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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH , 2000.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EGROUPS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7375 94-3302741
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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350 BRANNAN STREET, SAN FRANCISCO, CA 94107, (415) 546-2700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL B. KLEIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
350 BRANNAN STREET, SAN FRANCISCO, CA 94107, (415) 546-2700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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RALPH L. ARNHEIM III, ESQ. MICHAEL J. HALLORAN, ESQ.
CYNTHIA CLARFIELD HESS, ESQ. ROBERT E. SULLIVAN, ESQ.
JOHN S. WILLS, ESQ. W. WARREN H. BINFORD, ESQ.
PERKINS COIE LLP PILLSBURY MADISON & SUTRO LLP
180 TOWNSEND STREET, 3RD FLOOR 50 FREMONT STREET
SAN FRANCISCO, CA 94107 SAN FRANCISCO, CA 94105
(415) 344-7000 (415) 983-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common stock, $0.001 par value.......................... $75,000,000.00 $19,800.00
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
We will amend and complete the information in this prospectus. Although
we are permitted by US federal securities laws to offer these securities
using this prospectus, we may not sell them or accept your offer to buy
them until the documentation filed with the SEC relating to these
securities has been declared effective by the SEC. This prospectus is
not an offer to sell these securities or our solicitation of your offer
to buy these securities in any jurisdiction where that would not be
permitted or legal.
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PROSPECTUS
, 2000
[LOGO]
SHARES OF COMMON STOCK
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EGROUPS, INC.:
- We provide the most widely used email group communication platform on
the Internet.
- eGroups, Inc.
350 Brannan Street
San Francisco, CA 94107
(415) 546-2700
PROPOSED SYMBOL AND MARKET:
- EGPS/Nasdaq National Market
THE OFFERING:
- - We are offering shares of our common stock.
- - The underwriters have an option to purchase an additional
shares from us to cover over-allotments.
- - This is our initial public offering. We anticipate that the initial
public price will be between $ and $ per share.
- - We plan to use the net proceeds from this offering for the
development of our services, sales and marketing, and general
corporate purposes.
- - Closing: , 2000.
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Per Share Total
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Public Offering Price: $ $
Underwriting Fees:
Proceeds to eGroups, Inc.:
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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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.
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DONALDSON, LUFKIN & JENRETTE
CHASE H&Q
ROBERTSON STEPHENS
<PAGE> 3
[Inside Front Cover of Prospectus]
The top of the page has the following header:
THE LEADER IN EMAIL GROUP COMMUNICATION
The following four subheaders are located across the page directly under the
above header:
"eGroups empowers individuals and businesses to communicate and collaborate
around common interests."
"Our 14 million active members exchange 2 billion emails per month."
"The majority of our new members are referred by existing members."
"Our members have created 600,000 active email groups."
Below these sub-headers, on the right side of the page, there is screen shot of
an eGroups web page, including a magnified "My Groups" menu from that page. To
the left of this screen shot, and below the sub-headers, there are photographs
of an individual and four groups, each arranged on a separate circular pod. The
four groups have the following captions: "Music Fans;" "Class of '85;"
"Investing Group;" and "Regional Sales Managers."
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[Inside Front Cover Gatefold]
The top of the page has the following centered header:
HIGHLY TARGETED ADVERTISING AND DIRECT MARKETING SOLUTIONS
The following three sub-headers are located across the page directly under the
above header:
"eGroups offers advertising inventory of 2 billion email impressions and 163
million web page views each month."
"We deliver highly targeted marketing messages to our members based on their
self-declared interests."
"We have 2.5 million opt-in subscriptions from members who have elected to
receive email promotional offers."
Below these sub-headers, on the right-center and left-center of the page, there
are screen shots of two eGroups web pages, including a magnified message from
the group. There are several photographs of individuals arrayed around the
gatefold, along with eleven interspersed circles with the following text:
"Corvette World;" "Class of '85;" "Tech Investor;" Regional Sales Managers;"
"College Intramurals;" "Santana Fans;" "FlightSim Jockeys;" Golf-Pros;"
"Parenting;" "Sports Fans Now;" and "Spring Landscapes."
The following text is also interspersed among the photographs and circles:
"Prominent banner positioning on eGroups' web pages"
"Targeted sponsorships"
"Opt-in offers in specific categories of interest"
"Ad banners embedded within group messages and delivered to the email inbox"
<PAGE> 4
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or any sale of the common stock. In this prospectus, unless the
context indicates otherwise, the Company, eGroups, we, us and our refer to
eGroups, Inc., a Delaware corporation.
eGroups, eGroup, email Groups, ONElist and the eGroups logo are our
trademarks. This prospectus also contains trademarks and service marks of other
companies.
Unless otherwise indicated, all information in this prospectus:
- gives effect to the conversion of all our outstanding shares of series A,
B, C and D convertible preferred stock into shares of common stock upon
the closing of this offering and the conversion of approximately $3.2
million in principal amount of subordinated debt into 437,500 shares of
our common stock prior to the closing of this offering;
- assumes the effectiveness of our amended and restated certificate of
incorporation in the State of Delaware upon the completion of this
offering; and
- assumes no exercise of the underwriters' over-allotment option.
TABLE OF CONTENTS
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Page
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Prospectus Summary.................. 3
Risk Factors........................ 7
Use of Proceeds..................... 18
Dividend Policy..................... 18
Corporate Information............... 18
Forward-Looking Statements.......... 18
Capitalization...................... 19
Dilution............................ 20
Selected Consolidated Financial
Data.............................. 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 22
Business............................ 29
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Page
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Management.......................... 43
Relationships and Related
Transactions...................... 52
Principal Stockholders.............. 55
Description of Capital Stock........ 57
Shares Eligible for Future Sale..... 60
Underwriting........................ 62
Legal Matters....................... 65
Experts............................. 65
Additional Information.............. 65
Index to Consolidated Financial
Statements........................ F-1
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in the offering. You should read the entire
prospectus carefully.
EGROUPS
OUR BUSINESS
eGroups is the most widely used email group communication platform on the
Internet. Our service enables our members to easily create, join and manage
online groups focused on business and personal interests. As of February 2000,
we had over 14 million active members participating in approximately 600,000
member-created groups, with new members joining our service at a rate of
approximately 1.5 million per month. During February 2000, our members exchanged
email messages at a rate of approximately 2 billion per month, and our web site
generated 163 million page views. We derive revenue from permission-based direct
marketing programs, sponsorships and other forms of online advertising.
By aggregating our members who have segmented themselves into groups based
on their interests, we offer advertisers and direct marketers a broad audience
as well as enable them to deliver highly targeted marketing messages. Our
proprietary, high-volume ad-serving technology allows advertisers and direct
marketers to place context-sensitive advertisements in emails and web pages
based on member-designated interests, demographic information and other data. In
addition, through our permission-based direct marketing programs, we deliver
full-page emails to members who have elected to receive promotional offers in
specific categories of interest. We currently have approximately 2.5 million
subscriptions from our members for this opt-in advertising.
Our rapid growth in members has been driven by the inherently viral nature
of our business and the ease of using our service. The organic growth of our
member base occurs as existing members expand their groups by inviting new
members, who often form their own groups and invite additional new members. Our
member base has expanded rapidly in both the United States and abroad, with over
20% of our members coming from international domains.
BENEFITS TO OUR MEMBERS
Our easy-to-use and customizable email group communication service provides
numerous benefits to our members. Through our service, group members communicate
with each other using a single group email address, rather than the individual
email addresses of each member. We deliver group email directly to the member's
email inbox, allowing the member to read and reply at his or her convenience. In
addition, we archive group email communications over the prior six months,
enabling prospective and existing members to search our archives for past
communications among group members. Each group also has access to a group
calendar, an online chat application, a group polling feature, and dedicated
storage space to share files such as photographs, documents and digital music.
In April 2000, our members will have access to our web-based platform in 14
different languages and will be able to continue sending emails to other group
members in any language. We are able to align advertisements more effectively
with our members' self-designated interests, providing them with relevant
advertisements that they are more likely to find useful.
BENEFITS TO ADVERTISERS AND DIRECT MARKETERS
We offer advertisers and direct marketers broad reach as well as a variety
of targeting capabilities. Because our 14 million active members have segmented
themselves across approximately 600,000 groups based on business and personal
interests, we enable advertisers and direct marketers
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<PAGE> 6
to deliver highly targeted advertisements to specific audiences. We currently
deliver approximately 2 billion emails and 163 million web page views per month,
nearly all containing an advertisement. For example, online financial services
firms can target advertisements to members of an investment group, while
pharmaceutical companies can promote new therapies to a health-related group.
Because consumers spend a significant portion of their online time using email,
we believe advertisers are better able to reach these consumers by delivering
advertisements in email messages. In addition, we currently have approximately
2.5 million subscriptions from our members who have elected to receive
promotional offers by email in specific categories of interest.
OUR MARKET OPPORTUNITY
The Direct Marketing Association estimates that a total of $309 billion was
spent on advertising and direct marketing in the United States in 1999. Because
the Internet enables precise targeting of consumers through the use of
behavioral, demographic and other data, advertisers and direct marketers are
increasingly adopting online forms of advertising. Forrester Research estimates
that the amount spent on online advertising and direct marketing worldwide will
increase ten-fold from $3.3 billion in 1999 to $33.1 billion in 2004.
The Internet enables group communications to occur on a global scale and
offers efficiencies currently unavailable offline. Because email is the most
widely used application on the Internet, we believe that groups will utilize
email as a preferred medium for creating and managing their group
communications. Given the self-segmented nature of groups, we believe that
advertisers and direct marketers will embrace an email-based group communication
platform that enables them to deliver highly targeted advertisements to their
desired audience.
THE EGROUPS STRATEGY
Our objective is to maintain our leading position as the most widely used
email group communication platform on the Internet. The following are key
elements of our strategy:
- Continue to develop, acquire and license proprietary products and
technology to improve our member experience with enhanced functionality
and new features;
- Continue to increase the size of our member base and the level of group
activity among existing members;
- Maximize awareness of our brand among members and advertisers through
various marketing channels;
- Increase revenue by expanding our direct sales efforts, increasing our
inventory of rich-media email advertisements, improving our ability to
target our web and email advertising, refining our opt-in direct
marketing programs, and introducing new subscription-based services; and
- Leverage our email group communication platform to further expand
internationally.
EGROUPS, INC.
We were incorporated in Delaware in June 1998. Our principal office is
located at 350 Brannan Street, San Francisco, California, and our telephone
number is (415) 546-2700. We maintain a web site at www.egroups.com. Information
contained on our web site is not part of this prospectus.
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THE OFFERING
Common stock offered by
eGroups.......................... shares
Common stock to be outstanding
after the offering............... shares
Use of proceeds.................. We plan to use the net proceeds from this
offering for the development of our
services, sales and marketing, and general
corporate purposes.
Proposed Nasdaq National Market
symbol........................... EGPS
The number of shares to be outstanding after this offering is based on
shares outstanding as of March 15, 2000. This number excludes:
- 8,817,293 shares of our common stock reserved for issuance under our
option and employee stock purchase plans, of which 2,711,453 shares of
our common stock are issuable upon the exercise of outstanding stock
options; and
- 8,330 shares of our common stock issuable upon exercise of an outstanding
warrant.
See "Capitalization," "Management--Stock Plans," and Notes 8 and 11 of
Notes to our Consolidated Financial Statements.
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes the consolidated statement of operations
data for our business. The shares used in calculating our pro forma net loss per
share data include the assumed conversion of all shares of convertible preferred
stock into shares of our common stock from the date of issuance, but exclude the
issuance of 437,500 shares of common stock upon the conversion of subordinated
debt prior to the closing of this offering, the repurchase of 600,478 shares of
our common stock from one of our founders in March 2000 under a repurchase
right, and the purchase of 971,946 shares of our common stock from February 1,
2000 to March 15, 2000 by some employees through the exercise of stock options.
For a more detailed explanation of this financial data, see "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and our Consolidated Financial Statements
located elsewhere in this prospectus.
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PERIOD FROM
INCEPTION SIX MONTHS ENDED
(JUNE 5, 1998) TO JANUARY 31,
JULY 31, -----------------------
1999 1999 2000
(UNAUDITED)
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CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue......................................... $ 489 $ 43 $ 3,464
Gross profit (loss)............................. 267 (44) 3,139
Operating loss.................................. (6,804) (1,240) (12,605)
Net loss attributable to common stockholders.... $(6,857) $(1,235) $(12,903)
Net loss per share attributable to common
stockholders
Basic and diluted.......................... $ (1.25) $ (0.29) $ (1.61)
Shares used in per share calculation....... 5,465 4,303 8,011
Pro forma net loss per share attributable to
common stockholders
Basic and diluted (unaudited).............. $ (0.49) $ (0.56)
Shares used in pro forma per share
calculation (unaudited)................. 13,641 22,643
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The following table summarizes our consolidated balance sheet data. The pro
forma data reflects the assumed conversion of all of our shares of convertible
preferred stock into shares of our common stock, the issuance of 437,500 shares
of common stock upon the conversion of subordinated debt prior to the closing of
this offering, the repurchase of 600,478 shares of our common stock from one of
our founders in March 2000 under a repurchase right, and the purchase of 971,946
shares of our common stock from February 1, 2000 to March 15, 2000 by some
employees through the exercise of stock options. The pro forma as adjusted
consolidated balance sheet data also gives effect to the sale of
shares of common stock at an assumed initial public offering
price of $ per share in this offering, after deducting estimated
underwriting discounts, commissions and offering expenses payable by us, and the
application of the resulting net proceeds.
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JANUARY 31, 2000
---------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................. $44,586 $44,585 $
Working capital....................................... 44,578 44,576
Total assets.......................................... 52,211 51,312
Long-term capital lease obligations and debt.......... (8,149) (4,999) (4,999)
Total stockholders' equity............................ 41,555 43,806
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risks and all other information
contained in this prospectus before making an investment decision about our
common stock. Additional risks and uncertainties that we do not presently know
about or that we currently deem immaterial may also impair our business
operations. Any of the following risks could harm our business, financial
condition or operating results, or cause the trading price of our common stock
to decline. As a result, you could lose all or part of the money you paid to buy
our common stock.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY, UNPROVEN BUSINESS MODEL, RECENT MERGER, AND
UNPREDICTABLE OPERATING RESULTS, COMBINED WITH THE UNCERTAINTIES OF OUR RAPIDLY
EVOLVING MARKET, MAKE EVALUATING OUR BUSINESS DIFFICULT AND MAY LEAD TO
VOLATILITY IN OUR STOCK PRICE.
We were incorporated and began providing email group communication services
in mid-1998, and have only recently begun to recognize revenue. Our historical
financial information offers limited value in projecting our future operating
results due to our limited operating history and the frequently changing nature
of our market. Our business model is still evolving and could change
significantly. In addition, because our merger with ONElist, Inc., was completed
only recently in November 1999, we continue to integrate our operations and
business activities. For example, we are planning to launch the integrated
eGroups and ONElist web site in April 2000.
Our operating results have varied during our short operating history and
may continue to fluctuate significantly. As a result, we may fail to meet the
expectations of investors and securities analysts, causing our stock price to
become volatile or decline. Factors that may adversely affect our operating
results include:
- Failure to convince advertisers and direct marketers to adopt and
continue to use our service;
- Decreases in the price that advertisers and direct marketers will pay to
deliver advertisements through our service;
- Inability to increase our advertising response rates and targeting
capabilities;
- Introduction of new web sites, products or services by our competitors;
- Inability to build brand awareness;
- Inability to retain an active member base and attract new members;
- Inability to increase the size and productivity of our engineering,
marketing and sales forces;
- Decreases in the rate at which our members opt into our direct marketing
programs;
- Failure to enhance our services to members and advertisers in a timely
and effective manner;
- Service interruptions that lead to significant downtime in our services
to members or advertisers;
- General economic conditions and economic conditions specific to the
Internet; and
- Seasonal changes in Internet usage and advertising revenues.
As a result of all the factors described above, we believe that
period-to-period comparisons of our historical operating results do not offer
any indicator of our future performance and that
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unfavorable period-to-period comparisons could cause our stock price to become
volatile and to decline.
WE HAVE A HISTORY OF OPERATING LOSSES AND WE EXPECT INCREASED LOSSES FOR THE
FORESEEABLE FUTURE.
We have experienced increasing operating losses since we began operations
in June 1998. As of January 31, 2000, we had an accumulated deficit of
approximately $19.4 million. Although we have experienced revenue growth in
recent periods, our revenue may not continue to increase at its current rate and
we expect to experience increased losses for the foreseeable future as we:
- Increase our marketing activities to members and advertisers;
- Continue to expand our product development activities, including
enhancing our email-serving and ad-serving technology, developing new
service features and increasing our operational infrastructure;
- Increase our number of personnel; and
- Incur higher general and administrative expenses to support our growing
business.
We are investing considerable resources in our expansion strategies in
advance of anticipated growth, and these expenditures may delay our
profitability. We cannot predict when or if we will achieve sustained
profitability. Our failure to become and remain profitable would hinder our
ability to sustain our business.
WE FACE INTENSE AND INCREASING COMPETITION FOR MEMBERS AND ADVERTISERS THAT MAY
ADVERSELY AFFECT OUR BUSINESS.
Our market is intensely competitive and we expect that competition will
persist and intensify in the future. We face competition for members and for
advertising and direct marketing customers. Many of our competitors have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, technical, sales, marketing and other
resources. Many of these competitors can devote substantially more resources to
the development of their products and services. In addition, our competitors may
form strategic alliances or complete acquisitions of businesses, technologies or
products that could reduce our competitive advantage.
We compete for members with:
- Communication services such as Critical Path's RemarQ division, eCircles,
Inc., Microsoft Corporation's Listbot Service, Topica, Inc., and Visto
Corporation; and
- Community and club services of established portals such as Excite@Home
Networks, Inc., Lycos, Inc., Microsoft Corporation's MSN, and Yahoo! Inc.
We compete for Internet advertising, direct marketing and sponsorship
revenues with:
- Major web publishers and portals such as America Online, Inc.,
Excite@Home Networks, Inc., Lycos, Inc., MSN and Yahoo! Inc.;
- Internet advertising networks such as DoubleClick, Inc.; and
- Opt-in email companies such as LifeMinders.com, Inc., NetCreations, Inc.
and yesmail.com, Inc.
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We also compete with traditional advertising channels including television,
radio, print and outdoor media for a share of advertisers' and direct marketers'
total advertising budgets. Increased competition for advertising and direct
marketing spending may result in price reductions and reduced gross margins.
WE DEPEND UPON REVENUE FROM ADVERTISERS AND DIRECT MARKETERS, AND IF THEY DO NOT
ADOPT AND CONTINUE TO USE OUR SERVICE, OUR OPERATING RESULTS WOULD SUFFER.
We derive substantially all of our revenue from the sale of web-based and
email-based banner advertising, sponsorships and opt-in direct marketing
programs. The sale and deployment of email-based advertising remains a new and
unproven business, and we face significant hurdles and potential delays in
convincing many advertisers and direct marketers to utilize our platform to
reach their desired audiences. Even if we succeed in increasing the number of
these customers, a majority of our contracts are purchased on a short-term basis
and may be terminated at any time without penalty. The cancellation or deferral
of even a small number of advertising contracts could harm our business, and we
might not adjust our spending in time to compensate for any unexpected revenue
shortfall. Competitive pressures could cause us to decrease the prices we charge
advertisers, which would have a negative impact on our revenue.
WE RELY ON OUR ABILITY TO ENABLE ADVERTISERS AND DIRECT MARKETERS TO DELIVER
TARGETED ADVERTISEMENTS, AND IF WE FAIL TO CONTINUE ENHANCING OUR CAPABILITIES
FOR TARGETING ADVERTISING TO INDIVIDUAL MEMBERS, WE MAY LOSE CUSTOMERS.
The growth of our business will depend upon our ability to increase our
revenue from targeted advertising. We believe that our ability to realize such
increases will depend partly on our ability to acquire, develop and refine
technologies that better identify the preferences of individual members. For
example, we recently licensed technology intended to enable us to develop better
information regarding our members' interests and activities. We may fail to
implement this technology in a timely fashion or may not achieve the results we
expect from this technology. Our ability to analyze and predict accurately the
members who are likely to respond to particular advertisements will
significantly affect the prices that we can charge advertisers and may influence
their willingness to pay for advertisements at all. If we fail to increase our
capabilities to provide targeted advertising, our results of operations would be
harmed.
FAILURE TO REALIZE SUSTAINED OR HIGHER "CLICK THROUGH" RATES ON OUR
ADVERTISEMENTS MAY ADVERSELY AFFECT OUR ABILITY TO ATTRACT AND RETAIN
ADVERTISING CUSTOMERS.
To achieve the high response rates for our advertisers, we need to identify
and deliver the types and placement of advertisements that our members find most
appealing. Our ability to achieve higher "click through" or response rates on
our advertisements may be diminished by factors such as a failure to place
advertisements appropriately, a lack of interest in online advertising in
general, or a failure to deliver appealing advertising messages, such as those
using hyper-text markup language, or HTML. Consequently, advertisers and direct
marketers may not adopt, increase or continue their utilization of our service,
which would harm our operating results.
IF RESPONSE RATES TO OUR ADVERTISEMENTS FALL BELOW ADVERTISERS' EXPECTATIONS, WE
MAY NEED TO DELIVER MORE ADVERTISEMENTS THAN PLANNED, REDUCING OUR AVAILABLE
ADVERTISEMENT INVENTORY AND HARMING OUR OPERATING RESULTS.
Advertisers have demonstrated a keen interest in the level of response to
advertisements placed on our service. We base the deployment of advertisements
upon the rate of response that we expect.
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However, if we realize lower rates of response to particular advertisements than
we anticipated, sometimes we may choose to deliver more of those advertisements
than we have guaranteed to advertisers to achieve the desired absolute levels of
click-through responses. This could result in the over-delivery of some
advertisements, thereby reducing our available web site and email inventory to
sell to other advertisers and potentially harming our operating results.
IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, IT WILL PLACE SIGNIFICANT STRAIN ON
OUR MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES.
We have rapidly expanded our operations and plan to continue this
expansion. For example, from June 1998 to March 15, 2000, we grew from three
employees to 154 employees. We also recently commenced operations in Japan,
Germany, England and France. This recent growth has placed a significant strain
on our managerial, operational and financial resources, and we expect this
strain to continue.
We also may establish additional web sites, acquire additional companies or
develop new geographic markets, each of which would create additional
managerial, operational and financial challenges. We must expand our procedures
and controls to support our operations. If we fail to continue to implement and
improve our operational and financial systems or to train our employees
adequately, it could disrupt our business or place additional strain on our
management team.
In addition, nearly all of our management team have joined us in the last
nine months and have not worked together previously. This may compound future
growth-related strains on our operations. It may also prevent our management
team from making decisions rapidly enough to exploit market opportunities for
our member and advertiser services.
OUR INTERNATIONAL EXPANSION IS SUBJECT TO ADDITIONAL RISKS THAT COULD HARM OUR
BUSINESS AND OPERATING RESULTS.
A key component to our business strategy is to further expand
internationally. Our international operations will continue to be subject to a
number of risks. These risks include:
- Difficulties in staffing and managing foreign operations;
- Compliance with multiple, conflicting and changing laws and regulations;
- Uncertainty of acceptance of our services by potential members,
advertisers and direct marketers in international markets; and
- Costs of customizing our web pages and securing domain names for foreign
countries.
Our international operations also face foreign currency-related risks, and
we have not engaged in any hedging activity to mitigate these risks.
Fluctuations in the value of foreign currencies could have an adverse effect on
our operating results.
ATTEMPTS TO EXPAND BY MEANS OF ACQUISITIONS AND STRATEGIC ALLIANCES MAY FAIL,
AND SUCH FAILURES COULD DISRUPT OUR BUSINESS.
We anticipate that we will expand our operations and market presence by
entering into business combinations, investments, strategic alliances and joint
ventures in the United States and internationally. We may have difficulty
assimilating the operations, technology and personnel of acquired companies, and
other disruptions and costs may arise from these combinations. If our members
disapprove of these transactions or feel that they harm our services or
reputation, our brand
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<PAGE> 13
and business could suffer. Employees may not wish to continue working for us
following any business combination, and duplication of responsibilities between
our personnel and that of acquired companies may force us to dismiss some
employees.
We recently completed a merger with ONElist in November 1999, and we
continue to integrate our businesses and technologies. For example, we continue
to operate out of two facilities and are continuing the integration of the
ONElist and eGroups web sites. This integration process may prove to consume
more of management's time and energy and involve greater expense than we
currently anticipate and may not ultimately succeed. Although we have not
entered into any agreements to acquire other companies, we continually evaluate
potential acquisitions. In conjunction with any such business combination, we
may need to incur debt or issue equity securities to pay for acquisitions. We
also may assume contingent liabilities or amortize expenses related to goodwill.
If we are unsuccessful in closing or integrating any business combination, our
business and operating results could suffer.
THE TERMINATION OF CERTAIN PRE-EXISTING STRATEGIC ALLIANCES MAY DIVERT
MANAGEMENT RESOURCES OR RESULT IN LITIGATION THAT COULD HARM OUR BUSINESS.
In the past, we have entered into strategic alliances, some of which have
diverted engineering and other resources from other efforts or have involved
terms that restricted our growth. We are in the process of terminating, and have
previously terminated, agreements with third parties that we believe have
hindered our business. The termination of these agreements may result in
substantial costs and diversion of management and technical resources. In the
future, we may decide to terminate other contracts that we feel do not serve the
goals of our business. The termination of any contracts may result in litigation
or penalties, which could harm our business and operating results.
WE DEPEND ON KEY PERSONNEL FOR WHOM INTENSE COMPETITION EXISTS, AND ANY FAILURE
TO ATTRACT AND RETAIN THOSE PERSONNEL COULD HARM OUR BUSINESS.
