING AND DISTRIBUTION
The iPrint.com marketing group focuses on product marketing, business
development and direct marketing. Our marketing programs are designed to
introduce and extend the iPrint.com brand name and offered services to both
larger and better targeted audiences.
To attract customers to our iPrint.com and related websites, we use a
variety of electronic marketing and traditional media techniques. We generate
traffic to our websites by:
- offering printed products at special discount prices, including aggressive
promotions;
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<PAGE>
- building affiliate and co-labeled relationships with other companies so
that our websites are featured on or linked with their websites;
- directly soliciting our existing community of customers and parties who
have either saved a graphic design with us or otherwise registered with us
for our promotional activities; and
- purchasing advertising online and in traditional media.
In July 1999, we began to promote iPrint.com through a traditional
advertising program. This program initially targeted potential customers through
radio broadcasts in regional markets. We have continued our expenditures for
advertisements in traditional media during the fourth quarter of 1999 and expect
to increase them in the future. We believe our ongoing marketing program will
increase the reach of our name recognition and drive new customers to our online
print shop.
In addition, we routinely speak at industry tradeshows and seminars.
CUSTOMERS
Our target customers are predominately organizations of less than 100
employees. This segment includes the small office and home office market. While
our primary focus is on business customers, our ability to print in small
quantities allows us to service the printing needs of individuals as well. As of
December 31, 1999, we had over 380,000 print customers. Since inception our
total community is in excess of 775,000 members, including those who have not
placed an order but who have taken advantage of other iPrint.com services such
as saving a graphic design on one of our websites, sending free electronic
greeting cards or stationery or otherwise registering to receive promotional
offerings from us. Our online customers generate a high volume of order activity
at a relatively low dollar amount per order. For 1999, the average order value
for a promotional order was approximately $3.00, and for a non-promotional order
generated from our iPrint.com website, approximately $60.00. No single customer
accounts for a significant portion of our revenues.
INTELLECTUAL PROPERTY
We depend on our ability to develop and maintain the proprietary aspects of
our technology. To protect our proprietary technology, we rely primarily on a
combination of patent, trademark and copyright laws and confidentiality and/or
license agreements with our employees and others, including companies with whom
we enter into strategic relationships.
In the United States, we have filed two provisional patents and may seek
other patents in the future. The patent for which we have applied has not yet
been issued. We have one registered trademark and two pending trademark
applications and five service marks and eight service mark applications. In
addition, we seek to avoid disclosure of our trade secrets by limiting access to
our propriety technology and restricting access to our source code. Despite
these precautions, it may be possible for unauthorized third parties to copy
particular portions of our technology or reverse engineer or obtain and use
information that we regard as proprietary. In addition, the laws of some foreign
countries do not protect proprietary rights to the same extent as do the laws of
the United States. Our means of protecting our proprietary rights in the United
States or abroad may not be adequate and competing companies may independently
develop similar technology.
COMPETITION
Broadly speaking, we are an online alternative to traditional print shops
and print brokers. We compete with these offline entities. The existing printing
market is established, mature and intensely competitive. The United States
short-run mass market printing industry is highly fragmented, with an estimated
50,000 local and regional printers. These printers are mostly independent but
many are owned by larger consolidators, such as Taylor Corporation. Many of
these printers have long-term
40
<PAGE>
established relationships with their customers and provide geographic proximity
as well as services which are not yet available online.
For mass market printed items, price is generally not a principal method of
competition, primarily due to the short-run nature of this printing. We believe
that convenience of ordering, breadth of product offering, delivery time and
product quality all play a more important part in short-run, mass market print
buying psychology.
Ultimately, we believe that the Internet will become an important source for
the procurement of printed products targeted at businesses. Within this area,
our principal direct competitors are Taylor Corporation and Discount Labels, who
have developed online websites that permit customers to create, proof and order
popularly printed items directly online. While Taylor Corporation and Discount
Labels each have substantially more resources than us, we believe we can compete
with them because we have more experience in providing online printing services.
We also compete with mail order catalog printers, which may benefit from
offering a wider range of non-printed products than us. We also face direct
competition from a variety of other organizations, including existing office
supply chains, procurement brokers, stationery houses, design houses,
advertising specialty and print brokers and photo and gift operations. Some of
these are in the process of developing their own online print solutions. We also
face competition from the increasing sophistication of desktop printers which
may lessen the need for professional offset and raised ink printing. In
addition, companies with which we do not presently directly compete may become
competitors in the future, either through the expansion of our technology and
services or through their product development in the area of online print shops
or through acquisitions. These companies could include Adobe Systems, America
Online and Microsoft Corporation.
The market for online print shops is new, rapidly evolving and highly
competitive. We are aware of approximately 12 online print shops that provide
some of the printing products and services similar to ours. In addition, we are
aware of approximately 80 online businesses that offer some limited custom
printing services. The level of competition is likely to increase as current
competitors improve their offerings and as new participants enter the market or
as industry consolidation develops. Many of our current and potential
competitors have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources than us and may enter into strategic or commercial relationships with
larger, more established and well-financed companies. Some of our competitors
may be able to enter into these strategic or commercial relationships on more
favorable terms. Additionally, these competitors have research and development
capabilities that may allow them to develop new or improved services that may
compete with the services we market. New technologies and the expansion of
existing technologies may increase competitive pressures on us. Furthermore,
companies with whom we have formed a strategic relationship may offer to
end-users the choice between our services and the services of one of our
competitors, and future customers may also offer end-users a similar choice.
Increased competition may result in reduced operating margins as well as loss of
market share and brand recognition. We may be unable to compete successfully
against current and future competitors, and competitive pressures faced by us
could harm our business and prospects.
EMPLOYEES
As of December 31, 1999, we had 150 full-time employees. Of these employees,
51 were in product development, 36 in sales, marketing and business development,
38 in customer support and training and 25 in finance and administration. None
of our employees is subject to a collective bargaining agreement, and we have
never experienced a work stoppage. We believe our relations with our employees
are good. Our future success depends on our ability to attract, motivate and
retain highly qualified technical and management personnel. From time to time we
also employ independent
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<PAGE>
contractors to support our product development, sales, marketing, business
development and finance and administration organizations.
FACILITIES
Our principal offices are located in leased facilities in Redwood City,
California and consist of approximately 24,100 square feet under a series of
multi-year leases that expire between September 2001 and September 2003 and 600
square feet under one month-to-month lease. We believe that our existing
facilities are adequate for our current needs or that suitable additional or
alternative space will be available in the future on commercially reasonable
terms.
LEGAL PROCEEDINGS
From time to time, we could become involved in litigation relating to claims
arising out of our ordinary course of business. We are not presently involved in
any legal proceedings.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers, directors, and significant employees and their ages
as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Royal P. Farros........................... 40 President, Chief Executive Officer and
Chairman of the Board of Directors
James P. McCormick........................ 41 Chief Financial Officer and Secretary
Edward J. Sanden.......................... 47 Chief Marketing Officer
Nickoletta T. Swank....................... 42 Vice President, Strategic Relationships
and Assistant Secretary
David L. Hodson........................... 32 Vice President, Technology
Gregory M. Korjeff........................ 40 Vice President, Operations
Mark Dubovoy (1)(2)....................... 53 Director
Deepak Kamra (1).......................... 43 Director
J.A. Heidi Roizen (2)..................... 41 Director
</TABLE>
- ------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
ROYAL P. FARROS founded iPrint.com in February 1996 and has served as our
president, chief executive officer and chairman of the board of directors since
our inception. From June 1994 to February 1996, Mr. Farros served as executive
vice president and general manager of the Electronic Direct division of Deluxe
Corporation, a commercial printer. From June 1983 to June 1994, Mr. Farros
served as executive vice president and from June 1986 to June 1994 as chairman
of the board of directors of T/Maker Company, a consumer software company.
Mr. Farros holds a B.S. and an M.S. in Industrial Engineering from Stanford
University.
JAMES P. MCCORMICK has served as our chief financial officer since October
1999 and as our secretary since November 1999. From June 1997 to October 1999,
Mr. McCormick served in various executive positions, most recently as the chief
financial officer, senior vice president, finance and administration and chief
operating officer for General Magic, Inc., a computer software and
telecommunications company. From July 1994 to June 1997, Mr. McCormick was
employed by UB Networks, a computer networking company, where he served in
various executive positions, most recently as vice president, finance and
administration and chief financial officer. Mr. McCormick holds a B.B.A. from
the University of Toledo and an M.B.A. in Finance from the University of
Michigan.
EDWARD J. SANDEN has served as our chief marketing officer since April 1999.
From 1987 to April 1999, Mr. Sanden served in various executive positions, most
recently as senior vice president of interactive services, for Cendant
Corporation, formerly CUC International, Inc., a business and consumer services
company. Mr. Sanden holds a B.A. in English from the University of Alberta,
Canada.
NICKOLETTA T. SWANK was on the founding team of iPrint.com and served as our
vice president, operations until September 1997. Ms. Swank has served as our
vice president, strategic relationships since September 1997 and as our
assistant secretary since November 1999. Ms. Swank also served as secretary from
our inception to November 1999 and as a director from September 1997 to February
1999. From July 1992 to July 1996, Ms. Swank was employed at T/Maker Company, a
consumer software company, where from January 1995 to July 1996, she was
director, international sales, from February 1994 to December 1994, she was
international group manager and from July 1992 to
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January 1994, she was country manager for Australia and New Zealand. Ms. Swank
holds a B.S. in Industrial Engineering from Stanford University.
DAVID L. HODSON was on the founding team of iPrint.com and has served as our
vice president, technology since May 1998. From May 1996 to May 1998,
Mr. Hodson served as our director of technology. From February 1995 to May 1996,
Mr. Hodson was a technologist at the Electronic Direct division of Deluxe
Corporation. From June 1992 to October 1994, Mr. Hodson held various technical
positions with Visa International, a full-service payment network. Mr. Hodson
holds a B.S. in Management Information Systems and an M.B.A., both from
California State University, Chico.
GREGORY M. KORJEFF has served as our vice president, operations since
September 1997. From September 1995 to September 1997, Mr. Korjeff was chief
administrative officer at Accountants Inc., a staffing services company. From
January 1986 to September 1995, Mr. Korjeff was employed by the bankcards
division of Citicorp Credit Services, a commercial bank, where he served in
various management positions, most recently as vice president and division
financial officer. Mr. Korjeff holds a B.A. in Geology from Dartmouth College.
MARK DUBOVOY has been one of our directors since October 1997. Mr. Dubovoy
founded and has served as a general partner of Information Technology Ventures,
a venture capital partnership, since September 1994. Mr. Dubovoy currently
serves on the board of directors of Exodus Communications, a website and network
management company, as well the boards of directors of several private
companies. Mr. Dubovoy holds a B.S. in Physics from the National University of
Mexico, and both an M.A. and a Ph.D. in Physics from the University of
California, Berkeley.
DEEPAK KAMRA has been one of our directors since March 1999. Since October
1995, Mr. Kamra has been a general partner of Canaan Equity Partners, a venture
capital partnership. From March 1993 to October 1995, Mr. Kamra was a principal
at Canaan Equity Partners. Mr. Kamra serves on the board of directors of Concord
Communications, a computer network software company, and Saleslogix, a business
software company, as well as on the board of directors of several private
companies. Mr. Kamra holds a Bachelor of Commerce from Carleton University and
an M.B.A. from Harvard Business School.
J.A. HEIDI ROIZEN has been one of our directors since October 1999. Since
April 1999, Ms. Roizen has been a venture partner at Softbank Venture Capital.
From February 1997 to July 1999, Ms. Roizen was self-employed as a strategic
consultant to such technology companies as Intel Corporation, Microsoft
Corporation and Compaq Computer Corporation. From January 1996 to February 1997,
Ms. Roizen served as vice president of world wide developer relations for Apple
Computer. From 1983 to 1996, Ms. Roizen served as chief executive officer of
T/Maker Company. Ms. Roizen currently serves as a director of Great Plains
Software, a financial management software company, Preview Systems, a computer
network and software management company, and several private companies.
Ms. Roizen holds a B.A. in English and an M.B.A. from Stanford University.
BOARD COMPOSITION
Effective upon the closing of this offering, our certificate of
incorporation and bylaws will provide for a board of directors that is divided
into three classes:
- Class I, whose term will expire at the annual meeting of stockholders
expected to be held in May 2000;
- Class II, whose term will expire at the annual meeting of stockholders
expected to be held in May 2001; and
- Class III, whose term will expire at the annual meeting of stockholders
expected to be held in May 2002.
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<PAGE>
As a result, only one class of directors will be elected at each annual
meeting of stockholders, with the other classes continuing for the remainder of
their terms. Effective upon the closing of this offering, the following
individuals will serve as our directors:
Royal Farros and Mark Dubovoy will be our Class I directors;
Deepak Kamra will be our Class II director; and
J.A. Heidi Roizen will be our Class III director.
There are no family relationships among any of our directors, officers or
key employees, except that Ms. Swank, vice president, strategic relationships
and assistant secretary, is the sister of Mr. Farros, president, chief executive
officer and chairman of the board of directors.
BOARD COMMITTEES
Our board of directors recently formed an audit committee and a compensation
committee.
AUDIT COMMITTEE. The audit committee will review the results and scope of
the annual audit and will meet with our independent public accountants to review
our internal accounting policies and procedures. The audit committee currently
consists of Messrs. Dubovoy and Kamra.
COMPENSATION COMMITTEE. The compensation committee reviews and makes
recommendations to our board of directors on our general and specific
compensation policies and practices and administers our 1997 stock option plan,
our 1999 employee stock purchase plan and our 1999 outside director stock option
plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee has at any time since our
formation been one of our officers or employees. None of our executive officers
currently serves, or in the past has served, 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 the
creation of our compensation committee, all compensation decisions were made by
our full board of directors. Mr. Farros has not participated in discussions by
our board of directors with respect to his own compensation.
EMPLOYMENT, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
We routinely deliver written offer letters containing provisions on salary
bonuses, benefits and stock option grants to prospective members of management
and other employees. In addition, we have entered into agreements containing
employment and change-in-control provisions as described below.
In April 1999, we entered into a written employment agreement with
Edward J. Sanden, our chief marketing officer. This agreement describes
Mr. Sanden's base salary and bonuses as well as other benefits to which
Mr. Sanden is entitled. The agreement provides that if Mr. Sanden is
involuntarily terminated without cause at any time before April 29, 2000, he
will receive a lump sum severance payment equal to one week of base salary plus
a monthly bonus for each month of employment and his options will vest as if he
had completed one full year of employment with us. The agreement further
provides that if Mr. Sanden is involuntarily terminated without cause at any
time on or after April 29, 2000, he will receive a lump sum severance payment
equal to three months of base salary. In addition, one-half of his unvested
options will vest as of the date of his termination. Mr. Sanden also agreed not
to compete with us in any unfair manner at any time and for any reason following
the event of his termination.
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<PAGE>
In September 1999, we entered into a written employment agreement with
James P. McCormick, our chief financial officer. This agreement describes
Mr. McCormick's base salary and bonuses as well as other benefits to which
Mr. McCormick is entitled. Pursuant to the agreement, we agreed to enter into a
promissory note agreement in connection with the exercise of Mr. McCormick's
stock options.
We have entered into stock option agreements with each of our executive
officers that provide for partial acceleration of vesting upon a
change-in-control event in which our outstanding stock options are not assumed
or substituted with substantially equivalent stock options, or in which an
executive officer is terminated. Partial acceleration in this event would be as
follows:
- if the change-in-control event occurs during the executive officer's first
year of employment with us, that executive officer will be entitled to
acceleration of vesting equal to the number of months employed by us; or
- if the change-in-control event occurs after the executive officer's first
year of employment with us, that officer will be entitled to vesting equal
to the number of months employed by us, plus an additional 25% of the
number of months employed by us.
EXECUTIVE COMPENSATION
Our directors do not receive cash compensation for their services as
directors or members of committees of the board of directors. We do reimburse
directors for their reasonable expenses incurred in attending meetings of the
board of directors.
A total of 300,000 shares of common stock have been reserved for issuance
under our 2000 outside directors stock option plan, none of which have been
issued. The number of shares will be increased on January 1, 2001 and each
subsequent January 1 during the term of the plan by 70,000 shares. This plan
provides for the automatic grant of nonstatutory stock options to our directors
who are not employees. On the effective date of this offering, each of our
non-employee directors will automatically be granted an option to purchase
30,000 shares of common stock. Thereafter, each new non-employee director
elected after the effective date of this offering automatically will be granted
on the date of his or her initial election an option to purchase 30,000 shares
of common stock. In addition, each non-employee director will thereafter be
granted automatically an option to purchase 5,000 shares of common stock at each
annual meeting of the stockholders provided the non-employee director continues
to serve in that capacity following the annual meeting and has served as a
member of the board of directors for at least six months. The exercise price per
share of options granted under this plan will be equal to the fair market value
of a share of common stock on the date of grant. Shares subject to initial
options and annual options granted under this plan will vest over three years
and one year, respectively, and options granted under this plan must be
exercised within ten years from the date of grant.
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<PAGE>
The following table presents information regarding compensation paid or
earned by our chief executive officer and the other executive officer whose
total salary and bonus for the fiscal year ended December 31, 1999 exceeded
$100,000 per annum:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS
- --------------------------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
Royal P. Farros............................................ 1999 $100,001 -- 5,000
President, Chief Executive Officer and Chairman of the
Board of Directors
James P. McCormick......................................... 1999 $ 34,091 $11,364 290,000
Chief Financial Officer and Secretary (1)
Edward J. Sanden (2)....................................... 1999 $100,000 $33,333 250,000
Chief Marketing Officer
Nickoletta T. Swank........................................ 1999 $108,333 -- 55,000
Vice President, Strategic Relationships and Assistant
Secretary
David L. Hodson............................................ 1999 $130,000 -- 85,000
Vice-President, Technology
Gregory M. Korjeff......................................... 1999 $108,333 -- 5,000
Vice-President, Operations
</TABLE>
- ------------------------
(1) Mr. McCormick began employment with us in October 1999.
(2) Mr. Sanden began employment with us in May 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents information regarding grants of stock options
to each of the executive officers named in the Summary Compensation Table above
during the fiscal year ended December 31, 1999. All of these options were
granted under our 1997 stock option plan. Generally, the options vest at the
rate of one quarter the total number of shares on the one year anniversary from
the date of grant and thereafter ratably on a monthly basis for thirty-six
months.
The following table is based on the grant of options to purchase a total of
1,879,600 shares of our common stock during 1999. All options were granted at
the fair market value of our common stock, as determined by the board of
directors on the date of grant. Potential realizable values are net of exercise
price, but before taxes associated with exercise. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
option term. The assumed 5% and 10% rates of stock price appreciation are
required by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of the future common stock price. Unless
the market price of the common stock appreciates over the option term, no value
will be realized from the option grants made to executive officers. Actual
gains, if any, on stock option exercises will be dependent on the future
performance of our common stock. The assigned 5% and 10% rates of stock
appreciation are based on an assumed offering price of $9.00 per share.
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<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO OR BASE TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Royal P. Farros..................... 5,000 * .231 5/06/09 $ 68,655 $ 104,953
James P. McCormick.................. 290,000 15.4% 2.26 10/15/09 3,393,567 5,498,843
Edward J. Sanden.................... 250,000 13.3% .21 5/06/09 3,437,988 5,252,882
Nickoletta T. Swank (1)............. 15,000 * .231 5/06/09 205,964 314,858
40,000 2.1% 2.49 11/10/09 458,878 749,261
David L. Hodson (2)................. 15,000 * .21 5/06/09 206,279 315,173
70,000 3.7% 2.26 11/10/99 819,137 1,327,307
Gregory M. Korjeff.................. 5,000 * .21 5/06/09 68,760 105,058
</TABLE>
- ------------------------
* Less than 1%
(1) Ms. Swank was granted options to purchase 55,000 shares in fiscal 1999, or
2.9% of all options granted by us in fiscal 1999. The aggregate potential
realizable values at assumed annual rates of stock price appreciation of 5%
and 10% are $664,872 and $1,064,119, respectively.
(2) Mr. Hodson was granted options to purchase 85,000 shares in fiscal 1999, or
4.5% of all options granted by us in year 1999. The aggregate potential
realizable values at assumed annual rates of stock price appreciation of 5%
and 10% are $1,025,416 and $1,642,480, respectively.
OPTION EXERCISES AND FISCAL YEAR-END HOLDINGS
The following table presents the number of shares acquired and the value
realized upon exercise of stock options during 1999 and the number of shares of
common stock subject to exercisable and unexercisable options held as of
December 31, 1999 by each of the executive officers named in the Summary
Compensation Table above. All shares of common stock subject to options by us
and all shares of common stock which were purchased by exercising options
granted by us are subject to a right of repurchase in favor of iPrint.com which
lapses as to one quarter of the shares after one year of vesting and thereafter
ratably on a monthly basis for thirty-six months. Also presented are values of
in-the-money options, which represent the positive difference between the
exercise price of each outstanding stock option and a fair value on
December 31, 1999 of $4.86 per share.
AGGREGATE OPTION EXERCISES IN 1999 AND VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ON OPTIONS AT 12/31/99 MONEY OPTIONS AT 12/31/99
EXERCISE VALUE --------------------------- -----------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE INEXERCISABLE
- ---- --------- ------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Royal P. Farros......... -- -- 210,000 -- $1,017,190 --
James P. McCormick...... 290,000 -- -- -- -- --
Edward J. Sanden........ 125,000 $ 50,000 125,000 -- $ 581,250 --
Nickoletta T. Swank..... 270,000 $ 134,285 40,000 -- $ 94,800 --
David L. Hodson......... -- -- 345,000 -- $1,508,900 --
Gregory M. Korjeff...... 121,250 $ 63,613 -- -- -- --
</TABLE>
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<PAGE>
STOCK OPTION PLANS
1997 STOCK OPTION PLAN
Our 1997 stock option plan was adopted by our board of directors and
approved by our stockholders in August 1997 and has been amended from time to
time.
Our board of directors currently administers the 1997 stock option plan. The
plan allows grants of incentive stock options, within the meaning of Section 422
of the Internal Revenue Code, to employees, including officers and employee
directors. In addition, it allows grants of nonstatutory options to employees,
non-employee directors, and consultants.
We are authorized to issue up to 5,000,000 shares of common stock under this
plan. This number of shares will be increased on January 1, 2001 and each
subsequent January 1 during the term of the plan by 5% of the number of shares
of common stock issued and outstanding on the immediately preceding
December 31. However, the maximum number of shares of common stock that may be
issued under the plan pursuant to the exercise of incentive stock options shall
not exceed 5,000,000 shares cumulatively increased on January 1, 2001 and each
subsequent January 1 thereafter until and including January 1, 2009 by the
lesser of 5% of the number of shares of common stock issued and outstanding on
the immediately preceding December 31 or 5,000,000 shares.
The exercise price of nonstatutory stock options granted under the 1997
stock option plan must not be less than 85% of the fair market value of a share
of common stock on the date of grant. In the case of incentive stock options,
the exercise price must not be less than the fair market value of a share of
common stock on the date of grant. With respect to any optionee who owns stock
representing more than 10% of the voting power of all classes of our outstanding
capital stock, the exercise price of any incentive stock option must be equal to
at least 110% of the fair market value of a share of the common stock on the
date of grant, and the term of the option may not exceed five years. The terms
of all other options may not exceed ten years. The aggregate fair market value,
determined as of the date of option grant, of the common stock for which an
incentive stock option may become exercisable for the first time may not exceed
$100,000 in any calendar year.
The board of directors has discretion to determine vesting schedules and
exercise requirements, if any, of all options granted under the plan. In
addition, at the time each option is granted, our board of directors has
discretion to provide for full acceleration of vesting and exercisability in the
event that we experience a corporate change-in-control subsequent to the date of
grant.
As of December 31, 1999, 1,336,167 shares of common stock had been issued
upon exercise of options outstanding, options to purchase 1,593,348 shares of
common stock with a weighted average exercise price of $1.06 were outstanding,
and 2,070,485 shares remained available for future grants.
2000 EMPLOYEE STOCK PURCHASE PLAN
A total of 150,000 shares of common stock have been reserved for issuance
under our 2000 employee stock purchase plan, none of which have been issued.
This number of shares will be increased cumulatively on January 1, 2001 and each
January 1 thereafter through January 1, 2010 by the lesser of 5% of the shares
of the common stock issued and outstanding on the immediately preceding
December 31 or 3,000,000 shares. This plan is intended to qualify under Section
423 of the Internal Revenue Code and our compensation committee will administer
the plan. Any employee is eligible to participate in the plan if customarily
employed by us for more than 20 hours per week and more than five months per
calendar year.
The plan is implemented through two series of offerings, referred to herein
as "offering periods". A twelve-month "annual offering period" will generally
begin on or about February 1 of each year, and a six-month "half-year offering
period" will generally begin on or about August 1 of each year.
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Generally, each annual offering period is comprised of two six-month "purchase
periods" ending on or about the last days of January and July of each year,
while each half-year offering period is comprised of a single purchase period.
However, the board of directors may establish a different term for one or more
offerings or different commencement or ending dates for any offering period or
purchase period, provided that no offering period may exceed 27 months in
duration.
The 2000 employee stock purchase plan permits eligible employees to purchase
shares of our common stock through payroll deductions, which may not exceed 15%
of the employee's compensation. Stock may be purchased under the plan at a price
equal to 85% of the fair market value of our common stock on either the first
day of the offering period or the last day of each purchase period, whichever is
lower. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of a
participant's employment with us. Participants may not purchase shares of common
stock having a value, measured at the beginning of the offering period, greater
than $25,000 in any calendar year or more than a number of shares in any
offering period determined by dividing $25,000, or $12,500 with respect to a
six-month offering period, by the fair market value of a share of our common
stock determined at the beginning of the offering period.
2000 OUTSIDE DIRECTORS STOCK OPTION PLAN
A total of 300,000 shares of common stock have been reserved for issuance
under our 2000 outside directors stock option plan, none of which have been
issued. The number of shares will be increased on January 1, 2001 and each
subsequent January 1 during the term of the plan by 70,000 shares. This plan
provides for the automatic grant of nonstatutory stock options to our directors
who are not employees. On the effective date of this offering, each of our
non-employee directors will automatically be granted an option to purchase
30,000 shares of common stock. Thereafter, each new non-employee director
elected after the effective date of this offering will automatically be granted
on the date of his or her initial election an option to purchase 30,000 shares
of common stock. In addition, each non-employee director will thereafter be
granted automatically an option to purchase 5,000 shares of common stock at each
annual meeting of the stockholders provided the non-employee director continues
to serve in that capacity following the annual meeting and has served as a
director for at least six months. The exercise price per share of options
granted under this plan will be equal to the fair market value of a share of
common stock on the date of grant. Shares subject to initial options and annual
options granted under this plan will vest over three years and one year,
respectively, and options granted under this plan must be exercised within ten
years from the date of grant.
This plan provides that, in the event we experience a corporate
change-in-control, all outstanding options will become immediately exercisable
and vested as of the date ten days prior to the change-in-control. In addition,
the acquiring or successor corporation may assume or substitute substantially
equivalent options for the options outstanding under the plan. To the extent
that the options outstanding under the plan are not assumed, substituted for, or
exercised prior to the change-in-control, they will terminate.
401(k) PLAN
We sponsor a tax-qualified employee savings and retirement plan intended to
qualify under Section 401 of the Internal Revenue Code, or a 401(k) plan.
Full-time employees who are at least 21 years old and who perform at least three
months of service for us are generally eligible to participate and may enter the
plan as of the first day of any calendar quarter. Participants may make pre-tax
contributions to the plan of up to 25% of their eligible compensation, subject
to a statutorily prescribed annual limit, which was $10,000 in calendar year
1999. Each participant's contributions and investment earnings on these
contributions are fully vested at all times. The 401(k) plan permits us to make
discretionary matching contributions on behalf of participants. Contributions by
the participants or us to the plan,
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and the income earned on these contributions, are generally not taxable to the
participants until withdrawn. Contributions are generally deductible by us when
made. The 401(k) plan assets are held in trust. The trustee of the 401(k) plan
invests the assets of the plan in various investment options as directed by the
participants.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
We have adopted provisions in our certificate of incorporation, which the
Delaware General Corporation Law permits, which provide that our directors shall
not be personally liable to us or our stockholders for monetary damages
resulting from a violation of the directors' duty to act with care and in the
best interests of the stockholders, except for liability:
- for acts or omissions that are not in good faith, are deliberately
improper or are known to be illegal;
- under Section 174 of the Delaware General Corporation Law relating to
improper dividends or distributions; or
- for any transaction from which the director obtained an improper personal
benefit.
This limitation of liability does not affect the availability of equitable
remedies, including injunctive relief or rescission.
Our bylaws authorize us to indemnify our officers, directors, employees and
agents to the extent permitted by the Delaware General Corporation Law. Section
145 of the Delaware General Corporation Law empowers us to enter into
indemnification agreements with our officers, directors, employees and agents.
Before the completion of this offering, we intend to enter into separate
indemnification agreements with each of our current directors and executive
officers which may, in some cases, be broader than the specific indemnification
provisions allowed by the Delaware General Corporation Law. The indemnification
agreements will require us to indemnify the executive officers and directors
against liabilities that may arise by reason of status or service as directors
or executive officers and to advance expenses they spend as a result of any
proceeding against them for which they could be indemnified to the fullest
extent permitted by the Delaware General Corporation Law.
We intend to obtain liability insurance for our directors and officers and
intend to obtain a rider to extend that coverage for public securities matters.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of iPrint.com where indemnification will be
required or permitted, and we are not aware of any threatened litigation or
proceeding that may result in a claim for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers or persons controlling
iPrint.com, we have been informed that in the opinion of the Securities and
Exchange Commission this indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
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RELATED PARTY TRANSACTIONS
Since our inception in August 1996, there has not been, nor is there
currently planned, any transaction or series of similar transactions to which
iPrint.com was or is a party in which the amount involved exceeds $60,000 and in
which any director, executive officer or holder of more than 5% of iPrint.com's
capital stock or any member of their immediate family had or will have a direct
or indirect material interest other than agreements which are described under
the caption "Management" and the transactions described below.
SALES OF STOCK TO INSIDERS
The following directors, executive officers, holders of more than 5% of a
class of voting securities and members of these persons' immediate families
purchased shares of our series A preferred stock, series B preferred stock,
series C preferred stock or common stock. Immediately before the closing of this
offering, all outstanding shares of series A preferred stock, series B preferred
stock and series C preferred stock will automatically convert into shares of
common stock on a one-for-one basis:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED PREFERRED PREFERRED COMMON
STOCKHOLDER STOCK STOCK STOCK STOCK
- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
AT&T (1).......................................... -- -- 1,272,053 --
Canaan Equity (2)................................. -- 2,420,000 795,161
Mark Dubovoy (3).................................. 2,321,875 1,600,000 892,857 --
Royal P. Farros................................... 958,594 485,497 -- 7,000,000
Information Technology Ventures (3)............... 2,321,875 1,600,000 892,857 --
Deepak Kamra (2).................................. -- 2,420,000 795,161 --
Gregory M. and Linda L. Korjeff (4)............... -- 60,000 19,715 121,250
James P. McCormick................................ -- -- -- 290,000
J.A. Heidi Roizen and David G. Mohler, M.D. (5)... 25,000 -- 2,380,952 --
Edward J. Sanden.................................. -- -- 29,762 125,000
Softbank Technology Ventures (5).................. 25,000 -- 2,380,952 --
Nickoletta T. and David L. Swank III.............. 50,000 80,000 42,715 270,000
</TABLE>
- ------------------------
(1) Includes:
(a) 368,895 shares held by AT&T Venture Fund II, LP.,
(b) 765,721 shares held by Special Partners Fund International, LP.; and
(c) 137,437 shares held by Special Partners Fund, LP.
(2) Includes:
(a) 2,400,000 shares of series B preferred stock and 788,589 shares of
series C preferred stock held by Canaan Equity, L.P.; and
(b) 20,000 shares of series B preferred stock and 6,572 shares of series C
preferred stock held by Deepak Kamra.
(3) Includes:
(a) 2,261,567 shares of series A preferred stock, 1,558,442 shares of series
B preferred stock and 869,666 shares of series C preferred stock held by
Information Technology Ventures, L.P.; and
(b) 60,308 shares of series A preferred stock, 41,558 shares of series B
preferred stock and 23,191 shares of series C preferred stock held by ITV
Affiliates Fund, L.P.
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<PAGE>
(4) Includes:
(a) 60,000 shares of series B preferred stock and 19,715 shares of series C
preferred stock held by Gregory M. and Linda L. Korjeff; and
(b) 121,250 shares of common stock held by Gregory M. Korjeff.
(5) Includes:
(a) 25,000 shares of Series A preferred stock purchased by J.A. Heidi Roizen
and David G. Mohler, M.D., and
(b) 2,380,952 shares of Series C preferred stock purchased by Softbank
Technology Ventures V, L.P.
The following is a summary of sales of our preferred and common stock that
are presented in the table above:
SERIES A FINANCING. On October 17, 1997, we sold a total of 4,083,594
shares of series A preferred stock at a price of $0.80 per share.
SERIES B FINANCING. On February 25, 1999, we sold a total of 6,033,497
shares of series B preferred stock at a price of $1.25 per share.
SERIES C FINANCING. On September 30, 1999, we sold a total of 5,953,490
shares of series C preferred stock at a price of $3.36 per share.
SALES OF COMMON STOCK.
In October 1996, we sold to Royal P. Farros 7,000,000 shares of common stock
at a price of $0.0029 per share.
In June 1999, Mr. Korjeff exercised options to acquire 116,250 shares of
common stock at an exercise price of $0.08 per share and an option to purchase
5,000 shares of common stock at an exercise price of $0.21 per share.
In June 1999, Ms. Swank exercised options to acquire 205,000 shares of
common stock at an exercise price of $0.011 per share, an option to purchase
50,000 shares of common stock at an exercise price of $0.088 per share and an
option to purchase 15,000 shares of common stock at an exercise price of $0.231
per share.
In July 1999, Mr. Sanden exercised an option to purchase 125,000 shares of
common stock at an exercise price of $0.21 per share.
In November 1999, Mr. McCormick exerciesd an option to acquire 290,000
shares of common stock at an exercise price of $2.26 per share.
LOAN TO EXECUTIVE OFFICER
In November 1999, we received from James P. McCormick, our chief financial
officer and secretary, a full-recourse promissory note in an aggregate principal
amount of $655,400 in connection with the exercise of stock options. The note
bears interest at 5.96% per annum and is due in November 2003. We have a right
to repurchase these shares at cost in the event of the termination of
Mr. McCormick's employment with us. This right lapses ratably over four years.
LOANS FROM EXECUTIVE OFFICER
From August 1996 to September 1997, we issued to Royal P. Farros, our
president, chief executive officer and chairman of the board of directors,
promissory notes in an aggregate principal amount of $616,214. The principal and
an aggregate of $27,322 in accrued interest, along with deferred salary payments
of $123,340, were converted into 958,594 shares of series A preferred stock in
October 1997.
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<PAGE>
BUSINESS RELATIONSHIPS WITH FAMILY MEMBERS OF DIRECTORS AND EXECUTIVE OFFICERS
Since January 1998, Laurie K. Farros has served as a consultant to us on
matters involving human resources and recruiting of personnel. Ms. Farros is the
wife of Royal P. Farros, our founder and president, chief executive officer and
chairman of the board of directors, and the sister-in-law of Nickoletta T.
Swank, our vice president, strategic relationships. Ms. Laurie K. Farros'
current six-month contract as an independent contractor became effective
September 1, 1999 and stipulates monthly compensation of $8,667. Through
December 31, 1999, we have paid Ms. Farros an aggregate of $101,080 for
professional services to the Company and reimbursed her $34,710 for expenses. In
February 1999, we granted Ms. Farros an immediately exercisable option to
purchase 50,000 shares of our common stock at an exercise price of $0.088 per
share. As of September 30, 1999, Ms. Farros had not exercised this option.
Since August 1996, David L. Swank III has served as one of four members of
our board of advisors. Mr. Swank is the husband of Nickoletta T. Swank and the
brother-in-law of Royal P. Farros. In May 1998, Mr. Swank was granted an
immediately exercisable option to purchase 5,000 shares of our common stock at
an exercise price of $0.088 per share. Mr. Swank exercised this option in June
1999.
Since September 1998, Peter Roizen has served as an independent contractor
for us as a computer software programmer. Mr. Roizen is the brother of Ms. J.A.
Heidi Roizen, a member of our board of directors and a managing director of SBVC
V, LLC, a general partner of Softbank Technology Ventures V, L.P., which has
beneficial ownership of 8.3% of our stock after this offering. In April 1999,
Mr. Roizen was granted an immediately exercisable option to purchase 10,000
shares of our common stock at an exercise price of $0.21 per share. As of
September 30, 1999, Mr. Roizen had not exercised this option.
All of the transactions described above were approved by disinterested
directors of the board of directors. As a result, we believe those transactions
were made on terms no less favorable to us than could have been obtained from
unaffiliated third parties. We intend that all future transactions and loans
between us and our officers, directors and principal stockholders and their
affiliates, will be approved by a majority of the board of directors. In
addition, we intend that all of these future transactions will take place on
terms no less favorable to us than could be obtained from unaffiliated third
parties.
INDEMNIFICATION AGREEMENTS
We intend to enter into indemnification agreements with each of our
directors and officers. These agreements will require us to indemnify these
individuals to the fullest extent permitted by the Delaware General Corporation
Law.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents information concerning the beneficial ownership
of the shares of our common stock as of December 31, 1999, and pro forma as
adjusted to reflect the sale of shares of common stock in this offering assuming
(a) 24,406,748 shares of common stock outstanding as of December 31, 1999 and
28,906,748 shares outstanding immediately following the completion of this
offering, (b) conversion of all of iPrint.com's outstanding shares of
convertible preferred stock into common stock and (c) no exercise of the
underwriters' over-allotment option by:
- each person we know to be the beneficial owner of 5% of more of the
outstanding shares of common stock;
- each of our executive officers listed on the Summary Compensation Table
above under "Management";
- each of our directors; and
- all executive officers and directors of iPrint.com as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power over
securities. Except in cases where community property laws apply or as indicated
in the footnotes to this table, we believe that each stockholder identified in
the table possesses sole voting and investment power over all shares of common
stock shown as beneficially owned by the stockholder. Shares of common stock
subject to options that are currently exercisable or exercisable within 60 days
of December 31, 1999 are considered outstanding and beneficially owned by the
person holding the options for the purpose of computing the percentage ownership
of that person but are not treated as outstanding for the purpose of computing
the percentage ownership of any other person.
All shares of common stock subject to options granted by us and all shares
of common stock which were purchased by exercising options granted by us are
subject to a right of repurchase in favor of iPrint.com which lapses as to one
quarter of the shares after one year of vesting and therafter ratably on a
monthly basis for thirty-six months. Unless indicated below, the address of each
individual listed below is 1450 Oddstad Drive, Redwood City, CA 94063.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF OUTSTANDING
SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER THE
NAME AND ADDRESS OWNED THE OFFERING OFFERING
- ---------------- ------------ ------------ ---------
<S> <C> <C> <C>
OTHER 5% STOCKHOLDERS
Entities affiliated with Information Technology Ventures 4,814,732 19.7% 16.7%
(1).......................................................
3000 Sand Hill Road, Bldg. 1, Ste. 280
Menlo Park, CA 94025
Entities affiliated with Canaan Equity (2).................. 3,215,161 13.2 11.1
2884 Sand Hill Road, Ste. 115
Menlo Park, CA 94025
Entities affiliated with Softbank Technology Ventures (3)... 2,405,952 9.9 8.3
2000 West Evelyn Avenue, Ste. 200
Mountain View, CA 94043
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF OUTSTANDING
SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER THE
NAME AND ADDRESS OWNED THE OFFERING OFFERING
- ---------------- ------------ ------------ ---------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS:
Royal P. Farros (4)......................................... 8,669,291 35.1% 29.7%
James P. McCormick (5)...................................... 290,000 1.2 1.0
Edward J. Sanden (6)........................................ 250,000 1.0 *
Nickoletta T. Swank (7)..................................... 494,215 2.0 1.7
David L. Hodson (8)......................................... 345,000 1.4 1.2
Gregory M. Korjeff (9)...................................... 200,965 * *
Mark Dubovoy (1)............................................ 4,814,732 19.7 16.7
c/o Information Technology Ventures
3000 Sand Hill Road, Bldg. 1, Ste. 280
Menlo Park, CA 94025
Deepak Kamra (2)............................................ 3,215,161 13.2 11.1
c/o Canaan Equity Partners
2884 Sand Hill Road, Ste. 115
Menlo Park, CA 94025
J.A. Heidi Roizen (3)....................................... 2,405,952 9.9 8.3
c/o Softbank Technology Ventures
2000 West Evelyn Avenue, Ste. 200
Mountain View, CA 94043
All executive officers and directors as a group (9 persons) 20,679,316 82.2 69.7
(10)......................................................
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes:
(a) 4,689,675 shares held by Information Technology Ventures, L.P.; and
(b) 125,057 shares held by ITV Affiliates Fund, L.P.
The general partner of both Information Technology Ventures, L.P. and ITV
Affiliates Fund, L.P. is ITV Management, LLC. In this capacity, ITV
Management, LLC, through an executive committee, exercises sole voting and
investment power with respect to all shares held of record by the named
investment partnerships; individually, no stockholder, director or officer
of ITV Management, LLC has or shares such voting or investment power.
Mr. Dubovoy disclaims beneficial ownership of all shares except for his own
pecuniary interest.
(2) Includes:
(a) 3,188,589 shares held by Canaan Equity, L.P.; and
(b) 26,572 shares held by Deepak Kamra.
The general partner of Canaan Equity, L.P. is Canaan Equity Partners, LLC.
In this capacity, Canaan Equity Partners, LLC, through an executive
committee, exercises sole voting and investment power with respect to all
shares of record by the named investment partnerships; individually, no
stockholder, director or officer of Canaan Equity Partners, LLC has or
shares such voting or investment power. Mr. Kamra disclaims beneficial
ownership for all shares except for his pecuniary interest and for the
26,572 shares which he owns in his individual capacity.
(3) Includes:
(a) 2,380,952 shares held by Softbank Technology Ventures V, L.P.; and
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<PAGE>
(b) 25,000 shares held by J.A. Heidi Roizen and David G. Mohler M.D.
The general partner of Softbank Technology Ventures V, L.P. is SBVC V, LLC.
In this capacity, SBVC V, LLC, through an executive committee, exercises
sole voting and investment power with respect to all shares of record by the
named investment partnerships; individually, no stockholder, director or
officer of SBVC V, LLC has or shares such voting or investment power.
Ms. Roizen and Mr. Mohler disclaim beneficial ownership for all shares
except for their pecuniary interest and for the 25,000 shares which they own
in their individual capacity.
(4) Includes:
(a) 958,594 shares of series A preferred stock, 485,497 shares of series B
preferred stock and 6,964,800 shares of common stock;
(b) immediately exercisable options to purchase 210,000 shares of common
stock that are subject to a right of repurchase which lapses over time;
(c) 400 shares of common stock held in equal portions by Laurie K. Farros as
custodian for four minors; and
(d) an immediately exercisable option held by Laurie K. Farros to purchase
50,000 shares of common stock that are subject to a right of repurchase
which lapses over time.
(5) Includes 290,000 shares of common stock that are subject to a right of
repurchase which lapses over time.
(6) Includes:
(a) 29,762 shares of series C preferred stock;
(b) 125,000 shares of common stock that are subject to a right of repurchase
which lapses over time; and
(c) An immediately exercisable option to purchase 125,000 shares of common
stock that are subject to a right of repurchase which lapses over time.
(7) Includes:
(a) 50,000 shares of series A preferred stock, 80,000 shares of series B
preferred stock and 42,715 shares of series C preferred stock owned by
Ms. Swank and David L. Swank;
(b) 270,000 shares of common stock that are subject to a right of repurchase
which lapses over time;
(c) 6,000 shares of common stock held by Ms. Swank as custodian for
Katherine A. Swank;
(d) An immediately exercisable option to purchase 40,000 shares of common
stock that are subject to a right of repurchase which lapses over time;
(e) 500 shares of common stock held by Katherine A. Swank; and
(f) 5,000 shares of common stock held by David L. Swank that are subject to
a right of repurchase which lapses over time.