Our future performance will depend on our ability to retain and motivate
our officers and key employees. The loss of the services of any of our executive
officers or other key employees, especially members of our engineering,
operations, sales, marketing and business development teams, could harm our
business. We intend to purchase a "key person" life insurance policy on our
chief executive officer, and the proceeds from that policy could aid us in
recruiting his replacement, if needed. However, this policy would not remedy the
likely disruption of our business that would be caused by his loss and
subsequent efforts to recruit and assimilate new senior management. We do not
maintain "key person" life insurance policies on any other employees. We do not
have long-term employment agreements with any members of senior management, and
losing any of these personnel could significantly harm our business. Competition
for talented and experienced personnel is intense, especially in the San
Francisco Bay area where our headquarters are located. Our future success will
depend on our ability to attract, train, integrate, retain and motivate highly
skilled individuals.
OUR FAILURE TO EXPAND, UPDATE AND CREATE REDUNDANCIES IN OUR INFRASTRUCTURE
COULD MATERIALLY HARM OUR BUSINESS.
Our future success will depend on the efficient and uninterrupted operation
of our computer and communications hardware and software systems. Our reputation
and ability to attract and retain members and advertisers depend on the
satisfactory performance, reliability and availability of our web site,
email-servers and ad-servers, and operations infrastructure. If the volume of
traffic on our web site continues to increase, we will need to expand, upgrade
and create redundancies in our technology, systems and operations infrastructure
to assure minimal disruptions. We currently house all of our data storage and
servers at Global Crossing Ltd.'s Global Center facility in Sunnyvale,
11
<PAGE> 14
California, and these systems and operations are vulnerable to damage or
interruption from earthquakes, floods, fires, power loss, telecommunication
failures, vandalism and other events. Any such damage or disruption to Global
Crossing's Global Center facility and services could prohibit us from delivering
emails, page views and advertisements to members. We may enter into agreements
with other third parties that lead us to depend upon their timely and effective
performance and delivery of services. If these services are not performed
according to our expectations, our business may suffer.
IF WE FAIL TO PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY,
THE GROWTH OF OUR BUSINESS MAY SUFFER.
We rely on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to protect our proprietary rights in
products and services. The steps we have taken to protect our intellectual
property may not prevent misappropriation of our technology or deter independent
third-party development of similar technologies and services. We pursue the
registration of our trademarks and service marks in the United States and
internationally. However, effective intellectual property protection may not be
available in every country in which our services are made available. Enforcing
and protecting our intellectual property rights may require substantial amounts
of management's time and resources and may harm our financial results. If we
prove unable to protect our intellectual property, our actual and potential
competitors could improve their services and detract from our ability to attract
and retain members, advertisers and direct marketers.
FAILURE TO INTEGRATE AND MAINTAIN TECHNOLOGIES THAT WE LICENSE MAY ADVERSELY
AFFECT OUR OPERATIONS AND BUSINESS.
We rely on certain technologies that we license from third parties. These
third-party technology licenses may not remain available to us on commercially
reasonable terms. Our loss of this technology could require us to re-engineer
the technology internally, putting an unanticipated strain on our engineering
and operations teams, or to obtain substitute technology of lower quality or
performance standards, or at greater cost from third parties. Any of these
outcomes could harm our ability to maintain and improve our services. For
example, we currently license certain database technology from E.piphany, Inc.
The failure to integrate and maintain these technologies successfully may
adversely affect our operations and business.
WE ARE VULNERABLE TO CLAIMS THAT OUR PRODUCTS INFRINGE THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS, AND ANY RESULTING LITIGATION COULD HARM OUR BUSINESS.
We may become exposed to future litigation based on claims that our service
infringes the intellectual property rights of others. Claims of infringement
could require us to obtain licenses from third parties to continue offering our
services or cause us to cease offering them. To date, we have not been notified
that our technologies infringe the proprietary rights of others. However, third
parties may claim infringement by us in the future with respect to our current
or future technologies. We expect that participants in our markets will be
increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. In addition, an adverse legal
decision affecting our intellectual property, or the use of significant
resources to defend against this type of claim, could significantly strain our
financial resources and harm our reputation. We rely on technologies that we
license from third parties, and these licenses may not continue to be available
to us on commercially reasonable terms. Failure to obtain these licenses may
have an adverse affect on our operating results and business.
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<PAGE> 15
WE MAY BECOME SUBJECT TO LIABILITY FOR CONTENT THAT OUR MEMBERS INCLUDE IN THEIR
EMAIL MESSAGES OR FOR VIOLATION OF MEMBERS' PRIVACY RIGHTS.
We face potential liability for defamation, negligence, copyright
infringement or other claims based on the nature and content of materials that
our members publish or distribute. In the past, plaintiffs have brought these
types of claims and successfully litigated them against other online services.
In addition, we plan to collect personal information from our members that we
will use internally to improve our services and products. Although we have
instituted a policy on member privacy related to such information, and publish
that policy on our web site, our policy may not prevent members from claiming
that we have infringed their privacy rights.
WE MAY REQUIRE ADDITIONAL FINANCING, WHICH WE MAY NOT BE ABLE TO OBTAIN ON
FAVORABLE TERMS, IF AT ALL.
Since our inception, we have experienced negative cash flow from operations
and expect to experience significant negative cash flow from operations for the
foreseeable future. We currently anticipate that the net proceeds of this
offering, together with our available funds, will be sufficient to meet our
anticipated needs for development of our services, sales and marketing, and
general corporate purposes, including working capital and capital expenditures,
for at least 12 months. If we require additional funding, we cannot be certain
that it will be available to us on favorable terms, if at all. If we raise
additional funds by issuing equity or debt securities, such securities may have
rights, preferences or privileges senior to our common stock, and our
stockholders may experience additional dilution. Sales of a substantial number
of shares of our common stock in the public market following this offering could
cause the market price of our common stock to decline.
IF WE DO NOT BUILD OUR BRAND RECOGNITION, WE MAY FAIL TO ATTRACT AND RETAIN
MEMBERS, ADVERTISERS AND DIRECT MARKETERS.
Quickly building recognition of our brand is critical to expanding and
retaining our base of members, advertisers and direct marketers. Promoting and
positioning our brand will depend largely on the success of our marketing
efforts and our ability to provide consistent, high quality member experiences
and to meet or exceed the expectations of our advertisers. We anticipate that we
will incur significantly greater marketing and promotional expenses than we have
previously expended in our efforts to build brand awareness and to attract
members, advertisers and direct marketers to our service. Our increased
brand-promotion activities may not yield increased revenues, and any increased
revenues may not offset the expenses we incur to build our brand.
RISKS RELATED TO THE INTERNET
IF WE FAIL TO KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGES THAT CHARACTERIZE
THE INTERNET, OUR SERVICES MAY BECOME LESS DESIRABLE TO MEMBERS, ADVERTISERS AND
DIRECT MARKETERS.
Rapid innovations in technology, markets and business models characterize
the Internet. The emerging nature of Internet-based markets and the fact that
many other companies will introduce new Internet products and services in the
near future amplify these characteristics. For example, the widespread adoption
of new communication platforms such as personal digital assistants and digital
telephones could affect the nature and viability of our service and advertising
solutions. Our future success also will depend on our ability continually to
improve our product offerings, technology and services to attract and retain the
interest of members and advertisers.
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<PAGE> 16
NEW AND EXISTING REGULATION OF THE INTERNET COULD HINDER OUR BUSINESS.
Due to the increasing popularity and use of the Internet and online
services, it is likely that the government will adopt new laws and regulations
with respect to the Internet or online services. These laws and regulations
could cover issues such as online contracts, user privacy, spam, freedom of
expression, fraud, content and quality of products and services, advertising,
intellectual property rights and information security. For example, recent laws
adopted in Europe have restricted our right to use information about our users
and have required us to amend some member agreements in order to attempt to
maintain compliance with these laws. Applicability to the Internet of existing
laws governing issues such as property ownership, copyright and other
intellectual property issues, libel, obscenity and user privacy remains
uncertain. The vast majority of laws were adopted prior to the advent of the
Internet and related technologies and fail to address the unique issues that
have emerged. Those laws that do reference the Internet, such as the Digital
Millennium Copyright Act, have not yet been extensively interpreted by the
courts, and their applicability and reach are therefore uncertain. Current and
future laws and regulations could harm our business and have potentially
significant adverse effects on our financial and operating results.
We may be vulnerable to recently proposed regulations regarding unsolicited
email, known as "spam." We do not send unauthorized email, and we have
instituted mechanisms to prevent others from sending unauthorized emails to our
members. However, negative public perception, press reports or governmental
action related to spam could result in claims against us or our members.
Although we have instituted mechanisms to reduce the likelihood of a claim,
including limiting the addition of large numbers of email addresses to a
particular group at one time, we cannot assure you that a claim will not be
made. In addition, Internet service providers who misperceive our distribution
of email as spam could impede our ability to deliver emails. Any failure or
delay in the delivery of such emails would adversely affect our business and
operating results.
OUR BUSINESS IS SUBJECT TO ONLINE SECURITY RISKS THAT COULD LEAD TO
MISAPPROPRIATION OF OUR DATA AND SERVICE INTERRUPTIONS AND COULD HARM OUR
REPUTATION WITH MEMBERS.
We monitor and collect information regarding member-designated interests,
demographics and other data that we obtain from our members' use of our service.
Although we do not distribute or sell this information to third parties, our
security measures may not prevent security breaches and misappropriation of data
that we collect. A party who circumvents our security measures could cause
interruptions in our operations. Our reputation and popularity with members
could suffer if this misappropriation occurs. We may need to expend significant
resources to protect against security breaches or service interruptions or to
address problems caused by these breaches. These expenditures could be
significant and harm our operating results.
UNFORESEEN PROBLEMS WITH CONTINUED YEAR 2000 COMPLIANCE COULD DISRUPT OUR
SERVICE.
To date, we have not experienced any material disruption in our services as
a result of, nor are we aware that any of the third-party vendors on which we
depend has been materially affected by, the commencement of the year 2000. In
light of our experiences to date, we have not developed any specific contingency
plan for year 2000 issues. Although we do not anticipate that our services will
be affected by the year 2000, if we, or our third-party providers, fail to
remedy any year 2000 issues, the result could be lost revenues, increased
operating expenses, the loss of members or advertisers, and other business
interruptions, any of which could harm our business. If we fail to address
adequately year 2000 compliance issues, we may experience legal claims against
us which could be costly and time-consuming to defend. If we did experience
significant year 2000 problems and were unable to provide services to our
members and advertisers, our business and operating results would suffer.
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<PAGE> 17
RISKS RELATED TO THIS OFFERING AND OUR COMMON STOCK
THERE HAS BEEN NO PUBLIC MARKET FOR OUR STOCK PRIOR TO THIS OFFERING AND OUR
STOCK PRICE COULD BE EXTREMELY VOLATILE.
Previously there has not been a public market for our common stock. We
cannot predict the extent to which investor interest in our company will lead to
the development of a trading market or how liquid any trading market might
become. The public market may not agree with or accept the valuation determined
in connection with this offering, and the initial public offering price for the
shares of our common stock might not reflect prices that will prevail in the
trading market. The stock market has experienced extreme price and volume
fluctuations, and the market prices of technology-company securities,
particularly those related to the Internet, have been highly volatile. After
this offering, you might not succeed in reselling your shares at or above the
initial public offering price.
WE COULD BE NAMED AS A DEFENDANT IN SECURITIES CLASS ACTION LAWSUITS, WHICH
COULD DIVERT MANAGEMENT ATTENTION AND HARM OUR BUSINESS.
In the past, following periods of volatility in the market price of their
stock, many companies have been named in securities class action lawsuits. If
we, or our directors or officers, were named in a securities class action
lawsuit, it could result in substantial costs and a diversion of management's
attention and resources and could cause our stock price to fall.
As has been the case for other Internet companies, we expect that the
market price of our common stock could fluctuate significantly. These
fluctuations could result in a class action lawsuit. Volatility in our stock
price may occur as a result of various factors, such as the following, some of
which are beyond our control:
- Actual or expected variations in our quarterly results from operations;
- Initiation of coverage and changes in financial estimates by securities
analysts;
- Announcements by us or our competitors of significant new ventures,
acquisitions, strategic alliances or capital commitments;
- Announcements of technological innovations or new products or services by
us or our competitors;
- Additions or departures of key personnel;
- Changes in the operating performance or market valuations of other
Internet companies;
- Releases of lock-up agreements or other transfer restrictions on our
outstanding shares of common stock, or sales or announcements of sales of
additional shares of common stock;
- Potential or actual litigation; and
- Changes in Internet regulation.
A SIGNIFICANT NUMBER OF SHARES IS ELIGIBLE FOR SALE AND THE SALE OF THESE SHARES
COULD DEPRESS OUR STOCK PRICE.
Sales of substantial amounts of our common stock, including shares issued
upon the exercise of outstanding options, in the public market after this
offering could depress the market price of our common stock. These sales also
might make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem appropriate. Upon completion of
this offering, we will have outstanding shares of common stock
based upon shares
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<PAGE> 18
outstanding as of March 15, 2000, assuming no exercise of the underwriters'
over-allotment option. Of these shares, the shares sold in this
offering are freely tradable.
All of the holders of our common stock and stock options are subject to
agreements that limit their ability to sell common stock. These holders cannot
sell or otherwise dispose of any shares of common stock for a period of at least
180 days after the date of this prospectus without the prior written approval of
Donaldson, Lufkin & Jenrette. However, 25% of a holder's shares may be sold on
the earlier of 90 days after the date of this offering or on the second trading
day after the first public release of our quarterly results if the last recorded
sale price on the Nasdaq National Market for 20 of the 30 trading days ending on
that date is at least twice the price per share in this initial public offering.
Under these agreements, an additional 25% of each holder's shares may be sold
135 days after the date of this offering if the price per share of common stock
has achieved the same target level. When these agreements expire, all of the
shares of common stock and the shares underlying the options will become
eligible for sale, in most cases only pursuant to the volume, manner of sale and
notice requirements of Rule 144.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK
VALUE OF THE STOCK YOU PURCHASE.
The assumed public offering price is substantially higher than the net
tangible book value per outstanding share of common stock. Purchasers of our
common stock will incur immediate and substantial dilution of approximately
$ to $ per share in the net tangible book value of our common stock
from the assumed initial public offering price of $ per share. Additional
dilution will occur upon the exercise of outstanding options.
MANAGEMENT WILL HAVE BROAD DISCRETION OVER THE ALLOCATION OF PROCEEDS FROM THIS
OFFERING.
The net proceeds to us from the sale of the shares of common
stock we are offering are estimated to be approximately $ million after
deducting estimated underwriters' discounts, commissions and offering expenses
payable by us. We currently have no specific plans for a significant portion of
our net proceeds from this offering. Consequently, our management will have the
discretion to allocate the net proceeds to uses that stockholders may not deem
desirable. Our investment of the proceeds may not yield a significant return.
Pending their application, substantially all of our proceeds from the offering
will be invested in short-term, interest-bearing, investment-grade securities
immediately following the offering.
WE ARE CONTROLLED BY A SMALL NUMBER OF STOCKHOLDERS, EXECUTIVE OFFICERS AND
DIRECTORS WHO MAY MAKE DECISIONS WITH WHICH YOU DISAGREE.
Upon completion of this offering, a small number of stockholders and our
executive officers and directors and their affiliates will own approximately
% of our outstanding common stock. They will have the ability to control
our company and direct our affairs and business, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may have the effect of delaying, deferring or preventing a change
in control of our company and may make some transactions more difficult or
impossible without the support of these stockholders. Any of these events could
decrease the market price of our common stock.
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<PAGE> 19
PROVISIONS OF OUR CHARTER AND BYLAWS MAY DELAY OR PREVENT TRANSACTIONS THAT MANY
STOCKHOLDERS FAVOR.
Provisions of our certificate of incorporation and by-laws may discourage,
delay or prevent a merger or acquisition that stockholders may consider
favorable, including transactions in which you might otherwise receive a premium
for your shares. These provisions include:
- Authorizing the issuance of "blank check" preferred stock without any
need for stockholder action;
- Prohibiting the removal of directors without cause;
- Limiting the ability of stockholders to call special meetings of
stockholders;
- Prohibiting stockholders from acting by written consent;
- Prohibiting stockholders from filling vacancies on the board of
directors;
- Requiring a super-majority stockholder vote to amend our bylaws and
certain provisions of our certificate of incorporation; and
- Establishing advance notice requirements for nominations of directors or
other matters to be voted on by stockholders other than by or at the
direction of the board of directors.
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<PAGE> 20
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of
common stock we are selling in this offering will be approximately $
million, at an assumed initial public offering price of $ per share, after
deducting estimated underwriters' discounts, commissions and offering expenses
payable by us. If the underwriters' option to purchase an additional shares
of common stock is exercised in full, we estimate the aggregate net proceeds to
be approximately $ million.
We expect to use the net proceeds for the development of our services,
sales and marketing, and general corporate purposes, including working capital,
capital expenditures and possible acquisitions or investments in complementary
businesses or technologies. We have no current plans, agreements or commitments
relating to any such acquisition or investment. The amounts actually expended
for these purposes may vary significantly and will depend on a number of
factors, including the amount of our future revenue and the other factors
described under "Risk Factors." Accordingly, our management will retain broad
discretion in the allocation and use of the net proceeds of this offering.
Pending these uses, we will invest the net proceeds of this offering in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain all of our earnings to finance our operations and do
not anticipate paying cash dividends on our capital stock in the foreseeable
future. In addition, our lending facilities contain restrictions on our ability
to pay dividends. We may also incur indebtedness in the future that may prohibit
or further restrict any payment of dividends.
CORPORATE INFORMATION
We were incorporated in the State of Delaware as Findmail Communications,
Inc., in June 1998 and changed our name to eGroups, Inc., in December 1998. Our
principal headquarters is located at 350 Brannan Street, San Francisco,
California 94107, and our telephone number is (415) 546-2700. Our fiscal year
ends on July 31. We maintain a web site at www.egroups.com. Information
contained on our web site is not part of this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, the accuracy of which
involves risks and uncertainties. We use words such as "anticipates,"
"continue," "may," "goal," "believes," "plans," "expects," "future," "intends,"
and similar expressions to identify forward-looking statements. This prospectus
also contains forward-looking statements attributed to certain third parties
relating to their estimates regarding the growth of the Internet and online
advertising. Prospective investors should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in "Risk Factors" and elsewhere in this prospectus.
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<PAGE> 21
CAPITALIZATION
The following table describes the actual, pro forma and pro forma as
adjusted capitalization of eGroups as of January 31, 2000. Our pro forma
capitalization gives effect to the automatic conversion of all of our shares of
convertible preferred stock into shares of our common stock upon the closing of
this offering, the issuance of 437,500 shares of common stock upon the
conversion of subordinated debt prior to the closing of this offering, the
treatment of $898,000 of unamortized debt-issuance costs as an offset to
additional paid-in capital, the repurchase of 600,478 shares of our common stock
from one of our founders in March 2000 under a repurchase right, and the
purchase of 971,946 shares of our common stock from February 1, 2000 to March
15, 2000 by some employees through the exercise of stock options. Our pro forma
as adjusted capitalization gives effect to the sale of shares of
common stock at an assumed initial public offering price of $ per share in
this offering, after deducting estimated underwriting discounts, commissions and
offering expenses payable by us, and the application of the resulting net
proceeds.
<TABLE>
<CAPTION>
JANUARY 31, 2000
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Long-term capital lease obligations and debt............. $ 8,149 $ 4,999 $ 4,999
Stockholders' equity:
Convertible preferred stock: $0.001 par value; 17,500
shares authorized, 16,539 shares issued and
outstanding, actual; 10,000 shares authorized, no
shares issued and outstanding, pro forma and pro
forma as adjusted................................... 17 -- --
Common stock: $0.001 par value; 43,000 shares
authorized, 16,244 shares issued and outstanding,
actual; 150,000 shares authorized, 33,592 shares
issued and outstanding, pro forma; 150,000 shares
authorized, shares issued and outstanding,
pro forma as adjusted............................... 16 34
Additional paid-in capital............................. 75,297 83,330
Notes receivable from stockholders..................... (2,160) (7,943) (7,943)
Deferred stock compensation............................ (12,196) (12,196) (12,196)
Accumulated deficit.................................... (19,419) (19,419) (19,419)
-------- -------- --------
Total stockholders' equity..................... 41,555 43,806
-------- -------- --------
Total capitalization........................... $ 49,704 $ 48,805 $
======== ======== ========
</TABLE>
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DILUTION
Our pro forma net tangible book value as of January 31, 2000, was $43.8
million or approximately $1.30 per share of common stock. Pro forma net tangible
book value per share represents the amount of our total tangible assets less
total liabilities divided by the number of shares of common stock outstanding on
a pro forma basis. Pro forma net tangible book value gives effect to the
automatic conversion of all of our shares of convertible preferred stock into
shares of our common stock upon the closing of this offering, the issuance of
437,500 shares of common stock upon the conversion of subordinated debt prior to
the closing of this offering, the repurchase of 600,478 shares of our common
stock from one of our founders in March 2000 under a repurchase right, and the
purchase of 971,946 shares of our common stock from February 1, 2000 to March
15, 2000 by some of our employees through the exercise of stock options.
Dilution in pro forma net tangible book value represents the difference between
the amount per share paid by purchasers of shares of our common stock in this
offering and the pro forma net tangible book value per share of our common stock
immediately afterwards.
After giving effect to our sale of shares of common stock offered
by this prospectus in this offering at an assumed initial public offering price
of $ per share, and after deducting estimated underwriting discounts,
commissions and offering expenses payable by us, our pro forma as adjusted net
tangible book value would have been $ million, or approximately $ per
share. This represents an immediate increase in net tangible book value per
share of $ to existing stockholders and an immediate dilution per share of
$ to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of January
31, 2000.................................................. $1.30
Increase per share attributable to new investors............
-----
Pro forma as adjusted net tangible book value per share
after this offering.......................................
-----
Dilution in pro forma net tangible book value per share to
new investors.............................................
=====
</TABLE>
The following table describes, as of January 31, 2000, on the pro forma
basis described above, the differences between the number of shares of common
stock purchased from us, the total price and the average price per share paid by
existing stockholders and by the new investors in this offering, at an assumed
initial public offering price of $ per share, before deducting estimated
underwriters' discounts, commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 33,592,379 $63,321,072 $
New investors................ $
---------- ----- ----------- -----
Total...................... $
========== ===== =========== =====
</TABLE>
The discussion and tables assume no exercise of options and warrants that
will remain outstanding upon completion of this offering. As of January 31,
2000, there were options outstanding to purchase a total of 1,951,190 shares of
common stock, with a weighted average exercise price of $1.09 per share. As of
January 31, 2000, there was a warrant outstanding to purchase 8,330 shares of
our common stock at an exercise price of $7.20 per share. If the outstanding
options and warrants were exercised in full for cash, the dilution in pro forma
net tangible book value per share to new investors in this offering would be
$ and shares held by new investors would comprise % of outstanding
shares.
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new public investors will be increased to or
approximately % of the total number of shares of our common stock
outstanding after this offering.
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SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The consolidated statement of operations data for the period from inception
(June 5, 1998) to July 31, 1999, and for the six months ended January 31, 2000,
and the consolidated balance sheet data at July 31, 1999 and January 31, 2000,
are derived from our audited consolidated financial statements included
elsewhere in this prospectus. The consolidated statement of operations data for
the six months ended January 31, 1999 is derived from unaudited consolidated
financial statements included elsewhere in this prospectus, but in the opinion
of management, includes all adjustments, consisting only of normal recurring
adjustments, that are necessary for a fair presentation of our operations for
the period. The historical results presented below are not necessarily
indicative of future results or results to be expected for an entire fiscal
year. The following selected consolidated financial data is qualified in its
entirety by, and should be read in conjunction with, the Consolidated Financial
Statements and related Notes and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," all of which are included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
INCEPTION JANUARY 31,
(JUNE 5, 1998) TO ------------------
JULY 31, 1999 1999 2000
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $ 489 $ 43 $ 3,464
Cost of revenue............................................. 222 87 325
------- ------- --------
Gross profit (loss)......................................... 267 (44) 3,139
Operating expenses:
Product development.................................... 1,282 204 3,717
Sales and marketing.................................... 2,689 304 4,228
General and administrative............................. 2,125 550 3,804
Amortization of deferred stock compensation(1)......... 975 138 3,995
------- ------- --------
Total operating expenses.......................... 7,071 1,196 15,744
------- ------- --------
Operating loss.............................................. (6,804) (1,240) (12,605)
Other income (expense)...................................... 159 39 (169)
------- ------- --------
Net loss.................................................... (6,645) (1,201) (12,774)
Accretion on redeemable convertible preferred stock......... (212) (34) (129)
------- ------- --------
Net loss attributable to common stockholders................ $(6,857) $(1,235) $(12,903)
======= ======= ========
Basic and diluted net loss per share attributable to common
stockholders(2)........................................... $ (1.25) $ (0.29) $ (1.61)
======= ======= ========
Shares used in per share calculation(2)..................... 5,465 4,303 8,011
======= ======= ========
Pro forma basic and diluted net loss per share attributable
to common stockholders (unaudited)(2)..................... $ (0.49) $ (0.56)
======= ========
Shares used in pro forma per share calculation
(unaudited)(2)............................................ 13,641 22,643
======= ========
</TABLE>
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 2000
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 4,957 $ 44,586
Working capital............................................. 4,053 44,578
Total assets................................................ 6,756 52,211
Long-term capital lease obligations and debt................ 224 8,149
Redeemable convertible preferred stock...................... 4,237 --
Accumulated deficit......................................... (6,645) (19,419)
Total stockholders' equity.................................. 761 41,555
</TABLE>
- ------------------------------
(1) See Note 8 of Notes to Consolidated Financial Statements for a description
of the amortization of deferred stock compensation.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares in the calculation of
net loss per share and pro forma net loss per share.
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<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This prospectus contains forward-looking statements, the accuracy of which
involves risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements for many reasons,
including the risks faced by us described in "Risk Factors" and elsewhere in
this prospectus. You should read the following discussion in conjunction with
the "Selected Consolidated Financial Data" and our consolidated financial
statements and related notes included elsewhere in this prospectus.
OVERVIEW
eGroups is the most widely used email group communication platform on the
Internet. Our service allows members to easily create, join and manage online
groups focused on business and personal interests. As of February 2000, we had
over 14 million active members in approximately 600,000 member-created groups,
with new members joining our service at a rate of approximately 1.5 million per
month. Also, during February 2000, our members exchanged email messages at a
rate of approximately 2 billion per month, and our web site generated 163
million page views. By aggregating our members who have segmented themselves
into groups based on their interests, we offer advertisers and direct marketers
a broad audience as well as enable them to deliver highly targeted marketing
messages. Our proprietary, high-volume ad-serving technology allows advertisers
and direct marketers to place context-sensitive advertisements in emails and web
pages based on member designated interests, demographic information and other
data.
We derive substantially all of our revenue from the sale of advertising,
including permission-based direct marketing programs, sponsorships and banner
advertising. Through our permission-based direct marketing programs, we deliver
full-page emails to members who have elected to receive promotional offers in
specific categories of interest. We currently have approximately 2.5 million
subscriptions from our members for this opt-in advertising. In a typical
sponsorship agreement, we provide sponsors with a variety of additional
promotional opportunities, such as the delivery of impressions on our web site
through banner, button or text-link advertising, sometimes granting exclusive
placement on specific web pages. Under a typical banner advertising agreement,
we serve advertisements to web pages and into emails that we deliver through our
service.
In the past, we have received, and we anticipate that we will continue to
receive, higher advertising rates for targeted advertisements than for
non-targeted advertisements. Permission-based direct marketing advertisements,
for example, are a more highly targeted form of advertising and command much
higher rates than non-targeted banner advertisements. If we are able to increase
our targeting capabilities and further enhance our ad-serving technology, we
believe we will be able to increase revenue generated from the sale of these
advertisements. We also aim to increase revenue by expanding our direct sales
force, increasing our inventory of rich-media email advertisements, refining our
permission-based email direct marketing programs, and introducing new
subscription-based services.
We were incorporated in June 1998 as a Delaware corporation and our fiscal
year ends on July 31. Since inception, our operating activities have focused
primarily on developing an easy-to-use, convenient service for members,
expanding our member and advertiser base by increasing sales and marketing
activities, recruiting personnel, and raising capital. In November 1999, we
merged with ONEList, Inc., a privately-held company and leading provider of
email group communication services. The merger was treated as a pooling of
interests for accounting purposes, and accordingly, all of our historical
financial information has been restated to combine the results of the two
entities for all periods presented. We have recently opened offices in four
foreign countries and expect to release
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<PAGE> 25
web sites in 14 languages in April 2000. No significant revenue has been
recognized to date from our international operations.
Because of the rapid evolution of our business and our limited operating
history, we believe that period-to-period comparisons of our revenue and
operating results, including our gross margin and operating expenses as a
percentage of total revenue, are not meaningful, and you should not rely upon
them as an indication of future performance.
REVENUE
We derive our revenue principally from short-term advertising contracts
that guarantee a minimum number of advertising impressions that are delivered to
members in email messages or on web pages. We recognize advertising revenue
using either the ratio of impressions delivered to the total guaranteed
impressions or on a straight-line basis over the term of the contract, whichever
is less, provided that we do not have any significant remaining obligations and
collection of the resulting receivable is probable. For advertising contracts
that do not involve guaranteed impressions but are tied to members' "click
through" or other action, revenue is recognized as services are provided. We
provide for bad debts and additional discounts at the time revenue is
recognized, based on historical experience and current economic conditions.
Through January 31, 2000, the majority of our advertising contracts have ranged
from several weeks to two months in duration.
Revenue in any quarter substantially depends on advertising orders received
and campaigns run in that quarter. Accordingly, we cannot predict revenue for
any future quarter with any significant degree of certainty. In addition, given
our limited operating history, we are unable to predict the effect of
seasonality on our business. However, during the December 1999 holiday season,
we experienced increased advertising revenue.
Through February 2000, we derived a portion of our revenue from advertising
contracts negotiated by third-party advertising brokers. We recorded as revenue
our contractual percentage of the total revenue generated from the delivery of
advertisements, net of commissions taken by these advertising brokers. We
recognized this revenue in the period in which the advertisement was delivered,
provided that no significant obligations remained and collection of the
resulting receivable was probable.
We have not recognized any revenue related to the non-monetary exchange of
advertising-for-advertising as these exchanges were not objectively
determinable.
COST OF REVENUE
The major components of cost of revenue consist of direct costs related to
the ad-serving process, including web-hosting costs, direct labor attributable
to product development and depreciation on equipment. These costs relate to
serving advertisements to our members on behalf of our advertisers and direct
marketers.
OPERATING EXPENSES
Product development. Product development expenses primarily include
personnel and related expenses associated with the development of our email
group communication platform, technical support, member support, quality
assurance, and group categorization.
Sales and marketing. Sales and marketing expenses include salaries,
commissions and related expenses of employment for our direct sales force,
business development and marketing personnel,
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<PAGE> 26
together with the expenses of marketing promotional programs, advertising, and
public relations activities.
General and administrative. General and administrative expenses include
personnel and related expenses for corporate functions, such as accounting and
finance, human resources, facilities, legal and information systems. General and
administrative expenses also include consulting and professional service fees
which may vary over time.
Amortization of deferred stock compensation. Deferred stock compensation
represents the aggregate difference at the date of grant for our option awards,
between the respective exercise price and the deemed fair value of the
underlying stock. This deferred stock compensation is amortized using the graded
amortization method over the vesting period of the related awards, which is
generally four years. We recorded deferred stock compensation of approximately
$11.9 million for the six months ended January 31, 2000, and approximately $5.3
million for the period from inception to July 31, 1999. In connection with
grants made in February and March 2000, we estimate that we will record
additional deferred stock compensation of approximately $15.9 million.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 2000 AND 1999
REVENUE
Total revenue was approximately $3.5 million and $43,000 for the six months
ended January 31, 2000 and 1999. The increase in revenue was primarily due to
the growth of our direct sales force during the six months ended January 31,
2000. For the six months ended January 31, 2000 and 1999, sales through
third-party advertising brokers accounted for 22% and 0% of total revenue. As we
transition to using our direct sales force to sell the advertising inventory
formerly sold by these third-party brokers, we expect revenue generated by
outside brokers to be insignificant in future periods.
COST OF REVENUE
Cost of revenue was approximately $325,000 and $87,000 for the six months
ended January 31, 2000 and 1999. The increase in cost of revenue was primarily
due to the increased number of personnel and additional equipment required to
support the ad-serving process. Additional network and web-hosting costs also
contributed to the increase. We expect cost of revenue to increase over time in
absolute dollars as our ad-serving personnel and equipment costs continue to
increase.
OPERATING EXPENSES
Product development. Product development expenses were approximately $3.7
million and $204,000 for the six months ended January 31, 2000 and 1999. The
increase was due primarily to an increase in product development personnel and
related expenses. We expect product development expenses to increase in absolute
dollars as we continue to increase our product development personnel and further
enhance our email group communication infrastructure.
Sales and marketing. Sales and marketing expenses were approximately $4.2
million and $304,000 for the six months ended January 31, 2000 and 1999. The
increase was primarily a result of growth in our direct sales, business
development and marketing personnel. Direct labor and related expenses accounted
for a substantial portion of the increase. Additional promotional spending,
advertising, market-research activities and consulting fees also contributed to
the growth. We expect
24
<PAGE> 27
sales and marketing expenses to increase significantly in absolute dollars as we
continue to grow our sales force and expand our marketing programs in the United
States and abroad.
General and administrative. General and administrative expenses were
approximately $3.8 million and $550,000 for the six months ended January 31,
2000 and 1999. The increase was primarily due to increases in facility expenses,
professional fees and personnel expenses associated with growth in headcount. In
addition, in the six months ended January 31, 2000, we incurred merger-related
expenses of $500,000. We expect general and administrative expenses to increase
in absolute dollars to support an increasing number of employees and as a result
of becoming a public company.
Amortization of deferred stock compensation. Amortization of deferred stock
compensation was approximately $4.0 million for the six months ended January 31,
2000, which consisted of $1.1 million related to product development, $1.5
million related to sales and marketing, and $1.4 million related to general and
administrative expenses. Amortization expense was approximately $138,000 for the
six months ended January 31, 1999, which consisted of $44,000 related to product
development and $94,000 related to sales and marketing expenses. The unamortized
deferred stock compensation balance at January 31, 2000 will be amortized as
follows: $4.6 million for the six months ended July 31, 2000, $4.8 million for
the year ended July 31, 2001, $2.1 million for the year ended July 31, 2002,
$693,000 for the year ended July 31, 2003, and $22,000 for the year ended July
31, 2004. Stock options granted after January 31, 2000 will increase future
deferred stock compensation. If we terminate the employment of option holders,
this may reduce future stock compensation.
OTHER INCOME (EXPENSE)
Other income (expense) consists primarily of interest earned on investments
in money market funds and interest payable on debt and capital lease
obligations. Other income (expense) was approximately ($169,000) and $39,000 for
the six months ended January 31, 2000 and 1999. We expect other income to
increase as a result of interest earned on the anticipated cash proceeds from
the offering, and other expense to increase as a result of interest payable on
debt issued in October 1999 and January 2000 and additional anticipated capital
lease financings as we expand our operations infrastructure.
PROVISION FOR INCOME TAXES
We recorded no provision for federal and state income taxes as we incurred
net operating losses from inception to January 31, 2000. As of January 31, 2000,
we had federal net operating loss carryforwards of approximately $12.6 million.
If not utilized, the net operating loss carryforwards will expire at various
dates beginning in 2019. Utilization of these net operating losses is likely to
be subject to substantial annual limitation due to ownership change provisions
of the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses before
utilization. In addition, sales of stock, including shares sold in this
offering, may further restrict our ability to utilize our net operating loss
carryforwards.
PERIOD FROM INCEPTION TO JULY 31, 1999
Revenue for the period from inception to July 31, 1999 was approximately
$489,000. Advertising sold through third-party advertising brokers accounted for
44% of this revenue. We currently do not sell any advertising through
third-party brokers. This advertising inventory is now sold through our direct
sales force. Cost of revenue consisted of approximately $222,000 in direct costs
related to the
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<PAGE> 28
ad-serving process. Product development expenses were $1.3 million and primarily
consisted of personnel expenses. Sales and marketing expenses were approximately
$2.7 million and primarily consisted of personnel-related expenses, promotional
spending, advertising, market research activities and consulting. General and
administrative expenses were approximately $2.1 million and primarily consisted
of personnel, facilities, and recruiting expenses, and professional fees.
Amortization of deferred stock compensation amounted to approximately $975,000,
which consisted of $332,000 related to product development, $532,000 related to
sales and marketing, and $111,000 related to general and administrative
expenses.
QUARTERLY OPERATING RESULTS
The following table provides the unaudited quarterly condensed consolidated
statements of operations data for each of the four quarters ended January 31,
2000. We believe this information reflects all adjustments, consisting only of
normal recurring adjustments that are necessary for a fair presentation of such
information for the quarters presented. The results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
------------------------------------------------
APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1999 1999 1999 2000
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue....................................... $ 126 $ 320 $ 1,048 $ 2,416
Cost of revenue............................... 28 43 150 175
------- ------- ------- -------
Gross profit ............................ 98 277 898 2,241
Operating expenses, excluding amortization of
deferred stock compensation................. 1,685 3,416 4,422 7,327
Amortization of deferred stock compensation... 179 658 1,658 2,337
------- ------- ------- -------
Total operating expenses................. 1,864 4,074 6,080 9,664
------- ------- ------- -------
Operating loss........................... $(1,766) $(3,797) $(5,182) $(7,423)
======= ======= ======= =======
</TABLE>
The increase in revenue over the four quarters above was primarily due to
expanding our direct sales force beginning in April 1999, increasing our
advertising targeting capabilities, and introducing our opt-in, permission-based
marketing program in October 1999.
The increase in operating expenses, excluding amortization of deferred
stock compensation, over the four quarters above was due primarily to an
increase in personnel in the product development, sales and marketing, and
general and administrative areas. Other factors contributing to the increase
included: higher facilities and infrastructure expenses associated with the
growth in personnel and increased promotional spending, advertising and market
research activities. The increase in the amortization of deferred stock
compensation over the four quarters above was due to extensive hiring of the
senior management team and staff.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through private
placements of preferred and common stock, issuance of subordinated debt, revenue
from advertising sales and strategic alliances, and, to a lesser extent,
equipment financings. Through January 31, 2000, we have raised an aggregate of
approximately $51.9 million in preferred stock private placements, $7.0 million
in subordinated debt, $1.3 million in capital lease obligations, and $500,000 in
senior debt. As of January 31, 2000, we had working capital of $44.6 million.
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<PAGE> 29
Net cash used for operating activities was $8.6 million for the six months
ended January 31, 2000, primarily as a result of a net loss of $12.8 million and
an increase in accounts receivable of $1.8 million, adjusted for non-cash
expenses of $5.1 million from stock, debt and warrant issuances. Net cash used
in operating activities was $4.6 million for the period from inception to
July 31, 1999, primarily as a result of a net loss of $6.6 million, adjusted for
non-cash expenses of $1.4 million from stock, debt and warrant issuances, and
net changes in assets and liabilities of $558,000.
Net cash used in investing activities was $2.1 million for the six months
ended January 31, 2000 and $1.0 million for the period from inception to
July 31, 1999. Net cash used in investing activities consisted of capital
expenditures for computer equipment, leasehold improvements, and furniture and
fixtures.
Net cash provided by financing activities was $50.3 million for the six
months ended January 31, 2000 and $10.6 million for the period from inception to
July 31, 1999. Cash provided by financing activities primarily consisted of
proceeds from the sale of preferred and common stock, issuance of subordinated
debt, and, to a lesser extent, equipment financings. The net cash provided by
financing activities for the six months ended January 31, 2000 was mainly
attributable to the issuance of $7.0 million of subordinated debt and $42.0
million of preferred stock during that period.
As of January 31, 2000, our principal commitments consisted of operating
and capital leases and debt payments. Future minimum cash payments under all of
these non-cancelable commitments total $8.0 million through the year 2005,
excluding approximately $3.2 million of subordinated debt which will be
converted into common stock prior to the closing of this offering. The future
minimum cash payments include approximately $3.9 million of principal
outstanding under a subordinated loan which bears interest at 8.25% per annum.
The loan is due and payable in 24 equal monthly installments of interest-only
payments, followed by 12 equal monthly installments of principal and interest
payments. There is no prepayment penalty on the debt.
Our working capital requirements depend on numerous factors including
market acceptance of our service and the resources we allocate to supporting our
growing member base, further improving our email group communication platform,
launching new marketing programs, increasing our revenue, hiring additional
personnel and expanding our international operations. We have experienced
substantial increases in our expenditures since our inception consistent with
growth in our operations and personnel, and we anticipate that our expenditures
will continue to increase significantly for the foreseeable future.
We believe that our available cash and cash equivalents, combined with the
net proceeds of this offering, will be sufficient to meet our anticipated needs
for working capital and capital expenditures for at least the next 12 months.
After that period, however, we may need to raise additional funds to finance our
ongoing product development efforts, external marketing programs, increased
staffing and related expenses, and acquisitions or investments in complementary
businesses, technologies, services or products. In addition, to meet our
long-term liquidity needs, we may need to raise additional funds, establish
credit facilities, or seek other financing arrangements. Additional funding may
not be available on favorable terms, on a timely basis, if at all.
YEAR 2000 READINESS
To date, we have not experienced any material disruption in our services as
a result of, nor are we aware that any of the third-party vendors on which we
depend has been materially affected by, the commencement of the year 2000. In
light of our experiences to date, we have not developed any specific contingency
plan for year 2000 issues. Although we do not anticipate that our services will
be affected by the year 2000, if we, or our third-party providers, fail to
remedy any year 2000 issues, we
27
<PAGE> 30
may experience a decrease in revenue, increased operating expenses, the loss of
members or advertisers, and other business interruptions, any of which could
harm our business. If we fail to adequately address year 2000 compliance issues,
we may experience legal claims against us, which could be costly and
time-consuming to defend. If we did experience significant year 2000 problems
and were unable to provide services to our members and advertisers, our revenue
would decline.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," or SFAS 133. SFAS 133 requires us to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through net income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative are either offset against the change in the fair value
of the assets, liabilities, or firm commitments through earnings, or recognized
in other comprehensive income until the hedged item is recognized in earnings.
Any ineffective portion of the derivative's change in fair value will be
immediately recognized in earnings. SFAS 133 is effective for years beginning
after June 15, 2000. We do not currently hold any derivatives and do not expect
this pronouncement to impact materially our results of operations.
On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, or SAB 101. This SAB summarizes some areas of the
Staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. We believe that our current revenue
recognition principles comply with SAB 101.
DISCLOSURES REGARDING MARKET RISK
We have limited exposure to financial market risks, including changes in
interest rates. Our interest income and interest expense is sensitive to changes
in the general level of United States interest rates. Our $7.0 million
subordinated debt carries a fixed rate of interest and therefore does not expose
us to any risk from interest-rate fluctuations. An increase or decrease in
interest rates would not significantly increase or decrease interest income on
cash balances due to our cash being primarily invested in short-term marketable
securities. Due to the short-term nature of our investments, we believe that we
have no material exposure to interest-rate fluctuations. As our international
operations have been minimal to date, we believe that we have no material
exposure to foreign exchange rate fluctuations.
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<PAGE> 31
BUSINESS
OVERVIEW
eGroups is the most widely used email group communication platform on the
Internet. Our service enables our members to easily create, join and manage
online groups focused on business and personal interests. As of February 2000,
we had over 14 million active members participating in approximately 600,000
member-created groups, with new members joining our service at a rate of
approximately 1.5 million per month. During February 2000, our members exchanged
email messages at a rate of approximately 2 billion per month, and our web site
generated 163 million page views. We derive revenue from permission-based direct
marketing programs, sponsorships and other forms of online advertising.
By aggregating our members who have segmented themselves into groups based
on their interests, we offer advertisers and direct marketers a broad audience
as well as enable them to deliver highly targeted marketing messages. Our
proprietary, high-volume ad-serving technology allows advertisers and direct
marketers to place context-sensitive advertisements in emails and web pages
based on member-designated interests, demographic information and other data. In
addition, through our permission-based direct marketing programs, we deliver
full-page emails to members who have elected to receive promotional offers in
specific categories of interest. We currently have approximately 2.5 million
subscriptions from our members for this opt-in advertising.
Our rapid growth in members has been driven by the inherently viral nature
of our business and the ease of using our service. The organic growth of our
member base occurs as existing members expand their groups by inviting new
members, who often form their own groups and invite additional new members. Our
member base has expanded rapidly in both the United States and abroad, with over
20% of our members coming from international domains.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND EMAIL
The Internet is a global communications network that allows millions of
people to interact, share information and conduct business online. According to
International Data Corporation, or IDC, the number of Internet users worldwide
will increase from 196 million in 1999 to more than 500 million by the end of
2003. Jupiter Communications Inc. estimates that email is used by approximately
96% of Internet users. In addition, we believe that a majority of users' time
online is spent composing and reading email, making it the most popular online
application. Email continues to evolve as a primary facilitator of online
interaction and is quickly becoming the predominant medium for personal and
business communications.
As the number of Internet users increases and email continues to grow in
popularity, the number of email accounts created and messages delivered is
projected to increase significantly. IDC estimates that the number of email
accounts worldwide will more than double, from approximately 315 million in 1999
to approximately 757 million in 2005. Further, IDC estimates that email delivery
volumes will increase nearly five-fold, from 1.4 trillion messages in 1999 to
6.9 trillion in 2005.
IMPORTANCE OF GROUP COMMUNICATIONS
Individuals, businesses and other organizations often form groups to
communicate, coordinate and collaborate around areas of common interest. For
example, an individual may belong to a corporate project team, a music fan club,
an investment group, an alumni association, and a group of
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<PAGE> 32
family or friends. Businesses may join trade organizations or form vendor or
customer groups to share ideas or transact business. Groups are dynamic, forming
as people connect with each other and growing by personal referral. Groups may
also evolve over time as they grow, with members creating additional groups
focused on new or related interests. However, assembling and communicating can
be difficult offline, requiring time, effort and expense to identify and contact
participants. Traditional methods of communication among multiple group members
can prove difficult unless all participants are able to gather simultaneously.
Therefore, time constraints, geographic separation and technological limitations
can inhibit the growth of offline groups and the effectiveness of their
communications.
The Internet enables group communications to occur on a global scale and
offers efficiencies currently unavailable offline. Several online applications
have been developed in an effort to assist group interaction, such as message
boards, web-based clubs, online chat groups and newsletter distribution
services. However, all of these online applications have significant limitations
for group members and organizers. Many are difficult to use, and some require
expert assistance to add members or administer groups. Some are inconvenient, as
members must continually visit a web site to read group communications, while
others require multiple group members to communicate simultaneously.
Accordingly, group members and organizers are seeking a solution that provides a
rich set of integrated and easy-to-use features for creating, customizing and
managing their group communications.
TRADITIONAL, INTERNET AND EMAIL-BASED ADVERTISING AND DIRECT MARKETING
Advertisers and direct marketers spent approximately $309 billion on
advertising in the United States in 1999, of which $132 billion was invested in
brand advertising and $177 billion was spent on direct marketing, according to
the Direct Marketing Association. Traditional forms of advertising media, such
as print, broadcast and outdoor provide limited targeting capabilities and
generally provide for marketing messages to be delivered on an undifferentiated
basis to reach the broadest audience. Direct marketers attempt to target
consumers with direct mail pieces, catalogs, magazine inserts and telemarketing.
Advertising and direct marketing campaigns can be costly to administer due to
the acquisition of targeting data, production and distribution of creative
material, and the time delays involved in measuring customer responses.
The Internet represents an attractive new medium for advertising and direct
marketing and offers a combined set of features that are unavailable in
traditional media. Online advertising enables advertisers to target consumers
more precisely through the use of behavioral, demographic and other data. In
addition, the Internet allows advertisers to receive immediate responses, to
test campaign effectiveness, and to direct consumers to a precise point-of-sale
where they may more rapidly complete a purchase transaction. These factors
combine to increase the return on advertising investment and motivate
advertisers to increase their online advertising expenditures. Forrester
Research estimates that the amount spent on online advertising and direct
marketing worldwide will increase ten-fold from $3.3 billion in 1999 to $33.1
billion in 2004.
Internet advertisers and direct marketers are increasingly turning to email
as a preferred delivery mechanism for their marketing messages. Email marketing
provides significant efficiencies over traditional direct marketing through the
elimination of postage, paper, printing, and handling costs and through enhanced
delivery, tracking and reporting capabilities. In addition, email marketing also
enables advertisers to send targeted, more relevant advertisements and
promotions to consumers who have given permission to receive relevant
advertising in their categories of interest. Since consumers are more likely to
respond to advertising that they elect to receive, or which is targeted to their
specific interests, direct marketers have embraced permission-based online
marketing programs over traditional means. Jupiter Communications reports that
response rates for direct email campaigns
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targeted to permission-based audiences are three to ten times greater than the
response rates of traditional direct mail methods.
Although the Internet and email offer advertisers and direct marketers a
number of advantages over traditional media, there remain significant challenges
to realizing the full potential of online advertising. To date, online
advertising generally has consisted of banner advertisements and sponsorships on
heavily trafficked portals and other web content sites, similar to billboards on
a well-traveled roadway. To complement these forms of broad-reaching
advertising, advertisers also must be able to identify, target and reach
specific consumers and showcase products and services that are relevant to those
consumers. Many online advertisers have been unable to target their audiences
successfully, largely due to a lack of accurate data on users and their
interests. As a result, significant time and financial resources have been spent
obtaining and analyzing critical data about consumers in order to determine the
appropriate placement for advertisements and direct marketing offers. As
advertisers and direct marketers strive to increase the effectiveness of their
marketing programs, they are seeking solutions that will enable them to achieve
broad reach and to deliver highly targeted messages to consumers.
THE EGROUPS SOLUTION
eGroups is the most widely used email group communication platform on the
Internet. Our service allows members to easily create, join and manage online
groups focused on business and personal interests. As of February 2000, we had
over 14 million active members participating in approximately 600,000
member-created groups. During that same month, our members exchanged email
messages at a rate of approximately 2 billion per month, while our web site
generated 163 million page views. New members joined our service at a rate of
approximately 1.5 million per month, the majority of whom were referred by
existing members. Over 20% of our members have joined from international domains
despite limited marketing efforts.
By aggregating our members who have segmented themselves into groups based
on their interests, we offer advertisers and direct marketers a broad audience
as well as enable them to deliver highly targeted marketing messages. Our
proprietary, high-volume ad-serving technology allows advertisers and direct
marketers to place context-sensitive advertisements in emails and web pages
based on member-designated interests, demographic information and other data.
BENEFITS TO OUR MEMBERS:
- EASY-TO-USE, CONVENIENT SERVICE. We have designed our platform to offer
maximum ease of use and convenience to our members. Members communicate
with each other using a single group email address, such as
[email protected], rather than the individual email addresses of
each group member. Members can easily create groups and send personalized
email invitations to others to join. Also, our web site provides an
intuitive approach for members to join publicly accessible groups. We
deliver group email directly to the member's email inbox allowing the
member to read and reply at his or her convenience. Groups range in size
from several people to hundreds of thousands. Our platform supports all
popular email programs.