(8) Includes immediately exercisable options to purchase 345,000 shares of
common stock that are subject to a right of repurchase which lapses over
time.
(9) Includes:
(a) 60,000 shares of series B preferred stock and 19,715 shares of series C
preferred stock owned by Mr. Korjeff and Linda L. Korjeff; and
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<PAGE>
(b) 121,250 shares of common stock that are subject to a right of repurchase
which lapses over time.
(10) Includes an aggregate of:
(a) 3,355,469 shares of series A preferred stock, 4,645,497 shares of series
B preferred stock, 11,090,200 shares of series C preferred stock and
7,776,950 shares of common stock; and
(b) immediately exercisable options to purchase 1,581,250 shares of common
stock, of which 811,250 shares have been exercised as of December 31,
1999. All of the shares are subject to a right of repurchase which lapses
over time.
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DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, iPrint.com's authorized capital stock
will consist of 100,000,000 shares of common stock, $0.001 par value per share,
and 2,000,000 shares of preferred stock, $0.001 par value per share. As of
December 31, 1999, and assuming the conversion of each share of outstanding
preferred stock, there were 24,406,748 shares of common stock outstanding held
of record by approximately 104 stockholders.
COMMON STOCK
DIVIDEND RIGHTS. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts as our board of directors may from time to time
determine.
VOTING RIGHTS. Each common stockholder is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.
NO PREEMPTIVE OR SIMILAR RIGHTS. Our common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
RIGHT TO RECEIVE LIQUIDATION DISTRIBUTIONS. Upon our liquidation,
dissolution or winding-up, the assets legally available for distribution to our
stockholders are distributable ratably among the holders of our common stock and
any participating preferred stock outstanding at that time after payment of
liquidation preferences, if any, on any outstanding preferred stock and payment
of other claims of creditors. Each outstanding share of common stock is, and all
shares of common stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, each outstanding share of preferred stock
outstanding will be converted into one share of common stock. See note 9 to our
financial statements for a description of the preferred stock.
Following the offering, we will be authorized, subject to the limits imposed
by the Delaware General Corporation Law, to issue preferred stock in one or more
series, to establish from time to time the number of shares to be included in
each series, to fix the rights, preferences and privileges of the shares of each
wholly unissued series and any of its qualifications, limitations, restrictions.
Our board of directors can also increase or decrease the number of shares of any
series, but not below the number of shares of that series then outstanding,
without any further vote or action by the stockholders.
Our board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of our common stock. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of delaying, deferring or
preventing a change-in-control of iPrint.com and may cause the market price of
our common stock to decline or impair the voting and other rights of the holders
of our common stock. We have no current plans to issue any shares of preferred
stock.
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<PAGE>
WARRANTS
As of December 31, 1999, warrants to purchase 70,500 shares of common stock
are outstanding. We have issued:
- a warrant to purchase 62,500 shares of common stock at a price per share
of $0.80, which expires in March 2003; and
- a warrant to purchase 8,000 shares of common stock at a price per share of
$1.25, which expires in May 2003.
REGISTRATION RIGHTS
The holders of approximately 16,070,581 shares of preferred stock have the
right to require us to register their shares with the Securities and Exchange
Commission so that those shares may be publicly resold or to include their
shares in any registration statement we file.
DEMAND REGISTRATION RIGHTS
- At any time after October 15, 2002, stockholders with registration rights
can request that we file a registration statement so that they can
publicly sell their shares. The underwriters of any underwritten offering
will have the right to limit the number of shares to be included in the
filed registration statement.
- At any time six months after the closing of this offering the holders of
at least 40% of the shares having registration rights have the right to
demand that we file a registration statement on a form other than Form
S-3, as long as the aggregate amount of securities to be sold under the
registration statement exceeds $5 million.
- If we are eligible to file a registration statement on Form S-3, any
holder having registration rights has the right to demand that we file a
registration statement on Form S-3, as long as the amount of securities to
be sold under the registration statement exceeds $1 million.
PIGGYBACK REGISTRATION RIGHTS
If we register any securities for public sale, stockholders with
registration rights will have the right to include their shares in the
registration statement. The underwriters of any underwritten offering will have
the right to limit the number of shares to be included in the registration
statement.
EXPENSES OF REGISTRATION
We will pay all expenses relating to any demand or piggyback registration.
However, we will not pay for the expenses of any demand registration if the
request is subsequently withdrawn by the holders of a majority of the shares
having registration rights, subject to very limited exceptions.
EXPIRATION OF REGISTRATION RIGHTS
The registration rights described above will expire six years after this
offering is completed. The registration rights will terminate earlier for a
particular stockholder if that holder can resell all of its securities in a
three-month period under Rule 144 of the Securities Act and we are subject to
the reporting requirements of the Securities Exchange Act of 1934.
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<PAGE>
DELAWARE ANTI-TAKEOVER LAW AND CHARTER PROVISIONS
The provisions of the Delaware General Corporation Law, our certificate of
incorporation and our bylaws described below may have the effect of delaying,
deferring or discouraging another person from acquiring control of us.
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents Delaware
corporations from engaging, under limited circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets, with any interested stockholder, which is a stockholder
who owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of stockholders, for three years following the date
that the stockholder became an interested stockholder unless:
- the transaction is approved by the board before the date the interested
stockholder attained that status;
- upon the closing of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or after the date the business combination is approved by the board and
authorized at an annual or special meeting of stockholders by at least
two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. This provision of the Delaware
General Corporation Law could prohibit or delay merger or other takeover or
change-in-control attempts and may discourage attempts to acquire us.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
Provisions of our certificate of incorporation and bylaws, which will become
effective upon the closing of this offering, may have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of iPrint.com. These provisions could cause
the price of our common stock to decrease. Some of these provisions allow us to
issue preferred stock without any vote or further action by the stockholders,
eliminate the right of stockholders to act by written consent without a meeting
and eliminate cumulative voting in the election of directors. These provisions
may make it more difficult for stockholders to take specific corporate actions
and could have the effect of delaying or preventing a change in control of
iPrint.com. Our certificate of incorporation provides that, upon the closing of
this offering, the board of directors will be divided into three classes of
directors, with each class serving a staggered three-year term. The
classification system of electing directors may discourage a third party from
making a tender offer or otherwise attempting to obtain control of us and may
maintain the incumbency of the board of directors, because the classification of
the board of directors generally increases the difficulty of replacing a
majority of the directors.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our certificate of incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
our certificate of incorporation and bylaws provide that we will indemnify our
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law. Our bylaws will also provide that we will indemnify officers
and directors against losses that they may incur in investigations and legal
proceedings resulting from their services to
61
<PAGE>
us, which may include services in connection with takeover defense measures. We
intend to enter into separate indemnification agreements with our directors and
executive officers which may be more broad than the specific indemnification
provisions contained in the Delaware General Corporation Law. These provisions
and agreements may have the effect of preventing changes in our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company. The address of our transfer agent and registrar is
40 Wall Street, New York, New York, 10005, and its telephone number at this
location is (718) 921-8286.
LISTING
We have applied to list our common stock on the Nasdaq National Market under
the trading name IPRT.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has not been a public market for our common
stock. Future sales of substantial amounts of our common stock, including shares
issued upon exercise outstanding options and warrants, in the public markets
after this offering could adversely affect market prices prevailing from time to
time. Furthermore, as described below, no shares currently outstanding will be
available for sale immediately after this offering due to contractual and legal
restrictions on resale. Nevertheless, future sales of substantial amounts of our
common stock in the public market after the restrictions lapse, or the
possibility of these sales, could adversely affect the prevailing market price
and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding
28,906,748 shares of common stock, assuming the conversion of all outstanding
preferred stock and based on common stock outstanding as of December 31, 1999,
and assuming no exercise of the underwriters' over-allotment option or exercise
of outstanding options and warrants to purchase common stock. As of
December 31, 1999, there were options to purchase 1,593,348 shares of common
stock and warrants to purchase 70,500 shares of common stock outstanding. Of
these shares, the shares to be sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, except for
any shares purchased by affiliates of iPrint.com, defined as persons who
directly or indirectly control or are controlled by or are under common control
with iPrint.com.
The remaining 24,406,748 shares held by our existing stockholders were
issued and sold by iPrint.com in private transactions. These securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rules 144 or 701 under the Securities Act, which are
summarized below. Sales of these restricted securities in the public market, or
the availability of these shares for sale, could adversely affect the trading
price of iPrint.com's common stock. They are eligible for public sale as
follows:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF
DATE SHARES THAT MAY BE SOLD COMMENT
- ---- ------------------------ -------
<S> <C> <C>
Date of this prospectus -- --
181 days after the date 18,453,258 A substantial number of these shares will be
of this prospectus subject to volume limitations and restrictions
under Rule 144 because they will have been
held for over one year but less than two years
or they are held by some of our officers and
directors.
September 30, 2000 5,953,490 These shares will be subject to volume
limitations and restrictions of Rule 144 at
the expiration of a one year holding period,
which will occur on September 30, 2000.
</TABLE>
LOCK-UP AGREEMENTS
All of our officers and directors and substantially all of our security
holders have signed lock-up agreements under which they agreed not to sell,
dispose of, loan, pledge or grant any rights to any shares of common stock or
any securities convertible into or exercisable or exchangeable for shares of
common stock without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus.
Credit Suisse First Boston Corporation may choose to release some of these
shares from these restrictions before the expiration of this 180-day period
without notice.
63
<PAGE>
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 288,967 shares immediately after this offering
assuming no exercise of the underwriters' over-allotment option; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 for the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, shares that have been held by a non-affiliate for at least two years
may be sold in the open market immediately after the lock-up agreements expire.
RULE 701
Any employee, officer of director of, or consultant to, us who purchased his
shares under a written compensatory plan or contract may be entitled to sell his
shares in reliance on Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
these shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule 144.
All holders of Rule 701 shares are required to wait until 90 days after the date
of this prospectus before selling those shares. However, all shares issued under
Rule 701 are subject to lock-up agreements and will only become eligible for
sale when the 180-day lock-up agreements expire.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 16,070,581 shares of common
stock, or their transferees, may demand that we register their shares under the
Securities Act or, if we file another registration statement under the
Securities Act, may elect to include their shares in such registration. If these
shares are registered, they will be freely tradable without restriction under
the Securities Act.
STOCK OPTIONS
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register approximately 5,450,000 shares of common stock issued
under our stock option and employee stock purchase plans. These registration
statements are expected to be filed soon after the date of this prospectus and
will automatically become effective upon filing. Shares registered under these
registration statements will be available for sale in the open market, unless
the shares are subject to vesting restrictions with iPrint.com or the lock-up
restrictions above. Substantially all shares issuable upon the exercise of
options to purchase our shares are subject to lock-up agreements and will only
become eligible for sale when the 180-day lock-up agreements expire.
64
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, FleetBoston Robertson
Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as representatives,
the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation......................
FleetBoston Robertson Stephens Inc..........................
U.S. Bancorp Piper Jaffray Inc..............................
---------
Total................................................... 4,500,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 675,000 additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay based on an estimated offering price of $9.00 per share.
<TABLE>
<CAPTION>
Per Share Total
------------------------------- -------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid by us.............. $0.63 $0.63 $2,835,000 $3,260,250
Expenses payable by us.................. $0.29 $0.25 $1,300,000 $1,300,000
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
65
<PAGE>
We and substantially all of our other security holders have agreed that we
and they will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, or file with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 relating to, any
additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock, or publicly disclose
the intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of Credit Suisse First Boston Corporation for
a period of 180 days after the date of this prospectus, subject to limited
exceptions. Credit Suisse First Boston Corporation may waive the lock-up
restrictions at its sole discretion at any time without notice.
The underwriters have reserved for sale, at the initial public offering
price up to 225,000 shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market.
Bayview Investors, LTD, an affiliate of FleetBoston Robertson Stephens Inc.,
has purchased 120,000 shares of series B preferred stock and 36,905 shares of
series C preferred stock at $1.25 per share and $3.36 per share, respectively.
Under the NASD Rules of Fair Practice, the difference between the initial
offering price of our common stock and the purchase price could be deemed
underwriting compensation.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include the following:
- the information included in this prospectus and otherwise available to the
representatives;
- market conditions for initial public offerings;
- the history and the prospects for the industry in which we will compete;
- the ability of our management;
- the prospects for our future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of this
offering; and
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives, may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and "passive" market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
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<PAGE>
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a stabilizing transaction or a syndicate
covering transaction to cover syndicate short positions.
- In "passive" market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations, make
bids for or purchases of the common stock until the time, if any, at which
a stabilizing bid is made.
These stabilizing transactions, syndicate covering transactions, passive market
making transactions and penalty bids may cause the price of the common stock to
be higher than it would otherwise be in the absence of these transactions. These
transactions may be effected on The Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
67
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Release
Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or recission or rights of action under the civil liability provisions of
the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgement against the issuer or such person in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
68
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Gray Cary Ware & Freidenrich LLP, Palo Alto, California. Various legal
matters relating to the offering will be passed upon for the underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, California. As of
September 30, 1999, an investment partnership and a partner at Gray Cary Ware &
Freidenrich LLP owned an aggregate of 73,404 shares of our common stock.
EXPERTS
The audited financial statements included in this prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act that registers the shares of our common stock to be sold in this
offering. The registration statement, including the attached exhibits and
schedules, contain additional relevant information about us and our capital
stock. The rules and regulations of the SEC allow us to omit various information
included in the registration statement from this document.
In addition, upon completion of this offering, we will become subject to the
reporting and information requirements of the Exchange Act and, as a result,
will file periodic reports, proxy statements and other information with the SEC.
You may read and copy this information at the following public reference rooms
of the SEC:
<TABLE>
<S> <C> <C>
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, DC 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the public
reference section of the SEC, 450 Fifth Street, N.W. Room 1024, Washington, DC
20549, at prescribed rates. You may obtain information on the operation of the
public reference rooms by calling the SEC at 1-(800) SEC-0330.
The SEC also maintains an internet website that contains reports, proxy
statements and other information about issuers, like iPrint.com, who file
electronically with the SEC. The address of that website is http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing audited
financial statements, and make available to our stockholders quarterly reports
for the first three quarters of each fiscal year containing unaudited interim
financial information.
69
<PAGE>
IPRINT.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1997 and 1998 and
September 30, 1999........................................ F-3
Statements of Operations for the years ended December 31,
1996, 1997, and 1998 and the nine months ended
September 30, 1998 (unaudited) and 1999................... F-4
Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit) for the years ended
December 31, 1996, 1997, and 1998 and the nine months
ended September 30, 1999.................................. F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997, and 1998 and the nine months ended
September 30, 1998 (unaudited) and 1999................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
After the reincorporation discussed in Note 11 to iPrint.com, inc.'s financial
statements, we expect to be in a position to render the following audit report:
ARTHUR ANDERSEN LLP
San Jose, California
November 17, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of iPrint.com, inc.:
We have audited the accompanying balance sheets of iPrint.com,inc. (a Delaware
corporation) as of December 31, 1997 and 1998, and September 30, 1999, and the
related statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1998 and the nine months ended September 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iPrint.com,inc. as of
December 31, 1997 and 1998, and September 30, 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 and the nine months ended September 30, 1999 in conformity
with generally accepted accounting principles.
San Jose, California
November 17, 1999 (except with respect to
the matters referred to in Note 11, as to
which the date is , 1999)
F-2
<PAGE>
IPRINT.COM, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998 AND SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30,
1999
PRO FORMA
DECEMBER 31, STOCKHOLDERS'
------------------- SEPTEMBER 30, EQUITY
1997 1998 1999 (NOTE 10)
-------- -------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,322 $ 299 $ 14,007
Receivable from redeemable convertible preferred stock.... -- -- 8,000
Accounts receivable....................................... -- 18 107
Prepaid expenses and other................................ 1 32 329
------- ------- --------
Total current assets.................................. 2,323 349 22,443
------- ------- --------
PROPERTY AND EQUIPMENT, net................................. 73 565 1,374
------- ------- --------
$ 2,396 $ 914 $ 23,817
======= ======= ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES:
Borrowings under line of credit........................... $ -- $ 218 $ 284
Software licensing........................................ -- 211 118
Accounts payable.......................................... 30 143 1,035
Accrued liabilities....................................... 27 274 839
------- ------- --------
Total current liabilities............................. 57 846 2,276
------- ------- --------
LONG-TERM DEBT, net of current portion...................... -- -- 156
------- ------- --------
COMMITMENTS (NOTE 6)
REDEEMABLE CONVERTIBLE PREFERRED STOCK, no par value
Authorized -- 32,806,164 shares
Outstanding -- 4,083,594 shares at December 31, 1997 and
1998, 16,070,581 shares at September 30, 1999 and none
pro forma; aggregate liquidation preference at
September 30, 1999 of $30,812......................... 3,331 3,723 30,775 $ --
Value ascribed to redeemable convertible preferred stock
warrants................................................ -- -- 35 --
------- ------- -------- --------
Total redeemable convertible preferred stock.......... 3,331 3,723 30,810 --
------- ------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, no par value
Authorized -- 30,000,000 shares
Outstanding -- 7,006,000 shares at December 31, 1997,
7,010,375 share at December 31, 1998, 8,001,817 shares
at September 30, 1999 and 24,072,398 shares pro forma
at September 30, 1999................................. (730) (730) 713 31,488
Value ascribed to common stock warrants................... -- -- -- 35
Deferred stock compensation............................... -- -- (1,018) (1,018)
Accumulated deficit....................................... (262) (2,925) (9,120) (9,120)
------- ------- -------- --------
Total stockholders' equity (deficit).................. (992) (3,655) (9,425) $ 21,385
------- ------- -------- ========
$ 2,396 $ 914 $ 23,817
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
IPRINT.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES........................................ $ -- $ 168 $ 566 $ 306 $ 1,759
COST OF SALES................................... -- 85 331 172 1,205
------ ------ ------- ------- -------
GROSS PROFIT.................................... -- 83 235 134 554
------ ------ ------- ------- -------
OPERATING EXPENSES:
Research and development...................... 171 351 901 521 2,204
Sales and marketing........................... -- 181 970 629 3,636
General and administrative.................... 64 249 710 407 1,199
Amortization of deferred compensation......... -- -- -- -- 309
------ ------ ------- ------- -------
Total operating expenses.................... 235 781 2,581 1,557 7,348
------ ------ ------- ------- -------
LOSS FROM OPERATIONS............................ (235) (698) (2,346) (1,423) (6,794)
OTHER INCOME (EXPENSE), net..................... -- (1) 75 56 129
------ ------ ------- ------- -------
NET LOSS........................................ (235) (699) (2,271) (1,367) (6,665)
Accretion of redeemable convertible preferred
stock....................................... -- (78) (392) (293) --
Forgiveness of accretion of redeemable
convertible preferred stock (Note 9)........ -- -- -- -- 470
------ ------ ------- ------- -------
NET LOSS ATTRIBUTABLE TO COMMON STOCK........... $ (235) $ (777) $(2,663) $(1,660) $(6,195)
====== ====== ======= ======= =======
Basic and diluted net loss per common share..... $(0.15) $(0.11) $ (0.38) $ (0.24) $ (0.86)
====== ====== ======= ======= =======
Shares used to compute basic and diluted net
loss per common share......................... 1,573 7,001 7,007 7,006 7,169
====== ====== ======= ======= =======
Pro forma basic and diluted net loss per common
share (unaudited)............................. $ (0.24) $ (0.38)
======= =======
Shares used to compute pro forma basic and
diluted net loss per common share
(unaudited)................................... 11,090 16,092
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
IPRINT.COM, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
REDEEMABLE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK DEFERRED TOTAL
--------------------- -------------------- STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT EQUITY (DEFICIT)
---------- -------- --------- -------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996......... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock in
exchange for cash at $.0029
per share to sole
stockholder.................. -- -- 7,000,000 20 -- -- 20
Net loss....................... -- -- -- -- -- (235) (235)
---------- ------- --------- ------ ------------ ----------- ----------------
BALANCE, DECEMBER 31, 1996....... -- -- 7,000,000 20 (235) (215)
Issuance of Series A redeemable
convertible preferred stock
at $.80 per share, net of
issuance cost of $14......... 3,279,174 2,609 -- -- -- -- --
Conversion of notes payable and
accrued interest due primary
stockholder to Series A
redeemable convertible
preferred stock at $.80 per
share........................ 804,420 644 -- -- -- -- --
Accretion of redeemable
convertible preferred
stock........................ -- 78 -- -- -- (78) (78)
Exercise of stock options to
purchase common stock at $.01
per share.................... -- -- 6,000 -- -- -- --
Reclassification of accumulated
deficit through termination
of Subchapter S election..... -- -- -- (750) -- 750 --
Net loss....................... -- -- -- -- -- (699) (699)
---------- ------- --------- ------ ------------ ----------- ----------------
BALANCE, DECEMBER 31, 1997....... 4,083,594 3,331 7,006,000 (730) -- (262) (992)
Accretion of redeemable
convertible preferred
stock........................ -- 392 -- -- -- (392) (392)
Exercise of stock options at
$.01 per share............... -- -- 4,375 -- -- -- --
Net loss....................... -- -- -- -- -- (2,271) (2,271)
---------- ------- --------- ------ ------------ ----------- ----------------
BALANCE, DECEMBER 31, 1998....... 4,083,594 3,723 7,010,375 (730) -- (2,925) (3,655)
Issuance of Series B redeemable
convertible preferred stock
at $1.25 per share, net of
issuance costs of $10........ 6,033,497 7,532 -- -- -- -- --
Forgiveness of accretion of
preferred stock.............. -- (470) -- -- -- 470 470
Issuance of Series C redeemable
convertible preferred stock
at $3.36 per share, net of
issuance costs of $13........ 5,953,490 19,990 -- -- -- -- --
Exercise of stock options to
purchase common stock at $.01
- $.84 per share............. -- -- 991,442 116 -- -- 116
Deferred stock compensation
related to stock options..... -- -- -- 1,327 (1,327) -- --
Amortization of deferred stock
compensation................. -- -- -- -- 309 -- 309
Issuance of warrants to
purchase redeemable
convertible preferred
stock........................ -- 35 -- -- -- -- --
Net loss....................... -- -- -- -- -- (6,665) (6,665)
---------- ------- --------- ------ ------------ ----------- ----------------
BALANCE, SEPTEMBER 30, 1999...... 16,070,581 $30,810 8,001,817 $ 713 $ (1,018) $ (9,120) $ (9,425)
========== ======= ========= ====== ============ =========== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
IPRINT.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. $(235) $ (699) $(2,271) $(1,367) $(6,665)
Adjustments to reconcile net loss to net cash used in
operating activities:
Interest expense converted to redeemable convertible
preferred stock................................... -- 25 -- -- --
Depreciation and amortization....................... 2 13 43 22 123
Amortization of deferred stock compensation......... -- -- -- -- 309
Maintenance and training expense related to software
licensing......................................... -- -- -- -- 62
Interest and marketing expense related to issuance
of warrants....................................... -- -- -- -- 35
Changes in net assets and liabilities:
Accounts receivable............................... -- (1) (18) (11) (89)
Prepaid expenses and other........................ (1) -- (30) (6) (297)
Accounts payable.................................. 6 28 113 99 892
Accrued liabilities............................... 3 24 211 13 603
Deferred compensation............................. 73 (73) -- -- --
----- ------ ------- ------- -------
Net cash used in operating activities........... (152) (683) (1,952) (1,250) (5,027)
----- ------ ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................... (30) (59) (289) (172) (918)
----- ------ ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under line of credit......... -- -- 218 -- 234
Repayment of line of credit........................... -- -- -- -- (35)
Repayment of financing arrangement.................... -- -- -- -- (184)
Proceeds from note payable issued to stockholder...... 164 453 -- -- --
Proceeds from issuance of common stock................ -- -- -- -- 116
Proceeds from issuance of common stock under
restricted stock purchase plan...................... 20 -- -- -- --
Proceeds from issuance of redeemable convertible
preferred stock, net of issuance costs.............. -- 2,609 -- -- 19,522
----- ------ ------- ------- -------
Net cash provided by financing activities....... 184 3,062 218 -- 19,653
----- ------ ------- ------- -------
Net increase (decrease) in cash................. 2 2,320 (2,023) (1,422) 13,708
CASH AND CASH EQUIVALENTS, beginning of period.......... -- 2 2,322 2,322 299
===== ====== ======= ======= =======
CASH AND CASH EQUIVALENTS, end of period................ $ 2 $2,322 $ 299 $ 900 $14,007
===== ====== ======= ======= =======
NON-CASH FINANCING ACTIVITIES:
Software acquired through a financing arrangement..... $ -- $ -- $ 220 $ 220 $ 169
Receivable from redeemable convertible preferred
stock............................................... $ -- $ -- $ -- $ -- $ 8,000
Conversion of notes payable and accrued interest due
primary stockholder to redeemable convertible
preferred stock..................................... $ -- $ 644 $ -- $ -- $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Accretion of redeemable convertible preferred
stock............................................. $ -- $ 78 $ 392 $ 293 $ --
Forgiveness of accretion of redeemable convertible
preferred stock................................... $ -- $ -- $ -- $ -- $ 470
Cash paid for interest.............................. $ -- $ -- $ -- $ -- $ 29
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
IPRINT.COM, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(ALL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 IS UNAUDITED)
1. THE COMPANY:
iPrint.com, inc. (the "Company") was established in January 1996 as a sole
proprietorship. In August 1996, the Company was incorporated as a Subchapter S
Corporation. In October 1997, the Company changed to C corporation status. The
Company is an online provider of print and private-labeled print services
focused on the business market. Its online print shop offers customers a
one-stop shop for addressing their printing needs, allowing them to easily
design and order customized printed products. The Company also works with a
variety of online organizations, large commercial printers and office supply
chains to deliver co-labeled and private-labeled online printing services. In
addition, it offers specialized websites and print services in response to
customer requests for print items or quantities that are not generally offered
on its self-service print shop.
During 1997, the Company commenced shipments of its products. The Company is
subject to a number of risks including a lack of profitability and an evolving
business model, the need to attract repeat paying customers, competition from
larger, more established companies, enhancements to and scalability of the
iPrint.com and related websites, volatility of the printing industry, rapid
technological change, ability to support large numbers of customers, dependence
on outside commercial print vendors and delivery services, ability to obtain
adequate funding to support growth, dependence on key employees and the ability
to attract and retain additional qualified personnel to manage the anticipated
growth of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL DATA
The unaudited financial statement data as of September 30, 1998 and for the
nine months ended September 30, 1998 have been prepared on the same basis as the
audited financial statements and, in the opinion of management, include all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance with
generally accepted accounting principles.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid cash investments with maturity dates of three months or less to be
cash equivalents.
F-7
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, recorded amounts
approximate fair value due to the relatively short maturity period.
The carrying amount of the line of credit approximates its fair value
because it has interest rates that vary with market interest rates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives (3 to 5 years) of the
assets. Leasehold improvements are amortized over the shorter of the estimated
useful life or the lease term. Depreciation and amortization expense for the
years ended December 31, 1996, 1997 and 1998 was $2,000, $13,000 and $43,000.
Depreciation and amortization expense was $22,000 and $123,000 for the nine
months ended September 30, 1998 and 1999.
REVENUE RECOGNITION
The Company works with certified commercial print vendors to perform
printing services. Revenues from sales of printed materials are recognized when
all of the following conditions are met: the product has shipped, collection of
the receivable is probable and the Company has fulfilled all of its contractual
obligations to the customer. Sales discounts have been accounted for as
reductions of revenues. Shipping and handling charges billed to customers are an
integral part of the sale of printed products, and are recognized as revenues.
The related costs are expensed as cost of sales. Shipping and handling charges
included in revenue were $395,000 for the nine months ended September 30, 1999,
$132,000 for the year ended December 31, 1998 and $28,000 for the year ended
December 31, 1997.
In 1999, the Company entered into advertising barter transactions whereby
the Company's advertisement was placed on a co-labeled third party's website in
exchange for certain of the Company's products offered to customers of the
co-labeled third party. Barter transactions are recorded at the fair value of
goods provided or advertising services received, whichever is more readily
determinable in the circumstances. Revenues from barter transactions for the
nine-month period ended September 30, 1999 amounted to $175,000.
The Company has operated primarily in the United States and all sales to
date have been made in U.S. dollars. Accordingly, the Company has not had any
material exposure to foreign currency rate fluctuations.
SALES AND MARKETING
The Company expenses advertising costs, including the fair value of barter
transactions, promotional spending, and the costs of promotional products given
away, as incurred. Advertising costs and promotional spending for the years
ended December 31, 1996, 1997 and 1998 were approximately $0, $51,000, and
$392,000, and $159,000 and $1,993,000 for the nine months ended September 30,
1998 and September 30, 1999.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and consist
primarily of payroll costs, other direct expenses and overhead. Research and
development costs to date include expenses incurred by the Company to develop
and maintain the Company's website.
F-8
<PAGE>
STOCK-BASED COMPENSATION
Effective January 1, 1996, the Company adopted the disclosure provisions
under Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation." In accordance with the provisions of SFAS No.
123, the Company applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for stock
options.
The Company accounts for stock-based compensation to nonemployees at fair
value.
COMPUTATION OF BASIC AND DILUTED NET LOSS PER SHARE AND PRO FORMA BASIC AND
DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share on a historical basis is computed using
the weighted average number of shares of common stock outstanding. Potential
common shares from conversion of redeemable convertible preferred stock and
exercise of stock options and warrants are excluded from diluted net loss per
share because they would be antidilutive. The total number of shares excluded
from diluted net loss per share relating to these securities was 4,893,094
shares and 5,455,470 shares for 1997 and 1998, and 5,291,157 shares and
17,287,180 shares for the nine months ended September 30, 1998 and 1999.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
98, convertible preferred stock and common stock issued or granted for nominal
consideration prior to the anticipated effective date of an initial public
offering must be included in the calculation of basic and diluted net loss per
share as if they had been outstanding for all periods presented. To date, the
Company has not had any issuances or grants for nominal consideration.
Pro forma basic and diluted net loss per share is calculated assuming the
conversion of redeemable convertible preferred stock into an equivalent number
of shares of common stock, as if the shares had converted on the dates of their
issuances.
F-9
<PAGE>
A reconciliation of shares used in the calculation of basic and diluted and
pro forma basic and diluted net loss per share follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss attributable to common stock........... $ (235) $ (777) $(2,663) $(1,660) $(6,195)
====== ====== ======= ======= =======
Weighted average shares of common stock
outstanding................................... 1,573 7,002 7,009 7,009 7,384
Less: weighted average shares of common stock
subject to repurchase......................... -- (1) (2) (3) (215)
------ ------ ------- ------- -------
Weighted average shares used in computing basic
and diluted net loss per common share......... 1,573 7,001 7,007 7,006 7,169
====== ====== ======= ======= =======
Basic and diluted net loss per share............ $(0.15) $(0.11) $ (0.38) $ (0.24) $ (0.86)
====== ====== ======= ======= =======
Shares used in computing basic and diluted net
loss per common share......................... 7,007 7,169
Adjustment to reflect the effect of the assumed
conversion of redeemable convertible preferred
stock (unaudited)............................. 4,083 8,923
------- -------
Shares used in computing pro forma basic and
diluted net loss per common share
(unaudited)................................... 11,090 16,092
======= =======
Pro forma basic and diluted net loss per common
share (unaudited)............................. $ (0.24) $ (0.38)
======= =======
</TABLE>
F-10
<PAGE>
COMPREHENSIVE LOSS
Comprehensive income is defined as the changes in equity of an enterprise
except those resulting from stockholder transactions. Comprehensive loss for the
each of the three years ended December 31, 1998 and the nine months ended
September 30, 1999 equaled net loss.
SEGMENT REPORTING
The Company is organized and has operated in one operating segment for all
periods represented, to provide online print services for small businesses and
consumers through its online print shop and to deliver co-labeled and
private-labeled online printing solutions. The Company operates primarily in the
United States.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards, requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133, as recently amended, is effective for
fiscal years beginning after June 30, 2000. Management believes the adoption of
SFAS No. 133 will not have a material effect on the Company's financial position
or results of operations.
In October 1999, the SEC staff asked the Emerging Issue Task Force of the
Financial Accounting Standards Board to address accounting issues related to
eletronic commerce companies. These issues include accounting treatments of
barter transactions, free or heavily discounted products and shipping and
handling costs. The ultimate resolutions to these issues could have a material
effect on the accounting policies in the future.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- --------------
<S> <C> <C> <C>
Furniture and office equipment............................ $ 3 $ 40 $ 110
Computer systems.......................................... 80 487 658
Computer software......................................... 6 38 614
Leasehold improvements.................................... -- 59 174
---- ----- ------
89 624 1,556
Less: Accumulated depreciation............................ (16) (59) (182)
---- ----- ------
$ 73 $ 565 $1,374
==== ===== ======
</TABLE>
4. BORROWING ARRANGEMENTS:
LINE OF CREDIT ARRANGEMENT
The Company has a line of credit arrangement with a bank which provides for
maximum borrowings of $750,000 for working capital and capital improvements,
bearing interest at the prime rate. The bank has a senior security interest in
substantially all of the Company's assets. As of September 30, 1999, $440,000
was outstanding under this agreement. The credit line portion of this
arrangement expired and the Company repaid $200,000 on November 8, 1999 which
was the working capital component of the amount then outstanding. The balance of
$240,000 remains as a term loan, of
F-11
<PAGE>
which $156,000 will be repaid in fiscal years 2001 and 2002 and accordingly, the
amount is classified as a long-term debt on the accompanying financial
statements.
In connection with this arrangement, the Company issued a warrant to
purchase 8,000 shares of the Series B redeemable convertible preferred stock at
$1.25 per share. The warrant was valued at $15,000 and the amount was expensed
as interest expense. The warrant expires on May 8, 2003.
SOFTWARE LICENSE AGREEMENT
In 1998, the Company entered into a financing agreement with a software
company for the licensing of software. The agreement bears interest at an annual
rate of 12% and the principal balance is to be paid in 5 equal quarterly
payments of approximately $60,000. The final payment will be in February 2000.
5. INCOME TAXES:
Until October 16, 1997, the Company was an S Corporation. Effective
October 17, 1997, the Company changed its tax status to a C Corporation in
conjunction with the issuance of Series A redeemable convertible preferred
stock. For an S Corporation, income taxes are generally the responsibility of
the individual stockholders. As a C Corporation, the Company recognizes deferred
income tax assets and liabilities for the expected future income tax benefits
and consequences, based on enacted tax laws, of temporary differences between
the financial reporting and tax basis of assets, liabilities and carryforwards.
The Company has not had any taxable income or related tax liabilities for any
period.
The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory federal income tax rate of 35% to loss before
income taxes as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- --------------
<S> <C> <C> <C>
Federal statutory rate........................... (35)% (35)% (35)%
State taxes, net of federal benefit.............. (6) (6) (6)
Change in valuation allowance.................... 16 41 41
Effect of an S Corporation status terminated in
October 1997................................... 25 -- --
--- --- ---
-- % -- % -- %
=== === ===
</TABLE>
The components of the net deferred income tax asset are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- --------------
<S> <C> <C> <C>
Net operating loss carryforwards........................ $ 108 $ 989 $ 3,320
Tax credit carryforwards and cumulative temporary
differences........................................... 9 102 223
----- ------- -------
117 1,091 3,543
Valuation allowance..................................... (117) (1,091) (3,543)
----- ------- -------
Net deferred income tax asset........................... $ -- $ -- $ --
===== ======= =======
</TABLE>
The Company has provided a valuation allowance for the net operating losses,
deferred tax assets and tax credit carryforwards which may expire before the
Company can use them. The Company
F-12
<PAGE>
believes sufficient uncertainty exists regarding the realizability of these
items and accordingly, has provided a valuation allowance for them.
As of September 30, 1999, the Company had $8.8 million of federal and state
net operating loss carryforwards which expire in varying amounts through the
year 2019. Due to uncertainty regarding the ultimate utilization of the net
operating loss carryforwards, the Company has not recorded any benefit for
losses and a valuation allowance has been recorded for the entire amount of the
net deferred tax asset. Under applicable tax regulations, sales of the Company's
stock, including shares sold in this offering, may further restrict its ability
to utilize its net operating loss carryforwards.
6. LEASE COMMITMENTS:
The Company leased certain equipment amounting to $16,000 under a capital
lease agreement, which expires in October 2003 and bears interest at
approximately 11% per annum as of September 30, 1999.
Future minimum payments under all noncancellable operating lease agreements
as of September 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR OPERATING LEASES
- ----------- ----------------
<S> <C>
2000........................................................ $274
2001........................................................ 245
2002........................................................ 122
2003........................................................ 95
----
$736
====
</TABLE>
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
$7,000, $18,000 and $36,000. Rent expense was $32,000 and $77,000 for the nine
months ended September 30, 1998 and 1999.
7. RELATED PARTY TRANSACTIONS:
During 1997, the Company had various notes payable to the primary
stockholder of the Company. The notes were unsecured and accrued interest at
9.25% to 9.50% per annum. Upon issuance of Series A redeemable convertible
preferred stock in 1997 ($.80 per share), the outstanding notes and associated
accrued interest of $27,000, were converted to Series A redeemable convertible
preferred stock at $.80 per share.
8. RETIREMENT PLAN:
The Company maintains a retirement plan under Section 401(k) of the Internal
Revenue Code. Under the retirement plan, participating employees may defer a
portion of their pretax earnings up to the Internal Revenue Service annual
contribution limit. The Company may make contributions to the plan at the
discretion of the Board of Directors. To date, no such contributions have been
made by the Company.
9. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
DESIGNATED AND OUTSTANDING SHARES OF PREFERRED STOCK
<TABLE>
<CAPTION>
OUTSTANDING
SHARES DESIGNATED SHARES AMOUNT
----------------- ----------- -----------
<S> <C> <C> <C>
Series A redeemable convertible preferred stock..... 8,792,190 4,083,594 $ 3,253,000
Series B redeemable convertible preferred stock..... 12,106,994 6,033,497 7,532,000
Series C redeemable convertible preferred stock..... 11,906,980 5,953,490 19,990,000
---------- -----------
16,070,581 $30,775,000
========== ===========
</TABLE>
F-13
<PAGE>
RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK
- The holders of Series A, B and C redeemable convertible preferred stock
are entitled to receive non-cumulative dividends at the rate of $0.064,
$0.0875 and $0.2352 per share per annum, when and as declared by the Board
of Directors, prior to payment of dividends on common stock. As of
September 30, 1999, no dividends have been declared.
- Series A, B and C redeemable convertible preferred stock have a
liquidation preference of $0.80, $1.25 and $3.36 per share plus declared
but unpaid dividends on each such share.
- Each share of redeemable convertible preferred stock is entitled to a
number of votes equivalent to the number of common shares into which it is
convertible.
- Each share of preferred stock is convertible at the option of the holder
into shares of common stock determined by initial conversion prices and
subject to adjustment based upon various recapitalization events. Each
share of preferred stock will automatically convert into common stock upon
the closing of a public offering resulting in proceeds of not less than
$15 million and a price to the public of at least $5.04 per share. Each
share will also automatically convert into common shares upon written
consent of the holders of not less than 66 2/3% of the then outstanding
shares of outstanding preferred stock, voting on an as-converted basis.
- At any time on or after September 30, 2005, the preferred stock is
redeemable, at the option of the holders of at least a majority of the
then outstanding preferred stock. The redemption price for each share of
preferred stock will be the original issue price as adjusted by various
recapitalization events.
Each holder of Series A redeemable convertible preferred stock was
originally entitled to a 12% per annum accretion amount calculated on the
original issue price of the preferred stock and the accretion amounted to
$470,000 as of February 1999. When Series B redeemable convertible preferred
stock was issued in February 1999, the Company's articles of incorporation were
restated and each holder of Series A redeemable convertible preferred stock
forgave the accretion right. Accordingly, the Company reversed the accretion
amount in 1999.
RECEIVABLE FROM REDEEMABLE CONVERTIBLE PREFERRED STOCKHOLDERS
As of September 30, 1999, the Company had a receivable amounting to
$8,000,000 from Series C redeemable convertible preferred stockholders. The
proceeds were collected on October 6, 1999.
WARRANT ISSUANCE IN EXCHANGE FOR MARKETING COLLABORATION ARRANGEMENT
In 1998, the Company entered into a marketing collaboration agreement with
one of the preferred stockholders in exchange for an issuance of a warrant to
purchase the Series A redeemable convertible preferred stock. The Company issued
a warrant to purchase 62,500 shares of the Company's preferred stock and is not
obligated to issue further warrants. The warrant was valued at $20,000 and the
amount was expensed as marketing expense. The warrant expires on March 16, 2003.
10. COMMON STOCK:
STOCK OPTIONS
In August 1997, the Board of Directors approved the 1997 Stock Option Plan
(the "Plan"). Under the Plan, incentive and nonqualified stock options to
purchase shares of common stock may be granted to employees, directors,
consultants and advisors to the Company. The option price per share shall not be
less than the fair value, as determined by the Board of Directors, for incentive
stock option grants, or not less than 85% of the fair value for nonqualified
stock option grants. Any options granted to a
F-14
<PAGE>
stockholder with more than 10% of the voting power (a "ten percent owner") shall
not have an option price less than 110% of the fair value. Options become
exercisable as determined by the Board of Directors, which is generally over
four years from the date of grant, and generally expire ten years after the date
of grant, or five years for those options granted to a ten percent owner.
Option activity under the Plan is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
OPTIONS WEIGHTED
AVAILABLE AVERAGE
FOR GRANT NUMBER EXERCISE PRICE
--------- --------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1996......................... -- -- $ --
Authorized....................................... 3,000,000 -- --
Granted.......................................... (915,000) 915,000 $.02
Exercised........................................ -- (6,000) $.01
Cancelled........................................ 99,500 (99,500) $.01
--------- ---------
Balance, December 31, 1997......................... 2,184,500 809,500 $.02
--------- ---------
Granted.......................................... (613,063) 613,063 $.08
Exercised........................................ -- (4,375) $.01
Cancelled........................................ 108,812 (108,812) $.07
--------- ---------
Balance, December 31, 1998......................... 1,680,249 1,309,376 $.04
--------- ---------
Authorized....................................... 649,624 -- --
Granted.......................................... (992,000) 992,000 $.31
Exercised........................................ -- (991,442) $.12
Cancelled........................................ 163,835 (163,835) $.13
--------- ---------
Balance, September 30, 1999........................ 1,501,708 1,146,099 $.20
========= =========
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Exercisable at December 31, 1997............................ 270,355 $.01
Exercisable at December 31, 1998............................ 563,745 $.02
Exercisable at September 30, 1999........................... 431,606 $.02
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at September 30, 1999.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------------------- -------------------------
WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES NUMBER CONTRACTUAL LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
- --------------------- --------- ---------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C>
$0.01-$0.011 410,000 5.33 $0.011 348,333 $0.011
$0.08-$0.088 294,799 8.20 $0.081 83,273 $0.082
$0.21-$0.231 233,800 9.48 $0.210 -- --
$ 0.61-$0.84 207,500 9.83 $0.705 -- --
--------- -------
$ 0.01-$0.84 1,146,099 7.73 $0.195 431,606 $0.020
========= =======
</TABLE>
F-15
<PAGE>
The Company accounts for stock options granted to employees under APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Had compensation
expense for the Plan been determined consistent with SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company's net loss and basic and diluted net
loss per share would have been increased to the following pro forma amounts:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Net loss (in thousands):
As reported.................................. $ (235) $ (669) $(2,271) $(6,665)
Pro forma.................................... $ (235) $ (700) $(2,276) $(6,694)
Basic and diluted net loss per share:
As reported.................................. $(0.15) $(0.11) $ (0.38) $ (0.86)
Pro forma.................................... $(0.15) $(0.11) $ (0.38) $ (0.87)
</TABLE>
The weighted average fair value of options granted during fiscal 1997 and
1998 and the nine months ended September 30, 1999 was $.01, $.18 and $1.47 per
share. The fair value of each stock option grant in 1997 and 1998 and the nine
months ended September 30, 1999 was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------- SEPTEMBER 30,
1997 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Volatility......................... 0.01% 0.01% 0.01%
Risk-free interest rate............ 5.85% to 6.27% 4.30% to 5.67% 4.49% to 6.13%
Dividend yield..................... 0% 0% 0%
Expected lives..................... 6 years 6 years 6 years
</TABLE>
In 1998 and 1999, the Company granted to non-employees options to acquire
30,813 and 60,000 shares of common stock inside of the Plan at weighted average
exercise prices of $0.08 and $0.11 and weighted average fair value of $0.16 and
$0.74. As of September 30, 1999, 81,000 options were outstanding and exercisable
at exercise prices ranging from $0.08 to $0.21. The weighted average exercise
price of the outstanding options was $0.10 and the weighted average remaining
contractual life was 6.1 years. In 1998 and 1999, the Company recorded
compensation expense of $2,000 and $44,000. Pursuant to the provisions of SFAS
No. 123, the fair value of options issued was determined based on the fair value
of the consideration received, where such amount was reliably measurable, or the
fair value of the equity instruments issued, in which case, the fair value was
estimated as services were provided using the Black-Scholes model and the
following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------ -------------------
<S> <C> <C>
Volatility......................................... 65% 65%
Risk-free interest rate............................ 4.30% to 5.67% 4.49% to 6.13%
Dividend yield..................................... 0% 0%
Expected lives..................................... 1 year 1 year
</TABLE>
The Plan allows for the issuance of options which are immediately
exercisable through execution of a restricted stock purchase agreement. Shares
purchased pursuant to a restricted stock purchase agreement generally vest over
four years. The Company may repurchase unvested shares at a price equal to the
original issuance price upon termination of the employee. This right expires
generally over
F-16
<PAGE>
four years. As of December 31, 1997 and 1998 and September 30, 1999, 4,708,
2,864 and 612,522 shares of common stock issued and outstanding were unvested
and subject to repurchase by the Company at $.01, $.01 and $.01 to $.84 per
share.