- EXTENSIVE ARCHIVE OF MEMBER-GENERATED CONTENT. We believe that our
archived email messages, which represent 825 gigabytes of data,
constitute one of the largest searchable archives of user-generated
content on the Internet. We archive public and private group email
communications over the prior six months. On our web site, existing and
prospective members can search the communications within publicly
accessible groups or private groups to which they belong. During the past
six months, we posted over nine billion messages to our archives.
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Many of our members regularly browse and review these archives,
representing a significant percentage of the time they spend on our web
site. In addition, the publicly accessible archives attract new members
to our service, as prospective members can browse the archives and then
join groups that best match their interests.
- CUSTOMIZABLE, PRIVACY-PROTECTED GROUPS. We enable group members to
customize how they communicate and protect their privacy by limiting
access to their groups. Members may elect to receive each email as it is
sent, to receive a digest of each day's email messages, or to view group
email solely at our web site. Members can configure their groups as
announcement-only or discussion groups. Email messages to the group can
be moderated by a group member, and the group archives can be kept
private among group members or made public. In addition, we have
developed a variety of safeguards that are designed to protect members
and groups from the delivery of unauthorized email. We do not sell or
disclose our member information or identities to our advertisers or other
outside organizations.
- INTEGRATED GROUP COMMUNICATION FEATURES. We offer a set of integrated
web-based features that complement our email service and support dynamic
groups. Each group receives dedicated storage space to share files such
as photographs, documents and digital music. Group calendars with
automatic email reminders allow groups to coordinate events. Our chat
feature allows groups to schedule and conduct real-time discussions when
needed. A polling feature allows members to survey their group on various
topics that may be of interest to them, such as favorite political
candidates or places to go to dinner. A group database allows members to
store group information, such as contact data and project lists.
- MULTIPLE-LANGUAGE PLATFORM. We plan to make our web-based platform
available to users in 14 different languages starting in April 2000.
Because members and moderators generate their own content for
distribution within their groups, the emails can be written in the group
members' native languages. Consequently, we only need to translate our
homepage and certain parts of our web site to enhance the accessibility
of our service to more international members in the future. In many
countries, we are the first group communication platform available to
Internet users in their native language, and we have already seen rapid
expansion in those countries even prior to the planned launch of
translations of our web site.
- USEFUL AND RELEVANT ADVERTISING. We believe that more highly targeted
advertisements and promotions can provide valuable information to our
members. We are able to align advertisements more effectively with our
members' self-designated interests providing them relevant advertisements
that they are more likely to find useful. In addition, through our opt-in
direct marketing programs, members can elect to receive category-specific
email promotional offers, including new product offerings and special
promotions. Because these advertisements are permission-based and highly
targeted towards member-selected categories, they tend to provide more
relevant content than less targeted advertisements.
BENEFITS TO ADVERTISERS AND DIRECT MARKETERS:
- ACCESS TO A LARGE AND GROWING AUDIENCE. We offer advertisers considerable
breadth and reach, with 14 million active members across approximately
600,000 groups. We currently deliver approximately 2 billion emails and
163 million web-page views per month, nearly all containing an
advertisement. According to Media Metrix, our web site ranked as the 13th
most-visited site in the web-services category in February 2000 based on
page views alone. Importantly, this statistic only measures 10% of our
advertising inventory because Media Metrix does not measure email
traffic, which represents 90% of our advertising inventory.
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- MEMBER-DESIGNATED AFFINITY ADVERTISING. By subscribing to a group, our
members segment themselves based on the interest category of their group.
Advertisers and direct marketers then are able to target advertisements
to members based on their interests. For example, online financial
services firms can deliver email advertisements to members of an
investment group, while pharmaceutical companies can promote new
therapies to a health-related group. We believe that our
member-designated category approach to targeting advertisements is a more
effective approach than existing industry methods. In addition to
individual group targeting, advertisements on our web site can be
targeted to a member according to his or her age, gender, zip code and
the multiple groups to which the member belongs. During 2000, we plan to
extend this type of member targeting to our email inventory and to offer
email and web targeting according to country, local geography, domain,
operating system and type of web browser.
- OPT-IN, PERMISSION-BASED DIRECT MARKETING. In addition to joining groups,
our members may elect to receive relevant advertisements and promotions
from our direct marketers in specific categories of interest. We
currently have approximately 2.5 million subscriptions from our members
for this opt-in advertising. Through our permission-based direct
marketing programs, we deliver full-page emails to our members who have
opted into this program. These members have elected to receive special
offers and promotions in over 20 different product categories including
books, computers, electronics, health, home and garden, investments,
software, sports and travel. The offers provide more detailed product or
service descriptions in the content of the email. As a result, this form
of advertising generally yields higher response rates and commands higher
prices than banner advertising.
- EMAIL DELIVERY OF ADVERTISING IMPRESSIONS. We believe that by delivering
advertisements in email messages rather than web-page views, advertisers
are better able to reach consumers where they are spending the majority
of their online time. As email programs increasingly support HTML-based
content, we expect to be able to improve our delivery of rich-media
advertising within group emails.
THE EGROUPS STRATEGY
We intend to maintain our leading position as the most widely used email
group communication platform on the Internet. The following are key elements of
our strategy:
FURTHER ENHANCE OUR EMAIL GROUP COMMUNICATION PLATFORM. We intend to
continue to develop, acquire and license proprietary products and technology to
maintain our position as the leading email communication platform for online
groups. To retain our current members and attract additional members, we expect
to continue investing in and improving our members' experience with enhanced
functionality and new features. For example, after conducting usability tests of
our eGroups and ONElist web sites, we selected the best elements of each, and
recently built a new web site architecture to deliver a better member
experience. In April 2000, we plan to launch our redesigned web site with
several major service enhancements, including a new user interface with over 100
usability and navigation improvements, including enhanced search, directory and
archive features.
INCREASE MEMBER BASE AND ACTIVITY. We intend to continue to increase our
member base rapidly and encourage additional activity among existing members. To
date, our member base has grown almost exclusively through word-of-mouth
referrals by existing members. We plan to continue to expand our audience
through member referrals and by launching more member-acquisition advertising
and promotional programs, and by establishing more partnerships. We expect our
members' activity to increase through cross-promotion of our other services and
groups that may be of interest. Increasing member activity creates stronger
relationships between us and our members, as
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they join additional groups, use more applications, and send and receive more
email. We also expect our large and growing member base to increase our
attractiveness to advertisers and enhance our ability to enter into strategic
partnerships. Additionally, we intend to encourage increased participation by
our new and existing members in our opt-in direct marketing program.
PROMOTE BRAND AWARENESS. We believe that building strong brand awareness
will be instrumental in growing our member base and increasing our advertising
revenues. We intend to promote our brand by consistently delivering value to our
members and advertisers. We plan to promote eGroups within email messages sent
by members and through select online and offline marketing campaigns. We also
intend to maximize awareness of our brand among businesses and advertisers
through traditional marketing channels. Our goal is for eGroups to be recognized
as the leading platform for email group communication and as a leading provider
of email advertising solutions.
CONTINUE TO PURSUE MULTIPLE REVENUE SOURCES. We generate revenue from
diverse sources, including web site and email advertising, sponsorships and
opt-in email direct marketing programs. We plan to expand revenue from existing
sources by increasing our direct sales efforts, increasing our inventory of
rich-media email advertisements, improving our ability to target our web and
email advertising, improving our data analysis capabilities and refining our
opt-in direct marketing programs. In addition, we plan to introduce new
subscription-based services and to develop other revenue sources.
EXPAND INTERNATIONAL PRESENCE. We will leverage our email group
communication platform to further expand internationally. To date, we have
attracted over 20% of our members from international domains without incurring
significant marketing expenditures. Since members create the content of the
group communications, email messages can be composed in the member's native
language and require no translation. Coinciding with the launch of our enhanced
service in April 2000, we will launch 14 foreign language versions of our web
site. We expect the number of international members to increase as we continue
to launch additional foreign language versions of our web site and accelerate
international marketing efforts.
MEMBER SERVICES
We provide a free email group communication service that allows members to
create, join and manage email groups. Email groups offer a convenient way for
members to communicate, coordinate and collaborate online around areas of common
interest. We host approximately 600,000 active email groups on our service, and
our members create several thousand new email groups each day. A new group can
be created at our web site in a few easy steps--the group creator or moderator
simply chooses a name for the group, provides a description, selects the
appropriate category for the group directory and inputs the email addresses of
the members he or she wants to invite to join the group. Groups are classified
by the creator or moderator of the group, into categories provided by us. These
categories are based on a classification system established by the Open
Directory Project, or ODP. The ODP classification system allows individuals to
find groups of interest through our directory using descriptions that are also
used by numerous Internet search engines.
MEMBER FEATURES
Anyone with an email account may create a group or become a member of an
existing group. Group members can send email messages to their groups from any
email application such as Microsoft Outlook or Eudora, or through any email
service, such as America Online, Inc.'s email service, Microsoft Corporation's
Hotmail service or Yahoo! Inc.'s Yahoo Mail. Members also can configure email
aliases to use multiple email addresses on our service. Email messages are
delivered
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directly to the member's inbox, where the member can read them and reply at his
or her convenience.
Through our web site, members can manage their email groups and customize
their personal experience on our service. At the MyGroups page, each member can
easily access all the groups to which he or she belongs and get an overview of
current and past group activity. Members can decide when and how to view group
email messages by changing their mail delivery settings--members may receive
individual messages, receive a daily digest that consolidates all messages into
one, view messages solely on the eGroups web site, or halt messages temporarily
such as when going out of town. Members can also elect to receive special offers
and promotions from our direct marketing partners in over 20 different product
categories, such as investing, travel, sports and electronics.
Each group benefits from an integrated set of web-based features that
enhances email group communications. Each group also has a group page that
provides a custom description of the group and allows access to group
information and applications. Groups receive dedicated storage space to share
files such as photos, documents and digital music. The group calendar enables
groups to schedule meetings and events and can be configured to distribute email
reminders to the group automatically. Each group also can use a private chat
room on occasions when the members need a real-time collaboration tool and can
create polls to quickly tabulate group opinion. For example, the poll may ask
the group to vote on a date for a meeting, pick a design, or elect a group
leader. A group database allows members to store group information, such as
contact data and project lists.
We also archive all the messages that a group has sent over the past six
months, providing an easy and valuable reference tool for the group. Email
archives can be viewed by date, author or discussion topic. Groups and their
related archives may be designated as public or private. Publicly accessible
archives can be viewed by any visitor to the eGroups web site, which helps
attract new members to our service because prospective members can choose groups
that best match their interests. Private archives can be viewed only by group
members, thus maintaining group privacy. Because our members generate the
content for their groups, our costs associated with acquiring and maintaining
content remain minimal.
In February 2000, PC Magazine awarded eGroups its Editor's Choice award for
free email publishing based upon a number of factors including content
management, administration, reporting, archiving, protection against unsolicited
emails and back-end security.
MODERATOR FEATURES
Members who manage groups are known as "moderators." Moderators express
pride of ownership in their groups and invite prospective members to their
groups by sending out personalized email messages. Many members promote our
service on their own personal and business web sites. Accordingly, we have
tailored our service to provide several features designed to support group
moderators.
We enable moderators to customize their group settings based on the nature
and purpose of the group. Moderators can easily configure their groups to be
announcement groups, moderated discussion groups, or unmoderated discussion
groups. Announcement groups are one-way newsletters from the moderator to the
group. Moderated discussion groups allow any group member to post a message, but
the moderator must approve the message before it is distributed to the group.
Unmoderated discussion groups allow for free-flowing discussion with no
moderator intervention. A group may be restricted so that the moderator must
approve new members, or may be unrestricted so that any member may join. A group
may be marked as "private" so that it will not appear in our public search
database and will not be accessible to anyone but the members of that group. For
example, a
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music fan group may be configured as a public, unrestricted, announcement group
to encourage the broadest possible fan base for an artist. By comparison, the
moderator of a health support group may configure the group as a private,
restricted and moderated discussion group to maintain privacy and control over
the discussion content.
Additional features enable moderators to invite others to join their group
and to customize group communications. Moderators can easily add email addresses
to their groups and invite members to join their groups, either by sending email
invitations or posting links from their own web sites to the group page. We also
provide each group with customized software tools to promote the group via a
web-based subscription box, allowing the moderator to facilitate new member
subscriptions from his or her own web site. Moderators also can customize email
messages that go to their groups via an automated signature that is appended to
each message. Customized welcome and goodbye messages can be sent to new and
departing members. Moderators can also be notified by email when members join or
leave the group. Large groups can have multiple moderators to facilitate group
management.
REPRESENTATIVE GROUPS
Our service seamlessly handles email delivery for large and small groups.
Each email group, whether it has several people or a hundred thousand, uses a
single email address to communicate. For example, a member of a golfing group
can communicate with his or her entire group by sending a single message to
[email protected]. Our email system then distributes the email message
to each member of the group. When another group member replies to the message,
our service distributes the reply.
Examples of groups that use our platform include:
- Student and Alumni Groups. Student groups use our platform to coordinate
study sessions, share class notes and plan social events. Alumni groups
from high schools, colleges and universities utilize the eGroups service
to stay in touch, coordinate meetings and fundraising efforts, and
discuss favorite topics such as sports or politics.
- Business Groups. Businesses use our platform as an alternative to setting
up their own corporate intranet. In this regard, a business may establish
an employee group to coordinate work projects and share files, a customer
group to communicate new product announcements and product information,
and a vendor group to coordinate project schedules and supplier needs.
- Music/Entertainment Groups. Music groups have become especially popular
among teens and young adults, as fans discuss favorite songs, concerts,
or upcoming albums from popular artists like the BackStreet Boys, Ricky
Martin and Brittney Spears. Our members participate in different music
groups, which are focused on individual artists or types of music
including pop, rock, country, hip hop, punk and classical. Television and
movie fans also discuss episodes of their favorite TV shows or films.
- Investor Groups. Investor groups use our platform to discuss investment
ideas and portfolio strategies, as well as to exchange personal finance
advice. Groups may form around broad themes such as the stock market in
general or may be focused more narrowly on a specific industry or a
particular group's investment theme.
PRIVACY AND OTHER POLICIES
Our platform has several features and policies to prevent unauthorized
delivery of emails, harassment and illegal content. In order to prevent the
unauthorized delivery of unwanted email
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messages, we have implemented the following features: only group members may
post a message to a group, moderators are limited in their ability to add large
numbers of email addresses to their groups at one time, and email addresses
appearing in the archives on the web site are masked to prevent people from
copying and using email address lists without permission. Our member support
team responds to member complaints of harassment or illegal content and removes
offending content, groups and members from the service. Our privacy policies
have been certified by TRUSTe, a leading non-profit organization, which provides
privacy certification of web sites.
MEMBER SUPPORT
We provide support to our members seven days a week, 20 hours a day. Our
support service is evolving to provide coverage 24 hours a day on a two-tiered
basis. Tier 1 will consist of support representatives responsible for responding
to email inquiries within four hours. Tier 2 support representatives will be
dedicated to providing a more comprehensive level of support for participating
large groups with greater than 500 members. Further, we provide support
information on our web site that is accessible to all members. We utilize both
commercial and proprietary support tools to ensure the highest degree of member
service. These tools also afford us the ability to track recurring member issues
that highlight opportunities for service improvements and enhancements.
ADVERTISER AND DIRECT MARKETER SERVICES
We offer a wide range of packages and options for advertisers and direct
marketers to meet their specific needs.
- RUN-OF-NETWORK ADVERTISING. Our advertising customers can reach a broad
audience of over 14 million active members through run-of-network
advertising. These advertisements are in the form of HTML banners, which
can be delivered within page views on our web site or into group email
messages, or in the form of text email messages.
- TARGETED ADVERTISING. Advertisers can target banner advertisements to
individual groups based on member-designated interests. In addition,
advertisements on our web site can be targeted to a member according to
his or her age, gender, zip code, and the multiple groups to which the
member belongs. During 2000, we plan to extend this type of member
targeting to our email inventory and to offer increased email and web
targeting capabilities, including country, local geography, domain,
operating system, and type of web browser. For advertisers seeking
repeated exposure and increased response rates, we offer sponsorships,
which involve multiple advertising placements over an extended period of
time. Sponsorships provide a variety of additional promotional
opportunities, such as the delivery of impressions on our web site
through banner, button, or text-link advertising, sometimes including
exclusive placement on certain web pages.
- OPT-IN, PERMISSION-BASED DIRECT MARKETING PROGRAMS. We also offer
permission-based direct marketing programs, which involve delivering
full-page email promotional offers related to the categories of interest
specified by our opt-in members. Because consumers are more likely to
respond to advertising that they elect to receive and which is targeted
to their specific interests, our permission-based email marketing
programs have been well received by direct marketers. We currently have
approximately 2.5 million subscriptions from our members who have elected
to receive email promotional offers from our advertisers in specific
categories of
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interest. Our permission-based direct marketing programs can be targeted
to 20 different product categories, consisting of:
<TABLE>
<S> <C> <C>
apparel games pets
autos gifts small business
books health software
collectibles home & garden sports & outdoors
computers investment toys
electronics movies travel
food & wine music
</TABLE>
ADVERTISING AND DIRECT MARKETING SALES
Advertisers, direct marketers and advertising agencies buy directly through
our sales force, which is comprised of 23 people as of March 15, 2000. Our sales
force is structured as a multi-regional organization with account managers,
sponsorship managers and regional directors. Our sales personnel operate out of
our offices in San Francisco and New York City. We also intend to leverage
third-party advertising sales organizations in international markets.
ADVERTISER AND DIRECT MARKETING CUSTOMERS
During the three months ended January 31, 2000, we delivered advertisements
for 114 advertisers and direct marketers. These customers represented several
sectors, including technology companies, financial institutions, industrial
manufacturers, and media companies.
MARKETING
Without the benefit of significant marketing programs to date, over 14
million active members have joined our groups. Our rapid growth in members has
been driven by the inherently viral nature of our business and the ease of using
our service. The organic growth of our member base occurs as existing members
expand their groups by inviting new members, who often form their own groups and
invite additional new members.
To promote greater brand awareness, we intend to implement an integrated
marketing program, which may include print advertising in consumer and trade
publications, broadcast advertising on television and radio, outdoor advertising
and online advertising. In addition, we plan to strengthen the eGroups brand
with existing members by placing our own advertisements in group email messages
and on our web site. We also will promote our business through trade show
participation, speaking engagements and other public relations programs. We
expect to increase our marketing activities in the future.
TECHNOLOGY
We have developed, and continue to expand, our expertise and
industry-standard technology to deliver a robust, highly scalable email group
communication platform. Our technology consists of several key components:
EMAIL SYSTEM
Our proprietary email system uses a reliable, scalable, distributed
architecture to accept incoming email messages from group members, to process
the messages through several proprietary steps, and then to distribute the
messages to all members of that group. Incoming messages are authenticated to
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confirm group status and the sender's identity by checking the member database.
The system reformats the email according to the email preference of each member
in text or HTML and inserts a targeted advertisement from our proprietary ad
server. The system automatically handles problems common to large email lists
such as auto responders and bounced messages. Our email system is designed to
scale to support increasing email volumes by adding modest incremental hardware
with limited incremental software engineering efforts. We delivered email
messages at the rate of approximately 68 million messages per day during the
month of February 2000.
AD SERVERS
Our ad-serving technology is based on a highly reliable, scalable and
distributed architecture for targeting proprietary advertisements and delivering
them into group emails and on the eGroups web site. The proprietary ad server
manages our inventory of web and email advertising in order to maximize
advertising revenues. The ad server is currently capable of targeting
advertisements based on a number of parameters, including:
- Group characteristics, such as group name and category;
- Ad characteristics, such as ad location, size, format and type;
- Priority and timing of ad campaigns;
- Member demographics, such as age, gender and zip code.
During 2000, we plan to enhance our targeting capabilities by enabling the
ad server to target advertising based on additional member characteristics, such
as country, local geography, domain, operating system and type of web browser.
WEB AND APPLICATION SERVERS
The web and application servers are run on the Linux operating system. Our
web applications are based on a reliable, scalable, distributed architecture and
provide the user interface and logic for our email group service. The web
applications are integrated with the member database, archive servers and ad
servers.
ARCHIVE SERVERS
The archives serve as a central repository for the historical content
generated by groups on our service. Members can search for and retrieve prior
messages sent over the past six months within the groups to which they belong
and from other groups with publicly accessible archives. The archive servers
also provide designated storage space for storing files such as documents,
photos and digital music. We have licensed search technology to provide members
with advanced capabilities to search for groups of interest and to search
contents of archived messages.
MEMBER DATABASE
Our member database is the central repository for group and member
information and is never sold or distributed outside the company according to
our privacy policy. Each member's profile, preferences and group memberships are
stored in the database and changes are managed via our web applications. Member
information is also used to direct our ad targeting. Our member information may
be supplemented by third-party information to enhance ad-targeting capabilities.
The member database is maintained using an Oracle database on Sun Solaris
servers. We also have entered into a
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license agreement with E.piphany, Inc., to utilize its Data Mart software as the
central database for all member information. The Data Mart software will enable
us to integrate and analyze information from a variety of sources, including web
logs, ad logs, email logs, member profiles, subscription data and customer
support information. By enhancing our ability to analyze member information, we
intend to provide superior member support, implement more effective member
acquisition programs, and increase the response rates to our advertising.
HOSTING AND NETWORK INFRASTRUCTURE
Our email system and applications are hosted at Global Crossing's Global
Center in Sunnyvale, California. Our hosting facility features redundant systems
for power, fire protection, seismic reinforcement, and security surveillance by
personnel and video monitors on a 24-hour basis. To enhance the security and
performance of our service, our employees monitor the network hardware and
software 24 hours a day, seven days a week. In addition, we employ a firewall
solution to reduce the incidence of network security breaches. We intend to open
additional data centers that will add further redundancy and network diversity.
COMPETITION
We face competition for members and for advertising and direct marketing
customers. Our market is intensely competitive, and we expect that competition
will persist and intensify in the future. Many of our competitors have longer
operating histories, larger user bases, greater brand recognition and
significantly greater financial, sales, technical, marketing and other
resources. Many of these competitors can devote substantially more resources to
the development of their products and services. In addition, our competitors may
form strategic alliances or complete acquisitions of businesses, technologies or
products that could reduce our competitive advantage.
We believe that the primary competitive factors determining success in the
market for email group communications include easy-to-use integrated group
applications, a critical mass of active groups engaged in a diverse range of
topics, service reliability, and responsive member support. While we believe
that we compete favorably for members with respect to these factors, there is
increasing competition emerging in this field. We compete for members with other
Internet companies offering group communication services, such as Critical
Path's RemarQ division, eCircles, Inc., Microsoft Corporation's Listbot Service,
Topica, Inc., and Visto Corporation. In addition, the community and club
services of established portals, such as Excite@Home Networks, Inc., Lycos,
Inc., Microsoft Corporation's MSN, and Yahoo! Inc., represent alternatives to
the consumer.
We believe that the primary competitive factors determining success in the
market for advertising and direct marketing customers include: the size,
activity, and demographic profiles of the member base, and the ability to target
members based on specific interests and demographic criteria. While we believe
that we compete favorably with respect to these factors, numerous competitors
may have an advantage over us with respect to specific factors. We compete for
Internet advertising and sponsorship revenues with major web publishers and
portals, such as America Online, Inc., Excite@Home Networks, Inc., Lycos, Inc.,
Microsoft Corporation's MSN, and Yahoo! Inc., as well as Internet advertising
networks, such as DoubleClick, Inc. We compete for opt-in direct marketing
revenues with companies such as Life Minders.com, Inc., NetCreations, Inc. and
yesmail.com, Inc. We also compete with traditional advertising channels,
including television, radio, print and outdoor media, for a share of
advertisers' and direct marketers' total advertising budgets.
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GOVERNMENT REGULATION
We are not currently subject to direct federal, state or local regulation
other than regulations applicable to businesses generally or directly applicable
to electronic commerce. However, the Internet is increasingly popular and, as a
result, laws and regulations may be adopted to govern it. These laws may cover
issues such as user privacy, freedom of expression, pricing, content and quality
of products and services, taxation, advertising, intellectual property rights
and information security. Furthermore, the growth of electronic commerce may
prompt calls for more stringent consumer protection laws. Several jurisdictions
have proposed legislation to limit the uses of personal user information
gathered online or require online services to establish privacy policies. The
Federal Trade Commission has also initiated action against at least one online
service regarding the manner in which personal information is collected from
users and provided to third parties. The adoption of such consumer protection
laws could create uncertainty in web usage and reduce the demand for our
products and services. We have a privacy and information security policy and
seek to keep customer information private.
We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, libel and obscenity. The vast
majority of such laws were adopted prior to the advent of the Internet. As a
result, they do not address the unique issues of the Internet and related
technologies. Changes in laws intended to address such issues could create
uncertainty in the Internet marketplace. This uncertainty could reduce demand
for our services or increase the cost of doing business as a result of
litigation costs or increased service delivery costs.
Legislation has recently been enacted in several states relating to the
sending of unsolicited emails, a practice commonly referred to as "spamming."
The federal government and several states, including New York and California,
are considering, or have enacted, similar legislation. Although the provisions
of these current and contemplated laws vary, they generally limit or prohibit
both the transmission of unsolicited emails and the use of familiar spamming
techniques such as the use of forged or fraudulent routing and header
information. We believe that our services will not be significantly affected by
this legislation because our current practices are intended to comply with
current and proposed legislation. In addition, we have implemented a number of
features and policies designed to reduce the likelihood of the transmission of
unsolicited emails to our members. However, this legislation may affect our
services, particularly in light of the rapidly evolving state of the law in this
area.
In addition, because our services are available over the Internet in
multiple states and foreign countries, other jurisdictions may claim that we are
required to qualify to do business in each state or foreign country. Our failure
to qualify in a jurisdiction where we are required to do so could subject us to
taxes and penalties. It could also hamper our ability to enforce contracts in
these jurisdictions. The application of laws or regulations from jurisdictions
whose laws do not currently apply to our business could have a material adverse
effect on our business and operating results.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY PRODUCTS AND SERVICES
We rely on various intellectual property laws and contractual restrictions
to protect our proprietary products and services. These include confidentiality,
invention assignment and nondisclosure agreements with our employees,
contractors, suppliers and strategic partners. We rely on a combination of
copyright, trademark, service mark and trade secret laws and contractual
restrictions to protect our proprietary rights in products and services. In
addition, we pursue the registration of our trademarks and service marks in the
United States and internationally. However, effective
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intellectual property protection may not be available in every country in which
our services are made available online. We have filed for the registration of
our trademarks in 21 countries.
We have licensed various proprietary rights to third parties. Existing and
future licensees may take actions that materially adversely affect the value of
our proprietary rights or our reputation, or the quality of our brand. We also
rely on technologies that we license from third parties. These licenses may not
continue to be available to us on commercially reasonable terms. As a result, we
may be required to obtain substitute technology of lower quality at greater
cost, which could materially adversely affect our business and operating
results.
To date, we have not been notified, and are not aware, of any claims that
our technologies infringe the proprietary rights of third parties. However,
third parties could claim infringement by us with respect to our current or
future technologies. We expect that participants in our markets will be
increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. Any such claim, with or without
merit, could prove time-consuming, result in costly litigation, cause service
upgrade delays, or require us to enter into royalty or licensing agreements.
Such royalty or licensing agreements may not be available, or may not be
available on terms acceptable to us. As a result, any claim of infringement
against us could have a material adverse effect upon our business and operating
results.
EMPLOYEES
As of March 15, 2000, we had 154 full-time employees. We are not subject to
any collective bargaining agreements and consider our employee relations to be
good. Competition for employees in our industry is intense and our future
success depends on our ability to attract, retain and motivate skilled
employees.
FACILITIES
Our corporate offices are located in San Francisco, California, where we
lease approximately 11,000 square feet under two leases that expire in September
2004 for 10,550 square feet and July 2000 for 450 square feet, and in Redwood
City, California, where we lease approximately 14,000 square feet under a lease
that expires in July 2004. We also maintain a sales office in New York City,
where we lease approximately 3,850 square feet under a lease that expires in
September 2004. We have business development and marketing offices in Europe and
Japan.
LEGAL PROCEEDINGS
We currently are not a party to any material litigation, nor are we aware
of any pending or threatened litigation that, individually or in the aggregate,
would have a material adverse effect on our business, operating results or
financial condition. However, occasionally we may become involved in litigation.
Any litigation potentially could result in the expenditure of significant
financial and managerial resources, even if the underlying claims have no merit.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to our executive
officers and directors as of March 15, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Michael B. Klein................. 29 President, Chief Executive Officer and Director
Richard J. Carey................. 43 Senior Vice President, Product Development
Marjorie T. Sennett.............. 39 Senior Vice President and Chief Financial Officer
Steven T. Comfort................ 32 Vice President, Sales
David W. Cragg................... 44 Vice President, Human Resources
Jacqueline A. Maartense.......... 35 Vice President, Marketing
Margaret E. Nibbi................ 38 Vice President, General Counsel and Secretary
Carolyn J. Patterson............. 36 Vice President, Operations
Marcus Riecke.................... 34 Vice President, Business Development and International
Gayle A. Crowell(2).............. 49 Director
Peter Mills(1)................... 48 Director
Michael J. Moritz(2)............. 45 Director
Daniel D. Springer(1)............ 36 Director
</TABLE>
- ------------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Michael B. Klein has served as our Chief Executive Officer since November
1999 and served on our board of directors since December 1999. Prior to joining
us, Mr. Klein was the Chief Executive Officer of ONElist, Inc., beginning in
October 1999. Prior to that, he founded Transoft Networks, Inc., a leading
supplier of storage area networking software, and served as its President and
Chief Executive Officer from 1992 until May 1999 when the Company was acquired
by Hewlett Packard. From 1989 to 1992, Mr. Klein founded and served as Chief
Executive Officer of MIBEK Corporation, a developer of financial modeling and
analysis software which was acquired in 1992. Mr. Klein holds a B.A. from the
University of California, Santa Barbara, a J.D. from the Santa Barbara College
of Law and an M.B.A. from Pepperdine University.
Richard J. Carey has served as our Senior Vice President of Product
Development since February 2000 and served as Vice President and Chief Technical
Officer since November 1999. Prior to joining us, Mr. Carey was Vice President
of Engineering at ONElist, Inc., beginning in September 1999. From September
1998 to January 1999, Mr. Carey co-founded and served as Vice President of
Engineering at Listen.com, Inc., an online music service. Prior to that, Mr.
Carey led the development team and the industry consortium for VRML, an Internet
standard. He served as Director of Engineering at Silicon Graphics, a
workstation and server company, from 1989 to 1998 and Director of Engineering at
Vertigo/Cubicomp, a three-dimensional graphics and animation company, from 1984
to 1989. Mr. Carey holds a B.S. from the University of Maryland and an M.S. from
Cornell University.
Marjorie T. Sennett has served as our Senior Vice President and Chief
Financial Officer since July 1999. Prior to joining us, she served as Senior
Vice President and Chief Financial Officer of Amylin Pharmaceuticals, Inc., a
biotechnology company, from 1989 to 1998. From 1982 to 1986, Ms. Sennett worked
in the corporate finance and leveraged buyout departments at Bankers Trust
Company. Ms. Sennett holds a B.A. from Vanderbilt University and an M.B.A. from
the Stanford Graduate School of Business.
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Steven T. Comfort has served as our Vice President of Sales since April
1999. Prior to joining us, Mr. Comfort served as a Vice President of Sales at
24/7 Media, an Internet advertising firm, beginning in February 1997. From
January 1995 to February 1997, Mr. Comfort served as General Manager of Wired
Online at Wired Ventures/Lycos. He worked in positions related to media planning
at the advertising firms Messner Vetere Berger McNamee Schmetterer Euro-RSCG
from 1991 to 1994 and D'Arcy Masius Benton and Bowles from 1989 to 1990. Mr.
Comfort holds a B.A. from the University of North Carolina, Chapel Hill.
David W. Cragg has served as our Vice President of Human Resources since
March 2000. Prior to joining us, Mr. Cragg served as Principal HR Consultant at
Genentech Inc., beginning in 1996. From 1992 until 1995, he worked as Director
of Human Resources at Software Publishing Corporation. Mr. Cragg holds a B.A.
from the University of California, Santa Cruz.
Jacqueline A. Maartense has served as our Vice President of Marketing since
September 1999. From 1991 to 1999, Ms. Maartense worked at Intuit, Inc., in a
variety of marketing and general management roles, including Director of Quicken
Marketing, Director of Online Sales and General Manager for Intuit, U.K. Prior
to that, she worked at Gillette and Bristol Myers Squibb in positions related to
brand management. Ms. Maartense holds a Bachelor of Commerce from Queen's
University, Canada, and an M.B.A. from Harvard Business School.
Margaret E. Nibbi has served as our Vice President, General Counsel and
Corporate Secretary since November 1999. Prior to joining us, Ms. Nibbi was
Legal Counsel at GetThere.com, an Internet services company, from October 1997
to September 1999. From 1995 to 1997, Ms. Nibbi was an associate at the law firm
Gunderson, Dettmer, Stough, Villeneuve, Franklin & Hachigian and, from 1987 to
1995, she was an associate at the law firm Brobeck, Phleger & Harrison. Ms.
Nibbi holds a B.A. and an M.A. from Stanford University and a J.D. from the
Georgetown University Law Center.
Carolyn J. Patterson has served as our Vice President of Operations since
September 1999. Prior to joining us, Ms. Patterson served as Vice President of
Operations at Critical Path, Inc., a leading provider of Internet messaging
solutions, from August 1998 to August 1999. From January 1998 to August 1998,
Ms. Patterson was the Channel Manager of Strategic Platform Alliances at Sybase,
Inc., an integrated software company. From 1986 to 1997, Ms. Patterson worked in
a variety of roles at AT&T, most recently as General Manager of Data Services
Operations. Ms. Patterson holds a B.S. from Rider University and an M.B.A. from
Monmouth University.
Marcus Riecke has served as our Vice President of Business Development and
International since January 2000. Prior to joining us, Mr. Riecke served as
General Manager Europe at ONElist, Inc., beginning in September 1999. Prior to
that, Mr. Riecke was Vice President New Business at AOL Bertelsmann Online from
November 1998 to August 1999. Before joining AOL, Mr. Riecke was Managing
Director at Lycos Bertelsmann, Germany, from June 1997 to October 1998. Prior to
Lycos, Mr. Riecke was a consultant to the Chief Executive Officer and board of
Bertelsmann AG from August 1996 to June 1997. Mr. Riecke holds a B.A. from the
University of London (1989) and an M.B.A. from the Haas School of Business of
the University of California, Berkeley (1996).
Gayle A. Crowell has served on our board of directors since March 2000. Ms.
Crowell is currently President of E.piphany.net, the online business unit of
E.piphany, Inc., a customer relationship management software company. She has
held that position since January 2000, following E.piphany's acquisition of
RightPoint, Inc., a real-time marketing software company. From January 1998 to
December 1999, Ms. Crowell served as President, Chief Executive Officer and
Director of RightPoint. Ms. Crowell was named Chairman of the Board of
RightPoint in May 1998. From 1995 to 1998, Ms. Crowell served as Senior Vice
President and General Manager of Worldwide Field
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Operations for Mosaix, Inc., which provides enterprise customer management
call-center solutions to more than 1,300 customers worldwide. She holds a B.S.
from the University of Nevada, Reno.
Peter Mills has served on our board of directors since December 1999. Mr.
Mills is a General Partner in CMGI @Ventures and has served as the Managing
Partner of CMGI @Ventures since March 1995. From March 1992 to March 1995, from
September 1988 to August 1998, Mr. Mills was the Chief Executive Officer of the
United States Display Consortium (USDC) and served as SEMATECH's Chief
Administrative Officer from September 1988 to August 1998. Mr. Mills serves as a
director of Vicinity Corporation, as well as several privately held companies.
Mr. Mills holds a B.S. from Ithaca College and an M.B.A. from the Graduate
School of Business at Columbia University.
Michael J. Moritz has served on our board of directors since December 1998.
He has been a general partner of Sequoia Capital, a venture capital firm, since
1986. Mr. Moritz serves as a director of Yahoo! Inc., Flextronics International
Ltd., Webvan Group, Inc., eToys, Inc., and Agile Software Corporation, as well
as several private companies. Mr. Moritz holds an M.A. from Oxford University.
Daniel D. Springer has served on our board of directors since March 2000.
Mr. Springer has served as Chief Marketing Officer of NextCard, Inc., since
February 1998. From 1991 to 1997, Mr. Springer worked at McKinsey & Co., an
international consulting firm, where he consulted for a wide range of
enterprises. Mr. Springer holds a B.A. from Occidental College and an M.B.A.
from Harvard University.
BOARD COMPOSITION
Each of our officers who is also a director devotes full time to our
business and affairs. Our nonemployee directors devote such time to our business
and affairs as is necessary to discharge their duties. There are currently no
family relationships among any of our directors, officers or key employees.
BOARD COMMITTEES
Our board of directors has an audit committee and a compensation committee.
Audit Committee. The board of directors established our audit committee in
March 2000. The audit committee has the powers and responsibilities to monitor
our exposure to major financial risks and review, among other things, the
adequacy of our internal control systems and financial reporting procedures, our
annual and quarterly financial statements, and our annual audit. The audit
committee currently consists of Messrs. Mills and Springer.
Compensation Committee. The board of directors established our compensation
committee in March 2000. The compensation committee has authority to review and
recommend to the board of directors the compensation and benefits of all of our
executive officers, and general policies relating to compensation and benefits
of our employees. The compensation committee currently consists of Mr. Moritz
and Ms. Crowell.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationships currently exist between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
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DIRECTOR COMPENSATION
Our directors do not currently receive cash compensation from us for their
service as members of the board of directors. We do not provide additional
compensation for committee participation or special assignments of the board of
directors.
In March 2000, our board of directors adopted our stock option grant
program for non-employee directors. The program will be administered under our
2000 Stock Incentive Plan. Under this program, each non-employee director will
receive a nonqualified stock option to purchase 50,000 shares of common stock
upon initial election or appointment to the board following this offering.
One-fourth of the shares subject to these options will vest after one year of
service with the balance vesting in equal monthly installments over the next 36
months of continuous service. After that, beginning with the annual meeting of
stockholders in 2001, each nonemployee director will automatically receive an
additional option to purchase 12,500 shares of common stock immediately
following each year's annual meeting of stockholders. This option will vest
monthly over a four-year period measured from the date of grant. The exercise
price for all options granted under the program will be the fair market value of
the common stock on the date of grant. Options will have a ten-year term, except
that the unvested portion of options may expire on the earlier date that a
director ceases services as a director and the vested portion of those options
will expire three months after a nonemployee director ceases services as a
director, or in the case of death, one year after the date of death.
If specified corporate transactions occur, such as a merger or sale of the
company, 25% of the outstanding unvested options granted to a nonemployee
director under the program will automatically accelerate and become exercisable
immediately prior to the corporate transaction. Acceleration of option vesting
will not occur if the corporate transaction is a related-party transaction
specified in the plan.
EXECUTIVE COMPENSATION
The following table provides the total compensation received by our chief
executive officer for services rendered to us in all capacities for the period
from our inception on June 5, 1998 to July 31, 1999, the end of our last fiscal
year. The executive listed below is referred to as the Named Executive Officer
elsewhere in this prospectus.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION FOR THE PERIOD FROM COMPENSATION
INCEPTION (JUNE 5, 1998) TO JULY 31, 1999 AWARDS
------------------------------------------- --------------
ALL OTHER RESTRICTED
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) STOCK AWARD($)
<S> <C> <C> <C> <C>
Martin Roscheisen................. $104,781 -- -- $364,549(1)
Former President and Chief
Executive Officer(2)
</TABLE>
- ------------------------------
(1) This award covered 1,215,164 restricted shares of our common stock of which
401,004 shares were fully vested at the time of the award. During the period
from June 5, 1998 to February 4, 2000, the remaining unvested shares vested
at the rate of 22,616 shares for each month of continuous service completed
by Mr. Roscheisen in any capacity. On February 4, 2000, Mr. Roscheisen
entered into an executive separation agreement with us under which all of
his remaining unvested shares became vested as of that date.
(2) In November 1999, Mr. Roscheisen resigned from the office of President and
Chief Executive Officer. Michael B. Klein has served as our Chief Executive
Officer since November 1999 and receives an annual salary of $195,000.
Marjorie T. Sennett has served as our Senior Vice President and Chief
Financial Officer since July 1999 and receives an annual salary of $175,000.
Richard J. Carey has served as our Senior Vice President, Product
Development, since February 2000 and receives an annual salary of $175,000.
Jacqueline A. Maartense has served as our Vice President, Marketing, since
September 1999 and receives an annual salary of $150,000. Steven T. Comfort
has served as our Vice President, Sales, since April 1999 and receives an
annual salary of $100,000. Mr. Comfort received $75,000 as a sales
commission bonus for the calendar year 1999.
OPTION GRANTS SINCE INCEPTION
We did not grant stock options to our Named Executive Officer during the
period from our inception to July 31, 1999. We have never granted any stock
appreciation rights.
Michael B. Klein has served as our Chief Executive Officer since November
1999 and has been granted options to purchase 1,030,894, 196,809 and 522,297
shares of common stock at exercise prices of $0.05762, $5.00 and $6.00 per
share, all of which shares have been acquired upon exercise. Marjorie T. Sennett
has served as our Senior Vice President and Chief Financial Officer since July
1999 and has been granted options to purchase 232,000 and 143,000 shares of
common stock at exercise prices of $0.30 and $6.00 per share, all of which
shares have been acquired upon exercise. Richard J. Carey has served as our
Senior Vice President, Product Development since November 1999 and has been
granted options to purchase 256,161 and 118,839 shares of common stock at
exercise prices of $0.05762 and $6.00 per share, all of which shares have been
acquired upon exercise. Jacqueline A. Maartense has served as our Vice
President, Marketing since September 1999 and has been granted an option to
purchase 200,000 shares of common stock at an exercise price of $0.35 per share,
all of which shares have been acquired upon exercise. Steven T. Comfort has
served as our Vice President, Sales since April 1999 and has been granted
options to purchase 100,000, 15,000 and 10,000 shares of common stock at
exercise prices of $0.30, $0.35 and $6.00 per share, all of which shares have
been acquired upon exercise.
As of March 15, 2000, all of the shares acquired upon exercise of stock
options are subject to a right of repurchase by us at the exercise price paid.
These repurchase rights lapse over a period of four years measured from the date
of the option grant.
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FISCAL YEAR-END OPTION VALUES
Our Named Executive Officer did not hold options to purchase our stock as
of July 31, 1999.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
On February 4, 2000, our Named Executive Officer, Martin Roscheisen,
entered into an executive separation agreement with us under which all of his
remaining unvested shares became vested as of that date.
All of our executive officers employed in the United States are employed
"at-will" and their employment may be terminated at any time. We have issued
offer letters to all of our executive officers pursuant to which each person is
entitled to a base salary, bonuses and options to purchase restricted shares of
our common stock. In addition, we provided Ms. Sennett with a loan in the
principal amount of $100,000, bearing no interest, for relocation expenses as
part of her agreement to join us. The note also provides that we will forgive
this loan in 48 equal monthly installments following July 31, 1999, provided she
continues her employment with us on each of those dates. We also agreed upon
commencement of their employment that if any of the following executive officers
is actually or constructively discharged without cause in connection with or
following a transaction in which we experience a change in control, then a
portion of their remaining unvested shares will vest immediately: Michael B.
Klein, Marjorie T. Sennett, Richard J. Carey, Jacqueline A. Maartense and Steven
T. Comfort.
STOCK PLANS
2000 STOCK INCENTIVE PLAN
Our 2000 Stock Incentive Plan, or 2000 Plan, was adopted by our board in
March 2000, and we expect it will be approved by our stockholders in April 2000.
The purpose of our 2000 Plan is to enhance long-term shareholder value by
offering opportunities to officers, directors, employees, consultants, agents,
advisors and independent contractors of eGroups and its subsidiaries to
participate in eGroups' growth and success, and to encourage them to remain in
the service of eGroups and its subsidiaries and to own eGroups stock. Our 2000
Plan provides for awards of stock options and stock. Our board has reserved a
total of 5,400,000 shares of common stock for issuance under the plan, plus:
- Any shares reserved but not granted under our 1998 Stock Option Plan or
returned to the 1998 Stock Option Plan upon termination of options up to
a total of 1,808,729 shares; and
- An automatic annual increase, to be added on the first day of our fiscal
year beginning in 2001, equal to the lesser of (1) 2,000,000 shares, (2)
5% of the average number of shares outstanding as used to calculate fully
diluted earnings per share as reported in eGroups' financial statements
for the preceding fiscal year, and (3) a lesser number determined by the
board. Any shares from increases in previous years that are not actually
issued shall be added to the aggregate number of shares available for
issuance under the 2000 Plan.
Our 2000 Plan provides for the granting to employees, including officers,
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code and for the granting to employees, officers, directors,
consultants, agents, advisors and independent contractors of nonqualified stock
options. To the extent an optionee would have the right in any calendar year to
exercise for the first time one or more incentive stock options for shares
having an aggregate fair market value, determined for each share as of the date
the option to purchase the shares was granted, in excess of $100,000, any of
these excess options shall be treated as nonqualified stock options. Unless
terminated earlier, our 2000 Plan will terminate on March 1, 2010.
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Our 2000 Plan may be administered by the board of directors or a committee
or committees of the board. Currently, our 2000 Plan will be administered by the
compensation committee of our board. The plan administrator determines the terms
of options granted under the 2000 Plan, including the number of shares subject
to an option and its exercise price, which, for incentive stock options, must be
at least equal to the fair market value of the common stock on the date of
grant, term and exercisability.
The plan administrator determines the term of options, which may not exceed
ten years, or five years in the case of an incentive stock option granted to a
10% shareholder. Optionees may not transfer options other than by will or the
laws of descent or distribution, with the provision that the plan administrator
may grant nonqualified stock options with limited transferability rights in some
circumstances. The plan administrator determines when options vest and become
exercisable. eGroups expects that options granted under the 2000 Plan generally
will vest at the rate of 1/4 of the total number of shares subject to the
options 12 months after the date of grant, and 1/48 of the total number of
shares subject to the options each month thereafter.
The plan administrator is authorized under our 2000 Plan to issue shares of
common stock to eligible participants with terms, conditions and restrictions
established by the plan administrator in its sole discretion. Restrictions may
be based on continuous service with eGroups or its subsidiaries or the
achievement of performance goals. Holders of restricted stock are shareholders
of eGroups and have all the rights of stockholders with respect to such shares
with some restrictions.
The plan administrator will make proportional adjustments to the aggregate
number of shares issuable under our 2000 Plan and to outstanding awards in the
event of stock splits or other capital adjustments.
In the event of the sale of all or substantially all of eGroups' assets, or
a merger or consolidation of eGroups with or into another corporation, all
options outstanding under the 2000 Plan will be assumed or equivalent options
substituted by the successor corporation, unless such successor corporation does
not agree to such assumption or substitution, in which case each outstanding
option and restricted stock award will automatically accelerate and become 100%
vested and exercisable immediately before the corporate transaction, and any
unexercised options will terminate upon consummation of the transaction.
No awards will be granted under our 2000 Plan until the effective date of
this offering.
EGROUPS 1998 STOCK OPTION PLAN
Our 1998 Stock Option Plan was adopted by our board and approved by our
stockholders in June 1998. We reserved a total of 5,410,024 shares of common
stock for issuance under the 1998 Stock Option Plan. Simultaneous with the
effectiveness of this offering, our board of directors has suspended our 1998
Stock Option Plan and determined that no further grants will be made under it.
Any shares remaining for future option grants and any future cancellations of
options from our 1998 Stock Option Plan will become available for future grant
under our 2000 Plan.
The purposes of the 1998 Stock Option Plan are to attract and retain the
best available personnel, to provide additional incentives to eGroups' employees
and persons rendering consulting or advisory services, and to promote the
success of eGroups' business. The 1998 Stock Option Plan provides for the
granting of incentive and nonqualified options. Our 1998 Stock Option Plan may
be administered by our board or a committee of the board. Currently, the 1998
Stock Option Plan is administered by the board. The plan administrator
determines the terms of options granted under the 1998 Stock Option Plan,
including the number of shares subject to an option and its exercise price, term
and exercisability.
The terms and conditions for options granted under the 1998 Stock Option
Plan are substantially similar to those for options granted under the 2000 Plan,
except as follows. Generally, options under
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<PAGE> 52
the 2000 Plan may not be exercised until the options are vested. In some
instances, the plan administrator may grant options that may be exercised
immediately after the grant date, but to the extent the shares subject to the
options are not vested as of the date of the exercise, eGroups retains a right
to repurchase any shares that remain unvested at the time of the optionee's
termination of employment by paying an amount equal to the exercise price times
the number of unvested shares. No option may be transferred by the optionee
other than by will or the laws of descent or distribution.
As of March 15, 2000, options to purchase 2,711,453 shares of eGroups
common stock at a weighted average exercise price of $2.55 per share were
outstanding under the eGroups 1998 Stock Option Plan and the ONElist 1998 Stock
Plan described below.
ONELIST 1998 STOCK PLAN
We assumed the ONElist 1998 Stock Plan and options outstanding under that
plan in connection with the merger of eGroups and ONElist under which all
outstanding ONElist options were assumed by eGroups and are exercisable for
eGroups' stock. No further option grants will be made under this plan.
The purposes of the ONElist Plan were to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants, and to promote the
success of the company's business. The ONElist Plan provided for the granting of
incentive and nonqualified options. The terms and conditions for options granted
under the ONElist Plan were substantially similar to those for options granted
under the eGroups 1998 Option Plan.
EGROUPS 2000 EMPLOYEE STOCK PURCHASE PLAN
eGroups' 2000 Employee Stock Purchase Plan was adopted by our board in
March 2000, and we expect it to be approved by our stockholders in April 2000.
We will implement the Purchase Plan upon the effectiveness of this offering. We
reserved a total of 500,000 shares of common stock for issuance under the
Purchase Plan. The number of shares reserved will be increased automatically
each year on the first day of our fiscal year beginning in 2001 by an amount
equal to the lesser of (1) 420,000 shares, (2) 1.2% of the average number of
shares outstanding as used to calculate fully diluted earnings per share as
reported in eGroups' financial statements for the preceding fiscal year, and (3)
a lesser amount determined by our board. Any shares from increases in previous
years that are not actually issued shall be added to the aggregate number of
shares available for issuance under the Purchase Plan.
We intend for the Purchase Plan to qualify under Section 423 of the
Internal Revenue Code. We intend to implement the Purchase Plan by an offering
period commencing upon the effectiveness of this offering and ending on May 31,
2002. Each subsequent offering period will have a duration of 24 months. Each
offering period after the first offering period will commence on June 1st of
each year. Each offering period will consist of four consecutive purchase
periods of six months duration with the last day of each period being designated
a purchase date. The first purchase date will occur on November 30, 2000, with
subsequent purchase dates to occur every six months thereafter. The Purchase
Plan will be administered by the compensation committee of our board. Employees,
including officers and employee directors, of eGroups, or of any of its
majority-owned subsidiaries designated by our board, are eligible to participate
in the Purchase Plan if they are employed by eGroups or any such subsidiary for
at least 20 hours per week and more than five months per year.