DEFERRED STOCK COMPENSATION
Deferred compensation represents the aggregate difference, at the date of
grant, between the respective exercise price of stock options and the estimated
fair value of the underlying stock. Deferred stock-based compensation is
amortized over the vesting period of the underlying options based on an
accelerated vesting method, generally four years. Through September 30, 1999,
the Company had recorded unearned stock-based compensation of $1.3 million. For
the nine months ended September 30, 1999, the Company recorded stock-based
compensation of $309,000.
The total unearned stock-based compensation recorded for all option grants
through September 30, 1999 will be amortized as follows: $172,000 for the
remainder of the year ending December 31, 1999, $460,000 for the year ending
December 31, 2000, $244,000 for the year ending December 31, 2001, $116,000 for
the year ending December 31, 2002 and $26,000 for the year ending December 31,
2003. The amount of deferred stock compensation expense to be recorded in future
periods could decrease if options for which accrued but unvested compensation
has been recorded are forfeited.
RESERVED FOR FUTURE ISSUANCE
At September 30, 1999, the Company has reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Conversion of Series A redeemable convertible preferred
stock outstanding......................................... 4,083,594
Conversion of Series B redeemable convertible preferred
stock outstanding......................................... 6,033,497
Conversion of Series C redeemable convertible preferred
stock outstanding......................................... 5,953,490
Conversion of preferred stock warrants outstanding.......... 70,500
Stock options outstanding and available for grant........... 2,647,807
----------
Total shares reserved....................................... 18,788,888
==========
</TABLE>
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
The board of directors has authorized the filing of a registration statement
with the Securities and Exchange Commission to register shares of its common
stock in connection with a proposed initial public offering ("IPO"). If the IPO
is consummated under the terms presently anticipated, all of the outstanding
redeemable convertible preferred stock at September 30, 1999 will be converted
into 16,070,581 shares of common stock upon the closing of the IPO. The effect
of the conversion has been reflected as unaudited pro forma stockholders' equity
in the accompanying balance sheet as of September 30, 1999.
11. SUBSEQUENT EVENTS
In November 1999, the Company granted an immediately exercisable option to
purchase 290,000 shares of common stock at an exercise price of $2.26 to an
officer. The Company also issued to the same officer a promissory note in an
aggregate principal amount of $655,400 in connection with the exercise of stock
options. The note bears interest at 5.96% per annum and is due in November 2003.
The Company has the right to repurchase these shares at cost upon termination of
the officer's employment. This right expires over four years.
In December 1999, the Board of Directors approved reincorporation into
Delaware by way of a merger with a newly formed Delaware subsidiary, and the
associated issuance of one share of common
F-17
<PAGE>
stock of the subsidiary for each one share of common stock of the Company held
by the stockholders of record. Additionally, stockholders of record of
redeemable convertible preferred stock of the Company will exchange each of
their shares for one share of redeemable convertible preferred stock of the
subsidiary. The Board of Directors also approved (i) the adoption of the 2000
Employee Stock Purchase Plan (the "Purchase Plan") and the reservation of
150,000 shares of the Company's common stock for issuance under the Purchase
Plan and (ii) the adoption of the 2000 Outside Directors Stock Option Plan (the
"Outside Directors Plan") and the reservation of 300,000 shares of the Company's
common stock for issuance under the Outside Directors Plan.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[IPRINT.COM LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all costs and expenses, other than the
underwriting discounts and commissions payable by the Registrant in connection
with the sale and distribution of the common stock being registered. All amounts
shown are estimates except for the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market application
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 13,662
NASD filing fee............................................. 5,675
Nasdaq National Market application fee...................... 95,000
Blue sky qualification fees and expenses.................... 6,000
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 275,000
Director and officer liability insurance.................... 425,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous expenses...................................... 44,663
----------
Total............................................... $1,300,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant intends to enter into separate indemnification agreements (Exhibit
10.1) with its directors and officers which would require the Registrant, among
other things, to indemnify them against liabilities which may arise by reason of
their status or service (other than liabilities arising from willful misconduct
of a culpable nature). The Registrant also intends to maintain director and
officer liability insurance, if available on reasonable terms. These
indemnification provisions and the indemnification agreements may be
sufficiently broad to permit indemnification of the Registrant's officers and
directors for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant and its officers and directors for liabilities
arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Since our inception, iPrint.com has issued and sold the following
unregistered securities:
1. From inception through December 31, 1999, iPrint.com granted options
to employees and consultants to purchase an aggregate of 3,405,663 shares of
common stock under its 1997 stock option plan net of cancelled grants, of
which 1,336,167 have been exercised at prices ranging from $0.01 to $4.86.
2. In October 1996, iPrint.com sold 7,000,000 shares of common stock to
Royal P. Farros at a purchase price of $0.0029 per share for a total
purchase price of $20,300.
II-1
<PAGE>
3. In October 1997, iPrint.com sold 4,083,594 shares of series A
preferred stock to investors at a purchase price of $0.80 per share for a
total purchase price of $3,266,875.20.
4. In March 1998, iPrint.com issued a warrant to Intel Corporation,
which expires in March 2003, to purchase 62,500 shares of preferred stock at
a price per share of $0.80 for a total purchase price of $50,000.
5. In May 1998, iPrint.com issued a warrant to Silicon Valley Bank,
which expires in May 2003, to purchase 8,000 shares of preferred stock at a
price per share of $1.25 for a total purchase price of $10,000.
6. In February 1999, iPrint.com sold 6,033,497 shares of series B
preferred stock to investors at a purchase price of $1.25 per share, for a
total purchase price of $7,541,871.25.
7. In September 1999, iPrint.com sold 5,953,490 shares of its series C
preferred stock to investors at a purchase price of $3.36 per share, for a
total purchase price of $20,003,726.40.
There were no underwriters employed in connection with any of the
transactions set forth in this Item 15.
The issuances described in Items 15(a)(2) through 15(a)(7) were deemed
exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act as transactions by an issuer not involving a public
offering. Issuances described in Item 15(a)(1) were deemed exempt from
registration under the Securities Act in reliance on Rule 701 promulgated
thereunder as transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other instruments
issued in such transactions. All recipients either received adequate information
about iPrint.com or had access, through employment or other relationships, to
such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
3.3 Form of Certificate of Amendment of Restated Certificate of
Incorporation of Registrant to be filed after the closing
of the offering.
**4.1 Second Amended and Restated Rights Agreement dated
September 30, 1999 between Registrant and certain
stockholders.
*4.2 Specimen certificate representing the common stock.
*5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
**10.1 Form of Indemnification Agreement between Registrant and
Registrant's directors and officers.
10.2 1997 Stock Option Plan.
10.3 2000 Employee Stock Purchase Plan.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------- -----------------------
<C> <S>
10.4 2000 Outside Director Stock Option Plan.
**10.5 Employment Agreement, dated April 29, 1999, between Edward
J. Sanden and the Registrant.
10.6 Employment Agreement, dated September 17, 1999, between
James P. McCormick and the Registrant.
10.7 Loan and Security Agreement, dated May 8, 1998, between
Silicon Valley Bank and the Registrant.
10.8 Standard Industrial Lease--Gross, dated July 30, 1998, as
amended between Hansen Management and the Registrant.
10.9 Memorandum of Understanding regarding Sublease of 1496
Oddstad Drive, dated August 6, 1999, as amended, between
Water Sounds and the Registrant.
10.10 Industrial Real Estate Lease, dated September 14, 1999, as
amended, between Frederick and Doris Nicolini and the
Registrant.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
*23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1).
**24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES.
All schedules are 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 Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act, and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the 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; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing this Amendment No. 1 to the registration statement and has duly
caused this Amendment No. 1 to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Redwood City, State of
California, on January 11, 2000.
<TABLE>
<S> <C> <C>
IPRINT.COM, INC.
By: /s/ ROYAL P. FARROS
-----------------------------------------
Royal P. Farros
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
</TABLE>
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
the registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ ROYAL P. FARROS Officer and Chairman of the
------------------------------------------- Board of Directors January 11, 2000
Royal P. Farros (PRINCIPAL EXECUTIVE
OFFICER)
/s/ JAMES P. MCCORMICK* Chief Financial Officer
------------------------------------------- (PRINCIPAL FINANCIAL AND January 11, 2000
James P. McCormick ACCOUNTING OFFICER)
/s/ MARK DUBOVOY*
------------------------------------------- Director January 11, 2000
Mark Dubovoy
/s/ DEEPAK KAMRA*
------------------------------------------- Director January 11, 2000
Deepak Kamra
/s/ J.A. HEIDI ROIZEN*
------------------------------------------- Director January 11, 2000
J.A. Heidi Roizen
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ ROYAL P. FARROS
--------------------------------------
Royal P. Farros
(ATTORNEY-IN-FACT)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------------------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
3.3 Form of Certificate of Amendment to Certificate of
Incorporation of Registrant to be filed after the closing
of the offering.
**4.1 Second Amended and Restated Rights Agreement dated
September 30, 1999 between Registrant and certain
stockholders.
*4.2 Specimen certificate representing the common stock.
*5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
**10.1 Form of Indemnification Agreement between Registrant and
Registrant's directors and officers.
10.2 1997 Stock Option Plan.
10.3 2000 Employee Stock Purchase Plan.
10.4 2000 Outside Director Stock Option Plan.
**10.5 Employment Agreement, dated April 29, 1999, between Edward
J. Sanden and the Registrant.
10.6 Employment Agreement, dated September 17, 1999, between
James P. McCormick and the Registrant.
10.7 Loan and Security Agreement, dated May 8, 1998, between
Silicon Valley Bank and the Registrant.
10.8 Standard Industrial Lease--Gross, dated July 30, 1998, as
amended between Hansen Management and the Registrant.
10.9 Memorandum of Understanding regarding Sublease of 1496
Oddstad Drive, dated August 6, 1999, as amended, between
Water Sounds and the Registrant.
10.10 Industrial Real Estate Lease, dated September 14, 1999, as
amended, between Frederick and Doris Nicolini and the
Registrant.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
*23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1).
**24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
<PAGE>
_______________ SHARES
iPrint.com, inc.
COMMON STOCK
UNDERWRITING AGREEMENT
[INSERT DATE]
CREDIT SUISSE FIRST BOSTON CORPORATION
U.S. BANCORP PIPER JAFFRAY, INC.
BANCBOSTON ROBERTSON STEPHENS INC.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. INTRODUCTORY. iPrint.com, inc., a Delaware corporation
("COMPANY"), proposes to issue and sell __________ shares ("FIRM SECURITIES")
of its common stock, par value [$.001] per share ("SECURITIES") and also
proposes to issue and sell to the Underwriters, at the option of the
Underwriters, an aggregate of not more than __________ additional shares
("OPTIONAL SECURITIES") of its Securities as set forth below. The Firm
Securities and the Optional Securities are herein collectively called the
"OFFERED SECURITIES". As part of the offering contemplated by this Agreement,
Credit Suisse First Boston Corporation (the "DESIGNATED UNDERWRITER") has
agreed to reserve out of the Firm Securities purchased by it under this
Agreement, up to shares, for sale to the Company's directors, officers,
employees and other parties associated with the Company (collectively,
"PARTICIPANTS"), as set forth in the Prospectus (as defined herein) under the
heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The Firm Securities to
be sold by the Designated Underwriter pursuant to the Directed Share Program
(the "DIRECTED SHARES") will be sold by the Designated Underwriter pursuant
to this Agreement at the public offering price. Any Directed Shares not
orally confirmed for purchase by a Participant by the end of the business day
on which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus. The Company hereby agrees with
the several Underwriters named in Schedule A hereto ("UNDERWRITERS") as
follows:
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333- ) relating to the Offered
Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("COMMISSION") and either (i) has
been declared effective under the Securities Act of 1933 ("ACT") and is
not proposed to be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
("INITIAL REGISTRATION STATEMENT") has been declared effective, either
(i) an additional registration statement ("ADDITIONAL REGISTRATION
STATEMENT") relating to the Offered Securities may have been filed with
the Commission pursuant to Rule 462(b) ("RULE 462(b)") under the Act
and, if so filed, has become effective upon filing pursuant to such
Rule and the Offered Securities all have been duly registered under the
Act pursuant
<PAGE>
to the initial registration statement and, if applicable, the
additional registration statement or (ii) such an additional
registration statement is proposed to be filed with the Commission
pursuant to Rule 462(b) and will become effective upon filing pursuant
to such Rule and upon such filing the Offered Securities will all have
been duly registered under the Act pursuant to the initial registration
statement and such additional registration statement. If the Company
does not propose to amend the initial registration statement or if an
additional registration statement has been filed and the Company does
not propose to amend it, and if any post-effective amendment to either
such registration statement has been filed with the Commission prior to
the execution and delivery of this Agreement, the most recent amendment
(if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c) ("RULE 462(C)") under the Act or, in the case
of the additional registration statement, Rule 462(b). For purposes of
this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery
of this Agreement, the additional registration statement means (i) if
the Company has advised the Representatives that it does not propose to
amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (ii) if the Company
has advised the Representatives that it proposes to file an amendment
or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "EFFECTIVE TIME" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "EFFECTIVE DATE" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration statement,
as amended at its Effective Time, including all information contained
in the additional registration statement (if any) and deemed to be a
part of the initial registration statement as of the Effective Time of
the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(b)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION
STATEMENT". The Initial Registration Statement and the Additional
Registration Statement are herein referred to collectively as the
"REGISTRATION STATEMENTS" and individually as a "REGISTRATION
STATEMENT". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("RULE 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "PROSPECTUS". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the rules and regulations of the Commission ("RULES AND
REGULATIONS") and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to
the requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading and (iii) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b) or
2
<PAGE>
(if no such filing is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects
to the requirements of the Act and the Rules and Regulations, and
neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules
and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not apply to
statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by
any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as presently conducted and as described in the
Prospectus; and the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business
requires such qualification.
(d) The Company has no subsidiaries and no equity interests in
any other entity.
(e) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement on each Closing Date (as defined below), such Offered
Securities will have been, validly issued, fully paid and nonassessable
and will conform to the description thereof contained in the
Prospectus; and the stockholders of the Company and other third parties
have no preemptive rights with respect to the Securities.
(f) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Underwriter
for a brokerage commission, finder's fee or other like payment in
connection with this offering or any other arrangements, agreements,
understandings, payments or issuance with respect to the Company or any
of its officers, directors, shareholders, partners, employees,
subsidiaries or affiliates that may affect the Underwriters'
compensation as determined by the National Association of Securities
Dealers, Inc. (the "NASD").
(g) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Act with respect
to any securities of the Company owned or to be owned by such person or
to require the Company to include such securities in the securities
registered pursuant to a Registration Statement or, except such as have
been specifically waived with respect to the Registration Statements,
in any securities being registered pursuant to any other registration
statement filed by the Company under the Act.
(h) The Offered Securities have been approved for listing on the
Nasdaq Stock Market's National Market, subject to notice of issuance.
(i) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in
connection with the issuance and sale of the Offered Securities by the
Company, except such as have been obtained and
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made under the Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and such as may be required under state securities
laws.
(j) The execution, delivery and performance of this Agreement, and
the issuance and sale of the Offered Securities will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or
any such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or by-laws of
the Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement.
(k) This Agreement has been duly authorized, executed and
delivered by the Company.
(l) Except as disclosed in the Prospectus, the Company has good
and marketable title to all real properties and all other properties
and assets owned by it, free from liens, encumbrances and defects that
would materially affect the value thereof or materially interfere with
the use made or to be made thereof by it; and except as disclosed in
the Prospectus, the Company holds any leased real or personal property
under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by it.
(m) The Company possesses adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary
to conduct the business now operated by it and have not received any
notice of proceedings relating to the revocation or modification of any
such certificate, authority or permit that, if determined adversely to
the Company, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company ("MATERIAL ADVERSE
EFFECT").
(n) No labor dispute with the employees of the Company exists or,
to the knowledge of the Company, is imminent that might have a Material
Adverse Effect.
(o) Except as disclosed in the Prospectus, the Company owns or
possesses adequate trademarks, trade names and other rights to
inventions, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), patents, copyrights and other intellectual property
(collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the
business now operated by it or as proposed to be operated by it as
described in the Prospectus, or presently employed by it, and have not
received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights or knows of
any facts or circumstances which would render any intellectual property
invalid or inadequate to protect the interest of the Company.
(p) Except as disclosed in the Prospectus, the Company is not in
violation of any statute, any rule, regulation, decision or order of
any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), does not own or operate any real
property contaminated with any substance that is subject to any
environmental laws, is not liable for any off-site disposal or
contamination pursuant to any environmental laws, and is not subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware
of any pending investigation which might lead to such a claim.
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(q) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company or any
of its properties that, if determined adversely to the Company, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(r) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company as of the dates shown and its results of operations and
cash flows for the periods shown, and such financial statements have
been prepared in conformity with the generally accepted accounting
principles in the United States applied on a consistent basis and the
schedules included in each Registration Statement present fairly the
information required to be stated therein; and the assumptions used in
preparing the pro forma financial statements included in each
Registration Statement and the Prospectus provide a reasonable basis
for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts. No financial statements are required to be included in the
Registration Statement that have not been so included.
(s) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there
has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company, and, except as disclosed in or contemplated by the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(t) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940.
(u) The Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto
will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection
with the Directed Share Program, and that (ii) no authorization,
approval, consent, license, order, registration or qualification of or
with any government, governmental instrumentality or court, other than
such as have been obtained, is necessary under the securities law and
regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
(v) The Company has not offered, or caused the Underwriters to
offer, any offered Securities to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company to alter the customer's or
supplier's level or type of business with the Company or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.
(w) The Agreement and Plan of Merger dated _________, 2000 (the
"PLAN OF MERGER") by and between the Company and iPrint, Inc., a
California corporation ("iPrint"), has been duly authorized by all
necessary board of directors and stockholder action on the part of the
Company and iPrint and has been duly executed and delivered by each of
the parties thereto. The execution and delivery of the Plan of Merger
and the consummation of the merger contemplated thereby does not
contravene any provision of applicable Federal, California or Delaware
corporate law or the certificate of incorporation or bylaws of the
Company or the certificate of incorporation or bylaws of iPrint, or, to
the knowledge of the Company, any judgment or decree of any
governmental body, agency or court having jurisdiction over the Company
or iPrint, and no consent,
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approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by the
Company and iPrint of its obligations under the Plan of Merger except
such as have been obtained. The merger contemplated by the Plan of
Merger is effective under the laws of the State of California and the
State of Delaware.
(x) All material Tax returns required to be filed by the Company
have been filed and all such returns are true, complete, and correct in
all material respects. All material Taxes that are due or claimed to be
due from the Company have been paid other than those (i) currently
payable without penalty or interest or (ii) being con tested in good
faith and by appropriate proceedings and for which, in the case of both
clauses (i) and (ii), ade quate reserves have been established on the
books and records of the Company in accordance with GAAP. There are no
proposed, material Tax assessments against the Company. To the best
knowledge and belief of the Company, the accruals and reserves on the
books and records of the Company in respect of any material Tax
liability for any Taxable period not finally determined are adequate to
meet any assessments of Tax for any such period. For purposes of this
Agreement, the term "Tax" and "Taxes" shall mean all Federal, state,
local, and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through with holding), including any
interest, additions to tax, or penalties applicable thereto.
(y) The Company has, for federal, state, and all other income tax
purposes, properly elected under section 1362(a) of the Code, to be,
and has been, treated as an S corporation as defined in section 1361(a)
of the Code (and under the comparable relevant state statutes) for the
taxable period commencing August 1, 1996 through and including October
31, 1997.
(z) Neither the Company, nor any of its affiliates, has taken,
directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the
shares of the Securities to facilitate the sale or resale of the
Offered Securities.
(aa) To the knowledge of the Company, Arthur Andersen LLP, who
have certified the financial statements filed with the Commission as
part of each Registration Statement, are independent public auditors as
required by the Act and the Rules and Regulations. The Company
maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; and (C) access to
assets is permitted only in accordance with management's general or
specific authorization.
(bb) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.
(cc) The Company is in compliance with all material respects with
all presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder ("Code"); and each "pension plan" for which the
Company and each of its subsidiaries would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
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(dd) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectuses under the heading "Actual" under the
caption "Capitalization", and, after giving effect to the conversion of
preferred stock into common stock will be as set forth "Pro Forma", and after
giving effect to the offering and the conversion of preferred stock will be as
set forth under the heading "Pro Forma, As Adjusted", in each case under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement, pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of convertible
securities or options referred to in the Prospectus) and the number of
authorized, issued and outstanding options and other rights is set forth in the
footnotes under such caption. The shares of issued and outstanding capital stock
of the Company have been issued in compliance, in all material respects, with
all federal and state securities laws. Except as disclosed in the Prospectus,
there are no outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
the Company's capital stock or any such options, rights, convertible securities
or obligations. The description of the Company's stock option and purchase plans
and the options or other rights granted and exercised thereunder set forth in
the Prospectus accurately and fairly describe, in all material respects, the
information required to be shown with respect to such plans, arrangements,
options and rights.
(ee) the statistical and market-related data included in the
Registration Statement and the Prospectus are derived from sources which the
Company reasonably and in good faith believes to be accurate, reasonable and
reliable, and such data agrees in all material respects with the sources from
which they were derived.
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $ per share, the respective numbers of
shares of Firm Securities set forth opposite the names of the Underwriters in
Schedule A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of the Company at the office of Gray Cary Ware & Freidenrich
LLP, 400 Hamilton Avenue, Palo Alto, California 94301, at 10:00 A.M., New York
time, on , or at such other time not later than seven full business days
thereafter as CSFBC and the Company determine, such time being herein referred
to as the "FIRST CLOSING DATE". For purposes of Rule 15c6-1 under the Securities
Exchange Act of 1934, the First Closing Date (if later than the otherwise
applicable settlement date) shall be the settlement date for payment of funds
and delivery of securities for all the Offered Securities sold pursuant to the
offering. The certificates for the Firm Securities so to be delivered will be in
definitive form, in such denominations and registered in such names as CSFBC
requests and will be made available for checking and packaging at least 24 hours
prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
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Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of the Company, at the above office of Gray Cary Ware & Freidenrich
LLP. The certificates for the Optional Securities being purchased on each
Optional Closing Date will be in definitive form, in such denominations and
registered in such names as CSFBC requests upon reasonable notice prior to such
Optional Closing Date and will be made available for checking and packaging at a
reasonable time in advance of such Optional Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance
with subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this
Agreement or (B) the fifteenth business day after the Effective Date of
the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and
an additional registration statement is necessary to register a portion
of the Offered Securities under the Act but the Effective Time thereof
has not occurred as of such execution and delivery, the Company will
file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time,
on the date of this Agreement or, if earlier, on or prior to the time
the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters'
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delivery of, any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to
its securityholders an earnings statement covering a period of at least
12 months beginning after the Effective Date of the Initial
Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"AVAILABILITY DATE" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "AVAILABILITY DATE" means the
90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of each
Registration Statement, five of which will be signed and will include
all exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Offered Securities is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Prospectus and all amendments and supplements to such
documents, in each case in such quantities as CSFBC requests. The
Prospectus shall be so furnished on or prior to 3:00 P.M., New York
time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other documents shall be so furnished as
soon as available. The Company will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year,
a copy of its annual report to stockholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company
filed with the Commission under the Securities Exchange Act of 1934 or
mailed to stockholders, and (ii) from time to time, such other
information concerning the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the performance
of its obligations under this Agreement, for any filing fees and other
expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale and
determination of their eligibility for investment under the laws of
such jurisdictions as CSFBC designates and the printing of memoranda
relating thereto, for the filing fee incident to, and the reasonable
fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers,
Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except issuances of Securities pursuant to
the conversion or exchange of convertible or exchangeable securities or
the exercise of warrants or options, in each case outstanding on the
date hereof, grants of employee stock options pursuant to the terms of
a plan in effect on the date hereof, issuances of Securities
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pursuant to the exercise of such options [or issuances of Securities
pursuant to the Company's dividend reinvestment plan].
(j) In connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. The Designated Underwriter
will notify the Company as to which Participants will need to be so
restricted. The Company will direct the transfer agent to place stop
transfer restrictions upon such securities for such period of time.
(k) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Shares
Program and stamp duties, similar taxes or duties or other taxes, if
any, incurred by the underwriters in connection with the Directed Share
Program.
Furthermore, the Company covenants with the Underwriters that the
Company will comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered, if any, in connection with the Directed
Share Program.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of Arthur
Andersen LLP confirming that they are independent public accountants
within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published Rules
and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of
Auditing Standards No. 71, Interim Financial Information, on the
unaudited financial statements included in the Registration
Statements;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial
statements of the Company, inquiries of officials of the Company
who have responsibility for financial and accounting matters and
other specified procedures, nothing came to their attention that
caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statements do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the related published Rules and Regulations or
any material modifications should be made to such unaudited
financial statements for them to be in conformity with
generally accepted accounting principles;
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(B) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not
more than three business days prior to the date of such
letter, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of the
Company or, at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net assets, as compared with amounts shown on the
latest balance sheet included in the Prospectus; or
(C) for the period from the closing date of the latest
income statement included in the Prospectus to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year and with the period
of corresponding length ended the date of the latest income
statement included in the Prospectus, in consolidated net
sales or net operating income or in the total or per share
amounts of consolidated income before extraordinary items or
net income,
except in all cases set forth in clauses (B) and (C) above for changes,
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case
to the extent that such dollar amounts, percentages and other
financial information are derived from the general accounting
records of the Company and its subsidiaries subject to the
internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation)
with the results obtained from inquiries, a reading of such
general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except
as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "REGISTRATION STATEMENTS" shall mean the initial registration
statement as proposed to be amended by the amendment or post-effective amendment
to be filed shortly prior to its Effective Time, (ii) if the Effective Time of
the Initial Registration Statement is prior to the execution and delivery of
this Agreement but the Effective Time of the Additional Registration is
subsequent to such execution and delivery, "REGISTRATION STATEMENTS" shall mean
the Initial Registration Statement and the additional registration statement as
proposed to be filed or as proposed to be amended by the post-effective
amendment to be filed shortly prior to its Effective Time, and (iii)
"PROSPECTUS" shall mean the prospectus included in the Registration Statements.
(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or such later date as shall have
been consented to by CSFBC. If the Effective Time of the Additional
Registration Statement (if any) is not prior to the execution and
delivery of this Agreement, such Effective Time shall have occurred not
later than 10:00 P.M., New York time, on the date of this Agreement or,
if earlier, the time the Prospectus is printed and distributed to any
Underwriter, or shall have occurred at such later date as shall have
been consented to by CSFBC. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, the Prospectus shall have been filed with the Commission in
accordance with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Company or the Representatives, shall be contemplated
by the Commission.
(c) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or
event involving a prospective change, in the condition (financial or
other), business, properties or results of operations of the Company
which, in the judgment of a majority in interest
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<PAGE>
of the Underwriters including the Representatives, is material and
adverse and makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Offered Securities; (ii) any material suspension or material limitation
of trading in securities generally on the New York Stock Exchange, or
any setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange
or in the over-the-counter market; (iii) any banking moratorium
declared by U.S. Federal or New York authorities; or (iv) any outbreak
or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of
a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated such
Closing Date, of Gray, Cary, Ware & Friedenrich LLP, counsel for the
Company, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its
business requires such qualification;
(ii) The authorized, issued and outstanding capital stock
of the Company as of December 31, 1999 is as set forth under the
heading "Actual" under the caption "Capitalization" in the
Prospectus. To our knowledge, based solely on an officers'
certificate provided to us by the Company, the authorized, issued
and outstanding capital stock of the Company as of December 31,
1999, as adjusted to reflect the issuance and sale by the Company
of the Offered Shares and, in the case of the "Pro Forma, As
Adjusted" column, assuming the conversion of outstanding shares of
the Company's preferred stock into Common Stock, would have been
as set forth under the heading "Pro Forma," and "Pro Forma, As
Adjusted" under the caption "Capitalization" in the Prospectus.
Since December 31, 1999, the Company has not issued any securities
other than (i) Common Stock of the Company pursuant to the
exercise of previously outstanding and privately granted options
pursuant to the 1997 Stock Option Plan (the "Plan"), and (ii)
options granted pursuant to the Plan. To our knowledge, except as
described in the Registration Statement and the Prospectus, there
are no outstanding securities of the Company convertible or
exchangeable into, or evidencing the right to purchase or
subscribe for, any shares of capital stock of the Company and
there are no outstanding or authorized options, warrants or rights
of a similar character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into, or evidencing the right to purchase or subscribe for, any
shares of such stock, except as disclosed in the Prospectus. The
outstanding options relating to the Common Stock have been duly
authorized and validly issued in accordance with applicable United
States federal and Delaware and California state laws and each of
the Plan and the stock options granted by the Company in
accordance with the Plan conforms in all material respects to the
descriptions thereof contained in the Registration Statement and
the Prospectus;
(iii) the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the
description thereof contained in the Prospectus; and the
stockholders of the Company and other third parties have no
preemptive rights with respect to the Securities;
(iv) There are no contracts, agreements or understandings
known to such counsel between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or
to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in
any securities being registered pursuant to any other registration
statement
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<PAGE>
filed by the Company under the Act, except for such rights which
have been waived with respect to the filing of the Registration
Statements;
(v) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of
the proceeds thereof as described in the Prospectus, will not be
an "investment company" as defined in the Investment Company Act
of 1940.
(vi) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated by
this Agreement in connection with the issuance or sale of the
Offered Securities by the Company, except such as have been
obtained and made under the Act and the Exchange Act and such as
may be required under state securities laws;
(vii) The execution, delivery and performance of this
Agreement and the issuance and sale of the Offered Securities will
not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body or
any court having jurisdiction over the Company or any of its
properties, or any agreement or instrument to which the Company is
a party or by which the Company is bound or to which any of the
properties of the Company is subject, or the charter or by-laws of
the Company, and the Company has full power and authority to
authorize, issue and sell the Offered Securities as contemplated
by this Agreement;
(viii) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in such
opinion, the Additional Registration Statement (if any) was filed
and became effective under the Act as of the date and time (if
determinable) specified in such opinion, the Prospectus either was
filed with the Commission pursuant to the subparagraph of Rule
424(b) specified in such opinion on the date specified therein or
was included in the Initial Registration Statement or the
Additional Registration Statement (as the case may be), and, to
the best of the knowledge of such counsel, no stop order
suspending the effectiveness of a Registration Statement or any
part thereof has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the Act,
and each Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective
or issue dates, complied as to form in all material respects with
the requirements of the Act and the Rules and Regulations; such
counsel have no reason to believe that any part of a Registration
Statement or any amendment thereto, as of its effective date or as
of such Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto, as
of its issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; the
descriptions in the Registration Statements and Prospectus of
statutes, legal and governmental proceedings and contracts and
other documents are accurate and fairly present the information
required to be shown; and such counsel do not know of any legal or
governmental proceedings required to be described in a
Registration Statement or the Prospectus which are not described
as required or of any contracts or documents of a character
required to be described in a Registration Statement or the
Prospectus or to be filed as exhibits to a Registration Statement
which are not described and filed as required; it being understood
that such counsel need express no opinion as to the financial
statements or other financial data derived from such financial
statements contained in the Registration Statements or the
Prospectus; and
(ix) This Agreement has been duly authorized, executed and
delivered by the Company.
(x) The Agreement and Plan of Merger has been duly
authorized by all necessary board of directors and stockholder
action on the part of the Company and iPrint and has been duly
executed and
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<PAGE>
delivered by each of the parties thereto. The execution and
delivery of the Plan of Merger and the consummation of the merger
contemplated thereby does not contravene any provision of
applicable federal, California or Delaware corporate law or the
certificate of incorporation or bylaws of the Company or the
certificate of incorporation or bylaws of iPrint, or, to the
knowledge of such counsel, any judgment or decree of any
governmental body, agency or court having jurisdiction over the
Company or iPrint, and no consent, approval, authorization or
order of or qualification with any governmental body or agency is
required for the performance by the Company and iPrint of its
obligations under the Plan of Merger except such as have been
obtained. The merger contemplated by the Plan of Merger is
effective under the laws of the State of California and the State
of Delaware.
(xi) All of the Securities have been duly authorized and
accepted for quotation on the Nasdaq National Market, subject to
official notice of issuance.
(xii) The information required to be set forth in the
Registration Statement under the captions "Description of Capital
Stock," and "Business -- Legal Proceedings" is to our knowledge
accurately and adequately set forth therein in all material
respects.
(xiii) To our knowledge, all holders of securities of the
Company having rights to the registration of shares of Common
Stock, or other securities, because of the filing of the
Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration
Statement;
(xiv) [Except as disclosed in the Prospectus] to our
knowledge, the Company has not received any notice of infringement
of or conflict with asserted rights of any third party's material
patents, patent rights, licenses, inventions, copyrights,
know-how, (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, system or
procedures), trademarks, service marks and trade names that,
singly or in the aggregate, if the subject of an unfavorable
decisions, ruling or finding, would result in any material adverse
effect on the business, properties, operations, conditions
(financial or otherwise) or results of operations on the Company.
(e) The Representatives shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriters, such opinion
or opinions, dated such Closing Date, with respect to the incorporation
of the Company, the validity of the Offered Securities delivered on
such Closing Date, the Registration Statements, the Prospectus and
other related matters as the Representatives may require, and the
Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(f) The Representatives shall have received a certificate, dated
such Closing Date, of the Chief Executive Officer or any Vice President
and a principal financial or accounting officer of the Company in which
such officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance
with Rule 111(a) or (b) under the Act, prior to the time the Prospectus
was printed and distributed to any Underwriter; and, subsequent to the
dates of the most recent financial statements in the Prospectus, there
has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company except as set forth in or contemplated by the Prospectus or
as described in such certificate.
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<PAGE>
(g) The Representatives shall have received a letter, dated such
Closing Date, of Arthur Andersen LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred
to in such subsection will be a date not more than three days prior to
such Closing Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify
and hold harmless, on an after-tax basis, each Underwriter, its partners,
directors and officers and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon 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,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
solely upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.
The Company agrees to indemnify and hold harmless, on an after-tax
basis, the Designated Underwriter and each person, if any, who controls the
Designated Underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act (the "DESIGNATED ENTITIES"), from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) (i) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
material prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of
Directed Shares that the Participant agreed to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program, other than
losses, claims, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless, on an after-tax basis, the Company, its directors and officers and
each person, if any who controls the Company within the meaning of Section 15 of
the Act, against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
solely upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement, the Prospectus, or any amendment
or supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in
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<PAGE>
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Underwriter consists of
(i) the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the _____
paragraph under the caption "Underwriting" and the information contained in the
______ paragraph regarding sales to discretionary accounts and the _______
paragraph relating to stabilization under the caption "Underwriting"; and (ii)
the following information in the Prospectus furnished on behalf of BancBoston
Robertson Stephens Inc. contained in the________paragraph.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding anything contained herein to
the contrary, if indemnity may be sought pursuant to the last paragraph in
Section 7(a) hereof in respect of such action or proceeding, then in addition to
such separate firm for the indemnified parties, the indemnifying party shall be
liable for the reasonable fees and expenses of not more than one separate firm
(in addition to any local counsel) for the Designated Underwriter for the
defense of any losses, claims, damages and liabilities arising out of the
Directed Share Program, and all persons, if any, who control the Designated
Underwriter within the meaning of either Section 15 of the Act of Section 20 of
the Exchange Act. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such settlement (i) includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such action and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act by or on behalf of an indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the
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total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters
default in their obligations to purchase Offered Securities hereunder on either
the First or any Optional Closing Date and the aggregate number of shares of
Offered Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total number of shares of Offered
Securities that the Underwriters are obligated to purchase on such Closing Date,
CSFBC may make arrangements satisfactory to the Company for the purchase of such
Offered Securities by other persons, including any of the Underwriters, but if
no such arrangements are made by such Closing Date, the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Offered Securities that such defaulting
Underwriters agreed but failed to purchase on such Closing Date. If any
Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC and the Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company, except as provided in Section 9 (provided that if such default occurs
with respect to Optional Securities after the First Closing Date, this Agreement
will not terminate as to the Firm Securities or any Optional Securities
purchased prior to such termination). As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the
Offered Securities by the Underwriters is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5 and the respective obligations of the Company and the Underwriters
pursuant to Section 7 shall remain in effect, and if any Offered Securities have
been purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (ii), (iii) or (iv) of
Section 6(c), the Company will reimburse the Underwriters for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, with a copy to Skadden, Arps, Slate,
Meagher & Flom LLP, 525 University Avenue, Palo Alto, California
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94131, Attention: Gregory C. Smith, or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at , Attention: ; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. REPRESENTATION OF UNDERWRITERS. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
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If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
iPRINT.COM, iNC.
By...............................
Name:
Title:
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
U.S. BANCORP PIPER JAFFRAY, INC.
BANCBOSTON ROBERTSON STEPHENS, INC.
Acting on behalf of themselves and as the
Representatives of the several Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
By...............................................
Name:
Title:
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SCHEDULE A
NUMBER OF
UNDERWRITER FIRM SECURITIES
----------- ---------------
Credit Suisse First Boston Corporation [$]
U.S. Bancorp Piper Jaffray, Inc.
BancBoston Robertson Stephens, Inc.
---------------
Total [$]
===============
20
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RESTATED CERTIFICATE OF INCORPORATION
OF
DELAWARE IPRINT, INC.
(Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware)
Delaware iPrint, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware on November 12, 1999, (the
"Corporation") certifies as follows:
1. The Corporation's Restated Certificate of Incorporation was duly
adopted by the Board of Directors and sole stockholder by written consent in
accordance with Sections 242 and 245 of the General Corporation Law.
2. The Corporation's Certificate of Incorporation is restated to read
in full as follows:
FIRST: The name of the Corporation is Delaware iPrint, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Incorporating Services, Ltd., 15 East North
Street, in the City of Dover, County of Kent. The name of the
registered agent at that address is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH:
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 134,806,164
consisting of 100,000,000 shares of Common Stock, par value
one-tenth of one cent ($0.001) per share (the "Common Stock")
and 34,806,164 shares of Preferred Stock, par value one-tenth
of one cent ($0.001) per share (the "Preferred Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences, and
rights of the shares of each such series and any qualifications,
limitations or restrictions thereon. The number of authorized
shares of Preferred Stock may be increased or decreased (but
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not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock
without a vote of the holders of the Preferred Stock, or of any
series thereof, unless a vote of any such holders is required
pursuant to the certificate or certificates establishing the
series of Preferred Stock.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and
for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to
the powers and authority expressly conferred upon them by statute
or by this Certificate of Incorporation or the Bylaws of the
Corporation, the directors are hereby empowered to exercise all
such powers and do all such acts and things as may be exercised
or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
C. On and after the closing date of the first sale of the
Corporation's Common Stock pursuant to a firmly underwritten
registered public offering (the "IPO"), any action required or
permitted to be taken by the stockholders of the Corporation must
be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders. Prior to such sale,
unless otherwise provided by law, any action which may otherwise
be taken at any meeting of the stockholders may be taken without
a meeting and without prior notice, if a written consent
describing such actions is signed by the holders of outstanding
shares having not less than the minimum number of votes which
would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and
voted.
D. Special meetings of stockholders of the Corporation may be called
only (1) by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is
presented to the Board for adoption) or (2) by the holders of not
less than ten percent (10%) of all of the shares entitled to cast
votes at the meeting.
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SIXTH:
A. The number of directors shall initially be set at five (5) and,
thereafter, shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority
of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption).
Upon the closing of the IPO, the directors shall be divided into
three classes with the term of office of the first class
(Class I) to expire at the first annual meeting of the
stockholders following the IPO; the term of office of the second
class (Class II) to expire at the second annual meeting of
stockholders held following the IPO; the term of office of the
third class (Class III) to expire at the third annual meeting of
stockholders; and thereafter for each such term to expire at each
third succeeding annual meeting of stockholders after such
election. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, a vacancy resulting from the
removal of a director by the stockholders as provided in
Article SIXTH, Section C below may be filled at a special meeting
of the stockholders held for that purpose. All directors shall
hold office until the expiration of the term for which elected,
and until their respective successors are elected, except in the
case of the death, resignation, or removal of any director.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death,
resignation or other cause (other than removal from office by a
vote of the stockholders) may be filled only by a majority vote
of the directors then in office, though less than a quorum, and
directors so chosen shall hold office for a term expiring at the
next annual meeting of stockholders at which the term of office
of the class to which they have been elected expires, and until
their respective successors are elected, except in the case of
the death, resignation, or removal of any director. No decrease
in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
C. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, with or
without cause, but only by the affirmative vote of the holders of
at least a majority of the voting power of all of the then
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together
as a single class. Vacancies in the Board of Directors resulting
from such removal may be filled by a majority of the directors
then in office, though less than a quorum, or by the stockholders
as provided in Article SIXTH, Section A above. Directors so
chosen shall hold office for a term expiring
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at the next annual meeting of stockholders at which the term
of office of the class to which they have been elected
expires, and until their respective successors are elected,
except in the case of the death, resignation, or removal of
any director.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
repeal Bylaws of the Corporation. Any adoption, amendment or
repeal of Bylaws of the Corporation by the Board of Directors
shall require the approval of a majority of the total number of
authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the
Board). The stockholders shall also have power to adopt, amend
or repeal the Bylaws of the Corporation. Any adoption, amendment
or repeal of Bylaws of the Corporation by the stockholders shall
require, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then outstanding shares of the capital
stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability
of a director, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this
Article EIGHTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
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NINTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the
manner prescribed by the laws of the State of Delaware and all
rights conferred upon stockholders are granted subject to this
reservation; PROVIDED, HOWEVER, that, notwithstanding any other
provision of this Certificate of Incorporation or any provision
of law which might otherwise permit a lesser vote or no vote, but
in addition to any vote of the holders of any class or series of
the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least 66-2/3% of the voting power of all of the then
outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal
this Article NINTH, Article FIFTH, Article SIXTH, Article SEVENTH
or Article EIGHTH.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate
to be signed by a duly authorized officer on this __ day of _____________, 2000.