The Purchase Plan permits eligible employees to purchase shares of stock
through payroll deductions, which may not exceed 15% of an employee's
compensation. Under the Purchase Plan, no employee may purchase common stock
worth more than $25,000 in any calendar year, valued as of
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<PAGE> 53
the first day of each offering period, or more than $25,000 of common stock in
any purchase period, valued as of the last day of that purchase period. In
addition, owners of 5% or more of eGroups' or a subsidiary's common stock may
not participate in the Purchase Plan. The price of the common stock purchased
under the Purchase Plan will be the lesser of 85% of the fair market value of
eGroups' common stock at the beginning of the offering period or at the purchase
date, except that the purchase price for the first offering period will be equal
to the lesser of 100% of the initial public offering price of the common stock
or 85% of the fair market value on the purchase date. If the fair market value
of the common stock on a purchase date is less than the fair market value at the
beginning of the offering period, a new 24 month offering period will
automatically begin on the first business day following the purchase date with a
new fair market value. Employees may end their participation in the offering at
any time during the offering period, and participation ends automatically on
termination of employment with eGroups or a participating subsidiary. If not
terminated earlier, the Purchase Plan will have a term of ten years.
The Purchase Plan provides that in the event of a merger of eGroups with or
into another corporation or a sale of all or substantially all of eGroups'
assets, each right to purchase stock under the Purchase Plan will be assumed or
an equivalent right substituted by the successor corporation. If the successor
corporation refuses to assume or substitute for the purchase right, the offering
period during which a participant may purchase stock will be shortened to a
specified date before the proposed merger or sale. Our board has the power to
amend or terminate the Purchase Plan if that action does not adversely affect
any outstanding rights to purchase stock under the Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Amended and Restated Certificate of Incorporation limits the liability
of our directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors except
liability for breach of their duty of loyalty to the corporation or its
stockholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, unlawful payments of dividends or
unlawful stock repurchases or redemptions, or any transaction from which the
director derived an improper personal benefit. This limitation of liability does
not apply to liabilities arising under the federal or state securities laws and
does not affect the availability of equitable remedies like injunctive relief or
rescission.
Our bylaws provide that we shall indemnify our directors to the fullest
extent permitted by law. They also permit us similarly to indemnify officers,
employees and other agents. Our bylaws also permit us to secure insurance on
behalf of any officer, director, employee or other agent for any liability
arising out of his or her actions in that capacity.
We plan to enter into agreements to indemnify our directors and executive
officers, in addition to the indemnification provided for in our certificate of
incorporation and bylaws. These agreements will indemnify our directors and
executive officers for some expenses including attorneys' fees, judgments, fines
and settlement amounts incurred by any such person in any action or proceeding
arising out of or in connection with their services as a director, officer,
employee or agent of eGroups, any subsidiary of eGroups, or any other company or
enterprise to which the person provides services at our request. We believe that
these provisions and agreements are necessary to attract and retain qualified
persons as directors and executive officers.
At present, there is no pending litigation or proceeding involving any of
our directors or officers in which indemnification is required or permitted, and
we are not aware of any threatened litigation or proceeding that may result in a
claim for indemnification.
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<PAGE> 54
RELATIONSHIPS AND RELATED TRANSACTIONS
Since our inception in June 1998, there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
we were or are to be a party in which the amount involved exceeds $60,000 and in
which any director, executive officer, or holder of more than 5% of any class of
our voting securities or members of such person's immediate family had or will
have a direct or indirect material interest, other than (1) compensation
agreements and other arrangements, which are described in "Management," and (2)
the transactions described below.
EQUITY TRANSACTIONS
In June 1998, we sold 1,620,000 shares of our Series A preferred stock for
$0.50 per share. In December 1998, we sold 3,556,772 shares of our Series B
preferred stock for $1.43955 per share. On November 30, 1999, we merged with
ONElist through a statutory merger of EG Acquisition Corporation, a wholly owned
subsidiary of eGroups and ONElist by which 2,662,882 shares of ONElist common
stock were exchanged and converted into 8,318,629 shares of eGroups common
stock, and 2,330,665 shares of ONElist preferred stock were exchanged and
converted into 7,280,811 shares of eGroups Series C preferred stock. In December
1999, we sold 4,081,633 shares of our Series D preferred stock for $10.29 per
share. Listed below are the directors, executive officers and stockholders who
beneficially own more than 5% of our securities who participated in these
transactions. "See Description of Capital Stock."
<TABLE>
<CAPTION>
VALUE AT
SERIES A SERIES B SERIES C SERIES D AMOUNT $ PER
COMMON PREFERRED PREFERRED PREFERRED PREFERRED PAID SHARE
STOCKHOLDER (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Michael B. Klein........................... 1,030,894 -- -- -- -- 59
Richard J. Carey........................... 256,161 15
Mark Fletcher.............................. 4,685,880 -- -- -- -- 150
Entities affiliated with CMGI @Ventures.... -- -- -- 4,314,558 291,545 5,400
Bertelsmann Ventures....................... -- -- -- 2,876,371 680,272 8,600
Entities affiliated with Sequoia Capital... -- -- 2,848,112 -- 485,909 9,100
Entities affiliated with Atlas Venture..... -- 1,620,000 694,660 -- 680,272 8,810
</TABLE>
These parties acquired these shares on the same terms as other purchasers
in this transaction. Shares held by all affiliated persons and entities have
been aggregated. Share numbers and purchase price information are reflected on
an as-if-converted into shares of common stock basis. See "Principal
Stockholders" for more detail on shares held by these purchasers. Peter Mills,
one of our directors, is an affiliate of each of the entities affiliated with
CMGI @Ventures. Michael Moritz, one of our directors, is a general partner of
Sequoia Capital VIII and thus is an affiliate of each of the entities affiliated
with Sequoia Capital.
EMPLOYMENT-RELATED CONTRACTS
As part of Mr. Roscheisen's employment with us, he assigned a business
concept and related intellectual property rights to us. In return, we issued to
him 1,215,164 restricted shares of our common stock, all of which have vested.
Some of our executive officers have received employment offer letters from
us. See "Management--Employment Contracts and Change of Control Arrangements."
We plan to enter into indemnification agreements with each of our directors
and executive officers. See "Management--Indemnification of Officers and
Directors."
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<PAGE> 55
LOANS TO EXECUTIVE OFFICERS
The following executive officers delivered to us full-recourse promissory
notes to purchase restricted stock under our 1998 Stock Option Plan. The full
principal amount and accrued interest under each note remain outstanding. The
terms of the notes are summarized below:
<TABLE>
<CAPTION>
INTEREST ACCRUED INTEREST BALANCE
NAME DATE OF MATURITY RATE PRINCIPAL AS OF 3/15/00 AS OF 3/15/00
<S> <C> <C> <C> <C> <C>
Richard J. Carey................. March 15, 2004 6.80 $ 712,915 $ 0 $ 712,915
Steven T. Comfort................ October 12, 2003 6.25% 35,135 937 36,072
Steven T. Comfort................ March 15, 2004 6.80 59,990 0 59,990
David W. Cragg................... March 15, 2004 6.80 749,875 0 749,875
Michael B. Klein................. January 26, 2004 6.21 983,848 11,685 995,533
Michael B. Klein................. March 15, 2004 6.80 3,133,260 0 3,133,260
Jacqueline A. Maartense.......... October 12, 2003 6.25 69,800 1,862 71,662
Margaret E. Nibbi................ January 5, 2004 6.21 674,850 8,015 682,865
Carolyn J. Patterson............. November 17, 2003 6.08 27,920 555 28,475
Carolyn J. Patterson............. March 15, 2004 6.80 269,955 0 269,955
Marjorie T. Sennett.............. October 11, 2003 6.25 69,368 1,863 71,231
Marjorie T. Sennett.............. March 15, 2004 6.80 857,857 0 857,857
</TABLE>
We extended Marjorie T. Sennett, our Senior Vice President and Chief
Financial Officer, a loan related to her relocation expenses. See
"Management--Employment Contracts and Change of Control Arrangements."
OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS SINCE INCEPTION
David W. Cragg has served as our Vice President, Human Resources since
March 2000 and has been granted an option to purchase 125,000 shares of common
stock at an exercise price of $6.00 per share, all of which shares have been
acquired upon exercise. Margaret E. Nibbi has served as our Vice President,
General Counsel since November 1999 and has been granted an option to purchase
150,000 shares of common stock at an exercise price of $4.50 per share, all of
which shares have been acquired upon exercise. Carolyn J. Patterson has served
as our Vice President, Operations since September 1999 and has been granted
options to purchase 80,000 and 45,000 shares of common stock at exercise prices
of $0.35 and $6.00 per share, all of which shares have been acquired upon
exercise. Marcus Riecke has served as our Vice President, Business Development
since January 2000 and has been granted options to purchase 168,691 and 31,309
at exercise prices of $0.05762 and $5.00 per share, of which no shares have been
acquired upon exercise. See also "Management -- Option Grants Since Inception."
As of March 15, 2000, all of the shares acquired upon exercise of stock
options are subject to a right of repurchase by us at the exercise price paid.
These repurchase rights lapse over a period of four years measured from the date
of the option grant.
OTHER TRANSACTIONS
In March 2000, we entered into a Software License and Services Agreement
with E.piphany, Inc. Under this agreement, we acquired a nonexclusive license
for approximately $900,000 to use E.piphany's customization and campaign
management software to enhance our email and web-based services. We may
terminate the agreement at any time, and E.piphany may terminate upon written
notice if we materially breach the agreement and fail to correct the breach
within 30-days' notice.
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<PAGE> 56
Gayle Crowell, one of our directors, also serves as the President of
E.piphany.net, the online and electronic commerce operation of E.piphany.
In December 1999 and February 2000, we entered into advertising contract
orders with X.com, Inc., to provide $225,000 and $50,500, respectively, of
advertising placement services. Michael J. Moritz, one of our directors, is a
general partner of Sequoia Capital IX, which holds an equity interest in X.com,
Inc.
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table provides information regarding beneficial ownership of
our common stock, following automatic conversion of all preferred stock, as of
March 15, 2000, and as adjusted to reflect our sale of common stock in this
offering by:
- Each person or entity known by us to own beneficially more than 5% of our
common stock;
- Each of our directors and our Named Executive Officer; and
- All of our executive officers and directors as a group.
We determined this beneficial ownership under the rules of the Securities
and Exchange Commission, which generally require inclusion of shares over which
a person has voting or investment power. Share ownership in each case includes
shares issuable upon exercise of outstanding options and warrants that are
exercisable within 60 days of March 15, 2000, as described in the footnotes
below. The following calculations of the percentages of outstanding shares are
based on 33,583,879 shares of our common stock outstanding as of March 15, 2000,
on an as-converted basis, and shares of common stock outstanding
after this offering.
PRINCIPAL STOCKHOLDERS TABLE
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES --------------------------------
NAME BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING
<S> <C> <C> <C>
5% STOCKHOLDERS
Mark Fletcher(2)......................... 4,685,880 14.0%
Entities affiliated with CMGI
@Ventures(3).......................... 4,606,103 13.7%
Entities affiliated with Atlas
Venture(4)............................ 2,994,932 8.9%
Bertelsmann Ventures(5).................. 3,556,643 10.6%
Entities affiliated with Sequoia
Capital(6)............................ 3,334,021 9.9%
Scott Hassan(7).......................... 1,912,164 5.7%
DIRECTORS AND EXECUTIVE OFFICERS
Michael B. Klein(8)...................... 1,750,000 5.2%
Gayle Crowell(9)......................... 50,000 *
Peter Mills(10).......................... 4,656,103 13.9%
Michael J. Moritz(11).................... 3,384,021 10.1%
Daniel D. Springer(12)................... 50,000 *
Martin Roscheisen........................ 1,215,164 3.6%
All directors and executive officers
as a group (13
persons)(8)(9)(10)(11)(12) (13)..... 12,780,288 37.6%
</TABLE>
- ------------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and includes investment or voting power relating to the
securities. Shares of common stock subject to options, warrants or other
rights to purchase common stock that are currently exercisable or are
exercisable within 60 days after March 15, 2000, are deemed outstanding for
purpose of computing the percentage ownership of the persons holding such
options, warrants or other rights, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(2) At March 15, 2000, 1,366,715 shares held by Mr. Fletcher were vested, and
3,319,165 shares were unvested and subject to a right of repurchase in
favor of us. This right lapses over a period of four years from the date of
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<PAGE> 58
issuance and accelerates in some instances. Mr. Fletcher's address is 374
Genoa Drive, Redwood City, CA 94065.
(3) Represents 830,190 shares held by @Ventures Foreign Fund III, L.P.,
2,767,175 shares held by @Ventures III, L.P., 92,123 shares held by
@Ventures Investors, LLC, and 916,615 shares held by CMG@Ventures III, LLC.
The address for CMGI @Ventures is 100 Brickstone Square, 5th Floor,
Andover, MA 01810.
(4) Represents 63,732 shares held by Atlas Venture Entrepreneurs' Fund III,
L.P., and 2,931,200 shares held by Atlas Venture Fund III, L.P. The address
for Atlas Venture is 222 Berkeley Street, Boston, MA 02116.
(5) Bertelsmann Ventures' address is 813 Anacapa Street, Studio 111, Santa
Barbara, CA 93101.
(6) Represents 6,266 shares held by Sequoia 1997, 3,022,692 shares held by
Sequoia Capital VIII, 38,342 shares held by Sequoia International
Technology Partners VIII, 200,041 shares held by Sequoia International
Technology Partners VIII (Q), and 66,680 shares held by CMS Partners LLC.
The address of Sequoia Capital is 3000 Sand Hill Road, Building 4, Suite
280, Menlo Park, CA 94025.
(7) Mr. Hassan's address is 961 Duncan Street, San Francisco, CA 94131.
(8) At March 15, 2000, all of the shares held by Mr. Klein were unvested and
subject to a right of repurchase in favor of us. This right lapses over a
period of four years from the date of issuance and accelerates in some
instances.
(9) Represents 50,000 shares subject to options that are exercisable within 60
days. These options vest over a period of four years from the date of
issuance and accelerate in some instances.
(10) Includes 830,190 shares held by @Ventures Foreign Fund III, L.P., 2,767,175
shares held by @Ventures III, L.P., 92,123 shares held by @Ventures
Investors, LLC and 916,615 shares held by CMG@Ventures III, LLC. Mr. Mills
is a Managing Partner of CMGI @Ventures and thus may be deemed to be a
beneficial owner of these shares. Mr. Mills disclaims beneficial ownership
of these shares. Also includes 50,000 shares subject to options held by Mr.
Mills that are exercisable within 60 days. These options vest over a period
of four years from the date of issuance and accelerate in some instances.
(11) Represents 6,266 shares held by Sequoia 1997, 3,022,692 shares held by
Sequoia Capital VIII, 38,342 shares held by Sequoia International
Technology Partners VIII, 200,041 shares held by Sequoia International
Technology Partners VIII (Q), and 66,680 shares held by CMS Partners LLC.
Mr. Moritz is a general partner of Sequoia Capital and as such may be
deemed to be a beneficial owner of these shares. Mr. Moritz disclaims
beneficial ownership of these shares. Also includes 50,000 shares subject
to options held by Mr. Moritz that are exercisable within 60 days. These
options vest over a period of four years from the date of issuance and
accelerate in some instances.
(12) Represents 50,000 shares subject to options that are exercisable within 60
days. These options vest over a period of four years from the date of
issuance and accelerate in some instances.
(13) Includes 400,000 shares subject to options that are exercisable within 60
days and 3,225,000 shares subject to a right of repurchase in favor of us.
This right lapses over a period of four years from the date of issuance and
accelerates in some instances.
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<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of this offering, we will be authorized to issue
150,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of
undesignated preferred stock, $0.001 par value.
The following description of our capital stock is not complete and is
qualified in its entirety by our certificate of incorporation and bylaws, which
are included as exhibits to the registration statement, of which this prospectus
forms a part, and by the provisions of applicable Delaware law.
COMMON STOCK
As of March 15, 2000, we had 33,583,879 shares of common stock outstanding
and held of record by 120 stockholders, which includes the automatic conversion
of all of our shares of convertible preferred stock and the issuance of 437,500
of common stock upon the conversion of subordinated debt prior to the closing of
this offering. In addition, as of March 15, 2000, there were 2,711,453 shares of
common stock subject to outstanding options and 8,330 shares of common stock
subject to outstanding warrants.
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued after
the sale of the common stock offered by this prospectus may be entitled, holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the board of directors out of legally available
funds. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of eGroups, holders of common stock would be entitled to share in the
assets remaining after the payment of liabilities and the satisfaction of any
liquidation preference granted to the holders of any then outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the shares of common stock offered by us in this offering, when
issued and paid for, will be, fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that our board of directors may designate in the future.
PREFERRED STOCK
Upon the closing of this offering, the board of directors will have the
authority, without action by the stockholders, to designate and issue up to an
aggregate of 10,000,000 shares of preferred stock in one or more series, and to
designate the rights, preferences and privileges of each series. These rights
may be greater than those of the common stock. We cannot determine the actual
effect of the issuance of any shares of preferred stock upon the rights of
holders of common stock until the board of directors determines the specific
rights of the holders of the preferred stock. However, the effects might
include:
- Restricting dividends on the common stock;
- Diluting the voting power of the common stock;
- Impairing the liquidation rights of the common stock; or
- Delaying or preventing a change in control of us without further action
by the stockholders.
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<PAGE> 60
Upon the closing of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.
WARRANTS
In June 1999, we issued a warrant to purchase 8,330 shares of Series B
preferred stock to Comdisco, Inc., at an exercise price of $7.20 per share. This
warrant expires in June 2003.
REGISTRATION RIGHTS
We have entered into an investor rights agreement among us and some of our
stockholders. Under the terms of that agreement, the holders of 16,539,216
shares of the outstanding common stock, referred to as registrable securities,
are entitled to registration rights for their shares under the Securities Act.
These registration rights include the following:
- Beginning 180 days following the date of this prospectus, the holders of
a majority of the registrable securities may require us, subject to some
limitations, to file a registration statement covering their registrable
securities, provided that the anticipated aggregate offering price would
be at least $15,000,000.
- Most holders of registrable securities are entitled to piggyback
registration rights as part of any registration by us of securities for
our own account or the account of other security holders. If we propose
to register any shares of common stock under the Securities Act, the
holders of such piggyback registration rights are entitled to receive
notice of the registration and are entitled to include their shares in
the offering, with some exceptions.
- At any time after we become eligible to file a registration statement on
Form S-3, any holder of the registrable securities may require us to file
registration statements on Form S-3 under the Securities Act for a public
offering of registrable securities if the reasonably anticipated
aggregate offering price would exceed $1,000,000, with some exceptions.
Each of these registration rights has some conditions and limitations,
including the right of the underwriters in any underwritten offering to limit
the number of shares included in that registration. All registration rights
terminate either three years from the effective date of this offering or, with
respect to a particular holder, when the shares held by that holder either may
be sold under Rule 144 during any three-month period or represent less than one
percent of our outstanding voting stock. We are generally required to bear all
of the expenses of all such registrations, except underwriting discounts and
commissions. Registration of any of the shares entitled to registration rights
would result in such shares becoming freely tradable without restriction under
the Securities Act immediately upon effectiveness of such registration. The
investor rights agreement obligates us to indemnify the holders of registration
rights, with some exceptions.
EFFECT OF SOME PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS, AND
THE DELAWARE ANTI-TAKEOVER LAW
Various provisions of our Amended and Restated 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 us. In
addition, we are subject to Section 203 of the Delaware General Corporation Law,
which, with
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<PAGE> 61
some exceptions, prohibits a Delaware corporation from engaging in any business
combination involving any interested stockholder, unless:
- Prior to that date, the board of directors approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
- Upon consummation of the transaction that resulted in the stockholder
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, excluding for purposes of determining the
number of shares outstanding (1) shares owned by persons who are
directors and also officers, and (2) shares owned by employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer; or
- On or after that date, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Our certificate of incorporation and bylaws contain provisions that may
have the effect of delaying, deferring or preventing a change in control. These
provisions:
- Enable the board of directors, without further stockholder approval, to
designate and issue up to ten million shares of preferred stock;
- Prohibit the removal of directors without cause;
- Impose special notice requirements upon the right of stockholders to call
special meetings of stockholders;
- Prohibit stockholders from acting by written consent once this offering
closes;
- Prevent stockholders from filling vacancies on the board of directors;
- Require super-majority approval of the stockholders to effect amendments
to the bylaws and certain provisions of our certificate of incorporation;
and
- Require no less than 60 days' advance notice with respect to nominations
of directors or other matters to be voted on by stockholders other than
by or at the direction of the board of directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services, LLC.
NASDAQ NATIONAL MARKET LISTING
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "EGPS."
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<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have outstanding
shares of common stock. Of these shares, the
shares sold in the offering, plus any shares issued upon exercise of the
underwriters' over-allotment option, will be freely tradable without restriction
under the Securities Act, unless purchased by our "affiliates" as that term is
defined in Rule 144 under the Securities Act, generally, officers directors or
10% stockholders. The remaining 33,583,879 shares outstanding are "restricted
securities" within the meaning of Rule 144 under the Securities Act. Restricted
shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rules 144, 144(k) or 701 promulgated
under the Securities Act, which are summarized below. Sales of the restricted
shares in the public market, or the availability of these shares for sale, could
adversely affect the market price of the common stock.
All of these shares will be subject to "lock-up" agreements that will
prohibit these stockholders from offering, selling or otherwise disposing of any
of the shares of common stock owned by them for a period of 180 days after the
date of this offering, subject to the following exceptions applicable to
stockholders who are not officers of eGroups:
- 25% of a holder's shares may be sold on the earlier of 90 days after the
date of this offering or on the second trading day after the first public
release of our quarterly results if the last recorded sale price on the
Nasdaq National Market for 20 of the 30 trading days ending on that date
is at least twice the price per share in this initial public offering;
and
- An additional 25% of each holder's shares may be sold 135 days after the
date of this offering if the price per share of common stock has achieved
the same target level.
However, Donaldson, Lufkin & Jenrette Securities Corporation may, in its
sole discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements. Upon expiration of the lock-up agreements,
shares will become eligible for sale pursuant to Rule 144(k),
shares will become eligible for sale under Rule 144 and
shares will become eligible for sale under Rule 701.
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
(LISTED BY DATE UPON WHICH SHARES BECOME SALEABLE)
<TABLE>
<CAPTION>
APPROXIMATE NUMBER
OF SHARES ELIGIBLE
DAY AFTER DATE OF THIS PROSPECTUS ON EFFECTIVENESS FOR FUTURE SALE
<S> <C>
90 days after the effective date or second trading day
following first public release of quarterly
earnings(1).............................................
135 days after the effective date(1)........................
180 days after the effective date (expiration of lock-up)...
</TABLE>
- ------------------------------
(1) The number of shares listed may be offered, sold or traded, provided that
the last recorded sale price per share for 20 of the 30 trading days ending
on such date is at least twice the initial public offering price per share.
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<PAGE> 63
In general, under Rule 144, and beginning after the expiration of the
lock-up agreements 180 days after the date of this prospectus, a person, or
persons whose shares are combined, who has beneficially owned restricted
securities for at least one year would be entitled to sell within any three-
month period a number of shares that do not exceed the greater of the following:
- one percent of the number of shares of common stock then outstanding that
will equal approximately shares immediately after this
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to some manner of sale provisions and
notice requirements and to the availability of current public information about
us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144. Persons deemed to be
affiliates must always sell pursuant to Rule 144, even after the applicable
holding periods have been satisfied.
We are unable to estimate the number of shares that will be sold under Rule
144 since this will depend on the market price for our common stock, the
personal circumstances of the sellers and other factors. Prior to this offering,
there has been no public market for the common stock, and we cannot assure you
that a significant public market for the common stock will develop or be
sustained after the offering. Any future sale of substantial amounts of the
common stock in the open market may adversely affect the market price of the
common stock offered under this prospectus.
Any of our employees or professionals who purchased his or her shares under
a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume-limitation, or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus.
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our stock plans. We
expect to file the registration statement covering shares offered under our
stock incentive plans within 180 days after the date of this prospectus, thus
permitting the resale of such shares by non-affiliates in the public market
without restriction under the Securities Act.
In addition, after this offering, holders of shares will be
entitled to rights relating to registration of their shares under the Securities
Act. Registration of such shares would result in these shares, except for shares
purchased by our affiliates, becoming freely tradable without restriction under
the Securities Act immediately on the effectiveness of registration.
61
<PAGE> 64
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated , 2000, the underwriters named below, whom Donaldson,
Lufkin & Jenrette Securities Corporation, Chase Securities Inc. and FleetBoston
Robertson Stephens Inc. represent, have severally agreed to purchase from us the
respective number of shares of common stock set forth opposite their names
below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS: OF SHARES:
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Chase Securities Inc. ......................................
FleetBoston Robertson Stephens Inc. ........................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase and accept delivery of the shares of common stock in
the offering are subject to approval by their counsel of legal matters
concerning the offering and to conditions precedent that must be satisfied by
us. The underwriters are obligated to purchase and accept delivery of all the
shares of common stock in the offering, other than those shares covered by the
over-allotment option described below, if any are purchased.
The underwriters initially propose to offer some of the shares of common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers at the initial public
offering price less a concession not in excess of $ per share. The
underwriters may allow, and those dealers may re-allow, a concession not in
excess of $ per share. After the initial offering of the common stock to the
public, the public offering price and other selling terms may be changed by the
representatives at any time without notice. The underwriters do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
An electronic prospectus will be available on the web site maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
that web site relating to this offering is not part of this prospectus and has
not been approved or endorsed by us or the underwriters, and should not be
relied on by prospective investors.
We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of additional shares of common stock at
the initial public offering price less underwriting discounts and commissions.
The underwriters may exercise the option solely to cover over-allotments, if
any, made in connection with this offering. To the extent that the underwriters
exercise the option, each underwriter will become obligated, subject to
conditions contained in the underwriting agreement, to purchase its pro rata
portion of such additional shares based on the underwriters' percentage
underwriting commitment as indicated in the above table.
62
<PAGE> 65
The following table provides the compensation payable to the underwriters
by us in connection with this offering. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares of our common stock.
<TABLE>
<CAPTION>
NO FULL
EXERCISE EXERCISE
<S> <C> <C>
Per share.................................................
Total.....................................................
</TABLE>
We will pay the offering expenses, estimated to be $ .
We have agreed to indemnify the underwriters against liabilities which may
arise in connection with this offering, including liabilities under the
Securities Act, or to contribute to payments that the underwriters may be
required to make with respect to these liabilities.
We, our executive officers, directors, stockholders and option holders are
subject to lock-up agreements that will prohibit them from offering, selling or
otherwise disposing of any of the shares of common stock owned by them for a
period of 180 days after the date of this offering, subject to the following
exceptions applicable to stockholders who are not officers of eGroups:
- 25% of a holder's shares may be sold on the earlier of 90 days after the
date of this offering or on the second trading day after the first public
release of our quarterly results if the last recorded sale price on the
Nasdaq National Market for 20 of the 30 trading days ending on that date
is at least twice the price per share in this initial public offering;
and
- an additional 25% of each holder's shares may be sold 135 days after the
date of this offering if the price per share of common stock has achieved
the same target level.
However, Donaldson, Lufkin & Jenrette Securities Corporation may, in its
sole discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements.
In addition, during this 180-day period, we have also agreed not to file
any registration statement pertaining to, and each of our executive officers,
directors and stockholders have agreed not to make any demand for, or exercise
any class right pertaining to, the registration of any shares of common stock or
any securities convertible into or exercisable or exchangeable for common stock
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
Prior to this offering, there has been no established trading market for
our common stock. The initial public offering price of the shares of our common
stock offered by this prospectus will be determined by negotiation among us and
the representatives of the underwriters. The factors to be considered in
determining the initial public offering price include:
- The history of and the prospects for the industry in which we compete;
- Our past and present operations;
- Our historical results of operations;
- Our prospects for future earnings;
- The recent market prices of securities of generally comparable companies;
and
- The general condition of the securities markets at the time of the
offering.
At our request, the underwriters have reserved up to 15% of the shares of
common stock to be sold in this offering for sale to some of our members who
have registered with our service. No shares
63
<PAGE> 66
have been reserved for sale to our directors or officers. Through this directed
share program, we intend to ensure that those members that have supported us, or
who are in a position to support us in the future, have the opportunity to
purchase our common stock at the same price that we are offering our shares to
the general public. Indications of interest will be sought by means of a written
notice, which conforms to Rule 134 under the Securities Act, accompanied by a
copy of this prospectus. Prospective participants will be permitted to
participate in this offering at the initial public offering price presented on
the cover page of this prospectus. No commitment to purchase shares by any
participant in the directed share program will be accepted until after the
registration statement of which this prospectus is part is effective and an
initial public offering price has been established. The number of shares of our
common stock available for sale to the general public will be reduced by the
number of shares sold through the directed share program. Any shares reserved
for the directed share program which are not purchased will be offered by the
underwriters to the general public on the same basis as the other shares offered
by this prospectus.
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "EGPS."
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares of common stock included in this offering may not be
offered or sold, directly or indirectly, nor may this prospectus or any other
offering material or advertisements in connection with the offer and sale of any
of these shares of common stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. We advise persons who receive this
prospectus to inform themselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus. This prospectus is not
an offer to sell or a solicitation of an offer to buy any shares of common stock
included in this offering in any jurisdiction where an offer or solicitation is
unlawful.
As part of this offering, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may over-allot this offering, creating a
syndicate short position. The underwriters may bid for and purchase our shares
of common stock in the open market to cover such syndicate short positions or to
stabilize the price of our common stock. In addition, the underwriting syndicate
may reclaim selling concessions from syndicate members and selected dealers if
they repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.
64
<PAGE> 67
LEGAL MATTERS
The validity of the common stock we are offering will be passed upon for us
by Perkins Coie LLP, San Francisco, California. Selected legal matters in
connection with this offering will be passed upon for the underwriters by
Pillsbury Madison & Sutro LLP, San Francisco, California. As of the consummation
of this offering, an investment partnership associated with, and some partners
of, Perkins Coie LLP own an aggregate of 9,718 shares of our Series D Preferred
Stock, which will convert into 9,718 shares of common stock prior to the closing
of this offering.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at July 31, 1999 and January 31, 2000, and for the period
from our inception on June 5, 1998 to July 31, 1999 and for the six months ended
January 31, 2000, as set forth in their report. We have included our
consolidated financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given upon
their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC, a registration statement on Form S-1 under the
Securities Act relating to the shares of common stock we are offering. This
prospectus does not contain all the information provided in the registration
statement and the exhibits to it. For further information with respect to
eGroups, Inc., and our common stock, we refer you to the registration statement
and to the exhibits filed with the registration statement. Statements contained
in this prospectus relating to the contents of any contract or other document
are not necessarily complete, and in each instance we make reference to the copy
of such contract or other document that we have filed as an exhibit to the
registration statement, each of these statements being fully qualified by that
reference. Anyone may inspect a copy of the registration statement without
charge at the Public Reference Section of the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies of all or
any portion of the registration statement from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
prescribed fees. The SEC maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC.
65
<PAGE> 68
EGROUPS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statement of Redeemable Convertible Preferred
Stock and Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 69
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
eGroups, Inc.
We have audited the accompanying consolidated balance sheets of eGroups,
Inc. as of July 31, 1999 and January 31, 2000, and the related consolidated
statements of operations, redeemable convertible preferred stock and
stockholders' equity, and cash flows for the period from inception (June 5,
1998) to July 31, 1999 and for the six-month period ended January 31, 2000.
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 auditing standards generally
accepted in the United States. 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 consolidated financial position of eGroups, Inc.
at July 31, 1999 and January 31, 2000, and the consolidated results of its
operations and its cash flows for the period from inception (June 5, 1998) to
July 31, 1999 and for the six-month period ended January 31, 2000, in conformity
with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 25, 2000
F-2
<PAGE> 70
EGROUPS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
JULY 31, JANUARY 31, JANUARY 31,
1999 2000 2000
----------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 4,957,231 $ 44,586,059
Accounts receivable, net of allowance for doubtful
accounts of $10,000 and $150,000 at July 31,
1999 and January 31, 2000...................... 329,127 2,157,805
Prepaids and other current assets................. 301,404 340,797
----------- ------------
Total current assets........................... 5,587,762 47,084,661
Property and equipment, net......................... 950,594 2,697,423
Other assets, net................................... 217,595 2,429,171
----------- ------------
Total assets................................... $ 6,755,951 $ 52,211,255
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 708,065 $ 1,118,346
Accrued liabilities............................... 668,113 905,324
Deferred revenue.................................. -- 47,568
Short-term debt................................... 135,454 136,344
Short-term capital lease obligations.............. 23,030 299,240
----------- ------------
Total current liabilities...................... 1,534,662 2,506,822
Long-term capital lease obligations................. 54,662 938,162
Long-term debt...................................... 169,046 7,211,143
Commitments.........................................
Redeemable convertible preferred stock, $0.001 par
value, 7,300,000 shares authorized, 7,280,811
shares issued and outstanding at July 31, 1999 (no
shares authorized, issued or outstanding at
January 31, 2000 and pro forma)................... 4,236,723 -- $ --
Stockholders' equity:
Convertible preferred stock, $0.001 par value,
issuable in series; 5,220,000 and 17,500,000
shares authorized at July 31, 1999 and January
31, 2000; 5,176,772 and 16,539,216 (liquidation
preference of $51,979,337) shares issued and
outstanding at July 31, 1999 and January 31,
2000 (10,000,000 shares authorized, no shares
issued or outstanding pro forma)............... 5,177 16,539 --
Common stock, $0.001 par value; 43,000,000 shares
authorized; 12,453,628 and 16,244,195 shares
issued and outstanding at July 31, 1999 and
January 31, 2000 (150,000,000 shares
authorized, 32,783,411 shares issued and
outstanding pro forma)......................... 12,454 16,244 32,783
Additional paid-in capital........................ 11,717,496 75,296,764 75,296,764
Notes receivable from stockholders................ (14,330) (2,159,493) (2,159,493)
Deferred stock compensation....................... (4,315,327) (12,196,265) (12,196,265)
Accumulated deficit............................... (6,644,612) (19,418,661) (19,418,661)
----------- ------------ ------------
Total stockholders' equity..................... 760,858 41,555,128 $ 41,555,128
----------- ------------ ============
Total liabilities and stockholders' equity..... $ 6,755,951 $ 52,211,255
=========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 71
EGROUPS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS ENDED JANUARY 31,
(JUNE 5, 1998) TO -----------------------------
JULY 31, 1999 1999 2000
----------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue..................................... $ 488,700 $ 42,535 $ 3,463,636
Cost of revenue............................. 221,832 86,464 324,471
----------- ----------- ------------
Gross profit (loss)......................... 266,868 (43,929) 3,139,165
Operating expenses:
Product development....................... 1,282,240 204,480 3,717,296
Sales and marketing....................... 2,688,900 303,503 4,227,690
General and administrative................ 2,124,727 550,120 3,804,245
Amortization of deferred stock
compensation(1)........................ 974,754 138,294 3,994,627
----------- ----------- ------------
Total operating expenses............... 7,070,621 1,196,397 15,743,858
----------- ----------- ------------
Operating loss.............................. (6,803,753) (1,240,326) (12,604,693)
Interest and other income................... 181,871 44,255 348,509
Interest and other expense.................. (22,730) (4,638) (517,865)
----------- ----------- ------------
Total other income (expense)........... 159,141 39,617 (169,356)
----------- ----------- ------------
Net loss.................................... (6,644,612) (1,200,709) (12,774,049)
Accretion on redeemable convertible
preferred
stock..................................... (212,625) (33,861) (128,934)
----------- ----------- ------------
Net loss attributable to common
stockholders.............................. $(6,857,237) $(1,234,570) $(12,902,983)
=========== =========== ============
Basic and diluted net loss per share
attributable to common stockholders....... $ (1.25) $ (0.29) $ (1.61)
=========== =========== ============
Shares used in per share calculation........ 5,465,400 4,302,949 8,011,140
Pro forma basic and diluted net loss per
share attributable to common stockholders
(unaudited)............................... $ (0.49) $ (0.56)
=========== ============
Shares used in pro forma per share
calculation (unaudited)................... 13,641,257 22,642,636
</TABLE>
- ------------------------------
(1) See Note 8 for a description of the amortization of deferred stock
compensation.
See accompanying notes.
F-4
<PAGE> 72
EGROUPS, INC.
CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
---------------------------------------------------------
REDEEMABLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ -------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ----------- ---------- ------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception (June 5,
1998)........................... -- $ -- -- $ -- -- $ -- $ --
Issuances of common stock to
founders at $0.005 to $0.032 per
share........................... -- -- -- -- 11,490,340 11,490 214,725
Issuances of common stock and
options to consultants for cash
and services at $0.005 to $0.30
per share....................... -- -- -- -- 522,427 523 455,380
Issuance of Series A preferred
stock at $0.50 per share, net of
issuance costs of $18,375....... -- -- 1,620,000 1,620 -- -- 790,005
Issuance of Series B preferred
stock at $1.44 per share, net of
issuance costs of $12,545....... -- -- 3,556,772 3,557 -- -- 5,104,050
Issuance of Series C redeemable
preferred stock at $0.56 per
share, net of issuance costs of
$25,088......................... 7,280,811 4,024,098 -- -- -- -- --
Warrants issued in connection with
debt............................ -- -- -- -- -- -- 51,498
Accretion of redeemable
convertible preferred stock..... -- 212,625 -- -- -- -- (212,625)
Issuances of common stock upon
exercise of options............. -- -- -- -- 647,737 648 34,520
Repurchases of common stock upon
termination..................... -- -- -- -- (206,876) (207) (10,138)
Deferred stock compensation....... -- -- -- -- -- -- 5,290,081
Amortization of deferred stock
compensation.................... -- -- -- -- -- -- --
Net loss and comprehensive loss... -- -- -- -- -- -- --
---------- ----------- ---------- ------- ---------- ------- -----------
Balance at July 31, 1999 (carried
forward)........................ 7,280,811 4,236,723 5,176,772 5,177 12,453,628 12,454 11,717,496
<CAPTION>
STOCKHOLDERS' EQUITY
----------------------------------------------------------
NOTES
RECEIVABLE DEFERRED TOTAL
FROM STOCK ACCUMULATED STOCKHOLDERS'
STOCKHOLDERS COMPENSATION DEFICIT EQUITY
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at inception (June 5,
1998)........................... $ -- $ -- $ -- $ --
Issuances of common stock to
founders at $0.005 to $0.032 per
share........................... -- -- -- 226,215
Issuances of common stock and
options to consultants for cash
and services at $0.005 to $0.30
per share....................... -- -- -- 455,903
Issuance of Series A preferred
stock at $0.50 per share, net of
issuance costs of $18,375....... -- -- -- 791,625
Issuance of Series B preferred
stock at $1.44 per share, net of
issuance costs of $12,545....... -- -- -- 5,107,607
Issuance of Series C redeemable
preferred stock at $0.56 per
share, net of issuance costs of
$25,088......................... -- -- -- --
Warrants issued in connection with
debt............................ -- -- -- 51,498
Accretion of redeemable
convertible preferred stock..... -- -- -- (212,625)
Issuances of common stock upon
exercise of options............. (14,330) -- -- 20,838
Repurchases of common stock upon
termination..................... -- -- -- (10,345)
Deferred stock compensation....... -- (5,290,081) -- --
Amortization of deferred stock
compensation.................... -- 974,754 -- 974,754
Net loss and comprehensive loss... -- -- (6,644,612) (6,644,612)
----------- ------------ ------------ ------------
Balance at July 31, 1999 (carried
forward)........................ (14,330) (4,315,327) (6,644,612) 760,858
</TABLE>
F-5
<PAGE> 73
EGROUPS, INC.
CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
---------------------------------------------------------
REDEEMABLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ -------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
- ---------------------------------- ---------- ----------- ---------- ------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1999 (brought
forward)........................ 7,280,811 $ 4,236,723 5,176,772 $ 5,177 12,453,628 $12,454 $11,717,496
Issuances of common stock upon
exercise of options............. -- -- -- -- 4,001,489 4,001 2,274,925
Issuances of common stock and
options to consultants for cash
and services at $0.068 to $5.00
per share....................... -- -- -- -- 4,998 5 927,146
Accretion of redeemable
convertible preferred stock..... -- 128,934 -- -- -- -- (128,934)
Conversion of redeemable preferred
to nonredeemable preferred
stock........................... (7,280,811) (4,365,657) 7,280,811 7,281 -- -- 4,358,376
Issuance of Series D preferred
stock at $10.29 per share, net
of issuance costs of $27,420.... -- -- 4,081,633 4,081 -- -- 41,968,502
Warrants issued in connection with
debt............................ -- -- -- -- -- -- 2,327,500
Repurchases of common stock upon
termination..................... -- -- -- -- (215,920) (216) (23,812)
Deferred stock compensation....... -- -- -- -- -- -- 11,875,565
Amortization of deferred stock
compensation.................... -- -- -- -- -- -- --
Net loss and comprehensive loss... -- -- -- -- -- -- --
---------- ----------- ---------- ------- ---------- ------- -----------
Balance at January 31, 2000....... -- $ -- 16,539,216 $16,539 16,244,195 $16,244 $75,296,764
========== =========== ========== ======= ========== ======= ===========
<CAPTION>
STOCKHOLDERS' EQUITY
----------------------------------------------------------
NOTES
RECEIVABLE DEFERRED TOTAL
FROM STOCK ACCUMULATED STOCKHOLDERS'
STOCKHOLDERS COMPENSATION DEFICIT EQUITY
- ---------------------------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at July 31, 1999 (brought
forward)........................ $ (14,330) $ (4,315,327) $ (6,644,612) $ 760,858
Issuances of common stock upon
exercise of options............. (2,148,153) -- -- 130,773
Issuances of common stock and
options to consultants for cash
and services at $0.068 to $5.00
per share....................... -- -- -- 927,151
Accretion of redeemable
convertible preferred stock..... -- -- -- (128,934)
Conversion of redeemable preferred
to nonredeemable preferred
stock........................... -- -- -- 4,365,657
Issuance of Series D preferred
stock at $10.29 per share, net
of issuance costs of $27,420.... -- -- -- 41,972,583
Warrants issued in connection with
debt............................ -- -- -- 2,327,500
Repurchases of common stock upon
termination..................... 2,990 -- -- (21,038)
Deferred stock compensation....... -- (11,875,565) -- --
Amortization of deferred stock
compensation.................... -- 3,994,627 -- 3,994,627
Net loss and comprehensive loss... -- -- (12,774,049) (12,774,049)
----------- ------------ ------------ ------------
Balance at January 31, 2000....... $(2,159,493) $(12,196,265) $(19,418,661) $ 41,555,128
=========== ============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 74
EGROUPS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS ENDED JANUARY 31,
(JUNE 5, 1998) TO -----------------------------
JULY 31, 1999 1999 2000
----------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................ $(6,644,612) $(1,200,709) $(12,774,049)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 100,613 16,302 356,334
Noncash expenses from stock, debt and warrant
issuances.................................. 1,426,897 175,654 5,149,888
Changes in assets and liabilities:
Accounts receivable........................ (329,127) (26,033) (1,828,678)
Prepaids and other current assets.......... (301,404) (20,909) (39,393)
Other assets, net.......................... (187,266) (3,330) (118,076)
Accounts payable........................... 708,065 32,240 410,281
Accrued liabilities........................ 668,113 77,971 237,211
Deferred revenue........................... -- 1,401 47,568
----------- ----------- ------------
Net cash used in operating activities.... (4,558,721) (947,413) (8,558,914)
INVESTING ACTIVITIES:
Capital expenditures............................ (1,038,828) (218,785) (2,098,107)
FINANCING ACTIVITIES:
Principal payments of capital lease and debt
financing..................................... (2,740) -- (214,940)
Proceeds from capital lease obligations......... 80,432 -- 1,217,872
Proceeds from issuances of debt................. 304,500 100,000 7,199,765
Proceeds from issuances of preferred stock,
net........................................... 5,899,232 9,906,520 41,972,583
Proceeds from issuances of redeemable preferred
stock, net.................................... 4,024,098 -- --
Proceeds from issuances of common stock......... 259,603 203,849 131,607
Repurchase of common stock...................... (10,345) -- (21,038)
----------- ----------- ------------
Net cash provided by financing
activities............................ 10,554,780 10,210,369 50,285,849
----------- ----------- ------------
Net increase in cash and cash equivalents....... 4,957,231 9,044,171 39,628,828
Cash and cash equivalents at beginning of
period........................................ -- -- 4,957,231
----------- ----------- ------------
Cash and cash equivalents at end of period...... $ 4,957,231 $ 9,044,171 $ 44,586,059
=========== =========== ============
SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock for other assets....... $ 26,213 $ 26,213 $ --
=========== =========== ============
Issuance of common stock for notes receivable... $ 14,330 $ -- $ 2,148,153
=========== =========== ============
Deferred stock compensation..................... $ 5,290,081 $ 720,718 $ 11,875,565
=========== =========== ============
Deferred debt interest in connection with
issuance of warrants and conversion option.... $ 51,498 $ -- $ 2,327,500
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......................... $ 11,715 $ 4,732 $ 147,414
=========== =========== ============
</TABLE>
See accompanying notes.
F-7
<PAGE> 75
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
On June 5, 1998, eGroups, Inc., "eGroups", was incorporated in the state of
Delaware under the name Findmail Communications, Inc. eGroups offers a widely
used email group communication platform on the Internet, with an integrated set
of web-based features that support dynamic groups. eGroups enables advertisers
and direct marketers to reach consumers by delivering targeted email advertising
solutions. The financial operations of eGroups for the period from inception
(June 5, 1998) to July 31, 1998 were insignificant, with a net loss of
approximately $65,000 in the period, and have been combined with eGroups'
results for the period from inception (June 5, 1998) to July 31, 1999. The
accompanying consolidated financial statements include the accounts of eGroups
and its wholly owned subsidiary, ONElist, Inc., which merged with eGroups on
November 30, 1999 (see Note 2), and the accounts of its wholly owned foreign
subsidiaries in Germany and Japan. The historical consolidated financial
statements of eGroups prior to the merger date have been restated to reflect the
merger with ONElist, Inc., which has been accounted for as a pooling of
interests.
eGroups has sustained net losses and negative cash flows from operations
since inception. eGroups' ability to meet its obligations in the ordinary course
of business is dependent upon its ability to establish profitable operations and
to raise additional financing through public or private equity financings,
collaborative or other arrangements with corporate sources, or other sources of
financing. In the six months ended January 31, 2000, eGroups received financing
of approximately $42,000,000 through the issuance of Series D convertible
preferred stock and $7,000,000 through issuance of subordinated debt. Management
believes that these funds will be sufficient to enable eGroups to meet planned
expenditures through at least January 31, 2001. If anticipated operating results
are not achieved, and additional financial resources are not available on terms
acceptable to eGroups, management intends to delay or reduce expenditures so as
not to require such resources.
INTERIM FINANCIAL INFORMATION
In the opinion of management, the unaudited financial statements for the
six months ended January 31, 1999 have been prepared on the same basis as the
audited financial statements and contain all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the unaudited
interim results when read in conjunction with the audited financial statements
and the accompanying notes. Operating results for any interim period are not
necessarily indicative of results to be expected for the entire year or for any
other subsequent period.
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 amounts reported in the financial statements and the
accompanying notes. Actual results could differ materially from these estimates.
F-8
<PAGE> 76
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
eGroups derives its revenue principally from short-term advertising
contracts in which eGroups guarantees a minimum number of impressions (a view of
an advertisement by a member), for a fixed fee. Advertising revenue is
recognized using either the ratio of impressions delivered to the total
guaranteed impressions or on a straight-line basis over the term of the
contract, whichever is less, provided that eGroups does not have any significant
remaining obligations and collection of the resulting receivable is probable. To
the extent that minimum guaranteed impression levels or other obligations are
not being met, eGroups defers recognition of the corresponding revenue until
guaranteed levels are being achieved or the obligations are satisfied. For
advertising contracts that do not involve guaranteed impressions, revenue is
recognized based on actual impressions delivered. Provisions for bad debts and
additional discounts are provided at the time of revenue recognition based upon
historical experience and current economic conditions. Through January 31, 2000,
the majority of eGroups' advertising contracts have ranged from several weeks to
two months in duration.
eGroups has also derived a portion of its revenue from short-term
advertising contracts negotiated by third-party advertising brokers. eGroups
records as revenue its contractual percentage of the total revenue generated
from the delivery of advertisements, net of the commission taken by the
advertising broker. Such revenue is recognized in the period in which the
advertisement is delivered, provided that no significant obligations remain and
collection of the resulting receivable is probable. To the extent the
advertising broker does not collect billings from the advertisers, or grant
additional discounts, eGroups is not at risk for its contractual percentage of
such bad debts and additional discounts. Net revenue derived from these
agreements represented 44%, 0% and 22% of eGroups' revenue for the period from
inception (June 5, 1998) to July 31, 1999 and the six-month periods ended
January 31, 1999 and January 31, 2000.
Revenue also includes sponsorship revenue under contracts in which eGroups
commits to provide sponsors with a variety of promotional opportunities in
addition to traditional banner advertising. In a typical sponsorship agreement,
eGroups provides sponsors with a variety of additional promotional activities,
such as the delivery of impressions on its website through banner, button or
text-link advertising, sometimes granting exclusive placement on specific web
pages. The portion of sponsorship revenue that is recognized in the period in
which the advertisement is displayed is the ratio of impressions delivered over
the total guaranteed impressions or the straight-line basis over the term of the
contract, provided that no significant obligations remain and the collection of
the resulting receivable is probable.
eGroups also derives revenue from the delivery of permission-based, direct
marketing email campaigns. Such revenue is recognized upon the delivery of the
email advertisements at the lesser of the ratio of emails delivered over the
total guaranteed number of emails or on a straight-line basis over the term of
the contract.
eGroups has not recognized any revenue related to the nonmonetary exchange
of advertising for advertising as such exchanges were not objectively
determinable.
F-9
<PAGE> 77
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CERTAIN RISKS AND CONCENTRATIONS
eGroups has a limited operating history and its prospects are subject to
the risks, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets such as Internet services. These risks include the difficulty
of developing and extending the eGroups brand, competitive challenges posed by
other group communication services, fluctuations in operating results,
dependence on advertising revenues, and the difficulty in maintaining and
increasing the level of traffic to the eGroups networks and online services.
eGroups' revenue is principally derived from the sale of online advertising, the
market for which is highly competitive and rapidly changing. Significant changes
in the industry or changes in customer buying behavior could adversely affect
operating results. In the event that eGroups does not successfully implement its
business plan, certain assets may not be recoverable.
For the period from inception (June 5, 1998) to July 31, 1999, revenue from
eGroups' two largest customers accounted for approximately 44% and 37% of total
revenue. For the six-month period ended January 31, 2000, revenue from eGroups'
largest customer accounted for approximately 20% of total revenue. At July 31,
1999, one customer accounted for approximately 53% of the net accounts
receivable balances. At January 31, 2000, two customers accounted for 27% and
10% of net accounts receivable balances. eGroups generally does not require
collateral and maintains allowances for potential credit losses. Such losses
have been insignificant.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated amortization
and depreciation which is provided using the straight-line method over the
estimated useful lives of the assets, generally three to seven years. Leasehold
improvements are amortized over the lesser of the term of the lease or the
estimated useful life of the asset.