DELAWARE IPRINT, INC.
By: /s/ James P. McCormick
----------------------------------
James P. McCormick, Secretary
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BYLAWS
OF
DELAWARE IPRINT, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I STOCKHOLDERS...........................................................................................1
Section 1.1 Annual Meeting.........................................................................1
Section 1.2 Special Meetings.......................................................................1
Section 1.3 Notice of Meetings.....................................................................1
Section 1.4 Quorum.................................................................................2
Section 1.5 Conduct of the Stockholders' Meeting...................................................2
Section 1.6 Conduct of Business....................................................................2
Section 1.7 Notice of Stockholder Business.........................................................2
Section 1.8 Proxies and Voting.....................................................................3
Section 1.9 Stock List.............................................................................4
ARTICLE II BOARD OF DIRECTORS....................................................................................4
Section 2.1 Number and Term of Office..............................................................4
Section 2.2 Vacancies and Newly Created Directorships..............................................4
Section 2.3 Removal................................................................................5
Section 2.4 Regular Meetings.......................................................................5
Section 2.5 Special Meetings.......................................................................5
Section 2.6 Quorum.................................................................................5
Section 2.7 Participation in Meetings by Conference Telephone......................................5
Section 2.8 Conduct of Business....................................................................5
Section 2.9 Powers.................................................................................6
Section 2.10 Compensation of Directors..............................................................6
Section 2.11 Nomination of Director Candidates......................................................6
ARTICLE III COMMITTEES...........................................................................................7
Section 3.1 Committees of the Board of Directors...................................................7
Section 3.2 Conduct of Business....................................................................8
ARTICLE IV OFFICERS..............................................................................................8
Section 4.1 Generally..............................................................................8
Section 4.2 Chairman of the Board..................................................................8
Section 4.3 President..............................................................................8
Section 4.4 Vice President.........................................................................9
Section 4.5 Treasurer..............................................................................9
Section 4.6 Secretary..............................................................................9
Section 4.7 Delegation of Authority................................................................9
Section 4.8 Removal................................................................................9
Section 4.9 Action With Respect to Securities of Other Corporations................................9
ARTICLE V STOCK..................................................................................................9
Section 5.1 Certificates of Stock..................................................................9
Section 5.2 Transfers of Stock....................................................................10
Section 5.3 Record Date...........................................................................10
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Section 5.4 Lost, Stolen or Destroyed Certificates................................................10
Section 5.5 Regulations...........................................................................10
ARTICLE VI NOTICES..............................................................................................10
Section 6.1 Notices...............................................................................10
Section 6.2 Waivers...............................................................................10
ARTICLE VII MISCELLANEOUS.......................................................................................11
Section 7.1 Facsimile Signatures..................................................................11
Section 7.2 Corporate Seal........................................................................11
Section 7.3 Reliance Upon Books, Reports and Records..............................................11
Section 7.4 Fiscal Year...........................................................................11
Section 7.5 Time Periods..........................................................................11
ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................11
Section 8.1 Right to Indemnification..............................................................11
Section 8.2 Right of Claimant to Bring Suit.......................................................12
Section 8.3 Non-Exclusivity of Rights.............................................................13
Section 8.4 Indemnification Contracts.............................................................13
Section 8.5 Insurance.............................................................................13
Section 8.6 Effect of Amendment...................................................................13
ARTICLE IX AMENDMENTS...........................................................................................13
Section 9.1 Amendment of Bylaws...................................................................13
</TABLE>
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DELAWARE IPRINT, INC.
A DELAWARE CORPORATION
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1.1 ANNUAL MEETING. An annual meeting of the stockholders,
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen months
subsequent to the later of the date of incorporation or the last annual
meeting of stockholders.
Section 1.2 SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes prescribed in the notice of the meeting, may be
called only (i) by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors (whether or not there
exists any vacancies in previously authorized directorships at the time any
such resolution is presented to the Board of Directors for adoption) or (ii)
by the holders of not less than 10% of all shares entitled to cast votes at
the meeting, voting together as a single class and shall be held at such
place, on such date, and at such time as they shall fix. Business transacted
at special meetings shall be confined to the purpose or purposes stated in
the notice.
Upon request in writing sent by registered mail to the president or
chief executive officer by any stockholder or stockholders entitled to call a
special meeting of stockholders pursuant to this Section 1.2, the board of
directors shall determine a place and time for such meeting, which time shall
be not less than one hundred twenty (120) nor more than one hundred thirty
(130) days after the receipt of such request, and a record date for the
determination of stockholders entitled to vote at such meeting shall be fixed
by the board of directors, in advance, which shall not be more that 60 days
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. Following such receipt of a request and
determination of the validity of the request, it shall be the duty of the
secretary to cause notice to be given to the stockholders entitled to vote
at such meeting, in the manner set forth in Section 1.3 hereof, that a
meeting will be held at the place and time so determined. Business transacted
at special meetings shall be confined to the purpose or purposes stated in
the notice.
Section 1.3 NOTICE OF MEETINGS. Written notice of the place, date,
and time of all meetings of the stockholders shall be given, not less than
ten (10) nor more than sixty (60) days before the date on which the meeting
is to be held, to each stockholder entitled to vote at such meeting, except
as otherwise provided herein or required by law (meaning, here and
hereinafter, as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation of the Corporation).
<PAGE>
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 1.4 QUORUM. At any meeting of the stockholders, the holders
of a majority of all of the shares of the stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held
with those present constituting a quorum, then except as otherwise required
by law, those present at such adjourned meeting shall constitute a quorum,
and all matters shall be determined by a majority of the votes cast at such
meeting.
Section 1.5 CONDUCT OF THE STOCKHOLDERS' MEETING. At every meeting
of the stockholders, the Chairman, if there is such an officer, or if not,
the President of the Corporation, or in his absence the Vice President
designated by the President, or in the absence of such designation any Vice
President, or in the absence of the President or any Vice President, a
chairman chosen by the majority of the voting shares represented in person or
by proxy, shall act as Chairman. The Secretary of the Corporation or a person
designated by the Chairman shall act as Secretary of the meeting. Unless
otherwise approved by the Chairman, attendance at the stockholders' meeting
is restricted to stockholders of record, persons authorized in accordance
with Section 8 of these Bylaws to act by proxy, and officers of the
Corporation.
Section 1.6 CONDUCT OF BUSINESS. The Chairman shall call the meeting
to order, establish the agenda, and conduct the business of the meeting in
accordance therewith or, at the Chairman's discretion, it may be conducted
otherwise in accordance with the wishes of the stockholders in attendance.
The date and time of the opening and closing of the polls for each matter
upon which the stockholders will vote at the meeting shall be announced at
the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule
on the precedence of and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the
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procedures set forth in this Section 1.6 and Section 1.7, below. The Chairman
of a meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 1.6 and Section 1.7, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 1.7 NOTICE OF STOCKHOLDER BUSINESS. At an annual or special
meeting of the stockholders, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before
a meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
(b) properly brought before the meeting by or at the direction of the Board
of Directors, (c) properly brought before an annual meeting by a stockholder,
or (d) properly brought before a special meeting by a stockholder, but if,
and only if, the notice of a special meeting provides for business to be
brought before the meeting by stockholders. For business to be properly
brought before a meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder proposal to be presented at an annual meeting shall be
received at the Corporation's principal executive offices not less than 120
calendar days in advance of the date that the Corporation's (or the
Corporation's predecessor's) proxy statement was released to stockholders in
connection with the previous year's annual meeting of stockholders, except
that if no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, or in the
event of a special meeting, notice by the stockholder to be timely must be
received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual or
special meeting (a) a brief description of the business desired to be brought
before the annual or special meeting and the reasons for conducting such
business at the special meeting, (b) the name and address, as they appear on
the Corporation's books, of the stockholder proposing such business, (c) the
class and number of shares of the Corporation which are beneficially owned by
the stockholder, and (d) any material interest of the stockholder in such
business.
Section 1.8 PROXIES AND VOTING. At any meeting of the stockholders,
every stockholder entitled to vote may vote in person or by proxy authorized
by an instrument in writing or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. No stockholder may
authorize more than one proxy for his shares.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his or her name on the record date
for the meeting, except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting
where otherwise required by law, may be by a voice vote; provided, however,
that upon demand therefor by a stockholder entitled to vote or his or her
proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the stockholder or proxy
voting and such other information as may be required under the procedure
established for the meeting. Every vote
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taken by ballots shall be counted by an inspector or inspectors appointed by
the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast.
Section 1.9 STOCK LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the
number of shares registered in his or her name, shall be open to the
examination of any such stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten (10) days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not
so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number
of shares held by each of them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 NUMBER AND TERM OF OFFICE. The number of directors shall
initially be five (5) and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any
such resolution is presented to the Board for adoption). Upon the closing of
the first sale of the Corporation's common stock pursuant to a firmly
underwritten registered public offering (the "IPO"), the directors shall be
divided into three classes, with the term of office of the first class to
expire at the first annual meeting of stockholders held after the IPO, the
term of office of the second class to expire at the second annual meeting of
stockholders held after the IPO, the term of office of the third class to
expire at the third annual meeting of stockholders held after the IPO and
thereafter for each such term to expire at each third succeeding annual
meeting of stockholders after such election. A vacancy resulting from the
removal of a director by the stockholders as provided in Article II, Section
2.3 below may be filled at special meeting of the stockholders held for that
purpose. All directors shall hold office until the expiration of the term for
which elected and until their respective successors are elected, except in
the case of the death, resignation or removal of any director.
Section 2.2 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification or other cause (other than removal
from office by a vote of the stockholders) may be filled only by a majority vote
of the directors then in office, though less than a quorum, and directors so
chosen shall hold office for a
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term expiring at the next annual meeting of stockholders. No decrease in the
number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
Section 2.3 REMOVAL. Subject to the rights of holders of any series
of Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, with or without cause, but
only by the affirmative vote of the holders of at least a majority of the
voting power of all of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class. Vacancies in the Board of Directors resulting
from such removal may be filled by a majority of the directors then in
office, though less than a quorum, or by the stockholders as provided in
Article II, Section 2.1 above. Directors so chosen shall hold office until
the new annual meeting of stockholders.
Section 2.4 REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such place or places, on such date or dates, and
at such time or times as shall have been established by the Board of
Directors and publicized among all directors. A notice of each regular
meeting shall not be required.
Section 2.5 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by one-third of the directors then in office (rounded
up to the nearest whole number) or by the chief executive officer and shall
be held at such place, on such date, and at such time as they or he or she
shall fix. Notice of the place, date, and time of each such special meeting
shall be given each director by whom it is not waived by mailing written
notice not fewer than five (5) days before the meeting or by telegraphing or
personally delivering the same not fewer than twenty-four (24) hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
Section 2.6 QUORUM. At any meeting of the Board of Directors, a
majority of the total number of authorized directors shall constitute a
quorum for all purposes. If a quorum shall fail to attend any meeting, a
majority of those present may adjourn the meeting to another place, date, or
time, without further notice or waiver thereof.
Section 2.7 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 2.8 CONDUCT OF BUSINESS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the
vote of a majority of the directors present, except as otherwise provided
herein or requited by law. Action may be taken by the Board of Directors
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors.
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Section 2.9 POWERS. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(a) To declare dividends from time to time in accordance with
law;
(b) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(d) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(e) To confer upon any officer of the Corporation the power
to appoint, remove and suspend subordinate officers, employees and agents;
(f) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(g) To adopt from time to time such insurance, retirement,
and other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(h) To adopt from time to time regulations, not inconsistent
with these bylaws, for the management of the Corporation's business and
affairs.
Section 2.10 COMPENSATION OF DIRECTORS. Directors, as such, may
receive, pursuant to resolution of the Board of Directors, fixed fees and
other compensation for their services as directors, including, without
limitation, their services as members of committees of the Board of Directors.
Section 2.11 NOMINATION OF DIRECTOR CANDIDATES. Subject to the
rights of holders of any class or series of Preferred Stock then outstanding,
nominations for the election of Directors may be made by the Board of
Directors or a proxy committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally. However,
any stockholder entitled to vote in the election of Directors generally may
nominate one or more persons for election as Directors at a meeting only if
timely notice of such stockholder's intent to make such nomination or
nominations has been given in writing to the Secretary of the Corporation. To
be timely, a stockholder nomination for a director to be elected at an annual
meeting shall be received at the Corporation's principal executive offices
not less than 120 calendar days in advance of the date that the Corporation's
(or the Corporation's Predecessor's) Proxy statement was released to
stockholders in connection with the previous year's annual
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meeting of stockholders, except that if no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than
30 calendar days from the date contemplated at the time of the previous
year's proxy statement, or in the event of a nomination for director to be
elected at a special meeting, notice by the stockholders to be timely must be
received not later than the close of business on the tenth day following the
day on which such notice of the date of the special meeting was mailed or
such public disclosure was made. Each such notice shall set forth: (a) the
name and address of the stockholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to
vote for the election of Directors on the date of such notice and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as a director of the Corporation if so elected.
In the event that a person is validly designated as a nominee in
accordance with this Section 2.11 and shall thereafter become unable or
unwilling to stand for election to the Board of Directors, the Board of
Directors or the stockholder who proposed such nominee, as the case may be,
may designate a substitute nominee upon delivery, not fewer than five days
prior to the date of the meeting for the election of such nominee, of a
written notice to the Secretary setting forth such information regarding such
substitute nominee as would have been required to be delivered to the
Secretary pursuant to this Section 2.11 had such substitute nominee been
initially proposed as a nominee. Such notice shall include a signed consent
to serve as a director of the Corporation, if elected, of each such
substitute nominee.
If the chairman of the meeting for the election of Directors
determines that a nomination of any candidate for election as a Director at
such meeting was not made in accordance with the applicable provisions of
this Section 2.11, such nomination shall be void; provided, however, that
nothing in this Section 2.11 shall be deemed to limit any voting rights upon
the occurrence of dividend arrearages provided to holders of Preferred Stock
pursuant to the Preferred Stock designation for any series of Preferred Stock.
ARTICLE III
COMMITTEES
Section 3.1 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors, by a vote of a majority of the whole Board, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent or disqualified member
at any meeting of the
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committee. Any committee so designated may exercise the power and authority
of the Board of Directors to declare a dividend, to authorize the issuance of
stock or to adopt a certificate of ownership and merger pursuant to Section
253 of the Delaware General Corporation Law if the resolution which
designates the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any member
of any committee and any alternate member in his place, the member or members
of the committee present at the meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may by unanimous vote
appoint another member of the Board of Directors to act at the meeting in the
place of the absent or disqualified member.
Section 3.2 CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the authorized members shall constitute a quorum unless the
committee shall consist of one or two members, in which event one member
shall constitute a quorum; and all matters shall be determined by a majority
vote of the members present. Action may be taken by any committee without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of such committee.
ARTICLE IV
OFFICERS
Section 4.1 GENERALLY. The officers of the Corporation shall consist
of a President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of Directors, a
Chairman of the Board and such other officers as may from time to time be
appointed by the Board of Directors. Officers shall be elected by the Board
of Directors, which shall consider that subject at its first meeting after
every annual meeting of stockholders. Each officer shall hold office until
his or her successor is elected and qualified or until his or her earlier
resignation or removal. The Chairman of the Board, if there shall be such an
officer, and the President shall each be members of the Board of Directors.
Any number of offices may he held by the same person.
Section 4.2 CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors, and exercise and perform such other powers and duties
as may be from time to time assigned to him by the Board of Directors or
prescribed by these bylaws.
Section 4.3 PRESIDENT. The President shall be the chief executive
officer of the Corporation. Subject to the provisions of these bylaws and to
the direction of the Board of Directors, he or she shall have the
responsibility for the general management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him or her by the Board of Directors. He or she shall have power
to sign all stock certificates, contracts and
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other instruments of the Corporation which are authorized and shall have
general supervision and direction of all of the other officers, employees and
agents of the Corporation.
Section 4.4 VICE PRESIDENT. Each Vice President shall have such
powers and duties as may be delegated to him or her by the Board of
Directors. One Vice President shall be designated by the Board to perform the
duties and exercise the powers of the President in the event of the
President's absence or disability.
Section 4.5 TREASURER. Unless otherwise designated by the Board of
Directors, the Chief Financial Officer of the Corporation shall be the
Treasurer. The Treasurer shall have the responsibility for maintaining the
financial records of the Corporation and shall have custody of all monies and
securities of the Corporation. He or she shall make such disbursements of the
funds of the Corporation as are authorized and shall render from time to time
an account of all such transactions and of the financial condition of the
Corporation. The Treasurer shall also perform such other duties as the Board
of Directors may from time to time prescribe.
Section 4.6 SECRETARY. The Secretary shall issue all authorized
notices for, and shall keep, or cause to be kept, minutes of all meetings of
the stockholders, the Board of Directors, and all committees of the Board of
Directors. He or she shall have charge of the corporate books and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
Section 4.7 DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other
officers or agents, notwithstanding any provision hereof.
Section 4.8 REMOVAL. Any officer of the Corporation may be removed
at any time, with or without cause, by the Board of Directors.
Section 4.9 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy,
at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such
other corporation.
ARTICLE V
STOCK
Section 5.1 CERTIFICATES OF STOCK. Each stockholder shall be
entitled to a certificate signed by, or in the name of the Corporation by,
the President or a Vice President, and by the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer, certifying the number
of shares owned by him or her. Any of or all the signatures on the
certificate may be facsimile.
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Section 5.2 TRANSFERS OF STOCK. Transfers of stock shall be made
only upon the transfer books of the Corporation kept at an office of the
Corporation or by transfer agents designated to transfer shares of the stock
of the Corporation. Except where a certificate is issued in accordance with
Section 4 of Article V of these bylaws, an outstanding certificate for the
number of shares involved shall be surrendered for cancellation before a new
certificate is issued therefor.
Section 5.3 RECORD DATE. The Board of Directors may fix a record
date, which shall not be more than sixty (60) nor fewer than ten (10) days
before the date of any meeting of stockholders, nor more than sixty (60) days
prior to the time for the other action hereinafter described, as of which
there shall be determined the stockholders who are entitled: to notice of or
to vote at any meeting of stockholders or any adjournment thereof; to receive
payment of any dividend or other distribution or allotment of any rights; or
to exercise any rights with respect to any change, conversion or exchange of
stock or with respect to any other lawful action.
Section 5.4 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of
the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such regulations as the Board of Directors
may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5.5 REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI
NOTICES
Section 6.1 NOTICES. Except as otherwise specifically provided
herein or required by law, all notices required to be given to any
stockholder, director, officer, employee or agent shall be in writing and may
in every instance be effectively given by hand delivery to the recipient
thereof, by depositing such notice in the mails, postage paid, or by sending
such notice by prepaid telegram, mailgram, telecopy or commercial courier
service. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same
appears on the books of the Corporation. The time when such notice shall be
deemed to be given shall be the time such notice is received by such
stockholder, director, officer, employee or agent, or by any person accepting
such notice on behalf of such person, if hand delivered, or the time such
notice is dispatched, if delivered through the mails or be telegram or
mailgram.
Section 6.2 WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after
the time of the event for which notice is to be given, shall be deemed
equivalent to the notice required to be given to such stockholder, director,
officer, employee or agent. Neither the business nor the purpose of any
meeting need be specified in such a waiver.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 FACSIMILE SIGNATURES. In addition to the provisions for
use of facsimile signatures elsewhere specifically authorized in these
bylaws, facsimile signatures of any officer or officers of the Corporation
may be used whenever and as authorized by the Board of Directors or a
committee thereof.
Section 7.2 CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of
Directors or a committee thereof, duplicates of the seal may be kept and used
by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 7.3 RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records
of the Corporation, including reports made to the Corporation by any of its
officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
Section 7.4 FISCAL YEAR. The fiscal year of the Corporation shall be
as fixed by the Board of Directors.
Section 7.5 TIME PERIODS. In applying any provision of these bylaws
which require that an act be done or not done a specified number of days
prior to an event or that an act be done during a period of a specified
number of days prior to an event, calendar days shall be used, the day of the
doing of the act shall be excluded, and the day of the event shall be
included.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.1 RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person of whom he
or she is the legal representative, is or was a director, officer or employee
of the Corporation or is or was serving at the request of the Corporation as
a director, officer or employee of another corporation, or of a Partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer or employee or in any
other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by Delaware Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than said Law permitted the Corporation to provide prior to such amendment)
against all expenses, liability and
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loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties, amounts paid or to be paid in settlement and amounts expended in
seeking indemnification granted to such person under applicable law, this
bylaw or any agreement with the Corporation) reasonably incurred or suffered
by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer or employee
and shall inure to the benefit of his or her heirs, executors and
administrators; PROVIDED, HOWEVER, that, except as provided in Section 8.2 of
this Article VIII, the Corporation shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if (a) such indemnification is expressly
required to be made by law, (b) the action, suit or proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation, (c)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Delaware General
Corporation Law, or (d) the action, suit or proceeding (or part thereof) is
brought to establish or enforce a right to indemnification under an indemnity
agreement or any other statute or law or otherwise as required under Section
145 of the Delaware General Corporation Law. Such right shall be a contract
right and shall include the right to be paid by the Corporation expenses
incurred in defending any such proceeding in advance of its final
disposition; PROVIDED, HOWEVER, that, unless the Delaware General Corporation
Law then so prohibits, the payment of such expenses incurred by a director or
officer of the Corporation in his or her capacity as a director or officer
(and not in any other capacity in which service was or is tendered by such
person while a director or officer, including, without limitation. service to
an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it should be determined ultimately that such director
or officer is not entitled to be indemnified under this Section or otherwise.
Section 8.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
Section 1 of this Article VIII is not paid in full by the Corporation within
ninety (90) days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if such suit is not frivolous or
brought in bad faith, the claimant shall be entitled to be paid also the
expense of prosecuting such claim. The burden of proving such claim shall be
on the claimant. It shall be a defense to any such action (other then an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any, has been tendered to this Corporation) that the claimant
has not met the standards of conduct which make it permissible under the
Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
claimant has not met the applicable standard of conduct.
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Section 8.3 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person in Sections 1 and 2 shall not be exclusive of any other right which
such persons may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 8.4 INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VIII.
Section 8.5 INSURANCE. The Corporation shall maintain insurance to
the extent reasonably available, at its expense, to protect itself and any
such director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against
any such expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
Section 8.6 EFFECT OF AMENDMENT. Any amendment, repeal or
modification of any provision of this Article VIII by the stockholders and
the directors of the Corporation shall not adversely affect any right or
protection of a director or officer of the Corporation existing at the time
of such amendment, repeal or modification.
ARTICLE IX
AMENDMENTS
Section 9.1 AMENDMENT OF BYLAWS. The Board of Directors is expressly
empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors
shall require the approval of a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any resolution providing for adoption, amendment or
repeal is presented to the Board). The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment
or repeal of By-Laws of the Corporation by the stockholders shall require, in
addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class.
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CERTIFICATE OF SECRETARY
I hereby certify that I am the duly elected and acting Secretary of
Delaware iPrint, Inc., a Delaware corporation (the "Corporation"), and that
the foregoing Bylaws, comprising thirteen (13) pages, constitute the Bylaws
of the Corporation as duly adopted on ____________, 1999, by the unanimous
written consent of the Board of Directors of the Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name on
____________, 1999.
______________________________________
James P. McCormick
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CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
IPRINT.COM, INC.
iPrint.com, inc., a Delaware corporation (the "Corporation"), hereby
certifies:
1. That the Corporation's Board of Directors has duly adopted the
following resolutions:
RESOLVED, that the first paragraph of Article FOURTH of the Restated
Certificate of Incorporation is hereby amended to read in full as
follows:
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is
102,000,000 consisting of 100,000,000 shares of Common Stock,
par value one-tenth of one cent ($0.001) per share (the
"Common Stock") and 2,000,000 shares of Preferred Stock, par
value one-tenth of one cent ($0.001) per share (the "Preferred
Stock").
2. That the proposed amendment has been duly adopted by the Corporation's
Board of Directors and sole stockholder in accordance with the provisions of
Sections 242 and 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of Restated Certificate of Incorporation to be signed by a duly
authorized officer on this _____ day of February, 2000.
IPRINT.COM, INC.
By:
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iPRINT, INC.
1997 STOCK OPTION PLAN
(AS AMENDED EFFECTIVE ________, 1999)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The iPrint, Inc. 1997 Stock Option Plan
(the "PLAN"), established effective as of August 1, 1997, is hereby amended
effective as of the effective date of the initial registration by the Company of
its Stock under Section 12 of the Exchange Act.
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its shareholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Incentive
Stock Options shall be granted, if at all, within ten (10) years from the
earlier of the date that this Amended Plan is adopted by the Board or the date
that this Amended Plan is duly approved by the shareholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "BOARD" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.
(d) "COMPANY" means iPrint, Inc., a California
corporation, or any successor corporation thereto.
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(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services (other than as an
Employee or a Director) to a Participating Company, provided that the identity
of such person, the nature of such services or the entity to which such services
are provided would not preclude the Company from offering or selling securities
to such person pursuant to the Plan in reliance on registration on a Form S-8
Registration Statement under the Securities Act.
(f) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.
(g) "DISABILITY" means the inability of the Optionee,
in the opinion of a qualified physician acceptable to the Company, to perform
the major duties of the Optionee's position with the Participating Company group
because of the sickness or injury of the Optionee.
(h) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company and, with respect to any Incentive
Stock Option granted to such person, who is an employee for purposes of Section
422 of the Code; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
purposes of the Plan.
(i) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(j) "FAIR MARKET VALUE" means, as of any date, the
value of a share of Stock or other property as determined by the Board, in its
sole discretion, or by the Company, in its sole discretion, if such
determination is expressly allocated to the Company herein, subject to the
following:
(i) If, on such date, there is a public
market for the Stock, the Fair Market Value of a share of Stock shall be the
closing sale price of a share of Stock (or the mean of the closing bid and asked
prices of a share of Stock if the Stock is so quoted instead) as quoted on the
Nasdaq National Market, the Nasdaq Small-Cap Market or such other national or
regional securities exchange or market system constituting the primary market
for the Stock, as reported in the WALL STREET JOURNAL or such other source as
the Company deems reliable. If the relevant date does not fall on a day on which
the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public
market for the Stock, the Fair Market Value of a share of Stock shall be as
determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse.
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(k) "INCENTIVE STOCK OPTION" means an Option intended
to be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(l) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(m) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
(n) "OPTION" means a right to purchase Stock (subject
to adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(o) "OPTION AGREEMENT" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired upon
the exercise thereof. An Option Agreement may consist of a form of "Notice of
Grant of Stock Option" and a form of "Stock Option Agreement" incorporated
therein by reference, or such other form or forms as the Board may approve from
time to time.
(p) "OPTIONEE" means a person who has been granted
one or more Options.
(q) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(r) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(s) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.
(t) "RULE 16b-3" means Rule 16b-3 under the Exchange
Act, as amended from time to time, or any successor rule or regulation.
(u) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(v) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
the Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of
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absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the one hundred eighty-first (181st) day
following the commencement of such leave the Option shall thereafter be
treated as a Nonstatutory Stock Option (that is, an option not intended to be
an Incentive Stock Option within the meaning of Section 422(b) of the Code)
unless the Optionee's right to return to Service with the Participating
Company Group is guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or required by law, a
leave of absence shall not be treated as Service for purposes of determining
the Optionee's Vested Shares.. The Optionee's Service shall be deemed to have
terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination.
(w) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(x) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
(y) "TEN PERCENT OWNER OPTIONEE" means an Optionee
who, at the time an Option is granted to the Optionee, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board. All questions of interpretation of the Plan or of any
Option shall be determined by the Board, and such determinations shall be final
and binding upon all persons having an interest in the Plan or such Option. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, determination or election.
3.2 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
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3.3 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option;
(b) to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of
Stock or other property;
(d) to determine the terms, conditions and
restrictions applicable to each Option (which need not be identical) and any
shares acquired upon the exercise thereof, including, without limitation, (i)
the exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the Option, (iii) the method for satisfaction of
any tax withholding obligation arising in connection with the Option or such
shares, including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the exercisability of the Option or the vesting
of any shares acquired upon the exercise thereof, (v) the time of the expiration
of the Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, cancel, renew, reprice
or otherwise adjust the exercise price of, or grant a new Option in substitution
for, any Option or to waive any restrictions or conditions applicable to any
Option or any shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of Service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines
and policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take
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such other actions with respect to the Plan or any Option as the Board may
deem advisable to the extent consistent with the Plan and applicable law.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be five million (5,000,000), cumulatively
increased on January 1, 2001 and each January 1 thereafter by a number of shares
(the "ANNUAL INCREASE") equal to five percent (5%) of the number of shares of
Stock issued and outstanding on the immediately preceding December 31, and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof. Notwithstanding the foregoing, except as adjusted pursuant
to Section 4.2, the maximum aggregate number of shares of Stock that may be
issued pursuant to the exercise of Incentive Stock Options (the "ISO SHARE
LIMIT") shall not exceed five million (5,000,000), cumulatively increased on
January 1, 2001 and each January 1 thereafter until and including January 1,
2009 by that portion of the Annual Increase effective on such date which does
not exceed five million (5,000,000) shares. If an outstanding Option for any
reason expires or is terminated or canceled or shares of Stock acquired, subject
to repurchase, upon the exercise of an Option are repurchased by the Company,
the shares of Stock allocable to the unexercised portion of such Option, or such
repurchased shares of Stock, shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options, in the ISO Share Limit set
forth in Section 4.1, and in the exercise price per share of any outstanding
Options. If a majority of the shares which are of the same class as the shares
that are subject to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event, as
defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only
to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "EMPLOYEES," "CONSULTANTS" and "DIRECTORS" shall include prospective
Employees, prospective Consultants and prospective Directors to whom Options are
granted in connection with written offers of an
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employment or other service relationship with the Participating Company
Group. Eligible persons may be granted more than one (1) Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences service with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish. No Option or purported Option shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Option
Agreement. Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall
be established in the sole discretion of the Board; provided, however, that (a)
the exercise price per share for an Incentive Stock Option shall be not less
than the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) the exercise price per share for a Nonstatutory Stock Option
shall be not less than eighty-five percent (85%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option, and (c) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall have an
exercise price per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
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Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on which such
person commences Service with a Participating Company. Subject to the foregoing,
unless otherwise specified by the Board in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective date of
grant of the Option.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements with an underwriter
for the Company) not less than the exercise price, (iii) by the assignment of
the proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.
(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of shares of
Stock to the extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of the
Company's stock. Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of Stock unless such shares either
have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.
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(ii) CASHLESS EXERCISE. The Company
reserves, at any and all times, the right, in the Company's sole and absolute
discretion, to establish, decline to approve or terminate any program or
procedures for the exercise of Options by means of a Cashless Exercise.
(iii) PAYMENT BY PROMISSORY NOTE. No
promissory note shall be permitted if the exercise of an Option using a
promissory note would be a violation of any law. Any permitted promissory note
shall be on such terms as the Board shall determine at the time the Option is
granted. The Board shall have the authority to permit or require the Optionee to
secure any promissory note used to exercise an Option with the shares of Stock
acquired upon the exercise of the Option or with other collateral acceptable to
the Company. Unless otherwise provided by the Board, if the Company at any time
is subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its sole discretion, the Company shall have the right to
require the Optionee, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise, to make adequate provision for any
such tax withholding obligations of the Participating Company Group arising in
connection with the Option or the shares acquired upon the exercise thereof. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its sole discretion at
the time the Option is granted. The Company shall have the right to assign at
any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
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6.6 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier
termination of the Option as otherwise provided herein, an Option shall be
exercisable after an Optionee's termination of Service as follows:
(i) DISABILITY. If the Optionee's Service
with the Participating Company Group is terminated because of the Disability of
the Optionee, the Option, to the extent unexercised and exercisable on the date
on which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the
Board, in its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"OPTION EXPIRATION DATE").
(ii) DEATH. If the Optionee's Service with
the Participating Company Group is terminated because of the death of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee's
legal representative or other person who acquired the right to exercise the
Option by reason of the Optionee's death at any time prior to the expiration of
six (6) months (or such longer period of time as determined by the Board, in its
sole discretion) after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date. The Optionee's Service
shall be deemed to have terminated on account of death if the Optionee dies
within one (1) month after the Optionee's termination of Service.
(iii) TERMINATION AFTER CHANGE IN CONTROL.
In the event that the Optionee's Service with the Participating Company Group
terminates following a Change in Control (as defined below) under such
circumstances as shall have been specified by the Board, in its sole discretion,
and set forth in the Option Agreement evidencing the Option, then (A) the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of six (6) months after the date on which the Optionee's Service terminated, but
in any event no later than the Option Expiration Date, and (B) the
exercisability and vesting of the Option shall be accelerated to such extent, if
any, as shall have been determined by the Board, in its sole discretion, and set
forth in the Option Agreement evidencing such Option. Notwithstanding the
foregoing, if it is determined that the provisions or operation of this Section
6.6(a)(iii) would preclude treatment of a Change in Control as a
"pooling-of-interests" for accounting purposes and provided further that in the
absence of the preceding sentence such Change in Control would be treated as a
"pooling-of-interests" for accounting purposes, then this Section 6.6(a)(iii)
shall be void AB INITIO, and the vesting and exercisability of the Option shall
be determined under any other applicable provision of the Plan or the Option
Agreement evidencing such Option.
(iv) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability or death, or following a Change in Control to the
extent provided in Section 6.6(a)(iii), the Option, to the
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extent unexercised and exercisable by the Optionee on the date on which the
Optionee's Service terminated, may be exercised by the Optionee within one
(1) month (or such longer period of time as determined by the Board, in its
sole discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of an Option within the
applicable time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 11 below, the Option shall remain exercisable until one
(1) month after the date the Optionee is notified by the Company that the Option
is exercisable, but in any event no later than the Option Expiration Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 OPTION AGREEMENT. Unless otherwise provided by the Board
at the time the Option is granted, an Option shall comply with and be subject to
the terms and conditions set forth in the appropriate form of Option Agreement
approved by the Board concurrently with its adoption of the Plan and as amended
from time to time.
7.2 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any of the standard Option
Agreement described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Option Agreement
shall be in accordance with the terms of the Plan.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange
in a single or series of related transactions by the shareholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
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(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
Section 8.2, an Option shall be deemed assumed if, following the Change in
Control, the Option confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Change in Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled. In the event that the Acquiring
Corporation elects not to assume or substitute for outstanding Options in
connection with a Change in Control, the exercisability and vesting of each such
outstanding Option shall be accelerated, effective as of the date ten (10) days
prior to the date of the Change in Control, to such extent, if any, as shall
have been determined by the Board, in its sole discretion, and set forth in the
Option Agreement evidencing such Option. The exercise or vesting of any Option
that was permissible solely by reason of this Section 8.2 shall be conditioned
upon the consummation of the Change in Control. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Change in Control nor exercised as of the date of the Change in Control shall
terminate and cease to be outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise of an
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of the Option Agreement evidencing such Option
except as otherwise provided in such Option Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Options immediately prior to an Ownership Change Event
described in Section 8.1(a)(i)
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constituting a Change in Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent
(50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding
Options shall not terminate unless the Board otherwise provides in its sole
discretion.
9. PROVISION OF INFORMATION.
Each Optionee shall be given access to information concerning
the Company equivalent to that information generally made available to the
Company's common shareholders.
10. NONTRANSFERABILITY OF OPTIONS.
During the lifetime of the Optionee, an Option shall be
exercisable only by the Optionee or the Optionee's guardian or legal
representative. No Option shall be assignable or transferable by the Optionee,
except by will or by the laws of descent and distribution. Notwithstanding the
foregoing, to the extent permitted by the Board, in its discretion, and set
forth in the Option Agreement evidencing such Option, a Nonstatutory Stock
Option shall be assignable or transferable subject to the applicable
limitations, if any, described in Rule 701 under the Securities Act and the
General Instructions to Form S-8 Registration Statement under the Securities
Act.
11. COMPLIANCE WITH SECURITIES LAW.
The grant of Options and the issuance of shares of Stock upon
exercise of Options shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities.
Options may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Option may be exercised unless (a) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (b) in the opinion
of legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of any
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
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12. INDEMNIFICATION.
In addition to such other rights of indemnification as they
may have as members of the Board or officers or employees of the Participating
Company Group, members of the Board and any officers or employees of the
Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
13. TERMINATION OR AMENDMENT OF PLAN.
The Board may terminate or amend the Plan at any time.
However, subject to changes in applicable law, regulations or rules that would
permit otherwise, without the approval of the Company's shareholders, there
shall be (a) no increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of Section
4.2), (b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's shareholders under any applicable law, regulation or rule. In any
event, no termination or amendment of the Plan may adversely affect any then
outstanding Option or any unexercised portion thereof, without the consent of
the Optionee, unless such termination or amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock
Option or is necessary to comply with any applicable law, regulation or rule.
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STANDARD FORM OF
iPRINT, INC.
STOCK OPTION AGREEMENT
<PAGE>
iPRINT, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The iPrint, Inc. 2000 Employee Stock
Purchase Plan (the "PLAN") is hereby established effective as of the effective
date of the initial registration by the Company of its Stock under Section 12 of
the Securities Exchange Act of 1934, as amended (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of Company and its shareholders by providing an incentive to attract,
retain and reward Eligible Employees of the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan provides such Eligible Employees with an
opportunity to acquire a proprietary interest in the Company through the
purchase of Stock. The Company intends that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code (including any amendments or
replacements of such section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as specified by the
Board. Unless the powers of the Committee have been specifically limited, the
Committee shall have all of the powers of the Board granted herein, including,
without limitation, the power to amend or terminate the Plan at any time,
subject to the terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means iPrint, Inc., a California
corporation, or any successor corporation thereto.
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(e) "COMPENSATION" means, with respect to any Offering
Period, base wages or salary, overtime pay, bonuses, commissions, shift
differentials, payments for paid time off, payments in lieu of notice, and any
of such compensation deferred under any program or plan established by a
Participating Company, including, without limitation, pursuant to Section 401(k)
or Section 125 of the Code. Compensation shall be limited to amounts actually
payable in cash directly to the Participant or deferred by the Participant
during the Offering Period. However, notwithstanding the foregoing, Compensation
shall not include sign-on bonuses, profit sharing, payments pursuant to a
severance agreement, termination pay, moving allowances, relocation payments,
expense reimbursements, the cost of employee benefits paid by a Participating
Company, tuition reimbursements, imputed income arising under any benefit
program, contributions made by a Participating Company under any employee
benefit plan, income directly or indirectly received pursuant to the Plan or any
other stock purchase or stock option plan, or any other compensation not
included above.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the Plan.
(g) "EMPLOYEE" means a person treated as an employee of
a Participating Company for purposes of Section 423 of the Code. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while on any military
leave, sick leave, or other bona fide leave of absence approved by the Company
of ninety (90) days or less. If an individual's leave of absence exceeds ninety
(90) days, the individual shall be deemed to have ceased to be an Employee on
the ninety-first (91st) day of such leave unless the individual's right to
reemployment with the Participating Company Group is guaranteed either by
statute or by contract. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be
an Employee and the effective date of such individual's employment or
termination of employment, as the case may be. For purposes of an individual's
participation in or other rights, if any, under the Plan as of the time of the
Company's determination, all such determinations by the Company shall be final,
binding and conclusive, notwithstanding that the Company or any governmental
agency subsequently makes a contrary determination.
(h) "FAIR MARKET VALUE" means, as of any date:
(i) If the Stock is then listed on a national or
regional securities exchange or market system or is regularly quoted by a
recognized securities dealer, the closing sale price of a share of Stock (or the
mean of the closing bid and asked prices if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, the Nasdaq SmallCap Market or such other
national or regional securities exchange or market system constituting the
primary market for the Stock, or by such recognized securities dealer, as
reported in THE WALL STREET JOURNAL or such other source as the Company deems
reliable. If the relevant date does not fall on a day on which the Stock has
traded on such securities exchange or market system or has been quoted by such
securities dealer, the date on which the Fair Market Value is established shall
be
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the last day on which the Stock was so traded or quoted prior to the relevant
date, or such other appropriate day as determined by the Board, in its
discretion.
(ii) If, on the relevant date, the Stock is not
then listed on a national or regional securities exchange or market system or
regularly quoted by a recognized securities dealer, the Fair Market Value of a
share of Stock shall be as determined in good faith by the Board.
(iii) Notwithstanding the foregoing, the Fair
Market Value of a share of Stock on the Effective Date shall be deemed to be the
public offering price set forth in the final prospectus filed with the
Securities and Exchange Commission in connection with the Company's initial
public offering of the Stock.
(i) "OFFERING" means an offering of Stock as provided in
Section 6.
(j) "OFFERING DATE" means, for any Offering, the first
day of the Offering Period.
(k) "OFFERING PERIOD" means a period established in
accordance with Section 6.1.
(l) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has
become a participant in an Offering Period in accordance with Section 7 and
remains a participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation designated by the Board as a
corporation the Employees of which may, if Eligible Employees, participate in
the Plan. The Board shall have the sole and absolute discretion to determine
from time to time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.
(o) "PARTICIPATING COMPANY GROUP" means, at any point in
time, the Company and all other corporations collectively which are then
Participating Companies.
(p) "PURCHASE DATE" means, for any Purchase Period, the
last day of such period.
(q) "PURCHASE PERIOD" means a period established in
accordance with Section 6.2.
(r) "PURCHASE PRICE" means the price at which a share
of Stock may be purchased under the Plan, as determined in accordance with
Section 9.
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(s) "PURCHASE RIGHT" means an option granted to a
Participant pursuant to the Plan to purchase such shares of Stock as provided in
Section 8, which the Participant may or may not exercise during the Offering
Period in which such option is outstanding. Such option arises from the right of
a Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.
(t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(u) "SUBSCRIPTION AGREEMENT" means a written agreement
in such form as specified by the Company, stating an Employee's election to
participate in the Plan and authorizing payroll deductions under the Plan from
the Employee's Compensation.
(v) "SUBSCRIPTION DATE" means the last business day
prior to the Offering Date of an Offering Period or such earlier date as the
Company shall establish.
(w) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered
by the Board. All questions of interpretation of the Plan, of any form of
agreement or other document employed by the Company in the administration of the
Plan, or of any Purchase Right shall be determined by the Board and shall be
final and binding upon all persons having an interest in the Plan or the
Purchase Right. Subject to the provisions of the Plan, the Board shall determine
all of the relevant terms and conditions of Purchase Rights; provided, however,
that all Participants granted Purchase Rights pursuant to an Offering shall have
the same rights and privileges within the meaning of Section 423(b)(5) of the
Code. All expenses incurred in connection with the administration of the Plan
shall be paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election that is the responsibility of or
that is allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The
Company may, from time to time, consistent with the Plan and the requirements of
Section 423 of the
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Code, establish, change or terminate such rules, guidelines, policies,
procedures, limitations, or adjustments as deemed advisable by the Company,
in its discretion, for the proper administration of the Plan, including,
without limitation, (a) a minimum payroll deduction amount required for
participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, and (e) determination of the date
and manner by which the Fair Market Value of a share of Stock is determined
for purposes of administration of the Plan.
3.4 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be one hundred thousand (150,000),
cumulatively increased on January 1, 2001 and each January 1 thereafter until
and including January 1, 2010 by the lesser of 5% of the shares of common stock
issued and outstanding on the immediately preceding December 31 or three million
(3,000,000) shares (the "ANNUAL INCREASE"), and shall consist of authorized but
unissued or reacquired shares of Stock, or any combination thereof. If an
outstanding Purchase Right for any reason expires or is terminated or canceled,
the shares of Stock allocable to the unexercised portion of that Purchase Right
shall again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan, the Annual Increase
and each Purchase Right, and in the Purchase Price. If a majority of the shares
of the same class as the shares subject to
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outstanding Purchase Rights are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event) shares of
another corporation (the "NEW SHARES"), the Board may unilaterally amend the
outstanding Purchase Rights to provide that such Purchase Rights are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the Purchase Price of, the outstanding Purchase Rights
shall be adjusted in a fair and equitable manner, as determined by the Board,
in its discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded
down to the nearest whole number, and in no event may the Purchase Price be
decreased to an amount less than the par value, if any, of the stock subject
to the Purchase Right. The adjustments determined by the Board pursuant to
this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be deemed
an Eligible Employee, except any Employee who is either: (a) customarily
employed by the Participating Company Group for twenty (20) hours or less per
week or (b) customarily employed by the Participating Company Group for not more
than five (5) months in any calendar year.
5.2 EXCLUSION OF CERTAIN SHAREHOLDERS. Notwithstanding any
provision of the Plan to the contrary, no Employee shall be granted a Purchase
Right under the Plan if, immediately after such grant, the Employee would own or
hold options to purchase stock of the Company or of any Parent Corporation or
Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation, as
determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of such Employee.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below, the
Plan shall be implemented by two series of Offerings. One series shall be of
sequential Offerings of approximately twelve (12) months duration or such other
duration as the Board shall determine (an "ANNUAL OFFERING PERIOD"). The second
series shall be of Offerings of approximately six (6) months duration or such
other duration as the Board shall determine (a "HALF-YEAR OFFERING PERIOD").
Annual Offering Periods shall commence on or about February 1 of each year and
end on or about the first January 31 occurring thereafter. Half-Year Offering
Periods shall commence on or about August 1 of each year and end on or about the
first January 31 occurring thereafter. However, an initial Offering (the
"INITIAL OFFERING PERIOD") shall commence on the Effective Date and end on or
about January 31, 2001. Notwithstanding the foregoing, the Board may establish a
different duration for one or more Offering Periods or different commencing or
ending dates for such Offering Periods; provided, however, that no Offering
Period may have a duration exceeding twenty-seven (27) months. If the first or
last day of an Offering Period is not a day on which the national securities
exchanges or Nasdaq Stock Market are open for trading,
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the Company shall specify the trading day that will be deemed the first or
last day, as the case may be, of the Offering Period.
6.2 PURCHASE PERIODS. Each Annual Offering Period shall consist
of two (2) consecutive Purchase Periods of approximately six (6) months
duration, or such other number or duration as the Board determines. A Purchase
Period commencing on or about February 1 shall end on or about the next July 31.
A Purchase Period commencing on or about August 1 shall end on or about the next
January 31. Each Half-Year Offering Period shall consist of a single Purchase
Period of approximately six (6) months duration coterminous with such Offering
Period. However, the Initial Offering Period shall consist of two (2)
consecutive Purchase Periods ending on or about July 31, 2000 and January 31,
2001, respectively. Notwithstanding the foregoing, the Board may establish a
different duration for one or more Purchase Periods or different commencing or
ending dates for such Purchase Periods. If the first or last day of a Purchase
Period is not a day on which the national securities exchanges or Nasdaq Stock
Market are open for trading, the Company shall specify the trading day that will
be deemed the first or last day, as the case may be, of the Purchase Period.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the Subscription Date established by
the Company for that Offering Period. An Eligible Employee who does not deliver
a properly completed Subscription Agreement to the Company's designated office
on or before the Subscription Date for an Offering Period shall not participate
in the Plan for that Offering Period or for any subsequent Offering Period
unless the Eligible Employee subsequently delivers a properly completed
Subscription Agreement to the appropriate office of the Company on or before the
Subscription Date for such subsequent Offering Period. An Employee who becomes
an Eligible Employee after the Offering Date of an Offering Period shall not be
eligible to participate in that Offering Period but may participate in any
subsequent Offering Period provided the Employee is still an Eligible Employee
as of the Offering Date of such subsequent Offering Period.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the next Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
provided that the Participant remains an Eligible Employee on the Offering Date
of the new Offering Period and has not either (a) withdrawn from the Plan
pursuant to Section 12.1 or (b) terminated employment as provided in Section 13.
A Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section 7.1 if the Participant desires to change any of the elections
contained in the Participant's then effective Subscription Agreement.
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8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on the
Offering Date of each Offering Period, each Participant in that Offering Period
shall be granted automatically a Purchase Right determined as follows:
(a) ANNUAL OFFERING PERIOD. Each Purchase Right granted
on the Offering Date of an Annual Offering Period shall consisting of an option
to purchase that number of whole shares of Stock determined by dividing
Twenty-Five Thousand Dollars ($25,000) by the Fair Market Value of a share of
Stock on the Offering Date.
(b) HALF-YEAR OFFERING PERIOD. Each Purchase Right
granted on the Offering Date of a Half-Year Offering Period shall consist of an
option to purchase that number of whole shares of Stock determined by dividing
Twelve Thousand Five Hundred Dollars ($12,500) by the Fair Market Value of a
share of Stock on the Offering Date.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. If the Board
establishes an Offering Period of any duration other than twelve months or six
months, then the number of shares of Stock subject to each Purchase Right
granted on the Offering Date of such Offering Period shall be determined as
provided in Section 8.1, except that the applicable dollar amount shall be
determined by multiplying $2,083.33 by the number of months (rounded to the
nearest whole month) in the Offering Period and rounding to the nearest whole
dollar.
8.3 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any
provision of the Plan to the contrary, no Participant shall be granted a
Purchase Right which permits his or her right to purchase shares of Stock under
the Plan to accrue at a rate which, when aggregated with such Participant's
rights to purchase shares under all other employee stock purchase plans of a
Participating Company intended to meet the requirements of Section 423 of the
Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or
such other limit, if any, as may be imposed by the Code) for each calendar year
in which such Purchase Right is outstanding at any time. For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
Period. The limitation described in this Section shall be applied in conformance
with applicable regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired
in an Offering Period upon the exercise of all or any portion of a Purchase
Right shall be established by the Board; provided, however, that the Purchase
Price on each Purchase Date shall not be less than eighty-five percent (85%)
of the lesser of (a) the Fair Market Value of a share of Stock on the
Offering Date of the Offering Period or (b) the Fair Market Value of a share
of Stock on the Purchase Date. Unless otherwise provided by the Board prior
to the commencement of an Offering Period, the Purchase Price on each
Purchase Date during that Offering Period shall be eighty-five percent (85%)
of the lesser of (a) the Fair Market Value of a share of Stock on the
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Offering Date of the Offering Period, or (b) the Fair Market Value of a share
of Stock on the Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for only by means of payroll deductions
from the Participant's Compensation accumulated during the Offering Period for
which such Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided
herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by the
Participant's Subscription Agreement. The Subscription Agreement shall set forth
the percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than three percent
(3%) (except as a result of an election pursuant to Section 10.3 to stop payroll
deductions) or more than fifteen percent (15%). The Board may change the
foregoing limits on payroll deductions effective as of any Offering Date.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the Change Notice Date, as defined below. A Participant who elects,
effective following the first payday of an Offering Period, to decrease the rate
of his or her payroll deductions to zero percent (0%) shall nevertheless remain
a Participant in the current Offering Period unless such Participant withdraws
from the Plan as provided in Section 12.1. The "CHANGE NOTICE DATE" shall be the
day immediately prior to the beginning of the first pay period for which such
election is to be effective, unless a different date is established by the
Company and announced to the Participants.
10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The
Company may, in its sole discretion, suspend a Participant's payroll deductions
under the Plan as the Company deems advisable to avoid accumulating payroll
deductions in excess of the amount that could reasonably be anticipated to
purchase the maximum number of shares of Stock permitted (a) under the
Participant's Purchase Right or (b) during a calendar year under the limit set
forth in Section 8.3. Payroll deductions shall be resumed at the rate specified
in the Participant's then effective Subscription Agreement at the beginning,
respectively, of (a) the next Offering Period, provided that the individual is a
Participant in such Offering Period or (b) the next Purchase Period the Purchase
Date of which falls in the following calendar year, unless the Participant has
either withdrawn from the Plan as provided in Section 12.1 or has ceased to be
an Eligible Employee.
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10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall
be maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such Participant's Plan account and shall be
deposited with the general funds of the Company. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose.
10.6 NO INTEREST PAID. Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.
10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may
withdraw all or any portion of the payroll deductions credited to his or her
Plan account and not previously applied toward the purchase of Stock by
delivering to the Company's designated office a written notice on a form
provided by the Company for such purpose. A Participant who withdraws the entire
remaining balance credited to his or her Plan account shall be deemed to have
withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn shall
be returned to the Participant as soon as practicable after the Company's
receipt of the notice of withdrawal and may not be applied to the purchase of
shares in any Offering under the Plan. The Company may from time to time
establish or change limitations on the frequency of withdrawals permitted under
this Section, establish a minimum dollar amount that must be retained in the
Participant's Plan account, or terminate the withdrawal right provided by this
Section.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not otherwise terminated before such Purchase
Date shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole shares of Stock determined by dividing (a)
the total amount of the Participant's payroll deductions accumulated in the
Participant's Plan account during the Offering Period and not previously applied
toward the purchase of Stock by (b) the Purchase Price. However, in no event
shall the number of shares purchased by the Participant during an Offering
Period exceed the number of shares subject to the Participant's Purchase Right.
No shares of Stock shall be purchased on a Purchase Date on behalf of a
Participant whose participation in the Offering or the Plan has terminated
before such Purchase Date.
11.2 PRO RATA ALLOCATION OF SHARES. If the number of shares of
Stock which might be purchased by all Participants in the Plan on a Purchase
Date exceeds the number of shares of Stock available in the Plan as provided in
Section 4.1, the Company shall make a pro rata allocation of the remaining
shares in as uniform a manner as practicable and as the Company determines to be
equitable. Any fractional share resulting from such pro rata allocation to any
Participant shall be disregarded.
11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each
Purchase Date, the Company shall arrange the delivery to each Participant of a
certificate representing the shares acquired by the Participant on such Purchase
Date; provided that the Company may deliver such shares to a broker designated
by the Company that will hold such shares for the
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benefit of the Participant. Shares to be delivered to a Participant under the
Plan shall be registered in the name of the Participant, or, if requested by
the Participant, in the name of the Participant and his or her spouse, or, if
applicable, in the names of the heirs of the Participant.
11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash balance to be returned to a Participant pursuant to the preceding sentence
is less than the amount that would have been necessary to purchase an additional
whole share of Stock on such Purchase Date, the Company may retain the cash
balance in the Participant's Plan account to be applied toward the purchase of
shares of Stock in the subsequent Purchase Period or Offering Period, as the
case may be.
11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right
is exercised, in whole or in part, or at the time a Participant disposes of some
or all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the federal, state, local and foreign tax
withholding obligations, if any, of the Participating Company Group which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a
Participant's Purchase Right remaining unexercised after the end of the Offering
Period to which the Purchase Right relates shall expire immediately upon the end
of the Offering Period.
11.7 PROVISION OF REPORTS AND SHAREHOLDER INFORMATION TO
PARTICIPANTS. Each Participant who has exercised all or part of his or her
Purchase Right shall receive, as soon as practicable after the Purchase Date, a
report of such Participant's Plan account setting forth the total payroll
deductions accumulated prior to such exercise, the number of shares of Stock
purchased, the Purchase Price for such shares, the date of purchase and the cash
balance, if any, remaining immediately after such purchase that is to be
refunded or retained in the Participant's Plan account pursuant to Section 11.4.
The report required by this Section may be delivered in such form and by such
means, including by electronic transmission, as the Company may determine. In
addition, each Participant shall be provided information concerning the Company
equivalent to that information provided generally to the Company's common
shareholders.
12. WITHDRAWAL FROM OFFERING OR PLAN.
12.1 VOLUNTARY WITHDRAWAL. A Participant may withdraw from the
Plan or any Offering by signing and delivering to the Company's designated
office a written notice of withdrawal on a form provided by the Company for this
purpose. Such withdrawal may be elected at any time prior to the end of an
Offering Period; provided, however, that if a Participant withdraws from the
Plan or an Offering after a Purchase Date, the withdrawal shall not affect
shares of Stock acquired by the Participant on such Purchase Date. A Participant
who voluntarily withdraws from the Plan or an Offering is prohibited from
resuming participation in the Plan in the same Offering from which he or she
withdrew, but may participate in any subsequent Offering by again satisfying the
requirements of Sections 5 and 7.1. The Company
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may impose, from time to time, a requirement that the notice of withdrawal be
on file with the Company's designated office for a reasonable period prior to
the effectiveness of the Participant's withdrawal.
12.2 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market
Value of a share of Stock on a Purchase Date of an Offering Period (other than
the final Purchase Date of such offering) is less than the Fair Market Value of
a share of Stock on the Offering Date for such Offering Period, then every
Participant shall automatically be (a) withdrawn from such Offering Period after
the acquisition of shares of Stock on the Purchase Date and (b) enrolled in the
new Offering Period effective on its Offering Date. A Participant may elect not
to be automatically withdrawn from an Offering Period pursuant to this Section
12.2 by delivering to the Company's designated office not later than the close
of business on Offering Date new Offering Period a written notice indicating
such election.
12.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's
voluntary withdrawal from the Plan pursuant to Sections 12.1 or automatic
withdrawal from an Offering pursuant to Section 12.2, the Participant's
accumulated payroll deductions which have not been applied toward the purchase
of shares of Stock (except, in the case of an automatic withdrawal pursuant to
Section 12.2, for an amount necessary to purchase an additional whole share as
provided in Section 11.4) shall be refunded to the Participant as soon as
practicable after the withdrawal, without the payment of any interest, and the
Participant's interest in the Plan or the Offering, as applicable, shall
terminate. Such accumulated payroll deductions to be refunded in accordance with
this Section may not be applied to any other Offering under the Plan.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
Upon a Participant's ceasing, prior to a Purchase Date, to be an
Employee of the Participating Company Group for any reason, including
retirement, disability or death, or upon the failure of a Participant to remain
an Eligible Employee, the Participant's participation in the Plan shall
terminate immediately. In such event, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares shall, as
soon as practicable, be returned to the Participant or, in the case of the
Participant's death, to the Participant's beneficiary designated in accordance
with Section 20, if any, or legal representative, and all of the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned pursuant to this Section 13. A Participant whose participation has been
so terminated may again become eligible to participate in the Plan by satisfying
the requirements of Sections 5 and 7.1.
14. CHANGE IN CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in
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which the Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the
event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may assume the Company's rights and obligations under
the Plan. If the Acquiring Corporation elects not to assume the Company's rights
and obligations under outstanding Purchase Rights, the Purchase Date of the then
current Purchase Period shall be accelerated to a date before the date of the
Change in Control specified by the Board, but the number of shares of Stock
subject to outstanding Purchase Rights shall not be adjusted. All Purchase
Rights which are neither assumed by the Acquiring Corporation in connection with
the Change in Control nor exercised as of the date of the Change in Control
shall terminate and cease to be outstanding effective as of the date of the
Change in Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS.
Neither payroll deductions credited to a Participant's Plan
account nor a Participant's Purchase Right may be assigned, transferred, pledged
or otherwise disposed of in any manner other than as provided by the Plan or by
will or the laws of descent and distribution. (A beneficiary designation
pursuant to Section 20 shall not be treated as a disposition for this purpose.)
Any such attempted assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw from the Plan as provided in Section 12.1. A Purchase Right shall be
exercisable during the lifetime of the Participant only by the Participant.
16. COMPLIANCE WITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to
compliance with all applicable requirements of federal, state and foreign law
with respect to such securities. A
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Purchase Right may not be exercised if the issuance of shares upon such
exercise would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of
any securities exchange or market system upon which the Stock may then be
listed. In addition, no Purchase Right may be exercised unless (a) a
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the
Purchase Right may be issued in accordance with the terms of an applicable
exemption from the registration requirements of said Act. The inability of
the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company's legal counsel to be necessary to
the lawful issuance and sale of any shares under the Plan shall relieve the
Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As
a condition to the exercise of a Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation,
and to make any representation or warranty with respect thereto as may be
requested by the Company.
17. RIGHTS AS A SHAREHOLDER AND EMPLOYEE.
A Participant shall have no rights as a shareholder by virtue of
the Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
18. LEGENDS.
The Company may at any time place legends or other identifying
symbols referencing any applicable federal, state or foreign securities law
restrictions or any provision convenient in the administration of the Plan on
some or all of the certificates representing shares of Stock issued under the
Plan. The Participant shall, at the request of the Company, promptly present to
the Company any and all certificates representing shares acquired pursuant to a
Purchase Right in the possession of the Participant in order to carry out the
provisions of this Section. Unless otherwise specified by the Company, legends
placed on such certificates may include but shall not be limited to the
following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE
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CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED
HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER
THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY
NOMINEE)."
19. NOTIFICATION OF DISPOSITION OF SHARES.
The Company may require the Participant to give the Company prompt
notice of any disposition of shares acquired by exercise of a Purchase Right.
The Company may require that until such time as a Participant disposes of shares
acquired upon exercise of a Purchase Right, the Participant shall hold all such
shares in the Participant's name (or, if elected by the Participant, in the name
of the Participant and his or her spouse but not in the name of any nominee)
until the later of two years after the date of grant of such Purchase Right or
one year after the date of exercise of such Purchase Right. The Company may
direct that the certificates evidencing shares acquired by exercise of a
Purchase Right refer to such requirement to give prompt notice of disposition.
20. DESIGNATION OF BENEFICIARY.
20.1 DESIGNATION PROCEDURE. A Participant may file a written
designation of a beneficiary who is to receive (a) shares and cash, if any, from
the Participant's Plan account if the Participant dies subsequent to a Purchase
Date but prior to delivery to the Participant of such shares and cash or (b)
cash, if any, from the Participant's Plan account if the Participant dies prior
to the exercise of the Participant's Purchase Right. If a married Participant
designates a beneficiary other than the Participant's spouse, the effectiveness
of such designation shall be subject to the consent of the Participant's spouse.
A Participant may change his or her beneficiary designation at any time by
written notice to the Company.
20.2 ABSENCE OF BENEFICIARY DESIGNATION. If a Participant dies
without an effective designation pursuant to Section 20.1 of a beneficiary who
is living at the time of the Participant's death, the Company shall deliver any
shares or cash credited to the Participant's Plan account to the Participant's
legal representative.
21. NOTICES.
All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time amend or terminate the Plan, except that
(a) no such amendment or termination shall affect Purchase Rights previously
granted under the Plan unless expressly provided by the Board and (b) no such
amendment or termination may adversely affect a Purchase Right previously
granted under the Plan without the consent of the Participant, except
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to the extent permitted by the Plan or as may be necessary to qualify the
Plan as an employee stock purchase plan pursuant to Section 423 of the Code
or to comply with any applicable law, regulation or rule. In addition, an
amendment to the Plan must be approved by the shareholders of the Company
within twelve (12) months of the adoption of such amendment if such amendment
would authorize the sale of more shares than are then authorized for issuance
under the Plan or would change the definition of the corporations that may be
designated by the Board as Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing iPrint, Inc. 2000 Employee Stock Purchase Plan was duly
adopted by the Board of Directors of the Company on _____________, 1999.
------------------------------------
Secretary
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iPRINT, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NAME (Please print):____________________________________________________________
(Last) (First) (Middle)
/ / Original application for the Offering Period beginning (date):___________
/ / Change in payroll deduction rate effective with the pay period ending
(date):____________________________________
/ / Change of beneficiary.
I. SUBSCRIPTION
I elect to participate in the 2000 Employee Stock Purchase Plan (the
"PLAN") of iPrint, Inc. (the "COMPANY") and to subscribe to purchase shares of
the Company's Common Stock in accordance with this Subscription Agreement and
the Plan.
I authorize payroll deductions of __________ percent (in whole
percentages not less than 3%, unless an election to stop deductions is being
made, or more than 15%) of my "COMPENSATION" on each payday throughout the
"OFFERING PERIOD" in accordance with the Plan. I understand that these payroll
deductions will be accumulated for the purchase of shares of Common Stock at the
applicable purchase price determined in accordance with the Plan. Except as
otherwise provided by the Plan, I will automatically purchase shares on each
"PURCHASE DATE" unless I withdraw from the Offering or the Plan by giving
written notice on a form provided by the Company or unless my eligibility or
employment terminates.
I understand that I will automatically participate in each subsequent
Offering that commences immediately after the last day of an Offering in which I
am participating until I withdraw from the Plan by giving written notice on a
form provided by the Company or my eligibility or employment terminates.
Shares I purchase under the Plan should be issued in the name(s) set
forth below. (Shares may be issued in the participant's name alone or together
with the participant's spouse as community property or in joint tenancy.)
NAME(S) (please print):_________________________________________________
ADDRESS:________________________________________________________________
MY SOCIAL SECURITY NUMBER:______________________________________________
I agree to make adequate provision for the federal, state, local and
foreign tax withholding obligations, if any, which arise upon my purchase of
shares under the Plan and/or my disposition of shares. The Company may withhold
from my compensation the amount necessary to meet such withholding obligations.
I agree that, unless otherwise permitted by the Company, until I dispose
of shares I purchase under the Plan, I will hold such shares in the name(s)
entered above (and not in the name of any nominee) until the later of (i) two
years after the first day of the Offering Period in which I purchased the shares
and (ii) one year after the Purchase Date on which I purchased the shares.
I AGREE THAT I WILL NOTIFY THE CHIEF FINANCIAL OFFICER OF THE COMPANY IN
WRITING WITHIN 30 DAYS AFTER ANY SALE, GIFT, TRANSFER OR OTHER DISPOSITION OF
ANY KIND PRIOR TO THE END OF THE PERIODS REFERRED TO IN THE PRECEDING PARAGRAPH
(A "DISQUALIFYING DISPOSITION") OF ANY SHARES I PURCHASED
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UNDER THE PLAN. IF I DO NOT RESPOND WITHIN 30 DAYS OF THE DATE OF A
DISQUALIFYING DISPOSITION SURVEY DELIVERED TO ME BY CERTIFIED MAIL, THE
COMPANY IS AUTHORIZED TO TREAT MY NONRESPONSE AS MY NOTICE TO THE COMPANY OF
A DISQUALIFYING DISPOSITION AND TO COMPUTE AND REPORT TO THE INTERNAL REVENUE
SERVICE THE ORDINARY INCOME I MUST RECOGNIZE UPON SUCH DISQUALIFYING
DISPOSITION.
II. BENEFICIARY DESIGNATION
In the event of my death, I designate the following as my beneficiary to
receive all payments and shares then due me under the Plan:
BENEFICIARY'S NAME (please print):_______________________________________
(First) (Middle) (Last)
RELATIONSHIP:__________________ SOC. SEC. NO.:_________________________
ADDRESS:_________________________________________________________________
If you are married and your beneficiary is someone other than your
spouse, then your spouse must sign and date this form as indicated below. If you
are not married when you designate a beneficiary and you later become married,
or if you later become married to a different person, the beneficiary
designation previously made will be automatically revoked. Payments and shares
then due you upon your death will be delivered to your legal representative
unless you have completed a new beneficiary designation and it is consented to
by your then spouse.
III. CONSENT OF SPOUSE
I am the spouse of _____________________________. I consent to the above
designation of a beneficiary other than me of payments and shares due my spouse
under the Plan.
Date:_____________________________ _________________________________________
Signature of Participant's Spouse
IV. PARTICIPANT DECLARATION
Any election I have made on this form revokes all prior elections with
regard to this form.
I am familiar with the provisions of the Plan and agree to participate in
the Plan subject to all of its provisions. I understand that the Board of
Directors of the Company reserves the right to terminate the Plan or to amend
the Plan and my right to purchase stock under the Plan to the extent provided by
the Plan. I understand that the effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Plan and is subject to the
provisions of the Plan.
Date:_____________________________ _________________________________________
Signature of Participant
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iPRINT, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
NAME (Please print):____________________________________________________________
(Last) (First) (Middle)
/ / Withdrawal from Plan in full.
/ / Partial withdrawal of payroll deductions from Plan account.
I. WITHDRAWAL IN FULL
I elect to withdraw from the iPrint, Inc. 2000 Employee Stock Purchase
Plan (the "PLAN") and the Offering which began on (date) ____________________
and in which I am participating (the "CURRENT OFFERING").
ELECT EITHER A OR B BELOW:
/ / A. IMMEDIATE TERMINATION. I elect to terminate immediately my
participation in the Current Offering and the Plan. I request that
the Company cease all further payroll deductions under the Plan
(provided I have given sufficient notice before the next payday).
My payroll deductions not previously used to purchase shares
should NOT be used to purchase shares in the Current Offering.
Instead, I request that all such amounts be paid to me as soon as
practicable. I understand that this election immediately
terminates my interest in the Current Offering and in the Plan.
/ / B. TERMINATION AFTER NEXT PURCHASE. I elect to terminate my
participation in the Plan following my purchase of shares on the
next Purchase Date of the Current Offering. I request that the
Company cease all further payroll deductions under the Plan
(provided I have given sufficient notice before the next payday).
All payroll deductions credited to my Plan account should be used
to purchase shares on the next Purchase Date of the Current
Offering to the extent permitted by the Plan. I understand that
this election will terminate my interest in the Plan immediately
following such purchase. I request that any cash balance remaining
in my Plan account after my purchase of shares be paid to me as
soon as practicable.
I understand that I am terminating my interest in the Plan and that no
further payroll deductions will be made (provided I have given sufficient notice
before the next payday), unless I elect to become a participant in another
Offering by filing a new Subscription Agreement with the Company. I understand
that I will receive no interest on the amounts paid to me from my Plan account,
and that I may not apply such amounts to any other Offering under the Plan or
any other employee stock purchase plan of the Company.
II. PARTIAL WITHDRAWAL OF PAYROLL DEDUCTIONS
Amount of withdrawal requested: $____________________________
I request that the above amount not previously used to purchase shares
under the Plan be withdrawn from my Plan account and paid to me as soon as
practicable. If the amount requested constitutes the entire balance of my Plan
account, I understand that I will be treated as having elected to withdraw in
full from the Plan in accordance with alternative A above. I understand that I
will receive no interest on the amounts paid to me from my Plan account and that
I may not apply such amounts to any other Offering under the Plan or any other
employee stock purchase plan of the Company.
Date: ____________________________ Signature:_______________________________
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iPRINT, INC.
2000 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The iPrint, Inc. 2000 Outside Directors
Stock Option Plan (the "PLAN") is hereby established effective as of the
effective date of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its shareholders by providing
an incentive to attract and retain highly qualified persons to serve as Outside
Directors of the Company and by creating additional incentive for Outside
Directors to promote the growth and profitability of the Participating Company
Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company.
If one or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(d) "COMPANY" means iPrint, Inc., a California
corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
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(f) "DIRECTOR" means a member of the Board or the board
of directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value
of a share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, there is a public market
for the Stock, the Fair Market Value of a share of Stock shall be the closing
sale price of a share of Stock (or the mean of the closing bid and asked prices
of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq
National Market, the Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the WALL STREET JOURNAL or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Board without regard to any restriction other than a restriction which,
by its terms, will never lapse.
(j) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan.
(k) "OPTIONEE" means a person who has been granted one
or more Options.
(l) "OPTION AGREEMENT" means a written agreement between
the Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee.
(m) "OUTSIDE DIRECTOR" means a Director of the Company
who is not an Employee.
(n) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
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(o) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(p) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(q) "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. The Optionee's Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a
Participating Company.
(r) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(s) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION. The Plan shall be administered by the Board. All
questions of interpretation of the Plan or of any Option shall be determined by
the Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
determination or election.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be three hundred thousand (300,000),
cumulatively increased on January 1, 2001 and each January 1 thereafter by
70,000 shares, and shall consist of authorized but unissued or reacquired shares
of Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or shares of Stock acquired, subject to
repurchase, upon the exercise of an Option are repurchased by the Company, the
shares of Stock allocable to the unexercised portion of such Option, or such
repurchased shares of Stock, shall again be available for issuance under the
Plan.
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4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, to the "Initial Option" and "Annual Option" (as defined in
Section 6.1), and to any outstanding Options, and in the exercise price of any
outstanding Options. If a majority of the shares which are of the same class as
the shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to an "Ownership Change
Event" as defined in Section 8.1) shares of another corporation (the "NEW
Shares"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event may the
exercise price of any Option be decreased to an amount less than the par value,
if any, of the stock subject to the Option.
5. ELIGIBILITY AND TYPE OF OPTIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. An Option shall be granted
only to a person who, at the time of grant, is an Outside Director.
5.2 OPTIONS AUTHORIZED. Options shall be nonstatutory stock
options; that is, options which are not treated as incentive stock options
within the meaning of Section 422(b) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
Option Agreements specifying the number of shares of Stock covered thereby, in
such form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 AUTOMATIC GRANT OF OPTIONS. Subject to execution by an
Outside Director of the appropriate Option Agreement, Options shall be granted
automatically and without further action of the Board, as follows:
(a) INITIAL OPTION. Each person who is (i) serving as an
Outside Director on the Effective Date, or (ii) first elected or appointed as an
Outside Director after the Effective Date shall be granted an Option to purchase
thirty thousand (30,000) shares of Stock on the Effective Date or the date of
such initial election or appointment, respectively (an "INITIAL OPTION").
Notwithstanding anything herein to the contrary, an Initial Option shall not be
granted to a Director of the Company who previously did not qualify as an
Outside Director but subsequently becomes an Outside Director as a result of the
termination of his or her status as an Employee.
4
<PAGE>
(b) ANNUAL OPTION. Each Outside Director (including any
Director who previously did not qualify as an Outside Director but who
subsequently becomes an Outside Director) shall be granted an Option to purchase
five thousand (5,000) shares of Stock (an "Annual Option") on the date of each
annual meeting of the shareholders, provided that the person remains an Outside
Director immediately following such meeting and has served as a member of the
Board at least six (6) months prior to such date.
(c) RIGHT TO DECLINE OPTION. Notwithstanding the
foregoing, any person may elect not to receive an Option by delivering written
notice of such election to the Board no later than the day prior to the date
such Option would otherwise be granted. A person so declining an Option shall
receive no payment or other consideration in lieu of such declined Option. A
person who has declined an Option may revoke such election by delivering written
notice of such revocation to the Board no later than the day prior to the date
such Option would be granted pursuant to Section 6.1(a) or (b), as the case may
be.
6.2 EXERCISE PRICE. The exercise price per share of Stock
subject to an Option shall be the Fair Market Value of a share of Stock on the
date the Option is granted.
6.3 EXERCISE PERIOD. Each Option shall terminate and cease to
be exercisable on the date ten (10) years after the date of grant of the Option
unless earlier terminated pursuant to the terms of the Plan or the Option
Agreement.
6.4 RIGHT TO EXERCISE OPTIONS.
(a) INITIAL OPTIONS. Except as otherwise provided in the
Plan or in the Option Agreement, an Initial Option shall (i) first become
exercisable on the date which is one (1) year after the date on which the
Initial Option was granted (the "INITIAL OPTION VESTING DATE"); and (ii) be
exercisable on and after the Initial Option Vesting Date and prior to the
termination thereof in an amount equal to the number of shares of Stock
initially subject to the Initial Option multiplied by the Vested Ratio as set
forth below, less the number of shares previously acquired upon exercise
thereof. The Vested Ratio described in the preceding sentence shall be
determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Option Vesting Date 0
On Initial Option Vesting Date, provided the Optionee's 1/3
Service has not terminated prior to such date
PLUS
For each full month of the Optionee's continuous 1/36
Service from the Initial Option Vesting Date until the
Vested Ratio equals 1/1, an additional
</TABLE>
5
<PAGE>
(b) ANNUAL OPTIONS. Except as otherwise provided in the
Plan or in the Option Agreement, an Annual Option shall (i) first become
exercisable on the date which is one (1) month after the date on which the
Annual Option was granted (the "ANNUAL OPTION VESTING DATE"); and (ii) be
exercisable on and after the Annual Option Vesting Date and prior to the
termination thereof in an amount equal to the number of shares of Stock
initially subject to the Annual Option multiplied by the Vested Ratio as set
forth below, less the number of shares previously acquired upon exercise
thereof. The Vested Ratio described in the preceding sentence shall be
determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Annual Option Vesting Date 0
On Annual Option Vesting Date, provided 1/12
the Optionee's Service is continuous from the date
of grant of the Annual Option until the
Annual Option Vesting Date
PLUS
For each full month of the Optionee's continuous 1/12
Service from the Annual Option Vesting Date
until the Vested Ratio equals 1/1, an additional
</TABLE>
6.5 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value not less than the exercise
price, (iii) by the assignment of the proceeds of a sale or loan with respect to
some or all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), or (iv) by any
combination thereof.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or
6
<PAGE>
terminate any program or procedures for the exercise of Options by means
of a Cashless Exercise.
6.6 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value equal to all or any part of the
federal, state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to such Option or the shares
acquired upon exercise thereof. Alternatively or in addition, in its sole
discretion, the Company shall have the right to require the Optionee to make
adequate provision for any such tax withholding obligations of the Participating
Company Group arising in connection with the Option or the shares acquired upon
exercise thereof. The Company shall have no obligation to deliver shares of
Stock until the Participating Company Group's tax withholding obligations have
been satisfied.
7. STANDARD FORM OF OPTION AGREEMENT.
7.1 GENERAL. Each Option shall comply with and be subject to
the terms and conditions set forth in the appropriate form of Nonstatutory Stock
Option Agreement adopted by the Board concurrently with its adoption of the Plan
and as amended from time to time.
7.2 AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any of the standard forms of Option
Agreement described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Option Agreement are
not inconsistent with the terms of the Plan.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the shareholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or change in all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
7
<PAGE>
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Change in Control. The exercise or vesting of
any Option that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Change in Control. In addition, the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the "ACQUIRING CORPORATION"), may
either assume the Company's rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. For purposes of this Section 8.2, an Option shall
be deemed assumed if, following the Change in Control, the Option confers the
right to purchase in accordance with its terms and conditions, for each share of
Stock subject to the Option immediately prior to the Change in Control, the
consideration (whether stock, cash or other securities or property) to which a
holder of a share of Stock on the effective date of the Change in Control was
entitled. Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor exercised as
of the date of the Change in Control shall terminate and cease to be outstanding
effective as of the date of the Change in Control. Notwithstanding the
foregoing, shares acquired upon exercise of an Option prior to the Change in
Control and any consideration received pursuant to the Change in Control with
respect to such shares shall continue to be subject to all applicable provisions
of the Option Agreement evidencing such Option except as otherwise provided in
such Option Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options immediately
prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Change in Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Options shall not terminate.
8
<PAGE>
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative. No Option shall be assignable or transferable
by the Optionee, except by will or by the laws of descent and distribution.
10. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
11. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in applicable law, regulations
or rules that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the total number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.2), and (b) no other amendment of the Plan that would require
approval of the Company's shareholders under any applicable law, regulation or
rule. In any event, no termination or amendment of the Plan may adversely affect
any then outstanding Option, or any unexercised portion thereof, without the
consent of the Optionee, unless such termination or amendment is necessary to
comply with any applicable law, regulation or rule.
9
<PAGE>
EXHIBIT 10.6
[iPrint.com LETTERHEAD]
August 26, 1999
James McCormick
117 Madera Court
Los Gatos, CA 95032
Dear James,
We are pleased to offer you a position with iPrint, Inc (the "Company) as Chief
Financial Officer (CFO) commencing October 1, 1999 (or sooner).
We are proposing the following compensation package.
-------------------------------------- ------------------------------------
Annual Base Salary Stock Options
$150,000 290,000
-------------------------------------- ------------------------------------
(Your annual base salary will be paid in accordance with the Company's normal
bimonthly payroll procedures.)
GUARANTEED BONUS (FIRST YEAR)- to be paid over 12 months as a part of
normal payroll.
$50,000
SIGNING BONUS- to be paid Jan 2, 2000 (1 year of employment or full
refund)
$40,000
OPTION PURCHASE- Company to structure a promissory note allowing James
McCormick to purchase options (upon employment commencement). Term to
be four (4) years, plus interest to be determined.
You will receive stock options at fair market value, which will vest over a
four-year period. Please note the attached ACCELERATION CLAUSE which will be
include as a part of your Option Agreement.
1
<PAGE>
OTHER CONSIDERATIONS:
- - As a company employee, you will be eligible for full health coverage,
including dental and vision benefits, assuming you meet the insurance
underwriter's requirements for insurability. This would be effective on the
lst of the month following 30 days employment.
- - As a company employee, you will be eligible to participate in the
company's 401K plan, after 3 months with the company.
This offer is subject to you signing and returning Exhibit A (At Will Agreement)
of this offer letter and the Non-disclosure Agreement and Proprietary Rights
Assignment, a copy of which is attached as Exhibit B.
Sincerely,
iPrint, inc.
By: /s/ Gregory Korjeff
-----------------------------------
Title: VP Operations
--------------------------------
ACCEPTED:
Signature: /s/ James McCormick
----------------------------
Dated: 9/17/99
--------------------------------
2
<PAGE>
ACCELERATION CLAUSE
FOR JAMES MCCORMICK
In the event of either (i) an Acquiring Corporation's failure to assume or
substitute for the Option in connection with a Change in Control as provided
in Section 8.2 of the Stock Option Agreement between the Company and James
McCormick (the "Agreement") or (ii) the Optionee's Termination After Change
in Control as provided in Section 7.1(c) of the Agreement, the numerator of
the Vested Ratio as determined above shall be increased by (1) the number of
full months of the Optionee's Service credited for vesting purposes prior to
the date of the Change in Control or such termination of Service, as the case
may be, if the total number of such full months of Service is less than
twelve (12), or (2) an amount equal to twenty-five percent (25%) of the
number of full months of the Optionee's Service credited for vesting purposes
prior to the date of the Change in Control or such termination of Service, as
the case may be, if the total number of such full months of Service is twelve
(12) or more; provided, however, that in no event shall the Vested Ratio
exceed 1/1.
<PAGE>
Offer Letter to:
James McCormick
EXHIBIT A: NEW EMPLOYEE OFFER AND AGREEMENT
If you choose to accept this offer, you should be aware that your employment
with the Company will be voluntarily entered into and will be for no
specified period. As a result, you are free to resign at any time, for any
reason or for no reason, as you deem appropriate. Similarly, the Company is
free to conclude its employment relationship with you at any time, with or
without cause.
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.
In the event of any dispute or claim relating to or arising out of our
employment relationship, you and iPrint agree that all such disputes shall be
fully and finally resolved by binding arbitration conducted by the American
Arbitration Association in San Francisco, California. HOWEVER, we agree that
this arbitration provision shall NOT apply to any dispute or claims relating
to or arising out of the misuse or misappropriation of the Company's trade
secrets or proprietary or confidential information.
To indicate your acceptance of the Company's offer set forth in the attached
letter, please sign and date this Exhibit in the space provided below and
return it to us. A duplicate original is enclosed for your records. This
letter and its Exhibits set forth the terms of your employment with the
Company and supersedes 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.
AGREED TO AND ACCEPTED:
/s/ James McCormick
- ----------------------------
James McCormick
Date: 10/12/99
-----------------------
<PAGE>
EXHIBIT B
iPRINT
EMPLOYEE NON-DISCLOSURE AGREEMENT
AND
PROPRIETARY RIGHTS ASSIGNMENT
In return for new or continued employment by iPrint, inc., I agree that:
1. "Confidential Information" is information, including formulae,
patterns, compilations, programs, devices, methods, techniques, or processes,
owned by iPrint or entrusted to it that derives independent economic value,
actual or potential, to the owner of such information by reason of not being
generally known to the public, or to other persons who can obtain economic
value from its disclosure or use, and is subject to efforts by the owner
which are reasonable under the circumstances to maintain its secrecy.
"Confidential Information" may include, by way of example, know how,
algorithms, software programs, schematics, source documents, contracts,
customer information, financial information, product development, engineering
sales, and marketing plans, and business plans.
2. "Confidential Information" does not include any information that (a)
was in the public domain at the time it was communicated to me; (b) enters
the public domain through no fault of mine subsequent to the time it was
communicated to me; (c) was in my possession free and clear of any obligation
of confidence at the time it is communicated to me; or (d) is subsequently
communicated to me without violation of any non-disclosure agreement free and
clear of any obligations of confidence.
3. I will hold all "Confidential Information" in strictest confidence
and will use "Confidential Information" solely for purposes related to
iPrint. I will only disclose "Confidential Information" to others who have
the necessary authorization. I will treat as "Confidential Information" any
compilation, abstract, summary, or copy of "Confidential Information."
4. A "Development" is any invention, development, improvement, trade
secret, or original work of authorship (such as any computer software or data
or any other library, audio-visual, or artistic work). I assign to iPrint all
of my rights, title, and interest to each "Development" conceived or
developed by me alone or with others in connection with my employment by
iPrint, but I understand that in compliance with Section 2870 of the
California Labor Code my assignment to iPrint is limited to "Developments"
(a) related to iPrint's business or its actual or anticipated research or
development or (b) resulting from any work performed by me or others for
iPrint or (c) conceived or developed through the use of iPrint's equipment,
supplies, facilities, or confidential information. I further understand that
this assignment does not apply to any "Developments" which I may develop
entirely on my own without using any of iPrint's equipment, supplies,
facilities, or trade secret information and which does not fall within (a),
(b), or (c) of the preceding sentence. I will promptly disclose each
"Development" to iPrint. During and after my iPrint employment I will sign
and deliver to iPrint any further documents, including patent or copyright
assignments or applications, that iPrint requests, and I will otherwise
assist iPrint in protecting its rights to each "Development."
5. After my signature below is a complete list of all ideas,
inventions, discoveries, or
<PAGE>
improvements owned by me or others which I conceived or reduced to practice
before my employment with iPrint began. All other inventions are subject to
this Agreement. If nothing is listed, I have not conceived or reduced to
practice any inventions at the time of my signing of this Agreement.
I have no contract or other duty to assign "Developments" conceived
or developed by me in connection with my employment by iPrint to anyone other
than iPrint. During my employment by iPrint: (a) I will not improperly use or
disclose any proprietary information or trade secrets of my former or
concurrent employers or companies, if any; (b) I will not bring onto iPrint's
premises any unpublished document or any property belonging to my former or
concurrent employers or companies, if any (unless with written permission of
the applicable employers or companies); and (c) I will not engage in any
employment, consulting, or any other activity that conflicts with any of my
obligations to iPrint or that competes with iPrint.
6. During the term of my employment with the Company and for a period
of two (2) years thereafter, I will not interfere with iPrint's business in
any manner, including (without limitation) by encouraging anyone to leave
iPrint's employ or encourage a consultant or independent contractor to sever
that person's relationship with iPrint.
7. My failure to fulfill any of my promises in this Agreement will
cause iPrint irreparable and continuous damage for which iPrint will have no
adequate remedy at law. Consequently, if I do not keep any of my promises,
iPrint will be entitled to injunctive relief or decrees for specific
performance, or both, as well as any other relief as may be proper.
8. This is not an employment contract. Either iPrint or I may terminate
my employment at any time, with or without cause. My promises in the
Agreement will remain in effect after my employment by iPrint ends.
9. When my employment by iPrint ends or at any other time upon iPrint's
request, I will promptly deliver to iPrint, without keeping any copies, all
documents and other materials (including summaries, reports, computer
printouts, electronically stored data, or other data or things) received or
prepared by me in connection with my work for iPrint.
10. I will not export, directly or indirectly, any technical data or any
product utilizing any technical data to any country for which the U.S.
Government or any agency of the U.S. Government at the time of export
requires an export license or government approval without first obtaining
such license or approval. I understand that disclosing technical data to a
foreign national is an "export" even if the disclosure takes place within the
United States.
11. I have received a copy of this Agreement. This Agreement is my
entire agreement with iPrint and replaces any previous oral or written
understandings or agreements, if any, with iPrint with respect to
confidential information or proprietary rights. This agreement will be
interpreted in accordance with and governed by the laws of the State of
California as applied to transactions taking place wholly within California
between California residents. This Agreement may not be modified or amended
except by a written document signed by the persons to be bound by the
modification or amendment.
12. This agreement is effective as of October 12, 1999.
<PAGE>
EMPLOYEE:
Signature: /s/ James McCormick
-------------------------------
Name: James McCormick
-------------------------------
BY iPRINT:
Signature: /s/ Keith L. Westberg
-------------------------------
Name: Keith L. Westberg
-------------------------------
IDEAS, INVENTIONS, DISCOVERIES, OR IMPROVEMENTS CONCEIVED OR REDUCED TO
PRACTICE PRIOR TO EMPLOYMENT BY iPRINT:
<PAGE>
iPRINT, INC.
PROMISSORY NOTE
AND PLEDGE AGREEMENT
$ 655,400 October 13, 1999
Redwood City, California
FOR VALUE RECEIVED, the undersigned promises to pay to iPrint, Inc.,
a California corporation (the "Company"), or order, at its principal office
(now located in Redwood City, California) the principal sum of six hundred
fifty-five thousand four hundred dollars ($655,400) on October 13, 2003 (the
"Maturity Date"). Unpaid principal shall bear interest from the date hereof
at a rate of Five and Ninety-Six percent (5.96%) per annum, compounded
annually. Accrued but unpaid interest shall be payable on each anniversary of
the date hereof and on the Maturity Date. The entire outstanding balance of
principal and accrued but unpaid interest shall be due and payable on the
Maturity Date.
Each payment shall be credited first to interest then due and the
remainder to principal. Should interest not be paid when due hereunder, it
shall be added to the principal and thereafter bear like interest as the
principal, provided such unpaid interest so compounded shall not exceed an
amount equal to simple interest on the unpaid principal at the maximum rate
permitted by law.
The Company may at its option accelerate, in whole or in part, the
maturity of the outstanding principal balance due on this Note and any
accrued interest thereon upon the occurrence of any of the following events:
(1) The termination of the undersigned's employment with the Company
(or any present or future parent and/or subsidiary corporations of the
Company) for any reason, or no reason, with or without cause.
(2) A default in the payment of any installment of principal and/or
interest when due.
(3) A sale of the Pledged Stock (as defined below).
(4) Such acceleration is reasonably necessary for the Company to
comply with any regulations promulgated by the Board of Governors of the
Federal Reserve System affecting the extension of credit in connection with
the Company's securities.
The undersigned waives demand, presentment, notice of protest,
notice of demand, dishonor, diligence in collection and notices of intention
to accelerate maturity. Any such acceleration may be automatically
effectuated by the Company by making an entry to such effect in its records,
in which event the unpaid balance on this Note shall become immediately due
and payable without demand or notice.
1
<PAGE>
Principal and interest are payable in lawful money of the United
States of America. The undersigned may prepay any amount due hereunder,
without premium or penalty.
In the event the Company incurs any costs or fees in order to
enforce payment of this Note or any portion thereof, the undersigned agrees
to pay to the Company, in addition to such amounts as are owed pursuant to
this Note, such costs and fees, including, without limitation, a reasonable
sum for attorneys' fees.
The undersigned hereby waives to the full extent permitted by law
all rights to plead any statute of limitations as a defense to any action
hereunder.
As security for the full and timely payment of this Note, the
undersigned hereunder pledges and grants to the Company a security interest
in two hundred ninety thousand (290,000) shares of the Company's common stock
(the "Pledged Stock") purchased by the undersigned pursuant to the terms of
the Company's 1997 Stock Option Exercise Form attached hereto as Exhibit A.
The undersigned shall, upon execution of this Note, deliver all certificates
representing the Pledged Stock to the agent for the Company (the "Agent")
pursuant to the Joint Escrow Instructions of even date herewith between the
Company and the maker of this Note. The Agent shall hold the Pledged Stock
solely for the benefit of the Company to perfect the security interest
granted hereunder.
Notwithstanding the foregoing, the undersigned acknowledges that
this Note is a full recourse note and that the undersigned is liable for full
payment of this Note without regard to the value at any time or from time to
time of the Pledged Stock. In the event of any default in the payment of this
Note, the Company shall have and may exercise any and all remedies of a
secured party under the California Commercial Code, and any other remedies
available at law or in equity, with respect to the Pledged Stock. The
undersigned (i) acknowledges that state or federal securities laws may
restrict the public sale of securities, and may require private sales at
prices or on terms less favorable to the seller than public sales and (ii)
agrees that where the Company, in its sole discretion, determines that a
private sale is appropriate, such sale shall be deemed to have been made in a
commercially reasonable manner.
In the event the undersigned desires to obtain a release from the
Company's security interest in some or all of the Pledged Stock, the
undersigned shall pay that portion of the principal balance of this Note
equal to the purchase price of the Pledged Stock being released plus accrued
interest thereon. The Company shall thereafter instruct the Agent to effect
such release, provided that the fair market value of the Pledged Stock to
remain subject to the Company's security interest (as determined by the Board
of Directors of the Company or by the closing price of the Company's common
stock on the NASDAQ National Market System, or any successor listing, on the
date of such notice) shall satisfy the conditions of Regulation G, as
promulgated by the Board of Governors of the Federal Reserve System, or other
comparable law or regulation.
The failure of the Company to exercise any of the rights created
hereby, or to promptly enforce any of the provisions of this Note, shall not
constitute a waiver of the right to exercise such rights or to enforce any
such provisions.
2
<PAGE>
As used herein, the undersigned includes the successors, assigns and
distributees of the undersigned.
As used herein, the Company includes the successors, assigns and
distributees of the Company, as well as a holder in due course of this Note.
This Note is made under and shall be construed in accordance with
the laws of the State of California, without regard to the conflict of law
provisions thereof.
/s/ James P. McCormick
-------------------------------------
Signature
James P. McCormick
-------------------------------------
James McCormick
iPrint, Inc., a California corporation, hereby approves the terms of
the above promissory note (the "Note") executed by Mr. James McCormick
effective as of October 13, 1999.
Dated: 10/13/99 iPrint, Inc.
------------------ a California corporation
/s/ Nickoletta T. Farros-Swank
-------------------------------------
Secretary
3
<PAGE>
SILICON VALLEY BANK
QUICKSTART LOAN AND SECURITY AGREEMENT
BORROWER: iPrint, inc. ADDRESS: Nasa Ames Research Center
DATE: May 8, 1998 Bldg. N223, Suite 108, Mail Stop 223-5
Moffet Field, CA 94035
SILICON'S OFFER TO EXTENT FINANCING ON THE TERMS SET FORTH HEREIN SHALL
EXPIRE IF THIS AGREEMENT IS NOT EXECUTED BY BORROWER AND RETURNED
TO SILICON WITHIN 30 DAYS OF THE ABOVE DATE.
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower named above (the "Borrower") whose
chief executive office is located at the above address ("Borrower's Address").
1. LOANS. Silicon will make loans to Borrower (the "Loans") in amounts
determined by Silicon in its reasonable business judgment up to the amount
(the "Credit Limit") shown on the Schedule to this Agreement (the
"Schedule"), provided no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default has occurred.
All Loans and other monetary Obligations will bear interest at the rate shown
on the Schedule. Interest will be payable monthly, on the date shown on the
monthly billing from Silicon. Silicon may, in its discretion, charge interest
to Borrower's deposit accounts maintained with Silicon.
2. SECURITY INTEREST. As security for all present and future
indebtedness, guarantees, liabilities, and other obligations, of Borrower to
Silicon (collectively, the "Obligations"), Borrower hereby grants Silicon a
continuing security interest in all of Borrower's interest in the following
types of property, whether now owned or hereafter acquired, and wherever
located (collectively, the "Collateral"): All "accounts," "general
intangibles," "contract rights," "chattel paper," documents," "letters of
credit," "instruments," "deposit accounts," "inventory," "farm products,"
"investment property," "fixtures" and "equipment," as such terms are defined
in Division 9 of the California Uniform Commercial Code in effect on the date
hereof, and all products, proceeds and insurance proceeds of the foregoing.
3. REPRESENTATIONS AND AGREEMENTS OF BORROWER. Borrower represents to
Silicon as follows, and Borrower agrees that the following representations
will continue to be true, and that Borrower will comply with all of the
following agreements throughout the term of this Agreement:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a
corporation, is and will continue to be, duly authorized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
The execution, delivery and performance by Borrower of this Agreement, and
all other documents contemplated hereby have been duly and validly
authorized, and do not violate any law or any provision of, and are not
grounds for acceleration under, any agreement or instrument which is binding
upon Borrower.
3.2 NAME; PLACES OF BUSINESS. The name of Borrower set forth
in this Agreement is its correct name. Borrower shall give Silicon 15 days'
prior written notice before changing its name. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Silicon at least 15
days' prior written notice before changing its chief executive office or
locating the Collateral at any other location.
3.3 COLLATERAL. Silicon has and will at all times continue to
have a first-priority perfected security interest in all of the Collateral
other than specific equipment. Borrower will immediately advise Silicon in
writing of any material loss or damage to the Collateral.
3.4 FINANCIAL CONDITION AND STATEMENTS. All financial
statements now or in the future delivered to Silicon have been, and will be,
prepared in conformity with generally accepted accounting principles. Since
the last date covered by any such statement, there has been no material
adverse change in the financial condition or business of Borrower. Borrower
will provide Silicon: (i) within 30 days after the end of each month, a
monthly financial statement prepared by Borrower, and such other information
as Silicon shall reasonably request; (ii) within 120 days following the end
of Borrower's fiscal year, complete annual financial statements, certified by
independent certified public accountants acceptable to Silicon and
accompanied by the unqualified report thereon by said independent certified
public accountants; and (iii) other financial information reasonably
requested by Silicon from time to time.
3.5 TAXES; COMPLIANCE WITH LAW. Borrower has filed, and will
file, when due, all tax returns and reports required by applicable law, and
Borrower has paid, and will pay, when due, all taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower has
complied, and will comply, in all material respects, with all applicable
laws, rules and regulations.
3.6 INSURANCE. Borrower shall at all times insure all of the
tangible personal property Collateral and carry such other business insurance
as is customary in Borrower's industry.
<PAGE>
SILICON VALLEY BANK QUICKSTART LOAN AND SECURITY AGREEMENT
------------------------------------------------------------------------
3.7 ACCESS TO COLLATERAL AND BOOKS AND RECORDS. At reasonable
times, on one business day notice, Silicon, or its agents, shall have the
right to inspect the Collateral, and the right to audit and copy Borrower's
books and records.
3.8 OPERATING ACCOUNTS. Borrower shall maintain its primary
operating accounts with Bank.
3.9 ADDITIONAL AGREEMENTS. Borrower shall not, without
Silicon's prior written consent, do any of the following: (i) enter into any
transaction outside the ordinary course of business except for the sale of
capital stock to venture investors, provided that Borrower promptly delivers
written notification to Silicon of any such sale; (ii) sell or transfer any
Collateral, except in the ordinary course of business; (iii) pay or declare
any dividends on Borrower's stock (except for dividends payable solely in
stock of Borrower); or (iv) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower's stock other than the repurchase of
up to five percent (5%) of Borrower's then issued stock in any fiscal year
from Borrower's employees or directors pursuant to written agreement with
Borrower.
4. TERM. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"). This Agreement may be
terminated, without penalty, prior to the Maturity Date as follows: (i) by
Borrower, effective three business days after written notice of termination
is given to Silicon; or (ii) by Silicon at any time after the occurrence of
an Event of Default, without notice, effective immediately. On the Maturity
Date or on any earlier effective date of termination, Borrower shall pay all
Obligations in full, whether or not such Obligations are otherwise then due
and payable. No termination shall in any way affect or impair any security
interest or other right or remedy of Silicon, nor shall any such termination
relieve Borrower of any Obligation to Silicon, until all of the Obligations
have been paid and performed in full.
5. EVENTS OF DEFAULT AND REMEDIES. The occurrence of any of the
following events shall constitute an "Event of Default" under this Agreement:
(a) Any representation, statement, report or certificate given to Silicon by
Borrower or any of its officers, employees or agents, now or in the future,
is untrue or misleading in a material respect; or (b) Borrower fails to pay
when due any Loan or any interest thereon or any other monetary Obligation;
or (c) the total Obligations outstanding at any time exceed the Credit Limit;
or (d) Borrower fails to perform any other non-monetary Obligation, which
failure is not cured within 5 business days after the date due; or (e)
Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by or against [unless dismissed in 30 days]
Borrower under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (f) a material adverse
change in the business, operations, or financial or other condition of
Borrower [which is not cured within 30 days]. If an Event of Default occurs,
Silicon shall have the right to accelerate and declare all of the Obligations
to be immediately due and payable, increase the interest rate by an
additional four percent per annum, and exercise all rights and remedies
accorded it by applicable law.
6. GENERAL. If any provision of this Agreement is held to be
unenforceable, the remainder of this Agreement shall still continue in full
force and effect. This Agreement and any other written agreements, documents
and instruments executed in connection herewith are the complete agreement
between Borrower and Silicon and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There are no oral understandings,
representations or agreements between the parties which are not in this
Agreement or in other written agreements signed by the parties in connection
this Agreement. The failure of Silicon at any time to require Borrower to
comply strictly with any of the provisions of this Agreement shall not waive
Silicon's right later to demand and receive strict compliance. Any waiver of
a default shall not waive any other default. None of the provisions of this
Agreement may be waived except by a specific written waiver signed by an
officer of Silicon and delivered to Borrower. The provisions of this
Agreement may not be amended, except in a writing signed by Borrower and
Silicon. Borrower shall reimburse Silicon for all reasonable attorneys' fees
and all other reasonable costs incurred by Silicon, in connection with this
Agreement (whether or not a lawsuit is filed). If Silicon or Borrower files
any lawsuit against the other predicated on a breach of this Agreement, the
prevailing party shall be entitled to recover its reasonable costs and
attorneys' fees from the non-prevailing party. Borrower may not assign any
rights under this Agreement without Silicon's prior written consent. This
Agreement shall be governed by the laws of the State of California.
7. MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY CONDUCT, ACT OR
OMISSION OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR AFFILIATES.
Borrower:
IPRINT, INC.
By /s/ Royal P. Farros
--------------------------------------------------------------------
President or Vice President
Silicon:
SILICON VALLEY BANK
By /s/
--------------------------------------------------------------------
Title Vice President
-----------------------------------------------------------------
<PAGE>
SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (EQUIPMENT ADVANCES)
BORROWER: IPRINT, INC.
DATE: MAY 8, 1998
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT (EQUIPMENT)
(Section 1): $750,000.00 (such amount to be funded under
the aggregate Credit Limit). Equipment
Advances will be made only on or prior to
May 8, 1999 (the "Last Advance Date") and
only for the purpose of purchasing
equipment reasonably acceptable to
Silicon and may not exceed one hundred
percent (100%) invoice amount for the
equipment purchase. Software, softcosts,
and leasehold improvements may constitute
up to seventy-five percent (75%) of the
aggregate Equipment Advances. Borrower
must provide invoices for the equipment
to Silicon on or before the Last Advance
Date.
INTEREST RATE (Section 1): A per annum rate equal to the "Prime
Rate" in effect from time to time.
Interest shall be calculated on the basis
of a 360-day year for the actual number
of days elapsed. "Prime Rate" means the
rate announced from time to time by
Silicon as its "prime rate;" it is a base
rate upon which other rates charged by
Silicon are based, and it is not
necessarily the best rate available at
Silicon. The interest rate applicable to
the Obligations shall change on each date
there is a change in the Prime Rate.
MATURITY DATE (Section 4): After the Last Advance Date, the unpaid
principal balance of the Equipment
Advances shall be repaid in 36 equal
monthly installments of principal, plus
interest, commencing on June 8, 1999 and
continuing on the same day of each month
thereafter until the entire unpaid
principal balance of the Equipment
Advances and all accrued unpaid interest
have been paid (subject to Silicon's
right to accelerate the Equipment
Advances on an Event of Default).
Borrower: Silicon:
IPRINT, INC. SILICON VALLEY BANK
By /s/ Royal P. Farros By /s/
------------------------------------- -------------------------------
President or Vice President Title Vice President
----------------------------
<PAGE>
SILICON VALLEY BANK
SCHEDULE TO
QUICKSTART LOAN AND SECURITY AGREEMENT (MASTER)
BORROWER: IPRINT, INC.
DATE: MAY 8, 1998
This Schedule is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT (AGGREGATE)
(Section 1): $750,000.00 (includes, without
limitation, Equipment Advances and the
Merchant Services and Business Visa
Reserve, if any)
INTEREST RATE (Section 1): A per annum rate equal to the "Prime
Rate" in effect from time to time.
Interest shall calculated on the basis of
a 360-day year for the actual number of
days elapsed. "Prime Rate" means the rate
announced from time to time by Silicon as
its "prime rate;" it is a base rate upon
which other rates charged by Silicon are
based, and it is not necessarily the best
rate available at Silicon. The interest
rate applicable to the Obligations shall
change on each date there is a change in
the Prime Rate.
MATURITY DATE (Section 4): November 8, 1999
OTHER LOCATIONS AND ADDRESSES
(Section 3.2) ______________________________________
OTHER AGREEMENTS: Borrower also agrees as follows:
1. Bank Relationship. Borrower shall at
all times maintain fifty-one percent
(51%) of its cash deposits in accounts
maintained with Silicon.
Borrower: Silicon:
IPRINT, INC. SILICON VALLEY BANK
By /s/ Royal P. Farros By /s/
----------------------------------------------- ----------------------
President or Vice President Title Vice President
----------------------
<PAGE>
THIS SPACE FOR USE OF FILING OFFICER
<TABLE>
<S><C>
____92023002594000
FINANCING STATEMENT -- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant to the Uniform
Commercial Code and will remain effective, with certain exceptions, for 5
years from date of filing.
- ------------------------------------------------------------------------------------------
A. NAME & TEL. # OF CONTACT AT FILER (optional) B. FILING OFFICE ACCT. # (optional)
- ------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
Data File Services, Inc.
P.O. Box 275
Van Nuys, CA 91408-2750
- ------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION [if applicable]: LESSOR/LESSEE CONSIGNOR/CONSIGNEE
NON-UCC FILING
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) FILED WITH: CALIFORNIA
-----------------------------------------------------------------------------------------------------------------------------
OR 1a. ENTITY'S NAME
iPrint, inc.
-----------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- -----------------------------------------------------------------------------------------------------------------------------------
1c MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
Mail Stop 223-5 Moffett Field CA 94035
Nasa Ames Research Center, Bldg. N 223, Ste. 108
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1d S.S. OR TAX I.D. # OPTIONAL 1e TYPE OF ENTITY 1f.ENTITY'S STATE 1g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO OR COUNTRY OF
RE ENTITY ORGANIZATION
DEBTOR NONE
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) 113/JRM
----------------------------------------------------------------------------------------------------------------------------
OR 2a. ENTITY'S NAME
----------------------------------------------------------------------------------------------------------------------------
2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- -----------------------------------------------------------------------------------------------------------------------------------
2c MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- -----------------------------------------------------------------------------------------------------------------------------------
2d S.S. OR TAX I.D. # OPTIONAL 2e TYPE OF ENTITY 2f. ENTITY'S STATE 2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO OR COUNTRY OF
RE ENTITY ORGANIZATION
DEBTOR NONE
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL NAME - insert only one secured party name (3a or 3b)
----------------------------------------------------------------------------------------------------------------------------
OR 3a. ENTITY'S NAME
SILICON VALLEY BANK
----------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- -----------------------------------------------------------------------------------------------------------------------------------
3c MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
3003 Tasman Drive Santa Clara CA 95054
- -----------------------------------------------------------------------------------------------------------------------------------
4. This FINANCING STATEMENT covers the following types or items of property:
REFER TO EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF FOR DESCRIPTION OF COLLATERAL
- -----------------------------------------------------------------------------------------------------------------------------------
5. CHECK / / This FINANCING STATEMENT is signed by the Secured Party instead of the 7. If filed in Florida (check one)
BOX Debtor to perfect a security interest (a) in collateral already subject / /Documentary / /Documentary
(if applicable) to a security interest in another jurisdiction when it was brought stamp tax paid tax not
into this state, or when the debtor's location was changed to this state, applicable
or (b) accordance with other statutory provisions [additional data may
be required]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
6. REQUIRES SIGNATURE 8. / /This FINANCING STATEMENT is to be filed
iPrint, inc. (for record) (or recorded) in the REAL
ESTATE RECORDS
/s/ Royal P. Farros Attach Addendum (if applicable)
- -----------------------------------------------------------------------------------------------------------------------------------
9. Check to REQUEST SEARCH CERTIFICATE(S)
on Debtor(s) [ADDITIONAL FEE]
(optional) / / All Debtors / /Debtor 1 / / Debtor 2
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(1) FILING OFFICER COPY- NATIONAL FINANCING STATEMENT (FORM UCC 1) (TRANS) (REV. 12/18/95)
</TABLE>
<PAGE>
EXHIBIT "A" TO UCC-1 FINANCING STATEMENT
DEBTOR: iPrint, inc.
SECURED PARTY: SILICON VALLEY BANK
Debtor hereby grants Secured Party a security interest in
all of the following, whether now opened or hereafter acquired, and wherever
located, as collateral for the payment and performance of all present and
future indebtedness, liabilities, guarantees and obligations of Debtor to
Secured Party: All "accounts," "general intangibles," "contract rights",
"chattel paper," "documents," "letters of credit," "instruments," "deposit
accounts," "inventory," "farm products," "fixtures," "investment property,"
and "equipment," as such terms are defined in Division 9 of the California
Uniform Commercial Code in effect on the date hereof, and all products,
proceeds and insurance proceeds of any or all of the foregoing.
Debtor Initial here: /s/ RF
---------
<PAGE>
SILICON VALLEY BANK
Certified Resolution
Borrower: iPrint, inc., a corporation organized under the laws
of the State of California
Date: May 8, 1998
I, the undersigned, corporate officer of the above-named borrower, a
corporation organized under the laws of the state set forth above, do hereby
certify that the following is a full, true and correct copy of resolutions
duly and regularly adopted by the Board of Directors of said corporation as
required by law, and by the by-laws of said corporation, and that said
resolutions are still in full force and effect and have not been in any way
modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Silicon Valley Bank ("Silicon"),
from time to time, such sum or sums of money as, in the judgment of the
officer or officers authorized hereby, this corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she is
hereby authorized, in the name of this corporation, to execute and deliver to
Silicon the loan agreements, security agreements, notes, financing
statements, and other documents and instruments providing for such loans and
evidencing or securing such loans, and said authorized officers are
authorized from time to time to execute renewals, extensions and/or
amendments of said loan agreements, security agreements, and other documents
and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, as security for any and all indebtedness of this corporation to
Silicon, whether arising pursuant to this resolution or otherwise, to grant,
to Silicon, or deed of trust for its benefit, any property of any and every
kind, belonging to this corporation, including, but not limited to, any and
all real property, accounts, inventory, equipment, general intangibles,
instruments, documents, chattel paper, notes, money, deposit accounts,
furniture, fixtures, goods, and other property of every kind, and to execute
and deliver to Silicon any and all pledge agreements, mortgages, deeds of
trust, financing statements, security agreements and other agreements, which
said instruments and the note or notes and other instruments referred to in
the preceding paragraph may contain such provisions, covenants, recitals and
agreements as Silicon may require, and said authorized officers may approve,
and the execution thereof by said authorized officers shall be conclusive
evidence of such approval.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized to issue warrants to purchase this corporation's capital stock,
for such class, series and number, and on such terms, as said officers shall
deem appropriate.
RESOLVED FURTHER, that Silicon may conclusively rely on a certified copy of
these resolutions and a certificate of the corporate officer of this
corporation as to the officers of this corporation and their offices and
signatures, and continue to conclusively rely on such certified copy of these
resolutions and said certificate for all past, present and future
transactions until written notice of any change hereto or thereto is given to
Silicon by this corporation by certified mail, return receipt requested.
The undersigned further hereby certifies that the following persons are the
duly elected and acting officers of the corporation named above as borrower
and that the following are their actual signatures:
<TABLE>
<CAPTION>
NAMES OFFICE(S) ACTUAL SIGNATURES
<S> <C> <C>
Royal P. Farros CEO x /s/ Royal P. Farros
- ----------------------------------- --------------------------------- ---------------------------------
Nickoletta T. Farros-Swank Secretary x /s/ Nickoletta T. Farros-Swank
- ----------------------------------- --------------------------------- ---------------------------------
x
- ----------------------------------- --------------------------------- ---------------------------------
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as such corporate officer on
the date set forth above.
By: /s/ Gregory Korjeff
------------------------------------
Its: Vice President, Operations
-----------------------------------
<PAGE>
SILICON VALLEY BANK QUICKSTART LOAN AND SECURITY AGREEMENT
------------------------------------------------------------------------
<PAGE>
STANDARD INDUSTRIAL LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Parties.
This Lease, dated, for reference purposes only, July 30, 1998 is made
by and between HANSEN MANAGEMENT (herein called "Lessor") and iPrint Inc.
(herein called "Lessee").
2. Premises.
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, that
certain real property situated in the County of San Mateo, State of California
commonly known as 1450 ODDSTAD DRIVE, REDWOOD CITY, CA 94063 and described as
APPROXIMATELY 9,685 SQUARE FEET OF COMMERCIAL SPACE. Said real property
including the land and all improvements therein, is herein called "the
Premises".
3. Term.
3.1 Term. The term of this Lease shall be for THREE (3) YEARS
commencing on OCTOBER 1, 1998 and ending on September 30, 2001, unless sooner
terminated pursuant to any provision hereof.
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, 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 until possession of the Premises is tendered to Lessee; provided,
however, that if Lessor shall not have delivered possession of the Premises
within sixty (60) days from said commencement date, 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 shall be discharged from all obligations
hereunder; provided further, however, that if such written notice of 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.
3.3 Early Possession. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date. NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN THIS LEASE, PRIOR TO THE COMMENCEMENT DATE, LESSEE
MAY ENTER THE PREMISES TO INSTALL EQUIPMENT, TELEPHONE SYSTEMS, TRADE FIXTURES,
ALL CABLES AND WIRES NECESSARY FOR LESSEE'S BUSINESS, AND TO CONSTRUCT LESSEE
IMPROVEMENTS. LESSEE'S ENTRY SHALL NOT ACCELERATE THE COMMENCEMENT DATE.
4. Rent.
Lessee shall pay to Lessor as rent for the Premises, monthly payments
of $** advance, on the FIRST day of each month of the term hereof. Lessee shall
pay Lessor upon the execution
1
<PAGE>
hereof $** as rent for ** AS OF 10/01/98 FIRST YEARS RENT SHALL BE $9,685 PER
MONTH; AS OF 10/01/99 SECOND YEARS RENT SHALL BE $10,653.50 PER MONTH; AS OF
10/01/00 THIRD YEARS RENT SHALL BE $11,622.00 PER MONTH. Rent for any period
during the term hereof which is for less than one month shall be a pro rata
portion of the monthly installment. 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.
5. Security Deposit.
Lessee shall deposit with Lessor upon execution hereof $9,685.00 as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee falls 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 or 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 herein above stated and Lessee's failure to do so shall be a
material breach of this Lease. If the monthly rent shall, from time to time,
increase during the term of this Lease, Lessee shall thereupon deposit with
Lessor additional security deposit so that the amount of security deposit held
by Lessor shall at all times bear the same proportion to current rent as the
original security deposit bears to the original monthly rent set forth in
paragraph 4 hereof. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore 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 EXECUTIVE AND
ADMINISTRATIVE OFFICES, SALES TRAINING AND FOR ANY ANCILLARY USE THEREOF or any
other use which is reasonably comparable and for no other purpose.
6.2 Compliance with Law. Lessee shall, at Lessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders,
covenants and restrictions of record, and requirements in effect during the term
or any part of the term hereof, regulating the use by Lessee of the Premises.
Lessee shall not use nor permit the use of the Premises in any manner that will
tend to create waste or a nuisance or, if there shall be more than one tenant in
the building containing the Premises, shall tend to disturb such other tenants.
6.3 CONDITION OF PREMISES. LESSEE IS TAKING PREMISES IN ITS PRESENT
CONDITION WITH THE EXCEPTION THAT THE LESSOR WARRANTS THE HVAC UNITS,
ELECTRICAL, PLUMBING ARE IN NORMAL WORKING CONDITION IN ITS PRESENT
CONFIGURATION AS OF THE DATE OF EARLY POSSESSION. LESSOR SHALL DELIVER TO
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LESSEE, THE ENTIRE PREMISES IN BROOM CLEAN CONDITION, FREE FROM DEBRIS AND
WASTE. LESSOR ALSO REPRESENTS THAT ALL PORTIONS OF THE ROOF, ROOF STRUCTURES AND
SUPPORTS AND ALL STRUCTURAL PORTIONS OF THE PREMISES ARE IN GOOD OPERATING
CONDITION AS OF THE EARLY POSSESSION DATE.
7. Maintenance, Repairs and Alterations.
7.1 Lessor's Obligations. Subject to the provisions of Paragraphs 6,
7.2, and 9 and except for damage caused by any negligent or intentional act or
omission of Lessee, Lessee's agents, employees, or invitees in which event
Lessee shall repair the damage. Lessor, at Lessor's expense, shall keep in good
order, condition and repair; the foundations, INTERIOR LOAD BEARING, WALLS AND
COLUMNS (EXCEPT AS DAMAGED BY LESSEE, LESSEE'S AGENTS, EMPLOYEES, OR INVITEES),
exterior walls and the exterior roof, INTERNAL ROOF SUPPORT STRUCTURE of the
Premises. Lessor shall not, however, be obligated to paint such exterior, nor
shall Lessor be required to maintain the interior surface of exterior walls,
windows, doors or plate glass. Lessor shall have no obligation to make repairs
under this Paragraph 7.1 until a reasonable time after receipt of written notice
of the need for such repairs.
7.2 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 6, 7.1 and 9,
Lessee, at Lessee's expense, shall keep in good order, condition and repair the
Premises and every part thereof (whether or not the damaged portion of the
Premises or the means of repairing the same are reasonably or readily accessible
to Lessee) including, without limiting the generality of the foregoing, all
plumbing, heating, air conditioning, (Lessee shall procure and maintain, at
Lessee's expense, an air conditioning system maintenance contract) ventilating,
electrical and lighting facilities and equipment within the Premises, fixtures,
interior walls and interior surface of exterior walls, ceilings, windows, doors,
plate glass, and skylights, located within the Premises, and signs located in
the Premises.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.2 or under any other Paragraph of this Lease, Lessor may at Lessor's
option enter upon the Premises after 10 days' prior written notice to Lessee
(except in the case of emergency, in which case no notice shall be required).
perform such obligations on Lessee's behalf and put the Premises in good order,
condition and repair, and the cost thereof together with interest thereon at the
maximum rate then allowable by law shall be due and payable as additional rent
to Lessor together with Lessee's next rental installment. NOTWITHSTANDING
ANYTHING TO THE CONTRARY, IF LESSEE, AFTER TEN DAYS WRITTEN NOTIFICATION FROM
THE LESSOR, HAS BEGUN TO MAKE THE REPAIRS AND IS DILIGENTLY WORKING TO CORRECT
THE PROBLEM, OR SUCH LONGER PERIOD OF TIME AS IS REASONABLY NECESSARY IF THE
REPAIR CANNOT BE COMPLETED WITHIN THE THIRTY (30) DAY PERIOD WILL DELAY LESSOR'S
OPTION AS DESCRIBED ABOVE.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received (ordinary wear and tear, AND DAMAGE BY CASUALTY, ACTS OF GOD, OR THE
ELEMENTS AND CONDEMNATION EXCEPTED) clean and free
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of debris. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of its trade fixtures, furnishings and equipment.
Notwithstanding anything to the contrary otherwise stated in this Lease,
Lessee shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning, and plumbing on
the Premises in normal operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written
consent make any alterations, improvements, additions, or Utility
Installations in, on or about the Premises, except for non structural
alterations not exceeding $5,000 in cumulative costs during the term of this
Lease. In any event, whether or not in excess of $5,000 in cumulative cost,
Lessee shall make no change or alteration to the exterior of the Premises nor
the exterior of the building(s) on the Premises without Lessor's prior
written consent. As used in this Paragraph 7.3 the term "Utility
Installation" shall mean carpeting, window coverings, air lines, power
panels, electrical distribution systems, lighting fixtures, space heaters,
air conditioning, plumbing, and fencing. Lessor may require Lessee to
provide Lessor, at Lessee's sole cost and expense, a lien and completion bond
in an amount equal to one and one-half times the estimated cost of such
improvements, to insure Lessor against any liability, for mechanic's and
material men's liens and to insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, Lessor may require that Lessee remove any or all of
the same.
(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of 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 mechanics' or
material men's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises 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, 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 lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
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(d) all alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall become the
property of Lessor and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this Paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of Paragraph 7.2(c).
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 Combined
Single Limit Bodily Injury, and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance of
the Premises and all other areas appurtenant thereto. Such insurance shall be in
an amount not less than $1,000,000 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this Paragraph 8. The
limits of said insurance 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 Property Damage Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto in an amount not less than $1,000,000
per occurrence.
8.3 Property Insurance. 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 Premises, but not Lessee's fixtures, equipment or tenant improvements in
an amount not to exceed the full replacement value thereof, as the same may
exist from time to time, providing protection against all perils included within
the classification of fire, extended coverage, vandalism, malicious mischief,
flood (in the event same is required by a lender having a lien on the Premises)
special extended perils ("all risk", as such term is used in the insurance
industry) but not plate glass insurance.
8.4 Payment of Premium Increase.
(a) Lessee shall pay to Lessor, during the term hereof, in
addition to the rent, the amount of any increase in premiums for the insurance
required under Paragraphs 8.2 and 8.3 ITS PRO RATA SHARE OF SUCH PREMIUM
INCREASE over and above such premiums paid during the Base Period, as
hereinafter defined, whether such premium increase shall be the result of the
nature of Lessee's occupancy, any act or omission of Lessee, requirements of the
holder of a mortgage or deed of trust covering the Premises, increased
evaluation of the Premises, or general rate increases. In the event that the
Premises have been occupied previously, the words "Base Period" shall mean the
last twelve months of the prior occupancy. In the event that the Premises have
never been previously occupied, the premiums during the "Base Period" shall be
deemed to be the lowest premiums reasonably obtainable for said insurance
assuming the most nominal use of the Premises. Provided, however, in lieu of the
Base Period, the parties may insert a dollar amount at the end of this sentence
which figure shall be considered as the insurance premium for
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the Base Period: BASE YEAR 1998. In no event, however, shall Lessee be
responsible for any portion of the premium cost attributable to liability
insurance coverage in excess of $5,000,000 procured under paragraph 8.2.
(b) Lessee shall pay any such premium increases to Lessor
within 30 days after receipt by Lessee of a copy of the premium statement or
other satisfactory evidence of the amount due. If the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Lessor shall also deliver to Lessee a statement of the amount of such increase
attributable to the Premises and showing in reasonable detail, the manner in
which such amount was computed. If the term of this Lease shall not expire
concurrently with the expiration of the period covered by such insurance,
Lessee's liability for premium increases shall be prorated on an annual basis.
(c) If the Premises are part of a larger building, then Lessee
shall not be responsible for paying any increase in the property insurance
premium caused by the acts or omissions of any other tenant of the building of
which the Premises are a part.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide". Lessee shall
deliver to Lessor copies of policies of liability insurance required under
Paragraph 8.1 or certificates evidencing the existence and amounts of such
insurance. 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 or "binders" thereof,
or Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee upon demand. Lessee shall not do or permit to
be done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3.
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 loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, 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
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
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against Lessor by
reason of any such claim, Lessee upon notice from Lessor shall defend the same
at Lessee's
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expense by counsel satisfactory to Lessor. Lessee, as a material
part of the consideration to Lessor, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises 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 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, 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 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 the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable (EXCEPT TO THE EXTENT CAUSED BY THE WILLFUL
ACTS OF LESSOR, ITS AGENTS, EMPLOYEES, OR CONTRACTORS, OR AS A RESULT OF A
DEFAULT BY LESSOR OF ITS OBLIGATIONS UNDER THIS LEASE) for any damages arising
from any act or neglect of any other tenant, if any, of the building in which
the Premises are located.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair, is less than 50% of the fair market value of such building
as a whole immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or more
of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Total Destruction" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair is 50% or more of the fair market value of such building as a
whole immediately prior to such damage or destruction.
(c) "Insured Loss" shall herein mean damage or destruction
which was caused by an event required to be covered by the insurance described
in paragraph 8.
9.2 Partial Damage - Insured Loss. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, if at anytime during the term of this Lease there
is damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's sole cost, repair such damage, but not Lessee's fixtures,
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equipment
or tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect.
9.3 Partial Damage - Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, 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 Partial 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), 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 the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.
9.4 Total Destruction. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss, (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at anytime during the last six months of the term of
this Lease there is damage, whether or not an Insured Loss, which falls within
the classification of Premises Partial Damage, 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 9.5(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 20 days after the occurrence of
an Insured Loss falling within the classification of Premises Partial Damage
during the last six months of the term of this Lease. If Lessee duly exercises
such option during said 20 day period, Lessor shall, at Lessor's expense, repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option during said 20 day
period, then Lessor may at Lessor's option terminate and cancel this Lease as of
the expiration of said 20 day period by giving written notice to Lessee of
Lessor's election to do so within 10 days after the expiration of said 20 day
period, notwithstanding any term or provision in the grant of option to the
contrary.
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9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraphs 9.2 or 9.3,
and Lessor or Lessee repairs or restores the Premises pursuant to the provisions
of this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for 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 under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within 90 days after such obligations shall accrue, 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 of
such repair or restoration. In such event this Lease shall terminate as of the
date of such notice.
9.7 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.
9.8 Waiver. Lessor and Lessee waive the provisions of any statutes
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.
9.9 TERMINATION - DELAY. IF ANY REPAIRS ARE NOT COMPLETED OR
COMPLEATABLE WITHIN 180 DAYS OF DESTRUCTION OR PARTIAL DAMAGE, LESSEE HAS OPTION
TO TERMINATE THIS LEASE.
10. Real Property Taxes.
10.1 Payment of Tax Increase. Lessor shall pay the real property tax,
as defined in paragraph 10.3, applicable to the Premises; provided, however,
that Lessee shall pay its pro rata share, in addition to rent, the amount, if
any, by which real property taxes applicable to the Premises increase over the
fiscal real estate tax year 1998, 1999. Such payment shall be made by Lessee
within thirty (30) days after receipt of Lessor's written statement setting
forth the amount of such increase and the computation thereof. If the term of
this Lease shall not expire concurrently with the expiration of the tax fiscal
year. Lessee's liability for increased taxes for the last partial lease year
shall be prorated on an annual basis.
10.2 Additional Improvements. Notwithstanding paragraph 10.1 hereof,
Lessee shall pay to Lessor upon demand therefor 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
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tax (other than inheritance, personal income or estate taxes) imposed on the
Premises by any authority having the direct or indirect power to tax,
including any city, 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 Premises or in the
real property of which the Premises are a part, as against Lessor's right to
rent or other income therefrom, and as against Lessor's business of leasing
the Premises. 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 herein above 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 transfer, either partial or total, of
Lessor's interest in the Premises or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of
such transfer, 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 Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information 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. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee within 10 days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. Utilities.
Lessee shall pay for all water, gas, heat, light, power, telephone and
other utilities and services supplied to the Premises, together with any taxes
thereon. If any such services are not separately metered to Lessee, Lessee shall
pay a reasonable proportion to be determined by Lessor of all charges jointly
metered with other premises.
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 this Lease or in the Premises,
without Lessor's prior consent, which Lessor shall not
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unreasonably withhold. LESSEE SHALL PROVIDE WRITTEN NOTICE OF SUCH DESIRE AT
LEAST NINETY (90) DAYS IN ADVANCE OF THE DATE ON WHICH LESSEE DESIRES TO MAKE
SUCH ASSIGNMENT OR SUBLET. LESSOR SHALL THEN HAVE A PERIOD OF THIRTY (30)
DAYS FOLLOWING RECEIPT OF SUCH NOTICE WITHIN WHICH TO NOTIFY LESSEE IN
WRITING THAT LESSOR ELECTS EITHER (I) TO TERMINATE THIS LEASE AS TO THE SPACE
SO AFFECTED AS OF THE DATE SO SPECIFIED BY LESSEE IN WHICH EVENT LESSEE WILL
BE RELIEVED OF ALL FURTHER OBLIGATIONS HEREAFTER AS TO SUCH SPACE, OR (II) TO
PERMIT LESSEE TO ASSIGN OR SUBLET SUCH SPACE, SUBJECT, HOWEVER, TO PRIOR
WRITTEN APPROVAL OF THE PROPOSED ASSIGNEE OR SUBLESSEE BY LESSOR. IF LESSOR
SHOULD FAIL TO NOTIFY LESSEE IN WRITING OF SUCH ELECTION WITHIN SAID 30-DAY
PERIOD, LESSOR SHALL BE DEEMED TO HAVE ELECTED OPTION (II) ABOVE. LESSOR'S
REASONABLE JUDGMENT WILL BE USED IN SUCH A MANNER THAT NEW ASSIGNEE OR
SUBLESSEE (I) IS IN KEEPING WITH THE THEN STANDARDS OF THE BUILDING, (II)
WILL NOT VIOLATE ANY NEGATIVE COVENANT AS TO USE CONTAINED IN ANY OTHER LEASE
OF SPACE IN THE BUILDING, (III) THE PROPOSED ASSIGNEE OR SUBLESSEE IS A
REPUTABLE COMPANY WITH SUFFICIENT FINANCIAL NET WORTH CONSIDERING THE
RESPONSIBILITY INVOLVED, AND LESSOR HAS BEEN FURNISHED WITH REASONABLE PROOF
THEREOF. NO SUBLEASE SHALL BE FOR A LONGER TERM ENDING LATER THAN THE CURRENT
EXPIRATION DATE OF THIS LEASE. SUBLEASE SHALL BE IN A FORM ACCEPTABLE TO
LESSOR.
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, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. 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 No Release of Lessee. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee, in the performance of any of
the terms hereof, Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. IN THE
EVENT OF AN ASSIGNMENT OR SUBLEASE, LESSEE AND LESSOR SHALL SHARE EQUALLY IN ANY
EXCESS PROFIT CALCULATED AGAINST THE EFFECTIVE RENTAL RATE NET OF ANY RENT
ABATEMENT, AND AFTER LESSEE RECOVERS THE FOLLOWING COSTS: (1) REASONABLE
ATTORNEYS FEES (2) COST OF TENANT IMPROVEMENTS (3) COST OF ANY BROKERAGE FEES.
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12.4 Attorney's Fees. 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 attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $500.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee
WITHOUT PAYMENT OF RENT.
(b) 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) business 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.
(c) 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 described in paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice thereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless,
in the case of a petition filed against Lessee, the same is dismissed within
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 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
30 days, provided, however, in the event that any provision of this paragraph
13.1(d) is contrary to any applicable law, such provision shall be of no
force or effect.
(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, was materially false.
13.2 Remedies. In the event of any such material default or breach 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 or breach:
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(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession 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 attorney's 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 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 due 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 his 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 prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and 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 Premises.
Accordingly, if any installment of rent 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. In the event
that a late charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding paragraph 4
or any other provision of this Lease to the contrary.
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13.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, or real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
14. Condemnation.
If the Premises or any portion thereof are taken under the power of
eminent domain, or sold under the threat of the exercise of said power (all of
which are herein called "condemnation"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than 10% of the floor area of the building on
the Premises, or more than 25% of the land area of the Premises which is not
occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing only within ten (10) days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the rent shall be reduced in the proportion
that the floor area of the building taken bears to the total floor area of the
building situated on the Premises. No reduction of rent shall occur if the only
area taken is that which does not have a building located thereon. Any award for
the taking of all or any part of the Premises under the power of eminent domain
or any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution in value of the lease hold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any award
for loss of or damage to Lessee's trade fixtures and removable personal
property. 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.
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16. Estoppel Certificate.
(a) Lessee shall at anytime upon not less than ten (10) days' prior
written notice from Lessor execute, acknowledge and deliver to Lessor 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 Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be conclusive
upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, 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 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 Premises, 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 of such
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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. Severabililty.
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 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.
21. Additional Rent.
Any monetary obligations of Lessee to Lessor under the terms of this
Lease 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 mentioned herein. No prior 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 (if any) listed in Paragraph 15 hereof nor any cooperating broker
on this transaction nor the Lessor or any employees or agents of any of said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of said Premises 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 except as otherwise specifically stated in 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 mail or certified mail, and
if given personally or by mail, shall be deemed sufficiently given if addressed
to Lessee or to Lessor at the address noted below the signature of the
respective parties, as the case may be. Either party may by notice to the other
specify a different address for notice purposes except that upon Lessee's taking
possession of the
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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 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 at renegotiated rent from month to month upon all the
provisions of this Lease pertaining to the obligations of Lessee, but all
options and rights of first refusal, 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 provisions of Paragraph 17, this Lease shall bind
the parties, their personal representatives, successors and assigns. This Lease
shall be governed by the laws of the State wherein the Premises are located.
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30. Subordination.
(a) This Lease, 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 real property of which the Premises are a part 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 prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is 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 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 10 days after written demand shall constitute a
material default by Lessee hereunder, 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. Attorney's Fees.
If either party herein brings an action to enforce the terms hereof
or declare rights hereunder, the prevailing party in any such action, on
trial or appeal, shall be entitled to his reasonable attorney's fees to be
paid by the losing party as fixed by the court.
32. Lessor's Access.
Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times, WITH REASONABLE NOTICE, for the purpose of inspecting the
same, showing the same to prospective purchasers, lenders, or lessees, and
making such alterations, repairs, improvements or additions to the Premises or
to the building of which they are a part as Lessor may deem necessary or
desirable. Lessor may at any time place on or about the Premises 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, all
without rebate of rent or liability to Lessee.
33. Auctions.
Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises 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.
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34. Signs.
Lessee shall not place any sign upon the Premises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor to place ordinary and usual for rent or sublet signs
thereon. Subject to compliance with applicable local ordinances, LESSEE SHALL
HAVE THE RIGHT, WITH LESSOR'S CONSENT (WHICH SHALL NOT BE UNREASONABLY WITHHELD
OR DELAYED) TO ERECT ANY SIGN IN OR ON THE OUTSIDE OF THE PREMISES, AS LESSEE
DESIRES. LESSEE SHALL HAVE THE USE OF THE EXTERIOR MONUMENT SIGNAGE, BASED ON
LESSEE'S PRO RATA SHARE OF VETERANS SQUARE.
35. Merger.
The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation thereof, or a 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 paragraph 33 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.
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, 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 Premises.
39. Options.
39.1 Definition. As used in this paragraph the word "Options" 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 or 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 property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the Premises or the right or option to purchase
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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 are
personal to Lessee (AND LESSEE'S AFFILIATES, SEE 12.2) and may not be exercised
or be assigned, voluntarily or involuntarily, by or to any person or entity
other than Lessee, provided, however, the Option may be exercised by or assigned
to any assignable separate and apart from this Lease.
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(b) or 13.1(c) and continuing until the default
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) continuing until
the obligation is paid, or (iii) at any time after an event of default described
in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to
give notice of such default to Lessee), or (iv) in the event that Lessor has
given to Lessee three or more notices of default under paragraph 13.1(b), where
a late charge becomes payable under paragraph 13.4 for each of such defaults, or
paragraph 13.1(c), whether or not the defaults are cured, during the 12 month
period prior to the time that Lessee intends to exercise the subject Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) 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 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(c) within 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) Lessee
commits a default described in paragraph 13.1(a). 13.1(d) or 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv)
Lessor gives to Lessee three or more notices of default under paragraph 13.1(b),
where a late charge becomes payable under paragraph 13.4 for each such default,
or paragraph 13.1(c), whether or not the defaults are cured.
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40. Multiple Tenant Building.
In the event that the Premises are part of a larger building or group
of buildings then Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the building and grounds, the
parking of vehicles and the preservation of good order therein as well as for
the convenience of other occupants and tenants of the building. The violations
of any such rules and regulations shall be deemed a material breach of this
Lease by Lessee.
41. Security Measures.
Lessee hereby acknowledges that the rental payable to Lessor hereunder
does not include the cost of guard service or other security measures, and that
Lessor shall have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of Lessee, its agents and invitees from acts
of third parties.
42. Easements.
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 breach of this Lease.
43. Performance Under Protest.
If at anytime 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.
44. Authority.
If Lessee is a corporation, trust, or general or limited partnership,
each individual executing this Lease on behalf of such entity represents and
warrants that he or she is duly authorized to execute and deliver this Lease on
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.
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45. Conflict.
Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten,
underlined or handwritten provisions.
46. Addendum.
Attached hereto is an addendum or addenda containing paragraphs 47
THROUGH 58 which constitutes a part of this Lease.
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.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Redwood City
--------------------------
on July 31, 1998 by /s/ Robert Hansen
----------------------------------- ---------------------
address 2295 Woodside Rd. #400-33 by /s/ Hansen Management
------------------------------ ---------------------
Woodside, CA 94062 LESSOR
- --------------------------------------
Executed at Redwood City, CA
--------------------------
on August 3, 1998 by /s/ Gregory Korjeff
----------------------------------- --------------------
address 1450 Oddstad Dr. by /s/ iPrint, inc.
------------------------------ --------------------
Redwood City, CA LESSEE
- --------------------------------------
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ADDENDUM TO LEASE
In reference to the Agreement to Lease dated July 30, 1998 by and between,
HANSEN MANAGEMENT, hereafter referred to as Lessor, and iPrint Inc., hereafter
referred to as Lessee, covering the real property commonly known as 1450 ODDSTAD
DRIVE, REDWOOD CITY, CALIFORNIA, the undersigned Lessor and Lessee agree to the
following:
47. Lessee shall pay their pro-rata share (38.46%) of common area costs,
including but not limited to parking lot sweeping, landscaping, painting,
maintenance and common lighting. Lessee shall be provided a breakdown of these
costs.
48. Lessor hereby grants to Lessee the option to extend the term of this lease
for a five (5) year period following the expiration of the original term. Lessee
shall exercise this option by giving notice to Lessor at least six (6) months,
but not more than nine (9) months, prior to the expiration of the term. Terms
and conditions to be renegotiated at that time.
49. Lessee is taking premises in its present condition with the exception that
the Lessor warrants the HVAC units, electrical, plumbing are in normal working
condition in its present configuration as of the date of early possession.
Lessor shall deliver to Lessee, the entire Premises in broom clean condition,
free from debris and waste. Lessor also represents that all portions of the
roof, roof structures and supports and all structural portions of the Premises
are in good operating condition as of the early possession date.
50. At the time tenant enters the premises under the early possession provision,
all insurance including not limited to liability naming Lessor as coinsured, or
additional insured, to be in place, a copy of which shall be delivered to lessor
prior to entering.
51. Landlord to provide tenant with four (4) months of rental abatement as a
tenant improvement of allowance. (November 1998, December 1998, January 1999,
February 1999). iPrint shall not be required to restore the premises upon
expiration of the lease term or any extensions. All improvements are subject to
Lessor approval prior to work commencement.
52. Landlord is responsible for complying with the ADA in common areas, and
Lessee is responsible for compliance in their own space except for any ADA
compliance requirements triggered by Lessor's work in and around the premises.
<PAGE>
Lessee agrees to inform Landlord immediately (but not later than ten days) after
becoming aware of any notice from any governmental agency of any violation of
the American with Disabilities Act ("ADA").
53. iPrint will be granted eight (8) designated parking spaces.
54. Regarding section 12 (Assignment and Subletting) Lessor approves subleasing
a portion of the space to "The Enterprise Network" at the same rent and terms as
Lessee. All other requirements of section 12 apply.
55. Interruption of Services: Notwithstanding anything to the contrary in the
lease, if the water or sewer service shall be temporarily suspended and not
restored within five (5) business days after written notice from Lessee to
Lessor, rent shall abate from the date service was suspended until fully
restored; if any such service is not restored within thirty (30) days following
Lessee's written notice, Lessee shall have the right, until such service is
restored, to terminate this lease as of the date service was suspended and
Lessor shall afford Lessee twenty (20) days to surrender the Premises.
56. Indemnity: Notwithstanding anything to the contrary, Lessor and Lessee shall
each indemnify and hold each other harmless from all liability, claims, expenses
and penalties resulting from any breach by such party of any of its obligations
pursuant to this Lease or from the negligent acts or omissions of such party or
its partners, officers, agents, representatives, servants, employees,
contractors or invitees.
57. Hazardous Materials: Hazardous Materials is defined as and includes any of
the substances, materials, gases, elements or compounds that are contained in
the list of hazardous substances adopted by the United States Environmental
Protection Agency (the "EPA") and the list of toxic pollutants designated by the
United States Congress or the EPA or any substances, materials, cases, elements
or compounds affected by any other federal, state and local statute, ordinance,
code, rule, regulation, order or decree now or at any time hereafter in effect
regulating, relating to or imposing liability or standards of conduct concerning
any hazardous, toxic, dangerous, restricted or otherwise regulated, waste,
substance or material, as now or at any time hereafter in effect.
Lessor will deliver to Lessee all reports regarding Hazardous Materials within
or near the Premises or Building which have been prepared and of which Lessor
(after thorough investigation) is aware Lessor represents that to the best of
its knowledge the property is in compliance with all laws governing hazardous
materials, that it
<PAGE>
has received no notice of any regulatory action that would result in the
requirement of investigators, or remedial action relating to Hazardous
Materials.
Lessee shall not, and shall not permit or allow others to, possess, use,
transport, store or release in or about the Premises, any Hazardous Material,
without obtaining the prior written consent of Lessor. Such approval shall not
relieve Lessee from its obligations to handle such approved Hazardous Materials
in compliance with applicable regulations and shall not relieve Lessee from its
obligations as hereinafter set forth.
Lessee hereby acknowledges that California Health and Safety Code Section
25359.7 requires Lessee to notify Landlord in writing if Lessee knows or has
reasonable cause to believe that any release of a Hazardous Material has come to
be located on or near or beneath the Premises, and that failure to provide such
notice may constitute default under the terms of this Lease and subject Lessee
to civil penalties in amounts not to exceed $5,000.00 for each violation of the
statute.
Lessee shall indemnify, defend and hold harmless Landlord, its agents,
employees, partners, heirs, successors, assigns and lenders from and against
administrative or judicial orders or directives, costs, damages, liens, expenses
and fees arising from or connected with the presence of any Hazardous Material
on, about or beneath the Premises, whether or not the storage or use of such
Hazardous Material was authorized by Lessor, provided however that Lessee shall
have no obligation to indemnify or defend Lessor with respect to any Hazardous
Material present on the Property or in groundwater beneath the Property prior to
the date of commencement of this Lease. The obligations of Lessee pursuant to
this paragraph shall survive the expiration or other termination of this lease.
58. Arbitration of Disputes: In the event of any controversy or claim arising
out of or relating to any provisions of this Agreement or the breach thereof,
the Parties shall try to settle such conflicts amicably between themselves. Any
such conflict, which the Parties are unable to resolve, shall be settled by
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association. The demand for arbitration shall be filed within a reasonable time
after the controversy or claim has arisen, and in the event after the date upon
which institution of legal proceedings based on such controversy or claim would
be barred by the applicable statute of limitations. Such arbitration shall be
held in San Jose, California at the offices of the American Arbitration
Association. The award through arbitration shall be final and binding. The
prevailing Party in any arbitration shall be entitled to reasonable attorneys
fees costs and disbursements in addition to other relief to which such party is
entitled. Either Party may enter such award in a court having
<PAGE>
jurisdiction or may make application to such court for judicial acceptance of
the award and an order of enforcement, as the case may be.
July 31, 1998 August 3, 1998
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DATED DATED
/s/ Robert Hansen /s/ Gregory Korjeff
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LESSOR LESSEE
Hansen Management iPrint, inc.
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LESSOR LESSEE
<PAGE>
ADDENDUM TO LEASE
September 15, 1999
In reference to the Agreement to Lease dated July 30, 1998 by and between HANSEN
MANAGEMENT, hereafter referred to as Lessor, and IPRINT INC., hereinafter
referred to as Lessee, covering, the real property commonly known as 1450
ODDSTAD DRIVE, REDWOOD CITY, CALIFORNIA, the undersigned Lessor and Lessee agree
to the following leasing of two additional spaces:
PROPERTY 1 Approximately 1,000 square feet of commercial space
located at 1472 Oddstad Drive, Redwood City. Part of
a larger building.
TERM: Two year term, commencing October 1, 1999 and ending
on October 1, 2001.
RENT: $1,000.00 per month with same terms and conditions
as the lease referred to above.
PROPERTY 2 Approximately 1,428 square feet of commercial space
located at 1472 Oddstad Drive, Redwood City. Part of
a larger building.
TERM: One year and 10 month term, commencing December 1,
1999 and ending on October 1, 2001.
RENT: $1,428.00 per month with same terms and conditions
as the lease referred to above.
SECURITY DEPOSIT: No increase in security deposit.
APPROVED: APPROVED:
/s/ Robert Hansen /s/ Gregory Korjeff
------------------------------------
Hansen Management iPrint
9-15-99
Date 10/7/99
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<PAGE>
MEMORANDUM OF UNDERSTANDING
BETWEEN WATERSOUNDS AND IPRINT, INC.
RE: SUBLEASE OF 1496 ODDSTAD DR., REDWOOD CITY, CA 94063
iPrint inc hereby agrees to sublease approximately 580 square feet of office
space from Water Sounds under the following terms:
LOCATION: 1496 Oddstad Dr., Redwood City, CA 94063
TERM: Month to month, commencing 08/09/99
SPACE: 580 sq ft.
SUBLEASE PAYMENTS: $1.00/sq ft per month plus $120/month to cover escalation and
other operating expenses, due by the 5th of each rental month. (Water Sounds
will pay the first $200 a month for PG&E; iPrint will pay any amounts in excess
of $200 upon delivery of a proper invoice.)
DEPOSIT- one month base rent ($580), fully refundable within 15 days of
termination.
MONTHLY PAYMENT- $700
This includes the following expenses,
- Property Taxes
- Fire Insurance (structural only)
- Utilities
- Base rent per sq. ft.
- all other pro-rata share expenses
IN ADDITION,
iPrint agrees that this agreement may not be assigned without the
written consent of Water Sounds.
Either party may terminate this agreement upon 30 days written notice
for cause. Such cause must be identified in writing and resolved within
15 days of said written notice.
Either Party may terminate this contract for convenience with 60 days
notice.
Sublessor will abide by the following conditions described in the
Attachment A. Sections- 6.2, 6.3, 7.1, 7.2, 7.3, 8, 8.1, 8.2, 8.3, 8.5,
8.6, 8.7, 9.1-9.8, 10.2-10.5, 11, 12-12.4, 13-13.5, 14, 16-39,
39.2-39.4, 40-46, Addendum #51.
/s/ Gregory Korjeff 8/6/99 /s/ Mary Lou Maloe 8/6/99
_____________________________________ __________________________________
iPrint, inc. Date Water Sounds Date
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<PAGE>
STANDARD INDUSTRIAL LEASE -- GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. LEASES. This Lease, dated, for reference purposes only, July 18, 1996, is
made by and between Hansen Management (herein called "Lessor") and Water Sounds
(herein called "Lessee").
2. PREMISES. 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, that
certain real property situated in the County of San Mateo, State of California,
commonly known as 1496 Oddstad Drive, Redwood City, described as approximately
1,300 square feet of office and warehouse space, and real property including the
land and all improvements therein, is herein called "the Premises."
3. TERM.
3.1 TERM. The term of this Lease shall be for two (2) years commencing
on August 1, 1996 and ending on July 31, 1998 unless sooner terminated pursuant
to any provision hereof.
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, 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 until possession of the Premises is tendered by Lessee, provided,
however, that if Lessor shall not have delivered possession of the Premises
within sixty (60) days from said commencement date, 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 shall be discharged from all obligations
hereunder, provided further, however, that if such written notice of 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.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rates set forth below.
4. RENT. Lessee shall pay to Lessor as rent for the Premises, monthly payments
of:
[BLANK ON THIS COPY MLM]
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Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. 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.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
$800.00 as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to
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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 or for 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 default, 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 hereinabove stated and Lessee's failure to do
so shall be a material breach of this Lease. If the monthly rent shall, from
time to time, increase during the term of this Lease, Lessee shall thereupon
deposit with Lessor additional security deposit so that the amount of
security deposit held by Lessor shall at all times bear the same proportion
to current rent as the original security deposit bears to the original
monthly rent set forth in paragraph 4 hereof. Lessor shall not be required to
keep said deposit separate from its general accounts. If Lessee performs all
of Lessee's obligations hereunder, said deposit, or so much thereof as has
not theretofore 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 ASSEMBLY +
STORAGE INDOOR WATER FOUNTAINS + CLASSROOM or any other use which is reasonably
comparable and for no other purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in its state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will use 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, than it shall be the obligation of the
Lessor, after written notice of the violation of this warranty within six months
from the date that the Lease term commences, the correction of same shall be the
obligation of the Lessee at Lessee's sole cost. The warranty contained in this
paragraph 6.2(a) shall be of no force or effect if, prior to the date of this
Lease, Lessee was the owner or occupant of the Premises, and, in such event,
Lessee shall correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at
Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall not use nor permit
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant in the building containing
the Premises, shall tend to disturb such other tenants.
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<PAGE>
6.3 CONDITION OF PREMISES. (REFERENCE PARA 6.2)
(a) Lessor shall deliver the Premises to Lessee clean and free
of debris on Lease commencement date (unless Lessee is already in possession)
and Lessor further warrants to Lessee that the plumbing, lighting, air
conditioning, heating, and loading doors in the Premises shall be ___.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises 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 covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached herein. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 6,
7.2 and 9 and except for damage caused by any negligent or intentional act or
ommission of Lessee, Lessee's agents, employees, or invitees in which event
Lessee shall repair the damage. Lessor, at Lessor's expense, shall keep in good
order, condition and repair the foundations, exterior walls and the exterior
roof of the Premises. Lessor shall not, however, be obligated to paint such
exterior, nor shall Lessor be required to maintain the interior surface of
exterior walls, windows, doors or plate glass. Lessor shall have no obligation
to make repairs under this Paragraph 7.1 until a reasonable time after receipt
of written notice of the need for such repairs.
7.2 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 6, 7.1 and 9, Lessee, at
Lessee's expense, shall keep in good order, condition and repair the Premises
and every part thereof (whether or not the damaged portion of the Premises or
the means of repairing the same are reasonably or readily accessible to
Lessee) including, without limiting the generality of the foregoing, all
plumbing, heating, air conditioning. (Lessee shall procure and maintain, at
Lessee's expense, an air conditioning system maintenance contract)
ventilating, electrical and lighting facilities and equipment within the
Premises, fixtures, interior walls and interior surface of exterior walls,
ceilings, windows, doors, plate glass, and skylights, located within the
Premises, and .
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.2 or under any other paragraph of this Lease, Lessor may at Lessor's
option enter upon the Premises after 10 days' prior written notice to Lessee
(except in the case of emergency, in which case no notice shall be required),
perform such obligations on Lessee's behalf and put the Premises in
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<PAGE>
good order, condition and repair, and the cost thereof together with interest
thereon at the maximum rate then allowable by law shall be due and payable as
additional rent to Lessor together with Lessee's next rental installment.
(c) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as
received, ordinary wear and tear excepted, clean and free of debris. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of its trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave
the air lines, power panels, electrical distribution systems, lighting
fixtures, space heaters, air conditioning, plumbing and fencing on the
premises in good operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent
make any alterations, improvements, additions, or Utility Installations in, on
or about the Premises, except for nonstructural alterations not exceeding $2,500
in cumulative costs during the term of this Lease. In any event, whether or not
in excess of $2,500 in cumulative cost, Lessee shall make no change or
alteration to the exterior of the Premises nor the exterior of the building(s)
on the Premises without Lessor's prior written consent. As used in this
Paragraph 7.3 the term "Utility Installation" shall mean carpeting, window
coverings, air lines, power panels, electrical distribution systems, lighting
fixtures, space heaters, air conditioning, plumbing, and fencing. Lessor may
require that Lessee remove any or all of said alterations, improvements,
additions or Utility Installations at the expiration of the term, and restore
the Premises to their prior condition. Lessor may require Lessee to provide
Lessor, at Lessee's sole cost and expense, a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such improvements,
to insure Lessor against any liability for mechanic's and materialmen's liens
and to insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval of
Lessor, Lessor may require that Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of 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 mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of
any work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises 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
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<PAGE>
thereon before the enforcement thereof against the Lessor or the Premises,
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 lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys fees and costs
in participating in such action if Lessor shall decide it is to its best
interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph
7.3(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of
Lessee), which may be made on the Premises, shall become the property of
Lessor and remain upon and be surrendered with the Premises at the expiration
of the term. Notwithstanding the provisions of this Paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the
Premises, shall remain the property of Lessee and may be removed by Lessee
subject to the provisions of Paragraph 7.2(c). (EXCLUDE: TRAC LIGHTING ...
WILL RETURN ORIGINAL FIXTURES)
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 Combined
Single Limit Bodily Injury and Property Damage Insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance of
the Premises and all other areas appurtenant thereto. Such insurance shall be in
an amount not less than $500,000 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this Paragraph 8. The
limits of said insurance 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 Property Damage Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto in an amount not less than $500,000
per occurrence.
8.3 PROPERTY INSURANCE. 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 Premises, but not Lessee's fixtures, equipment or tenant
improvements in an amount not to exceed the full replacement value thereof,
as the same may exist from time to time, providing protection against all
perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, flood (in the event same is required by a
lender having a lien on the Premises) special extended perils ("all risk," as
such term is used in the insurance industry) but not plate glass insurance.
In addition, the 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 real estate
taxes and insurance costs for said period.
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8.4 PAYMENT OF PREMIUM INCREASE.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide." Lessee shall
deliver to Lessor copies of policies of liability insurance required under
Paragraph 8.1 or certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancellable or subject to reduction of
coverage or other modification except after thirty (30) days' prior written
notice to Lessor. Lessor shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with renewals or "binders" thereof,
or Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee upon demand. Lessee shall not do or permit to
be done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3.
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 loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
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contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, 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
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
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action proceeding be brought against Lessor by reason
of any such claim, Lessee upon notice from Lessor shall defend the same at
Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part
of the consideration to Lessor, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Partial Damage" shall herein mean damage or
destruction to the building of which the Premises are a part to the extent that
the cost of repair is less than 50% of the fair market value of such building as
a whole immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or more
of the fair market value of the Premises immediately prior to such damage or
destruction. "Premises Building Total
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Destruction" shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more
of the fair market value of the such building as a whole immediately prior to
such damage or destruction.
(c) "Insured Loss" shall herein mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8.
9.2 PARTIAL DAMAGE - INSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, 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
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's sole cost, 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.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, 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 Partial 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), 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 the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.4 TOTAL DESTRUCTION. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 DAMAGE NEAR END OF TERM.
(a) If at any time during the last six months of the term of
this Lease there is damage, whether or not an Insured Loss, which falls within
the classification of Premises Partial Damage, 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 9.5(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 20 days
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after the occurrence of an Insured Loss falling within the classification of
Premises Partial Damage during the last six months of the term of this Lease.
If Lessee duly exercises such option during said 20-day period, Lessor shall,
at Lessor's expense, repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to
exercise such option during said 20-day period, then Lessor may at Lessor's
option terminate and cancel this Lease as of the expiration of said 20-day
period by giving written notice to Lessee of Lessor's election to do so
within 10 days after the expiration of said 20-day period, notwithstanding
any term or provision in the grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in paragraphs 9.2 or 9.3,
and Lessor or Lessee repairs or restores the Premises pursuant to the provisions
of this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for 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 under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within 90 days after such obligations shall accrue, 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 of
such repair or restoration in such event this Lease shall terminate as of the
date of such notice.
9.7 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.
9.8 WAIVER. Lessor and Lessee waive the provisions of any statutes 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.
10.2 ADDITIONAL IMPROVEMENTS. Notwithstanding paragraph 10.1 hereof,
Lessee shall pay to Lessor upon demand therefor the entirety of any increase
in real property tax if assessed
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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 Premises by any authority having the direct or
indirect power to tax, including any city, 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
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of Leasing the Premises. The term "real property tax" 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 transfer, either partial or total, of Lessor's interest
in the Premises or which is added to a tax or charge hereinbefore included
within the definition of real property tax by reason of such transfer, 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 Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information 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. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee within 10 days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises. (REFERENCE PARA 53)
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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 this 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 breach of this Lease.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion
thereof, without Lessee's consent, to any corporation which controls, is
controlled by or is under common control with Lessor, 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, provided that said assignee
assumes, in full, the obligations of Lessee under this Lease. 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 _______ing 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 NO RELEASE OF LESSEE. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignee of Lessee or any successor of Lessee, in the
performance of any of the terms hereof, Lessor may proceed directly against
Lessee without the necessity of exhausting remedies against said assignee.
Lessor may consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of Lessee without
notifying Lessee, or any successor of Lessee, and without obtaining its or
their consent thereto and such action shall not relieve Lessee of liability
under this Lease.
12.4 ATTORNEY'S FEES. 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 attorneys fees incurred in
connection therewith, such attorneys fees not to exceed $350.00 for each such
request.
13. DEFAULTS; REMEDIES.
13.1 DEFAULTS. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) 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
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a period of three days after written notice thereof from Lessor to Lessee. In
the event that Lessor serves Lessee with 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.
(c) 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 described in paragraph (b) above, where such failure
shall continue for a period of 30 days after written notice thereof from
Lessor to Lessee; provided, however, that if the nature of Lessee's default
is such that more than 30 days are reasonably required for its cure, then
Lessee shall not be deemed to be in default if Lessee commenced such cure
within said 30-day period and thereafter diligently prosecutes such cure to
completion.
(d) (i) The making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within 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 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 30 days.
Provided, however, in the event that any provision of this paragraph 13.1(d)
is contrary to any applicable law, such provision shall be of no force or
effect.
(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, and any of them, was materially false.
13.2 REMEDIES. In the event of any such material default or breach 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 or breach:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession 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 attorney's 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 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.
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(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 due 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
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
prosecutes the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and 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 Premises.
Accordingly, if any installment of rent 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. In the event
that a late charge is payable hereunder, whether or not collected, for three (3)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding paragraph 4
or any other provision of this Lease to the contrary.
13.5 IMPOUNDS. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
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14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
building on the Premises, or more than 25% of the land area of the Premises
which is not occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the building situated on the Premises. No reduction of rent shall
occur if the only area taken is that which does not have a building located
thereon. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be 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 award for loss of damage to Lessee's trade fixtures and removable personal
property. 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) Upon execution of this Lease by both parties, Lessor
shall pay to N/A Licensed real estate broker(s), 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
$ N/A , for brokerage services rendered by said broker(s) to Lessor
in this transaction.
(b) Lessor further agrees that 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 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 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 if said broker(s) are the procuring cause of any other
Lease or sole entered into between the parties pertaining to the Premises and/or
any adjacent property in which Lessor has an interest, then as to any of said
transactions, 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.
(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
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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. Said broker shall be a third party beneficiary of the
provisions of this Paragraph 15.
16. ESTOPPEL CERTIFICATE.
(a) Lessee shall at any time upon not less than ten (10) day's prior
written notice from Lessor execute, acknowledge and deliver to Lessor 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 Lessee's knowledge any uncured
defaults on the part of Lessor hereunder, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there
are no uncured defaults in Lessor's performance, and (iii) that not more than
one month's rent has been paid in advance or such failure may be considered
by Lessor as a default by Lessee under this Lease.
(c) If Lesser desires to finance, refinance, or sell the Premises,
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 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 Premises, 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 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 from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this
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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.
21. ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease 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 mentioned herein. No prior
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
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises 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 except as otherwise
specifically stated in 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 mail, and if given
personally or by mail, shall be deemed sufficiently given if addressed to Lessee
or to Lessor at the address noted below the signature of the respective parties,
as the case may be. 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 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
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
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Lessee, but all options and rights of first refusal, 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 provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. SUBORDINATION.
(a) This Lease, 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 real property of which the Premises are a part 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
prior to the lien of its mortgage, deed of trust or ground lease, and shall
give written notice thereof to Lessee, this Lease shall be deemed prior to
such mortgage, deed of trust, or ground lease, whether this Lease is dated
prior or subsequent to the date or 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 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 10 days after written demand shall
constitute a material default by Lessee hereunder, 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. ATTORNEY'S FEES. If either party or the broker named herein brings an action
to enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court. The
provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same, showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or
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desirable. Lessor may at any time place on or about the Premises 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,
all without rebate of rent or liability to Lessee. Lessee requests 24 hour
notice barring emergency. Access to AC/heating controls is granted.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises 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.
34. SIGNS. Lessee shall not place any sign upon the Premises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor to place ordinary and usual for rent or sublet signs
thereon.
35. MERGER. The voluntary or other surrender of this lease by Lessee, or a
mutual cancellation thereof, or a 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 paragraph 33 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.
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, 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 duly 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 Premises.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Options" 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 or 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 property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the Premises 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 are
personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to
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any Lessee Affiliate as defined in paragraph 12.2 of this Lease. The Options
herein granted to Lessee are not assignable separate and apart from this
Lease.
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(b) or 13.1(c) and continuing until the default
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) continuing until
the obligation is paid, or (iii) at any time after an event of default described
in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to
give notice of such default to Lessee), (iv) in the event that Lessor has given
to Lessee three or more notices of default under paragraph 13.1(b), where a late
charge becomes payable under paragraph 13.4 for each of such defaults, or
paragraph 13.1(c), whether or not the defaults are cured, during the 12 month
period prior to the time that Lessee intends to exercise the subject Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) 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 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(c) within 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) Lessee
commits a default described in paragraph 13.1(a), 13.1(d), or 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv)
Lessor gives to Lessee three or more notices of default under paragraph 13.1(b),
where a late charge becomes payable under paragraph 13.4 for each such default,
or paragraph 13.1(c), whether or not the defaults are cured.
40. MULTIPLE TENANT BUILDING. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care, and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.
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41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.
42. EASEMENTS. 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 breach of this Lease.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on 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.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. ADDENDUM. Attached hereto is an addendum or addenda containing paragraphs
______ through ______ which constitutes a part of this Lease.
See addendum 47-53 attached.
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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.
The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at _________________________ _____________________________
on __________________________________ By __________________________
Address _____________________________ By __________________________
_____________________________________ "LESSOR" (Corporate Seal)
Executed at _________________________ _____________________________
/s/ Mary Lou Maloe
on __________________________________ By __________________________
Address _____________________________ By __________________________
_____________________________________ "LESSEE" (Corporate Seal)
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ADDENDUM TO LEASE
In reference to the Agreement to Lease dated July 18, 1996 by and between HANSEN
MANAGEMENT, hereafter referred to as Lessor, and WATER SOUNDS hereafter referred
to as Lessee, covering the real property commonly known as 1496 ODDSTAD DRIVE,
REDWOOD CITY, CALIFORNIA the undersigned Lessor and Lessee agree to the
following:
47. Lessor hereby grants to Lessee the option to extend the term of this lease
for two additional two (2) year periods following the expiration of the original
term. Lessee shall exercise this option by giving notice to Lessor at least
three (3) months, but not more than six (6) months, prior to the expiration of
the respective terms.
49. Rental Increases: Beginning August 1, 1997 rental shall be per month.
Beginning August 1, 1998, and in every subsequent year thereafter, for the term
of this lease (including both two year options), the monthly rental shall be
adjusted by the increase, if any, in the Consumer Price Index as published by
the Bureau of Labor Statistics, U.S. Department of Labor, for the San
Francisco/Oakland Metropolitan Area, all items, herein referred to as "CPI".
The monthly rental shall be calculated as follows: THE MONTHLY RENT PAYABLE
DURING THE PREVIOUS YEAR OF THE TERM OF THIS LEASE SHALL BE MULTIPLIED BY A
FRACTION, THE NUMERATOR OF WHICH SHALL BE THE CPI OF THE MONTH PUBLISHED
IMMEDIATELY PRECEDING THE CURRENT ADJUSTMENT MONTH AND THE DENOMINATOR SHALL
BE THE CPI OF THE MONTH IMMEDIATELY PRECEDING THE PREVIOUS YEAR OF THE LEASE
TERM. The sum so calculated shall constitute the new monthly rent hereunder;
however, in no event shall the new monthly rent be less than the rent payable
for the month immediately preceding the date for rent adjustments.
In the event the compilation and/or publication of the CPI shall be
transferred to another governmental department or bureau or agency, or shall
be discontinued, then the index most nearly the same as the CPI shall be used
to make such calculation. In the event the Lessor and Lessee cannot agree on
such alternative index, then the matter shall be submitted for decision to
the American Arbitration Association on accordance with the rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee. IN NO EVENT SHALL THE CPI INCREASE BE LESS THAN TWO PERCENT (2%) NOR
GREATER THAN FIVE (5%) IN ANY CALENDAR YEAR.
50. Lessee shall pay their pro-rata share of five point two two percent
(5.22%) of common area costs, including but not limited to parking lot
sweeping, maintenance, utilities, water, landscaping and common lighting.
Lessee shall be provided a breakdown of those costs.
51. If Lessee's tenant improvements cause a notice of violation of ADA, then
Lessee agrees to inform Lessor immediately (but not later than ten days)
after receiving notice of violation of the American Disabilities Act ("ADA").
In addition Lessor is responsible for complying with the ADA in the common
areas, and Lessee is responsible for compliance in their own space if
Lessee's improvements cause the notification.
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52. Lessee is taking premises in a condition requiring painting and
carpeting. Lessor grants to Lessee two months free rent for the improvement
of the property. Lessee will make the first rental payment October 1, 1996.
Lessor warrants to Lessee that the lighting and electrical system is in good
and safe operating condition on the lease commencement date. Lessor also
warrants the air conditioning and heating is in good operating condition on
the lease commencement date.
53. Lessee shall pay 45% {(Bill amount DIVIDED BY 2880) x 1300} of PG&E
expenses of combined 1494 and 1496 Oddstad bill. Lessee shall not pay more
than $150 for PG&E in any month.
The undersigned do hereby agree:
July 26, 1996
___________________________________ _______________________________
DATE DATE
/s/ Mary Lou Maloe
___________________________________ _______________________________
LESSOR LESSEE
___________________________________ _______________________________
LESSOR LESSEE
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HANSEN MANAGEMENT
2995 WOODSIDE RD. #400-332
WOODSIDE, CA 94062
(650) 365-2788
August 2, 1999
Marylou
1496 Oddstad Dr.
Redwood City, CA 94063
Re: subletting the front space at 1496 Oddstad Dr., Redwood City
Dear Marylou:
Hansen Management gives you permission to sublet the front of your space you
lease from Hansen Management at 1496 Oddstad Drive, Redwood City.
Sincerely,
/s/ Ronda E. Marin
Ronda E. Marin
Manager
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INDUSTRIAL REAL ESTATE LEASE
CB RICHARD ELLIS (SINGLE-TENANT FACILITY)
BROKERAGE AND MANAGEMENT
LICENSED REAL ESTATE BROKER
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic terms and are
to be read in conjunction with the Basic Terms.
Section 1.1 DATE OF LEASE: September 14, 1999
Section 1.2 LANDLORD (INCLUDE LEGAL ENTITY): Frederick & Doris Nicolini
Address of Landlord: 535 Chesnut Avenue
South San Francisco, CA 94080
Section 1.3 TENANT (INCLUDE LEGAL ENTITY: iPrint, Inc., a California
Corporation
Address of Tenant: 1450 Oddstand Drive
Redwood City, CA 94063
Section 1.4 PROPERTY: (include street address, approximate square
footage and description: 1475 Veterans Boulevard, Redwood City. +10,540
sq. ft. of combination of office/warehouse, partial two-story concrete tilt-up
building.
APN# 52-431-010
Section 1.5 LEASE TERM: four years - months
beginning on October 1, 1999 or such other date as is specified in this
Lease, and ending on September 30, 2003
Section 1.6 PERMITTED USES: (See Article Five) Office,
administration, storage, distribution, and other legal uses.
Section 1.7 TENANT'S GUARANTOR: (If none, so state) None
Section 1.8 BROKERS: (See Article Fourteen) (If none, so state)
Landlord's Broker: CB Richard Ellis, Inc.
Tenant's Broker: Spallino Reed Corporate Real Estate
Section 1.9 COMMISSION PAYABLE TO LANDLORD'S BROKER: (See Article
Fourteen ) $ Per Agreement
Section 1.10 INITIAL SECURITY DEPOSIT: (See Section 3.03) $Eight
Thousand ($8,000.00)
Section 1.11 VEHICLE PARKING SPACES ALLOCATED TO TENANT: Front and rear
of property
Section 1.12 RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT: Seven Thousand Nine Hundred Five and 00/100
Dollars ($7,905.00) per month, for the first twelve months, as provided in
Section 3.01, and shall be increased on the first day of the 13th, 25th,
37th, month(s) after the Commencement Date, as provided in the Base
Rent Schedule.
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See
Section 4.2); (ii) Utilities (See Section 4.3); (iii) Insurance Premiums (See
Section 4.4); (iv) Impounds for Insurance Premiums and Property Taxes (See
Section 4.7); (v) Maintenance, Repairs and Alterations (See Article Six).
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Section 1.13 LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE: (See
Section 9.5) zero percent ( 0 %) of the Profit (the "Landlord's Share").
Section 1.14 RIDERS: The following Riders are attached to and made a
part of this Lease: (If none, so state)
(i) Addendum to Industrial Real Estate Lease
ARTICLE TWO: LEASE TERM
Section 2.1 LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.5 above and shall
begin and end on the dates specified in Section 1.5 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.5 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.2 DELAY IN COMMENCEMENT. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on
the Commencement Date. Landlord's non-delivery of the Property to Tenant on
that date shall not affect this Lease or the obligations of Tenant under this
Lease except that the Commencement Date shall be delayed until Landlord
delivers possession of the Property to Tenant and the Lease Term shall be
extended for a period equal to the delay in delivery of possession of the
Property to Tenant, plus the number of days necessary to end the Lease Term
on the last day of a month. If Landlord does not deliver possession of the
Property to Tenant within sixty (60) days after the Commencement Date, Tenant
may elect to cancel this Lease by giving written notice to Landlord within
ten (10) days after the sixty (60) -day period ends. If Tenant gives such
notice, the Lease shall be cancelled and neither Landlord nor Tenant shall
have any further obligations to the other. If Tenant does not give such
notice, Tenant's right to cancel the Lease shall expire and the Lease Term
shall commence upon the delivery of possession of the Property to Tenant. If
delivery of possession of the Property to Tenant is delayed, Landlord and
Tenant shall. upon such delivery, execute an amendment to this Lease setting
forth the actual Commencement Date and expiration date of the Lease. Failure
to execute such amendment shall not affect the actual Commencement Date and
expiration date of the Lease.
Section 2.3 EARLY 0CCUPANCY. If Tenant occupies the Property prior
to the Commencement Date, Tenant's occupancy of the Property shall be subject
to all of the provisions of this Lease. Early occupancy of the Property
shall not advance the expiration date of this Lease.
Section 2.4 HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnity Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property. If Tenant does not vacate the
Property upon the expiration or earlier termination of the Lease and Landlord
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall
be a "month-to-month" tenancy, subject to all of the terms of this Lease
applicable to a month-to-month tenancy, except that the Base Rent then in
effect shall be increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.1 TIME AND MANNER OF PAYMENT. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in
Paragraph 1.12(a) above for the first month of the Lease Term. On the first day
of the second Lease Term and each month thereafter, Tenant shall pay Landlord
the Base Rent. in advance, without offset, deduction or prior demand. The Base
Rent shall be payable at Landlord's address or at such other place as Landlord
may designate in writing.
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Section 3.3 SECURITY DEPOSIT; INCREASES.
(a) Upon the execution of this Lease, Tenant shall deposit
with Landlord a cash Security Deposit in the amount set forth in Section 1.10
above. Landlord may apply all or part of the Security Deposit to any unpaid
rent or other charges due from Tenant or to cure any other defaults of
Tenant. If Landlord uses any part of the Security Deposit, Tenant shall
restore the Security Deposit to its full amount within ten (10) days after
Landlord's written request. Tenant's failure to do so shall be a material
default under this Lease. No interest shall be paid on the Security Deposit.
Landlord shall not be required to keep the Security Deposit separate from
its other accounts and no trust relationship is created with respect to the
Security Deposit.
(b) Each Time the Base Rent is increased, Tenant shall
deposit additional funds with Landlord sufficient to increase the Security
Deposit to an amount which bears the same relationship to the adjusted Base
Rent as the initial Security Deposit bore to the initial Base Rent.
Section 3.4 TERMINATION; ADVANCE PAYMENTS. Upon termination of this
Lease under Article Seven (Damage or Destruction). Article Eight
(Condemnation) or any other termination not resulting from Tenant's default,
and after Tenant has vacated the Property in the manner required by this
Lease, Landlord shall refund or credit to Tenant (or Tenant's successor) the
unused portion of the Security Deposit, any advance rent or other advance
payments made by Tenant to Landlord, and any amounts paid for real property
taxes and other reserves which apply to any time periods after termination of
the Lease [WITHIN THIRTY (30) DAYS].
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.1 ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
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Section 4.2 PROPERTY TAXES.
[TENANT SHALL NOT PAY ANY ADDITIONAL PROPERTY TAXES IN THE EVENT LANDLORD SELLS
THE PROPERTY.]
(a) REAL PROPERTY TAXES. Tenant shall pay all real properly
taxes on the Property (including any fees, taxes or assessments against, or
as a result of, any tenant improvements installed on the Property by or for
the benefit of Tenant) during the Lease Term. Subject to Paragraph 4.02(c)
and Section 4.07 below, such payment shall be made at least ten (10) days
prior to the delinquency date of the taxes. Within such ten (10) -day
period, Tenant shall furnish Landlord with satisfactory evidence that the
real property taxes have been paid. Landlord shall reimburse Tenant for any
real properly taxes paid by Tenant covering any period of time prior to or
after the Lease Term. If Tenant fails to pay the real property taxes when
due, Landlord may pay the taxes and Tenant shall reimburse Landlord for the
amount of such tax payment as Additional Rent.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax"
means: (i) any fee, license fee, license tax, business license fee,
commercial rental tax, levy, charge, assessment, penalty or tax imposed by
any taxing authority against the Property; (ii) any tax on the Landlord's
right to receive, or the receipt of, rent or income from the Property or
against Landlord's business of leasing the Property; (iii) any tax or charge
for fire protection, streets, sidewalks, road maintenance, refuse or other
provided to the Property by any governmental agency; (iv) any tax imposed
upon this transaction or based upon a re-assessment of the Property due to a
change of ownership, as defined by applicable law, or other transfer of all
or part of Landlord's interest in the Property; and (v) any charge or fee
replacing any tax previously included within the definition of real properly
tax. "Real property tax" does not, however, include Landlord's federal or
state income, franchise, inheritance or estate taxes.
(c) JOINT ASSESSMENT. If the Property is not separately
assessed. Landlord shall reasonably determine Tenant's share of the real
property tax payable by Tenant under Paragraph 4.02(a) from the assessor's
worksheets or other reasonably available information. Tenant shall pay such
share to Landlord within fifteen (15) days after receipt of Landlord's written
statement.
(d) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade
fixtures, furnishings, equipment or any other personal property belonging to
Tenant. Tenant shall try to have personal property taxed separately from the
Property.
(ii) If any of Tenant's personal property is taxed
with the Property Tenant shall pay Landlord the taxes for the personal
property within fifteen (15) days after Tenant receives a written statement
from Landlord for such personal property taxes.
(e) TENANT'S RIGHT TO CONTEST TAXES. Tenant may attempt to
have the assessed valuation of the Property reduced or may initiate
proceedings to contest the real property taxes. If required by law, Landlord
shall join in the proceedings brought by Tenant. However, Tenant shall pay
all costs of the proceedings, including any costs or fees incurred by
Landlord. Upon the final determination of any proceeding or contest, Tenant
shall immediately pay the real property taxes due, together with all costs,
charges, interest and penalties incidental to the proceedings. Tenant does
not pay the real property taxes when due and contests such taxes, Tenant
shall not be in default under this Lease for nonpayment of such taxes if
Tenant deposits funds with Landlord or opens an interest-bearing account
reasonably acceptable to Landlord in the joint names of Landlord and Tenant.
The amount of such deposit shall be sufficient to pay the real property taxes
plus a reasonable estimate of the interest, costs, charges and penalties
which may accrue if Tenant's action is unsuccessful, less any applicable tax
impounds previously paid by Tenant to Landlord. The deposit shall be applied
to the real property taxes due, as determined at such proceedings. The real
property taxes shall be paid under protest from such deposit if such payment
under protest is necessary to prevent the Property from being sold under a
"tax sale" or similar enforcement proceeding.
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Section 4.3 UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.4 INSURANCE POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant
shall maintain a policy of commercial general liability insurance (sometimes
known as broad form comprehensive general liability insurance) insuring
Tenant against liability for bodily injury, property damage (including loss
of use of property) and personal injury arising out of the operation, use or
occupancy of the Property. Tenant shall name Landlord as an additional
insured under such policy. The initial amount of such insurance shall be One
Million Dollars ($1,000,000) per occurrence and shall be subject to periodic
increase based upon inflation, increased liability awards, recommendation of
Landlord's professional insurance advisers and other relevant factors. The
liability insurance obtained by Tenant under this Paragraph 4D4(a) shall (i)
be primary and non-contributing; (ii) contain cross-liability endorsements;
and (iii) insure Landlord against Tenant's performance under Section 5.05, if
the matters giving rise to the indemnity under Section 5.05 result from the
negligence of Tenant. The amount and coverage of such insurance shall not
limit Tenant's liability nor relieve Tenant of any other obligation under
this Lease. Landlord may also obtain comprehensive public liability
insurance in an amount and with coverage determined by Landlord insuring
Landlord against liability arising out of ownership. operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.
(b) PROPERTY AND RENTAL INCOME INSURANCE. During the
Lease Term, Landlord-shall maintain policies of insurance covering loss of or
damage to the Property in the full amount of its replacement value. Such
policy shall contain an Inflation Guard Endorsement and shall provide
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils
(all risk), sprinkler leakage and any other perils which Landlord deems
reasonably necessary. Landlord shall have the right to obtain flood and
earthquake insurance if required by any lender holding a security interest in
the Property. Landlord shall not obtain insurance for Tenant's fixtures or
equipment or building improvements installed by Tenant on the Property.
During the Lease Term, Landlord shall also maintain a rental income insurance
policy, with loss payable to Landlord, in an amount equal to one year's Base
Rent, plus estimated real properly taxes and insurance premiums. Tenant
shall be liable for the payment of any deductible amount under Landlord's or
Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies.
(c) PAYMENT OF PREMIUMS. Subject to Section 4.07, Tenant
shall pay all premiums for the insurance policies described in Paragraphs
4.04(a) and (b) (whether obtained by Landlord or Tenant) within fifteen (15)
days after Tenant's receipt of a copy of the premium statement or other
evidence of the amount due, except Landlord shall pay all premiums for
non-primary comprehensive public liability insurance which Landlord elects to
obtain as provided in Paragraph 4.04(a). If insurance policies maintained by
Landlord cover improvements on real property other than the Property,
Landlord shall deliver to Tenant a statement of the premium applicable to the
Property showing in reasonable detail how Tenant's share of the premium was
computed. If the Lease Term expires before the expiration of an insurance
policy maintained by Landlord, Tenant shall be liable for Tenant's prorated
share of the insurance premiums. Before the Commencement Date, Tenant shall
deliver to Landlord a copy of any policy of insurance which Tenant is
required to maintain under this Section 4.04. At least thirty (30) days prior
to the expiration of any such policy, Tenant shall deliver to Landlord a
renewal of such policy. As an alternative to providing a policy of
insurance, Tenant shall have the right to provide Landlord a certificate of
insurance, executed by an authorized officer of the insurance company,
showing that the insurance which Tenant is required to maintain under this
Section 4.04 is in full force and effect and containing such other
information which Landlord reasonably requires.
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(d) GENERAL INSURANCE PROVISIONS.
(i) Any insurance which Tenant is required to
maintain under this Lease shall include a provision which requires the
insurance carrier to give Landlord not less than thirty (30) days' written
notice prior to any cancellation or modification of such coverage.
(ii) If Tenant fails to deliver any policy,
certificate or renewal to Landlord required under this Lease within the
prescribed time period or if any such policy is cancelled or modified during
the Lease Term without Landlord's consent, Landlord may obtain such
insurance, in which case Tenant shall reimburse Landlord for the cost of such
insurance within fifteen (15) days after receipt of a statement that
indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required
under this Lease with companies holding a "General Policy Rating" of A-12 or
better. as set forth in the most current issue of "Best Key Rating Guide".
Landlord and Tenant acknowledge the insurance markets are rapidly changing
and that insurance in the form and amounts described in this Section 4.04 may
not be available in the future. Tenant acknowledges that the insurance
described in this Section 4.04 is for the primary benefit of Landlord. It at
any time during the Lease Term, Tenant is unable to maintain the insurance
required under the Lease, Tenant shall nevertheless maintain insurance
coverage which is customary and commercially reasonable in the insurance
industry for Tenant's type of business, as that coverage may change from time
to time. Landlord makes no representation as to the adequacy of such
insurance to protect Landlord's or Tenant's interests. Therefore, Tenant
shall obtain any such additional property or liability insurance which Tenant
deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance
policies maintained, Landlord and Tenant each hereby waive any and all rights of
recovery against the other, or against the officers, employees, agents or
representatives of the other, for loss of or damage to its property or the
properly of others under its control, if such loss or damage is covered by any
insurance policy in force (whether or not described in this Lease) at the time
of such loss or damage. Upon obtaining the required policies of insurance,
Landlord and Tenant shall give notice to the insurance carriers of this mutual
waiver of subrogation.
Section 4.5 LATE CHARGES. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs
are impractical or extremely difficult to ascertain. Such costs may include,
but are not limited to, processing and accounting charges and late charges
which may be imposed on Landlord by any ground lease, mortgage or trust deed
encumbering the Property. Therefore, if Landlord does not receive any rent
payment within ten (10) days after it becomes due, Tenant shall pay Landlord
a late charge equal to [FIVE PERCENT (5%)] of the overdue amount. The
parties agree that such late charge represents a fair and reasonable estimate
of the costs Landlord will incur by reason of such late payment.
Section 4.6 INTEREST ON PAST DUE OBLIGATIONS. Any amount owned by
Tenant to Landlord which is not paid when due shall bear interest at the rate
of fifteen percent (15%) per annum from the due date of such amount.
However, interest shall not be payable on late charges to be paid by Tenant
under this Lease. The payment of interest on such amounts shall not excuse
or cure any default by Tenant under this Lease. If the interest rate
specified in this Lease is higher than the rate permitted by law, the
interest rate is hereby decreased to the maximum legal interest rate
permitted by law.
Section 4.7 IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES.
If requested by any ground lessor or lender to whom Landlord has granted a
security interest in the Property, or if Tenant is more than ten (10) days late
in the payment of rent more than once in any consecutive twelve (12) -month
period. Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the
annual real property taxes and insurance premiums payable by Tenant under this
Lease, together with each payment of Base Rent. Landlord shall hold such
payments in a non-interest bearing impound account. It unknown, Landlord shall
reasonably estimate the amount of real property taxes and insurance premiums
when due. Tenant shall pay any deficiency of funds in the impound account to
Landlord
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upon written request. If Tenant defaults under this Lease, Landlord may
apply any funds in the impound account to any obligation then due under this
Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.1 PERMITTED USES. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.2 MANNER OF USE. Tenant shall not cause or permit the
Properly to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of other tenants of Landlord, or which constitutes a nuisance or
waste. Tenant shall obtain and pay for all permits, including a Certificate of
Occupancy, required for Tenant's occupancy of the Properly and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.3 HAZARDOUS MATERIALS. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition
of "hazardous substances", "hazardous wastes", "hazardous materials" or
"toxic substances" now or subsequently regulated under any applicable
federal, state or local laws or regulations, including without limitation
petroleum-based products, paints, solvents, lead, cyanide, DDT, printing
inks, acids, pesticides, ammonia compounds and other chemical products,
asbestos, PCBs and similar compounds, and including any different products
and materials which are subsequently found to have adverse effects on the
environment or the health and safety of persons. Tenant shall not cause or
permit any Hazardous Material to be generated, produced, brought upon, used,
stored, treated or disposed of in or about the Property by Tenant, its
agents, employees, contractors, sublessees or invitees without the prior
written consent of Landlord. Landlord shall be entitled to take into account
such other factors or facts as Landlord may reasonably determine to be
relevant in determining whether to grant or withhold consent to Tenant's
proposed activity with respect to Hazardous Material. In no event, however,
shall Landlord be required to consent to the installation or use of any
storage tanks on the Property.
Section 5.4 SIGNS AND AUCTIONS. Tenant shall not place any signs on
the Property without Landlord's prior written consent. Tenant shall not
conduct or permit any auctions or sheriff's sales at the Property.
Section 5.5 INDEMNITY. Tenant shall indemnify Landlord against and
hold Landlord harmless from any and all costs. claims or liability arising
from: (a) Tenant's use of the Property: (b) the conduct of Tenant's business
or anything else done or permitted by Tenant to be done in or about the
Property, including any contamination of the Property or any other property
resulting from the presence or use of Hazardous Material caused or permitted
by Tenant; (c) any breach or default in the performance of Tenant's
obligations under this Lease: (d) any misrepresentation or breach of warranty
by Tenant under this Lease; or (e) other [WILLFUL OR MALICIOUS] acts or
omissions of Tenant. Tenant shall defend Landlord against any such cost,
claim or liability at Tenant's expense with counsel reasonably acceptable to
Landlord or, at Landlord's election. Tenant shall reimburse Landlord for any
legal fees or costs incurred by Landlord in connection with any such claim.
As a material part of the consideration to Landlord, Tenant assumes all risk
of damage to property or injury to persons in or about the Property arising
from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.6 LANDLORD'S ACCESS. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall
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give Tenant prior notice of such entry, except in the case of an emergency.
Landlord may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.7 QUIET POSSESSION. If Tenant pays the rent and complies
with all other terms of this Lease. Ten and enjoy the Property for the full
Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.1 EXISTING CONDITIONS. Tenant accepts the Property in its
condition as of the [COMMENCEMENT DATE] of the Lease, subject to all recorded
matters, laws, ordinances, and governmental regulations and orders. Except as
provided herein. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation as to the condition of the Property or the
suitability of the Property for Tenant's intended use. Tenant represents and
warrants that Tenant has made its own inspection of and inquiry regarding the
condition of the Property and is not relying on any representations of Landlord
or any Broker with respect thereto. If Landlord or Landlord's Broker has
provided a Property Information Sheet or other Disclosure Statement regarding
the Property, a copy is attached as an exhibit to the Lease.
Section 6.2 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall
not be liable for any damage or injury to the person, business (or any loss
of income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
Property, whether such damage or injury is caused by or results from: (a)
fire, steam, electricity, water, gas or rain; (b) the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures or any other cause; (c)
conditions arising in or about the Property or upon other portions of the
Project, or from other sources or places; or (d) any act or omission of any
other tenant of the Project. Landlord shall not be liable for any such
damage or injury even though the cause of or the means of repairing such
damage or injury are not accessible to Tenant. The provisions of this
Section 6.02 shall not, however, exempt Landlord from liability for
Landlord's gross negligence or willful misconduct.
Section 6.3 LANDLORD'S OBLIGATIONS. Subject to the provisions of
Article Seven (Damage or Destruction) and Article Eight (Condemnation),
Landlord shall have absolutely no responsibility to repair, maintain or
replace any portion of the Property at any time. Tenant waives the benefit
of any present or future law which might give Tenant the right to repair the
Property at Landlord's expense or to terminate the Lease due to the condition
of the Property. Landlord shall be responsible for all exterior walls,
structure and roof throughout the Lease Term.
Section 6.4 TENANT'S OBLIGATIONS.
(a) Except as provided in Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions
of the Properly (including nonstructural, interior, and landscaped areas,
portions, systems and equipment) in good order, condition and repair
(including interior repainting and refinishing, as needed). If any portion
of the Property or any system or equipment in the Property which Tenant is
obligated to repair cannot be fully repaired or restored. Tenant shall
promptly replace such portion of the Property or system or equipment in the
Property, regardless of whether the benefit of such replacement extends
beyond the Lease Term; but if the benefit or useful life of such replacement
extends beyond the Lease Term (as such term may be extended by exercise of
any options), the useful life of such replacement shall be prorated over the
remaining portion of the Lease Term (as extended), and Tenant shall be liable
only for that portion of the cost which is applicable to the Lease Term (as
extended). Tenant shall maintain a preventive maintenance contract providing
for the regular inspection and maintenance of the heating and air
conditioning system by a licensed heating and air conditioning contractor. If
any part of the Property is damaged by any act or omission of Tenant, Tenant
shall pay Landlord the cost of repairing or replacing such damaged property,
whether or not Landlord would otherwise be obligated to pay the cost of
maintaining or repairing such property. It is the intention of Landlord and
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Tenant that at all times Tenant shall maintain the portions of the Property
which Tenant is obligated to maintain in [A SIMILAR OR BETTER CONDITION,] and
fully operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under
this Section 6.04 at Tenant's sole expense. If Tenant fails to maintain,
repair or replace the Property as required by this Section 6.04, Landlord
may, upon ten (10) days' prior notice to Tenant (except that no notice shall
be required in the case of an emergency), enter the Property and perform such
maintenance or repair (including replacement, as needed) on behalf of Tenant.
In such case, Tenant shall reimburse Landlord for all costs incurred in
performing such maintenance or repair immediately upon demand.
Section 6.5 ALTERATIONS, ADDITIONS. AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions, or
improvements to the Property without Landlord' prior written consent,
[WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD,] except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside
of any building of which the Property is part. Landlord may require Tenant
to provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and
improvements shall be done in a good and workmanlike manner, in conformity
with all applicable laws and regulations, and by a contractor approved by
Landlord. Upon completion of any such work, Tenant shall provide Landlord
with "as built" plans, copies of all construction contracts, and proof of
payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and
material furnished to the Property. Tenant shall give Landlord at least
twenty (20) days' prior written notice of the commencement of any work on the
Property, regardless of whether Landlord's consent to such work is required.
Landlord may elect to record and post notices of non-responsibility on the
Property.
Section 6.6 CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in
the same condition as received except for ordinary wear and tear which Tenant
was not otherwise obligated to remedy under any provision of this Lease.
However, Tenant shall not be obligated to repair any damage which Landlord is
required to repair under Article Seven (Damage or Destruction). In addition,
Landlord may require Tenant to remove any alterations, additions or
improvements (not made with Landlord's consent) prior to the expiration of
the Lease and to restore the Property to its prior condition, all at Tenant's
expense. All alterations, additions and improvements which Landlord has not
required Tenant to remove shall become Landlord's property and shall be
surrendered to Landlord upon the expiration or earlier termination of the
Lease, except that Tenant may remove any of Tenant's machinery or equipment
which can be removed without material damage to the Property. Tenant shall
repair, at Tenant's expense, any damage to the Property caused by the removal
of any such machinery or equipment. In no event, however, shall Tenant
remove any of the following materials or equipment (which shall be deemed
Landlord's property) without Landlord's prior written consent: any power
wiring or power panels: lighting or lighting fixtures: wall coverings;
drapes, blinds or other window coverings; carpets or other floor coverings;
heaters, air conditioners or any other heating or air conditioning equipment;
fencing or security gates; or other similar building operating equipment and
decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.1 PARTIAL DAMAGE TO PROPERTY.
(a) Tenant shall notify Landlord in writing immediately
upon the occurrence of any damage to the Property. If the Property is only
partially damaged (i.e., less than fifty percent (50%) of the Property is
untenable as a result of such damage or less than fifty percent (50%) of
Tenant's operations are materially impaired)
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and if the proceeds received by Landlord from the insurance policies
described in Paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the
damage as soon as reasonably possible. Landlord may elect (but is not
required) to repair any damage to Tenant's fixtures, equipment, or
improvements.
(b) If the insurance proceeds received by Landlord are not
sufficient to pay the entire cost of repair or if the cause of the damage is
not covered by the insurance policies which Landlord maintains under
Paragraph 4.04(b), Landlord may elect either to (i) repair the damage as soon
as reasonably possible, in which case this Lease shall remain in full force
and effect, or (ii) terminate this Lease as of the date the damage occurred.
Landlord shall notify Tenant within thirty (30) days after receipt of notice
of the occurrence of the damage whether Landlord elects to repair the damage
or terminate the Lease. If Landlord elects to repair the damage, Tenant
shall pay Landlord the "deductible amount" (if any) under Landlord's
insurance policies and, if the damage was due to [NEGLIGENCE OR WILLFUL
MISCONDUCT OF] Tenant, or Tenant's employees, agents, contractors or
invitees, the difference between the actual cost of repair and any insurance
proceeds received by Landlord. If Landlord elects to terminate the Lease,
Tenant may elect to continue this Lease in full force and effect, in which
case Tenant shall repair any damage to the Property and any building in which
the Property is located. Tenant shall pay the cost of such repairs, except
that upon satisfactory completion of such repairs, Landlord shall deliver to
Tenant any insurance proceeds received by Landlord for the damage repaired by
Tenant. Tenant shall give Landlord written notice of such election within
ten (10) days after receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six
(6) months of the Lease Term and such damage will require more than thirty (30)
days to repair, either Landlord or Tenant may elect to terminate this Lease as
of the date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.2 SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage
to the Properly is greater than partial damage as described in Section 7.01),
and regardless of whether Landlord receives any insurance proceeds, this
Lease shall terminate as of the date the destruction occurred Notwithstanding
the preceding sentence, if the Property can be rebuilt within six (6) months
after the date of destruction. Landlord may elect to rebuild the Property at
Landlord's own expense, in which case this Lease shall remain in full force
and effect. Landlord shall notify Tenant of such election within thirty (30)
days after Tenant's notice of the occurrence of total or substantial
destruction. If Landlord so elects, Landlord shall rebuild the Property at
Landlord's sole expense, except that if the destruction was caused by an
[NEGLIGENCE OR WILLFUL MISCONDUCT] of Tenant. Tenant shall pay Landlord the
difference between the actual cost of rebuilding and any insurance proceeds
received by Landlord.
Section 7.3 TEMPORARY REDUCTION OF RENT. If the Property is
destroyed or damaged and Landlord or Tenant repairs or restores the Property
pursuant to the provisions of this Article Seven, any rent payable during the
period of such damage, repair and/or restoration shall be reduced according
to the degree, if any, to which Tenant's use of the Property is impaired.
However, the reduction shall not exceed the sum of one year's payment of Base
Rent, insurance premiums and real property taxes. Except for such possible
reduction in Base Rent, insurance premiums and real property taxes. Tenant
shall not b compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction. repair, of or to the Property.
Section 7.4 WAIVER. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
[TENANT MAY TERMINATE THE LEASE IF LANDLORD CANNOT REBUILD THE PREMISES WITHIN
180 DAYS, EXCEPT IF DESTRUCTION WAS
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CAUSED BY A WILLFUL ACT OR GROSS OMISSION OF TENANT.]
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power (all of which are
called "Condemnation"), this Lease shall terminate as to the part taken or
sold on the date the condemning authority takes title or possession,
whichever occurs first. If more than twenty percent (20%) of the floor area
of the building in which the Property is located, or which is located on the
Property, is taken, either Landlord or Tenant may terminate this Lease as of
the date the condemning authority takes title or possession, by delivering
written notice to the other within ten (10) days after receipt of written
notice of such taking (or in the absence of such notice, within ten (10) days
after the condemning authority takes title or possession). It neither
Landlord nor Tenant terminates this Lease, this Lease shall remain in effect
as to the portion of the Property not taken, except that the Base Rent and
Additional Rent shall be reduced in proportion to the reduction in the floor
area of the Property. Any Condemnation award or payment shall be distributed
in the following order: (a) first, to any ground lessor, mortgagee or
beneficiary under a deed of trust encumbering the Property, the amount of its
interest in the Property; (b) second, to Tenant, only the amount of any award
specifically designated for loss of or damage to Tenant's trade fixtures or
removable personal property; and (c) third, to Landlord, the remainder of
such award, whether as compensation for reduction in the value of the
leasehold, the taking of the fee, or otherwise. If this Lease is not
terminated, Landlord shall repair any damage to the Properly caused by the
Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If
the severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
Such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.1 LANDLORD'S CONSENT REQUIRED. No portion of the Property
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation
of law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold
its consent as provided in Section 9.05 below Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this
Lease. If Tenant is a partnership, any cumulative transfer of more than
twenty percent (20%) of the partnership interests shall require Landlord's
consent. If Tenant is a corporation. any change in the ownership of a
controlling interest of the voting stock of the corporation shall require
Landlord's consent.
Section 9.2 TENANT AFFILIATE. Tenant may assign this Lease or
sublease the Property, without Landlord's consent, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from the merger of or consolidation with Tenant
("Tenant's Affiliate"). In such case, any Tenant's Affiliate shall assume in
writing all of Tenant's obligations under this Lease.
Section 9.3 NO RELEASE OF TENANT. No transfer permitted by this
Article Nine, whether with or without Landlord's consent, shall release Tenant
or change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Article Nine. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's
transferee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing remedies against the transferee. Landlord may consent
to subsequent assignments or modifications of this Lease by Tenant's transferee,
without notifying Tenant or obtaining its consent. Such action shall not
relieve Tenant's liability under this Lease.
Section 9.4 OFFER TO TERMINATE. If Tenant desires to assign the
Lease or sublease the Property, Tenant shall have the right to offer, in
writing, to terminate the Lease as of a date specified in the offer. If
Landlord elects in writing to accept the offer to terminate within twenty
(20) days after notice of the offer, the Lease shall terminate as of the date
specified and all the terms and provisions of the Lease governing termination
shall apply. If Landlord
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does not so elect, the Lease shall continue in effect until otherwise
terminated and the provisions of Section 9.05 with respect to any proposed
transfer shall continue to apply.
Section 9.5 LANDLORD'S CONSENT.
(a) Tenant's request for consent to any transfer described
in Section 9.01 shall set forth in writing the details of the proposed
transfer, including the name, business and financial condition of the
prospective transferee, financial details of the proposed transfer (e.g., the
term of and the rent and security deposit payable under any proposed
assignment or sublease), and any other information Landlord deems relevant.
Landlord shall have the right to withhold consent, if reasonable, or to grant
consent, based on the following factors: (i) the business of the proposed
assignee or subtenant and the proposed use of the Property; (ii) the net
worth and financial reputation of the proposed assignee or subtenant; (iii)
Tenant's compliance with all of its obligations under the Lease; and (iv)
such other factors as Landlord may reasonably deem relevant. If Landlord
objects to a proposed assignment solely because of the net worth and/or
financial reputation of the proposed assignee. Tenant may nonetheless
sublease (but not assign), all or a portion of the Property to the proposed
transferee, but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall
apply:
(i) Tenant shall pay to Landlord as Additional Rent
under the Lease the Landlord's Share (stated in Section 1.13) of the Profit
(defined below) on such transaction as and when received by Tenant, unless
Landlord gives written notice to Tenant and the assignee or subtenant that
Landlord's Share shall be paid by the assignee or subtenant to Landlord
directly. The "Profit" means (A) all amounts paid to Tenant for such
assignment or sublease, including "key" money, monthly rent in excess of the
monthly rent payable under the Lease, and all fees and other consideration
paid for the assignment or sublease, including fees under any collateral
agreements, less (B) costs and expenses directly incurred by Tenant in
connection with the execution and performance of such assignment or sublease
for real estate broker's commissions and costs of renovation or construction
of tenant improvements required under such assignment or sublease. Tenant is
entitled to recover such costs and expenses before Tenant is obligated to pay
the Landlord's Share to Landlord. The Profit in the case of a sublease of
less than all the Property is the rent allocable to the subleased space as a
percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written
statement certifying all amounts to be paid from any assignment or sublease
of the Property within thirty (30) days after the transaction documentation
is signed, and Landlord may inspect Tenant's books and records to verify the
accuracy of such statement. On written request, Tenant shall promptly
furnish to Landlord copies of all the transaction documentation, all of which
shall be certified by Tenant to be complete, true and correct. Landlord's
receipt of Landlord's Share shall not be a consent to any further assignment
or subletting. The breach of Tenant's obligation under this Paragraph
9.05(b) shall be a material default of the Lease.
Section 9.6 NO MERGER. No merger shall result from Tenant's
sublease of the Property under this Article Nine, Tenant's surrender of this
Lease or the termination of this Lease in any other manner. In any such
event, Landlord may terminate any or all subtenancies or succeed to the
interest of Tenant as sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.1 COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants
and conditions.
Section 10.2 DEFAULTS. Tenant shall be in material default under this
Lease:
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(a) If Tenant abandons the Property or if Tenant's
vacation of the Property results in the cancellation of any insurance
described in Section 4.04; for more than 30 days
(b) If Tenant fails to pay rent or any other charge when
due; within ten (10) days after receiving notice from Landlord
(c) If Tenant fails to perform any of Tenant's
non-monetary obligations under this Lease for a period of thirty (30) days
after written notice from Landlord; provided that if more than thirty (30)
days are required to complete such performance, Tenant shall not be in
default it Tenant commences such performance within the thirty (30) -day
period and thereafter diligently pursues its completion. However, Landlord
shall not be required to give such notice if Tenant's failure to perform
constitutes a non-curable breach of this Lease. The notice required by this
Paragraph is intended to satisfy any and all notice requirements imposed by
law on Landlord and is not in addition to any such requirement.
(d) (i) If Tenant makes a general assignment or general
arrangement for the benefit of creditors; (ii) if a petition for adjudication of
bankruptcy or for reorganization or rearrangement is filed by or against Tenant
and is not dismissed within thirty (30) days: (iii) if a trustee or receiver is
appointed to take possession of substantially all of Tenant's assets located at
the Property or of Tenant's interest in this Lease and possession is not
restored to Tenant within thirty (30) days; or (iv) if substantially all of
Tenant's assets located at the Property or of Tenant's interest in this Lease is
subjected to attachment, execution or other judicial seizure which is not
discharged within thirty (30) days. If a court of competent jurisdiction
determines that any of the acts described in this subparagraph (d) is not a
default under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession) and such trustee or Tenant transfers
Tenant's interest hereunder, then Landlord shall receive, as Additional Rent,
the excess, if any, of the rent (or any other consideration) paid in connection
with such assignment or sublease over the rent payable by Tenant under this
Lease.
(e) If any guarantor of the Lease revokes or otherwise
terminates, or purports to revoke or otherwise terminate, any guaranty of all or
any portion of Tenant's obligations under the Lease. Unless otherwise expressly
provided, no guaranty of the Lease is revocable.
Section 10.3 REMEDIES. On the occurrence of any material default by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property
by any lawful means, in which case this Lease shall terminate and Tenant
shall immediately surrender possession of the Property to Landlord. In such
event, Landlord shall be entitled to recover from Tenant all damages incurred
by Landlord by reason of Tenant's default, including (i) the worth at the
time of the award of the unpaid Base Rent, Additional Rent and other charges
which Landlord had earned at the time of the termination; (ii) the worth at
the time of the award of the amount by which the unpaid Base Rent, Additional
Rent and other charges which Landlord would have earned after termination
until the time of the award exceeds the amount of such rental loss that
Tenant proves Landlord could have reasonably avoided; (iii) the worth at the
time of the award of the amount by which the unpaid Base Rent. Additional
Rent and other charges which Tenant would have paid for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss
that Tenant proves Landlord could have reasonably avoided; and (iv) any other
amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under the Lease or
which in the ordinary course of things would be likely to result therefrom,
including, but not limited to, any costs or expenses Landlord incurs in
maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property. Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate
commission paid or payable. As used in subparts (i) and (ii) above, the
"worth at the time of the award" is computed by allowing interest on unpaid
amounts at the rate of fifteen percent (15%) per annum, or such lesser amount
as may then be the maximum lawful rate. As used in subpart (iii) above, the
"worth at
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the time of the award" is computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award,
plus one percent (1%). It Tenant has abandoned the Property, Landlord shall
have the option of (i) retaking possession of the Property and recovering
from Tenant the amount specified in this Paragraph 10.03(a), or (ii)
proceeding under Paragraph 10.03(b);
(b) Maintain Tenant's right to possession, in which case
this Lease shall continue in effect whether or not Tenant has abandoned the
Properly. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due;
(c) Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the state in which the
Property is located.
Section 10.5 AUTOMATIC TERMINATION. Notwithstanding any other term
or provision hereof to the contrary, the Lease shall terminate on the
occurrence of any act which affirms the Landlord's intention to terminate the
Lease as provided in Section 10.03 hereof, including the filing of an
unlawful detainer action against Tenant. On such termination, Landlord's
damages for default shall include all costs and fees, including reasonable
attorneys' fees that Landlord incurs in connection with the filing,
commencement, pursuing and/or defending of any action in any bankruptcy court
or other court with respect to the Lease; the obtaining of relief from any
stay in bankruptcy restraining any action to evict Tenant; or the pursuing of
any action with respect to Landlord's right to possession of the Property.
All such damages suffered (apart from Base Rent and other rent payable
hereunder) shall constitute pecuniary damages which must be reimbursed to
Landlord prior to assumption of the Lease by Tenant or any successor to
Tenant in any bankruptcy or other proceeding.
Section 10.6 CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.1 SUBORDINATION. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any
lender which is acquiring a security interest in the Property or the Lease.
Tenant shall execute such further documents and assurances as such lender may
require, provided that Tenant's obligations under this Lease shall not be
increased in any material way (the performance of ministerial acts shall not
be deemed material), and Tenant shall not be deprived of its rights under
this Lease, Tenant's right to quiet possession of the Property during the
Lease Term shall not be disturbed if Tenant pays the rent and performs all of
Tenant's obligations under this Lease and is not otherwise in default. If
any ground lessor, beneficiary or mortgagee elects to have this Lease prior
to the lien of its ground lease, deed of trust or mortgage and gives written
notice thereof to Tenant, this Lease shall be deemed prior to such ground
lease, deed of trust or mortgage whether this
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Lease is dated prior or subsequent to the date of said ground lease, deed of
trust or mortgage or the date of recording thereof.
Section 11.2 ATTORNMENT. If Landlord's interest in the Property is
acquired by any groundless or beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so. It Tenant fails to do so
within ten (10) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of
Landlord, the attorney-in-fact of Tenant to execute and deliver any such
instrument or document.
Section 11.4 ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement certifying: (i) that
none of the terms or provisions of this Lease have been changed (or if they
have been changed, stating how they have been changed); (ii) that this Lease
has not been cancelled or terminated; (iii) the last date of payment of the
Base Rent and other charges and the time period covered by such payment;
(iv) that Landlord is not in default under this Lease (or, if Landlord is
claimed to be in default, stating why); and (v) such other representations or
information with respect to Tenant or the Lease as Landlord may reasonably
request or which any prospective purchaser or encumbrancer of the Property
may require. Tenant shall deliver such statement to Landlord within ten (10)
days after Landlord's request. Landlord may give any such statement by
Tenant to any prospective purchaser or encumbrancer of the Property. Such
purchaser or encumbrancer may rely conclusively upon such statement as true
and correct.
(b) If Tenant does not deliver such statement to Landlord
within such ten (10)-day period, Landlord, and any prospective purchaser or
encumbrancer, may conclusively presume and rely upon the following facts:
(i) that the terms and provisions of this Lease have not been changed except
as otherwise represented by Landlord: (ii) that this Lease has not been
cancelled or terminated except as otherwise represented by Landlord;
(iii) that not more than one month's Base Rent or other charges have been
paid in advance; and (iv) that Landlord is not in default under the Lease.
In such event, Tenant shall be estopped from denying the truth of such facts.
Section 11.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days
after written request from Landlord, Tenant shall deliver to Landlord such
financial statements as Landlord reasonably requires to verity the net worth
of Tenant or any assignee, subtenant, or guarantor of Tenant. In addition.
Tenant shall deliver to any lender designated by Landlord any financial
statements required by such lender to facilitate the financing or refinancing
of the Property. Tenant represents and warrants to Landlord that each such
financial statement is a true and accurate statement as of the date of such
statement. All financial statements shall be confidential and shall be used
only for the purposes set forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.1 LEGAL PROCEEDINGS. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any
costs or expenses that the Nondetaulting Party incurs in connection with any
breach or default of the Defaulting Party under this Lease, whether or not
suit is commenced or judgment entered. Such costs shall include legal fees
and costs incurred for the negotiation of a settlement, enforcement of rights
or otherwise. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award
to the party in whose favor a judgment is entered, a reasonable sum as
attorneys' fees and costs. The losing party in such
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action shall pay such attorneys' fees and costs. Tenant shall also indemnify
Landlord against and hold Landlord harmless from all costs, expenses, demands
and liability Landlord may incur if Landlord becomes or is made a party to
any claim or action (a) instituted by Tenant against any third party, or by
any third party against Tenant, or by or against any person holding any
interest under or using the Property by license of or agreement with Tenant;
(b) for foreclosure of any lien for labor or material furnished to or for
Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 1.1 of the United States Code, as amended.
Tenant shall defend Landlord against any such claim or action at Tenant's
expense with counsel reasonably acceptable to Landlord or, at Landlord's
election. Tenant shall reimburse Landlord for any legal fees or costs
Landlord incurs in any such claim or action.
Section 12.2 LANDLORD'S CONSENT. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenant's request for
Landlord's consent under Article Nine (Assignment and Subletting), or in
connection with any other act which Tenant proposes to do and which requires
Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.1 NON-DISCRIMINATION. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no
discrimination against, or segregation of, any person or group of persons on
the basis of race, color, sex, creed, national origin or ancestry in the
leasing, subleasing, transferring, occupancy, tenure or use of the Property
or any portion thereof.
Section 13.2 LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means
only the current owner or owners of the fee title to the Property or the
leasehold estate under a ground lease of the Property at the time in
question. Each Landlord is obligated to perform the obligations of Landlord
under this Lease only during the time such Landlord owns such interest or
title. Any Landlord who transfers its title or interest is relieved of all
liability with respect to the obligations of Landlord under this Lease to be
performed on or after the date of transfer. However, each Landlord shall
deliver to its transferee all funds that Tenant previously paid if such funds
have not yet been applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by
Landlord to perform any of its obligations under this Lease to Landlord and
to any ground lessor, mortgagee or beneficiary under any deed of trust
encumbering the Property whose name and address have been furnished to Tenant
in writing. Landlord shall not be in default under this Lease unless Landlord
(or such ground lessor, mortgagee or beneficiary) fails to cure such
non-performance within thirty (30) days after receipt of Tenant's notice.
However if such non-performance reasonably requires more than thirty (30)
days to cure, Landlord shall not be in default if such cure is commenced
within such thirty (30) -day period and thereafter diligently pursued to
completion.
(c) Notwithstanding any term or provision herein to the
contrary the liability of Landlord for the performance of its duties and
obligations under this Lease is limited to Landlord's interest in the Property,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.3 SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.4 INTERPRETATION. The captions of the Articles or
Sections of this Lease are to assist the parties in reading this Lease and
are not a part of the terms or provisions of this Lease. Whenever required
by the context of this Lease, the singular shall include the plural and the
plural shall include the singular. The masculine,
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feminine and neuter genders shall each include the other. In any provision
relating to the conduct, acts or omissions of Tenant, the term "Tenant" shall
include Tenant's agents, employees. contractors, invitees. successors or
others using the Property with Tenant's expressed or implied permission.
Section 13.5 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the lease of
the Property and no other agreements are effective. All amendments to this
Lease shall be in writing and signed by all parties. Any other attempted
amendment shall be void.
Section 13.6 NOTICES. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by
certified mail, return receipt requested, postage prepaid. Notices to Tenant
shall be delivered to the address specified in Section 1.03 above, except
that upon Tenant's taking possession of the Property, the Property shall be
Tenant's address for notice purposes. Notices to Landlord shall be delivered
to the address specified in Section 1.02 above. All notices shall be
effective upon delivery. Either party may change its notice address upon
written notice to the other party.
Section 13.7 WAIVERS. All waivers must be in writing and signed by
the waiving party. Landlord's failure to enforce any provision of this Lease
or its acceptance of rent shall not be a waiver and shall not prevent
Landlord from enforcing that provision or any other provision of this Lease
in the future. No statement on a payment check from Tenant or in a letter
accompanying a payment check shall be binding on Landlord. Landlord may,
with or without notice to Tenant, negotiate such check without being bound to
the conditions of such statement.
Section 13.8 NO RECORDATION. Tenant shall not record this Lease
without prior written consent from Landlord. However, either Landlord or
Tenant may require that a "Short Form" memorandum of this Lease executed by
both parties be recorded. The party requiring such recording shall pay all
transfer taxes and recording fees.
Section 13.9 BINDING EFFECT; CHOICE OF LAW. This Lease binds any
party who legally acquires any rights or interest in this Lease from Landlord
or Tenant. However, Landlord shall have no obligation to Tenant's successor
unless the rights or interests of Tenant's successor are acquired in
accordance with the terms of this Lease. The laws of the state in which the
Property is located shall govern this Lease.
Section 13.10 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant
is a corporation. each person signing this Lease on behalf of Tenant
represents and warrants that he has full authority to do so and that this
Lease binds the corporation. If Tenant is a partnership, each person or
entity signing this Lease for Tenant represents and warrants that he or she
is a general partner of the partnership, that he or it has full authority to
sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11 JOINT AND SEVERAL LIABILITY. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.12 FORCE MAJEURE. It Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include. but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
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Section 13.13 EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the
counterparts shall constitute a single binding instrument. Landlord's
delivery of this Lease to Tenant shall not be deemed to be an offer to lease
and shall not be binding upon either party until executed and delivered by
both parties.
Section 13.14 SURVIVAL. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.1 BROKER'S FEE. When this Lease is signed by and
delivered to both Landlord and Tenant, Landlord shall pay a real estate
commission to Landlord's Broker named in Section 1.08 above, if any, as
provided in the written agreement between Landlord and Landlord's Broker, or
the sum stated in Section 1.09 above for services rendered to Landlord by
Landlord's Broker in this transaction. Landlord shall pay Landlord's Broker
a commission if Tenant exercises any option to extend the Lease Term or to
buy the Property, or any similar option or right which Landlord may grant to
Tenant, or if Landlord's Broker is the procuring cause of any other lease or
sale entered into between Landlord and Tenant covering the Property. Such
commission shall be the amount set forth in Landlord's Broker's commission
schedule in effect as of the execution of this Lease. If a Tenant's Broker
is named in Section 1.08 above, Landlord's Broker shall pay an appropriate
portion of its commission to Tenant's Broker if so provided in any agreement
between Landlord's Broker and Tenant's Broker. Nothing contained in this
Lease shall impose any obligation on Landlord to pay a commission or tee to
any party other than Landlord's Broker.
Section 14.2 PROTECTION OF BROKERS. If Landlord sells the Property,
or assigns Landlord's interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's
Broker shall have the right to bring a legal action to enforce or declare
rights under this provision. The prevailing party in such action shall be
entitled to reasonable attorneys' fees to be paid by the losing party. Such
attorneys' fees shall be fixed by the court in such action. This Paragraph
is included in this Lease for the benefit of Landlord's Broker.
Section 14.3 Agency Disclosure; No Other Brokers.
Landlord and Tenant each warrant that they have dealt with no other real estate
broker(s) in connection with this transaction except: ,
who represents Landlord and Spallino Reed Corporate Real Estate,
who represents .
In the event that represents both Landlord and Tenant,
Landlord and Tenant hereby confirm that they were timely advised of the dual
representation and that they consent to the same, and that they do not expect
said broker to disclose to either of them the confidential information of the
other party.
ARTICLE FIFTEEN: COMPLIANCE
The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive
Environmental Response Compensation and Liability Act, and The Americans With
Disabilities Act.
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ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED
HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED.
PLEASE DRAW A LINE THROUGH THE SPACE BELOW.
Landlord and Tenant have signed this Lease at the place and on the
dates specified adjacent to their signatures below and have initialed all
Riders which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on , 19 Frederick & Doris Nicolini
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at
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By: /s/ Frederick Nicolini
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Frederick Nicolini
Its:
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By: /s/ Doris Nicolini
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Doris Nicolini
Its:
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"TENANT"
Signed on September 21, 1999 iPrint, Inc.
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at Redwood City, CA a California Corporation
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By: /s/ Greg Korjeff
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Greg Korjeff
Its: Vice President Operations
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By:
-------------------------------
Its:
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IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT
WITH A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER
PERSON WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING
THE POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND
STORAGE TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE
DIRECTION OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND
OFFICE REALTORS-Registered Trademark- INC. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF
INDUSTRIAL AND OFFICE REALTORS-Registered Trademark- INC., ITS LEGAL
COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR AGENTS.
AS M THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR
OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO
19
- -C-1988 Southern California Initials /s/ GK
Chapter of the ------------------
Society of Industrial /s/ FN DN
and Office Realtors,
-Registered Trademark- Inc.
* CB Richard Ellis, Inc.
(Single-Tenant Net Form)
<PAGE>
ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL
COUNSEL.
20
- -C-1988 Southern California Initials /s/ GK
Chapter of the ------------------
Society of Industrial /s/ FN DN
and Office Realtors,
-Registered Trademark- Inc.
* CB Richard Ellis, Inc.
(Single-Tenant Net Form)
<PAGE>
CB RICHARD ELLIS
ADDENDUM TO INDUSTRIAL REAL ESTATE LEASE PAGE 1 OF 1
This Addendum One is made a part of the Lease dated September 14, 1999 by and
between Frederick & Doris Nicolini as Landlord and iPrint, Inc., a California
Corporation as Tenant, for the premises commonly known as 1475 Veterans
Boulevard, Redwood City, California.
16. BASE RENT SCHEDULE
Months 1 - 12: $0.75/sq. ft./mo. NNN
Months 13 - 24: $0.80/sq. ft./mo. NNN
Months 25 - 36: $0.85/sq. ft./mo. NNN
Months 37 - 48: $0.90/sq. ft./mo. NNN
17. OPERATING EXPENSES AND REAL ESTATE TAXES
1999 ESTIMATED OPERATING EXPENSES $0.10 per sq. ft. per month
Property Taxes $8,559.30
Property Insurance $2,634.00
Common Area: $960.00
18. EARLY ENTRY TO PREMISES
Tenant shall have a right to enter the Premises prior to the lease
commencement for the purpose of space planning, tenant improvements and
the installation of telephones and electronic communication equipment
related to operating its business.
19. TENANT IMPROVEMENT ALLOWANCE
Landlord to provide the space in an "As-Is" condition. All construction
shall be subject to the reasonable approval of Landlord. Landlord
represents that the premises including but not limited to HVAC,
electrical and lighting shall be in good working order at the
commencement of this Lease. Tenant anticipates spending $150,000.00 -
$200,000.00 towards tenant improvements work for the property. Any and
all improvements must be to applicable City codes and must be done by
permits with the City of Redwood City.
20. SIGNAGE
Landlord shall allow, at Tenant's sole cost and expense, the installation
of building and monument signage subject to Landlord's and the City of
Redwood City's approval which consent shall not be unreasonable withheld.
21. LANDLORD'S OBLIGATIONS
Landlord shall be solely responsible to maintain and repair building,
structure, exterior walls, and roof throughout the Lease Term.
If any conflicts exist between the Lease and this Addendum, the terms of this
Addendum shall govern.
Landlord: Frederick & Doris Nicolini Tenant: iPrint, Inc.
a California Corporation
By: /s/ Frederick Nicolini By: /s/ Greg Korjeff
------------------------------- ------------------------------
Its: /s/ Doris Nicolini Its: VP Operations
------------------------------- ------------------------------
Date: Date: 9/21/99
------------------------------- ------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
January 7, 2000