ADVERTISING EXPENSES
Advertising is expensed as incurred. The costs of producing advertising are
incurred and expensed during production. The costs of communicating advertising
are incurred and expensed as the advertisement is broadcast in accordance with
Statement of Position No. 93-7, "Reporting on Advertising Costs." Advertising
expense was approximately $128,000 for the period from inception (June 5, 1998)
to July 31, 1999, and approximately $194,000 for the six-month period ended
January 31, 2000.
CASH AND CASH EQUIVALENTS
eGroups considers all highly liquid investments with an original maturity
from the date of purchase of three months or less to be cash equivalents. As of
July 31, 1999 and January 31, 2000, cash equivalents consisted primarily of
investments in money market funds. To date, eGroups has not experienced losses
on any of its investments.
F-10
<PAGE> 78
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of eGroups' cash and cash equivalents, accounts
receivable, accounts payable, and accrued liabilities approximate fair value
because of their short maturities. The carrying amount of eGroups debt and
capital lease obligations approximates the fair value of such instruments based
upon management's best estimate of interest rates that would be available for
similar debt obligations at January 31, 2000.
NET LOSS PER SHARE
Basic and diluted net loss per share is presented in conformity with the
Financial Accounting Standards Board's ("FASB") Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). Pursuant to the
Securities and Exchange Commission ("SEC") Accounting Bulletin No. 98, common
stock and convertible preferred 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,
eGroups has not had any issuances or grants for nominal consideration.
In accordance with SFAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of common shares outstanding during
the period, less the weighted-average number of shares of common stock issued to
founders, investors, and employees that are subject to repurchase. Shares
subject to repurchase have been excluded as these shares must be returned to
eGroups if specified conditions are not met. Basic and diluted pro forma net
loss per share, as presented in the statements of operations, have been computed
as described above and also give effect, under SEC guidance, to the conversion
of the convertible preferred stock and redeemable convertible preferred stock
(using the if-converted method) from the original date of issuance. The
F-11
<PAGE> 79
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
following table presents the calculation of basic and diluted and pro forma
basic and diluted net loss per share:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JUNE 5, 1998) TO SIX MONTHS ENDED JANUARY 31,
JULY 31, -----------------------------
1999 1999 2000
----------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Net loss................................... $(6,644,612) $(1,200,709) $(12,774,049)
Accretion on redeemable convertible
preferred
stock.................................... (212,625) (33,861) (128,934)
----------- ----------- ------------
Net loss attributable to common
stockholders............................. $(6,857,237) $(1,234,570) $(12,902,983)
=========== =========== ============
Basic and diluted:
Weighted-average shares of common stock
outstanding........................... 9,651,015 8,254,854 15,828,528
Less: weighted-average shares subject to
repurchase............................ (4,185,615) (3,951,905) (7,817,388)
----------- ----------- ------------
Weighted-average shares used in computing
basic and diluted net loss per share..... 5,465,400 4,302,949 8,011,140
=========== =========== ============
Basic and diluted net loss per share....... $ (1.25) $ (0.29) $ (1.61)
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION SIX MONTHS
(JUNE 5, 1998) TO ENDED
JULY 31, JANUARY 31,
1999 2000
----------------- ------------
<S> <C> <C> <C>
Net loss.................................. $(6,644,612) $(12,774,049)
=========== ============
Pro forma basic and diluted:
Shares used above....................... 5,465,400 8,011,140
Pro forma adjustment to reflect
weighted-average effect of assumed
conversion of convertible preferred
stock (unaudited).................... 8,175,857 14,631,496
----------- ------------
Shares used in computing pro forma basic
and diluted net loss per share
(unaudited)............................. 13,641,257 22,642,636
=========== ============
Pro forma basic and diluted net loss per
share (unaudited)....................... $ (0.49) $ (0.56)
=========== ============
</TABLE>
eGroups has excluded all convertible preferred stock, redeemable
convertible preferred stock, warrants for convertible preferred stock,
outstanding stock options, and shares subject to repurchase from the calculation
of diluted net loss per share because all such securities are antidilutive for
all periods presented. If eGroups' initial public offering is consummated, all
of the convertible preferred stock outstanding will automatically be converted
into common stock. Unaudited pro forma stockholders' equity at January 31, 2000,
as adjusted for the assumed conversion of convertible
F-12
<PAGE> 80
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
preferred stock based on the shares of convertible preferred stock outstanding
at January 31, 2000, is disclosed on the balance sheet.
The total number of shares excluded from the calculation of diluted net
loss per share was as follows (on an as-converted-to-common basis):
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 2000
----------- -----------
<S> <C> <C>
Common stock subject to repurchase.................. 7,197,104 9,902,047
Preferred stock..................................... 12,457,583 16,539,216
Common stock options outstanding.................... 2,816,835 1,951,190
Warrants to purchase preferred stock................ 8,330 445,830
----------- ----------
22,479,852 28,838,283
=========== ==========
</TABLE>
INCOME TAXES
Since incorporation, eGroups has recognized income taxes under the
liability method. Deferred income taxes are recognized for differences between
the financial statement and tax basis of assets and liabilities at enacted
statutory tax rates in effect for the years in which the differences are
expected to reverse. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. In
addition, valuation allowances are established when necessary to reduce deferred
tax assets to the amounts expected to be realized.
STOCK-BASED COMPENSATION
As permitted by the FASB Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), eGroups accounts
for employee stock-based compensation in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and
related interpretations in accounting for its stock-based compensation plans.
Under APB 25, when the exercise price of eGroups' employee stock awards equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized. Stock compensation related to non-employees is based on
the fair value of the related stock or options in accordance with SFAS 123 and
its interpretations.
COMPREHENSIVE LOSS
To date, comprehensive loss has been the same as net loss and the
accumulated deficit is the same as the accumulated comprehensive loss.
SEGMENT INFORMATION
eGroups has organized its operations into a single operating segment, the
development of group communication services on the Internet. eGroups derives the
significant majority of its revenues from operations in the United States. At
January 31, 2000, no material assets were held outside of the United States.
F-13
<PAGE> 81
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOFTWARE DEVELOPED FOR INTERNAL USE
Through January 31, 2000, capitalizable costs incurred have not been
significant for any development project. Accordingly, eGroups has charged all
costs to product development expense in the periods they were incurred.
RECENT PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 requires eGroups to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through net income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of the derivative are either offset
against the change in fair value of assets, liabilities, or firm commitments
through earnings, or recognized in other comprehensive income until the hedged
item is recognized in earnings. Any ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. SFAS 133 is effective
for years beginning after June 15, 2000. eGroups does not currently hold any
derivatives and does not expect this pronouncement to materially impact the
results of its operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of the
Staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. eGroups believes that its current revenue
recognition principles comply with SAB 101.
2. MERGER WITH ONELIST
On November 30, 1999, eGroups completed its merger with ONElist, Inc.
("ONElist"), a privately held company that operates in the Internet group
communication business. ONElist commenced operations in June 1998. eGroups
exchanged all of the outstanding common stock of ONElist for 8,318,629 shares of
eGroups common stock at an exchange ratio of 3.12392 shares of eGroups common
stock for each share of ONElist common stock, and exchanged all of the
outstanding Series A redeemable convertible preferred stock of ONElist for
7,280,811 shares of eGroups Series C redeemable convertible preferred stock.
eGroups also assumed all outstanding stock options to acquire 1,304,182 shares
of ONElist capital stock, after giving effect to the exchange ratio. The merger
was treated as a pooling of interests for accounting purposes, and accordingly,
the historical financial statements of eGroups have been restated to combine the
results of both companies in all periods.
F-14
<PAGE> 82
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
2. MERGER WITH ONELIST (CONTINUED)
Separate results of the combined entities through the date of the merger
(November 30, 1999) were as follows (Unaudited):
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JUNE 5, 1998) TO SIX MONTHS ENDED FOUR MONTHS ENDED
JULY 31, JANUARY 31, NOVEMBER 30,
1999 1999 1999
----------------- ---------------- -----------------
<S> <C> <C> <C>
Revenue:
eGroups.......................... $ 265,582 $ 41,413 $ 1,179,056
ONElist.......................... 223,118 1,122 434,359
----------- ----------- -----------
$ 488,700 $ 42,535 $ 1,613,415
=========== =========== ===========
Net loss attributable to common
stockholders:
eGroups.......................... $(4,343,492) $ (933,718) $(4,363,859)
ONElist.......................... (2,513,745) (300,852) (3,579,520)
----------- ----------- -----------
$(6,857,237) $(1,234,570) $(7,943,379)
=========== =========== ===========
</TABLE>
There were no intercompany transactions between the two companies or
significant conforming accounting adjustments.
3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 2000
---------- -----------
<S> <C> <C>
Cash and cash equivalents:
Cash................................................ $ 498,152 $ 1,501,325
Money market funds.................................. 4,459,079 43,084,734
---------- -----------
Total cash and cash equivalents.................. $4,957,231 $44,586,059
========== ===========
</TABLE>
4. LOAN TO OFFICER
In June 1999, eGroups provided a $100,000 loan to an officer in connection
with relocation and in exchange for a nonrecourse promissory note. The note does
not bear interest, is being forgiven over a four-year period beginning in July
1999, and is included in other assets in the accompanying balance sheet. Amounts
forgiven have been recorded as compensation expense.
F-15
<PAGE> 83
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
5. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 2000
---------- -----------
<S> <C> <C>
Property and equipment:
Computer and software equipment...................... $ 876,417 $2,546,083
Furniture, fixtures, and leasehold improvements...... 79,240 486,828
Other equipment...................................... 83,171 104,024
---------- ----------
1,038,828 3,136,935
Accumulated depreciation and amortization............ (88,234) (439,512)
---------- ----------
$ 950,594 $2,697,423
========== ==========
</TABLE>
As of July 31, 1999 and January 31, 2000, eGroups had approximately $80,432
and $1,217,872 of fixed assets purchased under capital leases with approximately
$0 and $71,456 of accumulated depreciation, respectively.
Other assets:
Other assets at January 31, 2000 are primarily comprised of the unamortized
debt interest expense associated with the value of a conversion option issued in
connection with subordinated debt. See Note 8.
<TABLE>
<S> <C> <C>
Accrued liabilities:
Accrued compensation................................. $ 290,957 $ 439,737
Accrued legal and accounting......................... 40,000 184,000
Accrued marketing and advertising.................... 45,000 60,000
Other accrued expenses............................... 292,156 221,587
---------- ----------
$ 668,113 $ 905,324
========== ==========
</TABLE>
6. COMMITMENTS AND BORROWINGS
eGroups leases its main facilities under noncancelable operating lease
agreements, which expire in July 2004 and September 2004. Rent expense was
$102,211 for the period from inception (June 5, 1998) to July 31, 1999, and
$468,296 for the six-month period ended January 31, 2000.
In September 1999, eGroups entered into a noncancelable sublease agreement
with a stockholder of eGroups, which expires in April 2000. Rent expense in
connection with this sublease was $168,525 for the six-month period ended
January 31, 2000. In December 1999, eGroups entered into a noncancelable
sub-sublease for the same property with an unrelated third party which expires
in April 2000. Rental income was approximately $26,700 for the six-month period
ended January 31, 2000.
In June 1999, eGroups entered into a one-year Master Lease Agreement with a
lender that allows eGroups to borrow up to $1,500,000 for the purchase of
property and equipment. Under this Agreement, in July 1999, eGroups signed a
$204,500 Secured Promissory Note with the lender. The Note bears interest at an
annual rate of 7.4%. Payments of approximately $3,600 are due monthly with a
final $30,675 payment due on September 1, 2003. Also under this agreement, in
October and December 1999, the Company entered into lease agreements for
approximately $436,000 and $782,000, respectively. The leases are payable in 48
equal monthly payments of approximately $9,100 and $16,300, respectively,
beginning in October and December 1999. The Note and lease agreements
F-16
<PAGE> 84
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
6. COMMITMENTS AND BORROWINGS (CONTINUED)
are secured by certain property and equipment of eGroups. The Note and lease
agreements reduce the available borrowings under the Master Lease Agreement to
approximately $77,600 as of January 31, 2000.
In July 1999, eGroups entered into a three-year capital lease agreement for
the purchase of $80,432 in equipment.
As of January 31, 2000, minimum payments under all noncancelable leases
were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
Six months ending July 31, 2000........................ $ 191,590 $ 383,305
Years ending July 31:
2001................................................. 383,180 700,581
2002................................................. 380,440 700,581
2003................................................. 350,304 348,654
2004................................................. 118,395 330,334
2005 and thereafter.................................. -- 66,794
---------- ----------
Total minimum lease payments........................... 1,423,909 $2,530,249
==========
Less amount representing interest...................... (186,507)
----------
Present value of minimum payments...................... 1,237,402
Less current portion................................... (299,240)
----------
Long-term portion...................................... $ 938,162
==========
</TABLE>
In July 1998, eGroups entered into a $100,000 loan agreement with a
financial institution for the purchase of property and equipment. The rate of
interest was the lender's prime lending rate plus 2.00%. Payments of
approximately $3,000 in principal plus interest, were due monthly beginning in
August 1999 through January 2003. The loan was secured by substantially all of
eGroups' assets. In October 1999, eGroups repaid the entire outstanding balance.
In September 1999, eGroups entered into a $200,000 loan agreement with a
financial institution. The loan bears interest at 8% and is payable in 24 equal
monthly payments of approximately $7,900, plus interest, beginning in September
1999 through August 2001.
In October 1999, eGroups entered into a $7,000,000 Subordinated Loan and
Security Agreement. Notes taken out under this Agreement bear interest at 8.25%
per annum and are due and payable in 24 equal monthly installments of
interest-only payments, followed by 12 equal monthly installments of principal
and interest payments. The loan is secured by a secondary lien on substantially
all of eGroups' assets. In connection with this Agreement, eGroups issued an
option, allowing the lender to convert 45% of the notes taken out under the loan
into shares of eGroups' convertible preferred stock (see Note 8). As of January
31, 2000, eGroups has borrowed $7,000,000 under the terms of the Subordinated
Loan Security Agreement. The loan agreement provides that eGroups shall not,
without prior written consent of the lender, declare or pay cash dividends or
make a distribution on any class of stock.
F-17
<PAGE> 85
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
6. COMMITMENTS AND BORROWINGS (CONTINUED)
A summary of eGroups' outstanding debt is as follows:
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 2000
--------- -----------
<S> <C> <C>
Subordinated notes...................................... $ -- $7,000,000
Other notes............................................. 304,500 347,487
--------- ----------
Total debt.............................................. 304,500 7,347,487
Short-term debt......................................... (135,454) (136,344)
--------- ----------
Long-term debt.......................................... $ 169,046 $7,211,143
========= ==========
</TABLE>
401(k) PROFIT SHARING PLAN
Effective January 1, 1999, eGroups established the eGroups 401(k) Profit
Sharing Plan (the "Plan"). The Plan provides for eGroups to match employee
contributions at a rate equal to 50% of employee contributions up to 6% of their
compensation. Employees are eligible to participate in the Plan on any January
1, April 1, July 1, or October 1 following the first day of employment. The
terms of the Plan are subject to change as determined by management. eGroups
made contributions for the period from inception (June 5, 1998) to July 31, 1999
and for the six months ended January 31, 2000, of $25,351 and $65,638,
respectively.
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK
As part of the merger agreement with ONElist, eGroups exchanged all shares
of ONElist redeemable convertible preferred Series A shares for a new class of
Series C eGroups redeemable convertible preferred shares with terms identical to
the redeemable convertible preferred Series A shares of ONElist.
For so long as shares of Series C redeemable convertible preferred stock
remained outstanding, each holder of Series C redeemable convertible preferred
stock could, at the option of the holder, on each of December 31, 2003, December
31, 2004 and December 31, 2005, require eGroups to redeem a number of shares of
Series C preferred stock equal to one-third of the number of shares of Series C
preferred stock held by such holder as of the first such date. The shares were
redeemable at the original issue price plus an additional 9% per annum,
compounded annually commencing on the date of issuance. The carrying amount of
Series C preferred stock has been increased by periodic accretions so as to
equal redemption amounts at the redemption dates. In December 1999, in
connection with the issuance of Series D convertible preferred stock, the Series
C redeemable preferred stock was modified to be non-redeemable. At January 31,
2000, the outstanding shares are classified as convertible preferred stock in
stockholders' equity.
F-18
<PAGE> 86
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
<TABLE>
<CAPTION>
SHARES SHARES ISSUED AND
AUTHORIZED OUTSTANDING
----------------------- -----------------------
JULY 31, JANUARY 31, JULY 31, JANUARY 31,
1999 2000 1999 2000
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Series A................................... 1,620,000 1,620,000 1,620,000 1,620,000
Series B................................... 3,600,000 3,600,000 3,556,772 3,556,772
Series C................................... -- 7,280,811 -- 7,280,811
Series D................................... -- 4,520,000 -- 4,081,633
Undesignated............................... -- 479,189 -- --
--------- ---------- --------- ----------
Total convertible preferred stock.......... 5,220,000 17,500,000 5,176,772 16,539,216
========= ========== ========= ==========
</TABLE>
Each share of Series A, B, C and D convertible preferred stock is, at the
option of the holder, convertible into one share of common stock, subject to
certain adjustments for dilution, if any, resulting from future stock issuances.
The outstanding shares of Series A, B, C and D convertible preferred stock
automatically convert into common stock immediately prior to the closing of an
underwritten public offering of common stock under the Securities Act of 1933 in
which the Company receives at least $20,000,000 in gross proceeds at a per share
offering price of at least $15.44.
Series A, B, C and D convertible preferred stockholders are entitled to
noncumulative dividends of $0.040, $0.115, $0.050 and $0.926 per share per annum
if and when declared by the board of directors. No dividends have been declared
as of January 31, 2000.
The Series A, B, C and D convertible preferred stockholders are entitled to
receive, upon liquidation, an amount per share equal to the issuance price, plus
all declared but unpaid dividends. Thereafter, the remaining assets and funds,
if any, shall be distributed pro rata among the common stockholders.
The Series A, B, C and D convertible preferred stockholders have voting
rights equal to the common shares issuable upon conversion of their preferred
shares.
COMMON STOCK
eGroups has sold 11,490,340 shares of common stock to founders of eGroups
and ONElist for $0.005 - $0.032 per share. Certain of these shares are subject
to repurchase by eGroups at the price paid by the stockholder, in the event of
termination of services by the stockholder to eGroups. For 3,512,475 of these
shares, the repurchase option lapses ratably over a 36-month period. For
4,685,880 of these shares, the repurchase option lapses ratably over a 36-month
period beginning on the one-year anniversary. Additionally, the repurchase
option of certain shares will lapse upon the occurrence of certain defined
events. At July 31, 1999 and January 31, 2000, 6,637,256 and 5,921,679 shares
were subject to repurchase (see Note 11).
eGroups has sold 522,427 and 527,425 shares of common stock to consultants
for cash at $0.005 - $0.349 per share and services rendered at July 31, 1999 and
January 31, 2000, respectively.
F-19
<PAGE> 87
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
337,500 of these shares were subject to repurchase by eGroups at the price paid
by the stockholder, in the event of termination of services by the consultant to
eGroups. The repurchase option lapses ratably over a 48-month period.
Additionally, the repurchase option lapses upon the occurrence of certain
defined events. At July 31, 1999 and January 31, 2000, 232,500 and 85,312 shares
were subject to repurchase.
eGroups has reserved shares of common stock for issuance as follows:
<TABLE>
<CAPTION>
JANUARY 31,
2000
-----------
<S> <C>
Warrants.................................................... 445,830
Stock options............................................... 2,744,767
Conversion of convertible preferred stock................... 16,539,216
----------
19,729,813
==========
</TABLE>
STOCK WARRANTS
In conjunction with a debt agreement (see Note 6), eGroups issued warrants
to purchase 8,330 shares of eGroups' Series B preferred stock at $7.20 per share
to a lender. The warrants vested immediately and are exercisable over a period
of five years or three years from the effective date of eGroups' initial public
offering, whichever is earlier. The value of the warrants, based on a Black-
Scholes calculation using a volatility factor of 0.5, and a life of five years,
was $51,498, which is being amortized to interest expense over the one-year life
of the agreement. As of July 31, 1999, and January 31, 2000, all of these
warrants are exercisable.
SUBORDINATED DEBT CONVERSION OPTION
In conjunction with a subordinated loan and security agreement (see Note
6), the lender purchased an option to convert 45% of the notes taken out under
the loan into shares of eGroups' convertible preferred stock with an aggregate
purchase value of 45% of the total amount advanced against the loan. The
exercise price of the convertible preferred stock is equal to 70% of the Series
D convertible preferred stock price, or $7.20 per share. At January 31, 2000,
the lender has the option to purchase 437,500 shares under the agreement (see
Note 11). The value of the option, based on a Black-Scholes calculation, using a
volatility factor of 0.5, and a life of three years, was $2,327,500 which is
being amortized to interest expense over the three-year life of the loan.
1998 STOCK OPTION PLAN
In June 1998, eGroups adopted the 1998 Stock Option Plan and on November
30, 1999, eGroups assumed the ONElist, Inc. 1998 Stock Plan (collectively the
"Plan"). Options under the Plan are generally for periods not to exceed ten
years, and must be issued at prices not less than 100% and 85% for incentive and
non-statutory stock options, respectively, of the estimated fair value of the
underlying shares of common stock on the date of grant as determined by the
board of directors. Options granted to stockholders who own greater than 10% of
the outstanding stock are for periods not to exceed five years, and must be
issued at prices not less than 110% of the estimated fair
F-20
<PAGE> 88
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
value of the underlying shares of common stock on the date of grant. The Plan
provides for grants of immediately exercisable options; however, eGroups has the
right to repurchase any unvested common stock upon termination of employment at
the original exercise price. As of July 31, 1999, and January 31, 2000, eGroups
had 327,348 and 3,895,056 shares of common stock outstanding subject to
repurchase under the Plan. Options become exercisable at such times and under
such conditions as determined by the board of directors. Options generally vest
over four years and are immediately exercisable.
Information with respect to stock option activity from inception (June 5,
1998) to January 31, 2000, is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
OPTIONS AVERAGE
AVAILABLE FOR OPTIONS PRICE EXERCISE
GRANT OUTSTANDING PER SHARE PRICE
------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Shares authorized................... 5,539,376
Options granted................... (3,726,744) 3,726,744 $0.02 - $0.30 $0.14
Options exercised................. -- (647,737) $0.02 - $0.30 $0.05
Options canceled.................. 262,172 (262,172) $0.06 - $0.30 $0.11
---------- ----------
Balance at July 31, 1999............ 2,074,804 2,816,835 $0.02 - $0.30 $0.16
Additional shares authorized...... 3,914,965 -- -- --
Authorized shares canceled........ (1,346,474) -- -- --
Options granted................... (4,122,518) 4,122,518 $0.06 - $5.00 $1.11
Options exercised................. -- (4,001,489) $0.06 - $5.00 $0.58
Options canceled.................. 272,800 (986,674) $0.03 - $4.50 $0.56
---------- ----------
Balance at January 31, 2000......... 793,577 1,951,190 $0.02 - $5.00 $1.09
========== ==========
</TABLE>
Exercise prices for options outstanding as of January 31, 2000, and the
weighted-average remaining contractual life are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
-------------------------------------
WEIGHTED-
AVERAGE WEIGHTED-
REMAINING AVERAGE
NUMBER CONTRACTUAL EXERCISE
EXERCISE OF SHARES LIFE PRICE
PRICE --------- ----------- ---------
(IN YEARS)
<S> <C> <C> <C>
$0.02 - 0.06................................. 1,091,701 9.26 $0.05
0.30 - 0.35................................. 437,132 9.51 0.33
4.50 - 5.00................................. 422,357 9.87 4.58
---------
1,951,190 9.45 1.09
=========
</TABLE>
For the period from inception (June 5, 1998) to July 31, 1999, and for the
six-month periods ended January 31, 1999 and 2000, eGroups recorded deferred
compensation expense of $5,290,081, $720,718, and $11,875,565, respectively,
representing the difference between the exercise prices and
F-21
<PAGE> 89
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
the deemed fair values of eGroups' common stock on the dates these stock options
were granted. These amounts are being amortized by charges to operations over
the vesting periods of the individual stock options using a graded vesting
method.
The unamortized deferred stock compensation balance at January 31, 2000,
will be amortized as follows: $4,553,899 in the six months ending July 31, 2000,
$4,808,181 in the year ending July 31, 2001, $2,119,283 in the year ending July
31, 2002, $693,009 in the year ending July 31, 2003, and $21,893 in the year
ending July 31, 2004. Subsequent terminations of the employment of option
holders may reduce future stock-based compensation. See Note 11.
Amortization of deferred stock compensation relates to the following
operating expenses:
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
INCEPTION JANUARY 31,
(JUNE 5, 1998) TO -------------------------
JULY 31, 1998 1999 2000
----------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Product development................... $332,295 $ 44,318 $1,120,695
Sales and marketing................... 531,652 93,586 1,533,921
General and administrative............ 110,807 390 1,340,011
-------- -------- ----------
Total............................... $974,754 $138,294 $3,994,627
======== ======== ==========
</TABLE>
In the period from inception (June 5, 1998) to July 31, 1999, and in the
six-month period ended January 31, 2000, eGroups issued options to purchase
18,750 and 22,550 shares of common stock, respectively, to several third-party
consultants in exchange for services rendered. In connection with these options,
eGroups recorded noncash charges of $20,392 and $64,042 in these periods.
ACCOUNTING FOR STOCK-BASED COMPENSATION UNDER SFAS 123
As discussed in Note 1, eGroups has elected to follow APB 25 and related
interpretations in accounting for its employee stock awards. The alternative
fair value accounting provided for under SFAS 123 requires use of option
valuation models that were not developed for use in valuing employee stock
awards. Under APB 25, when the exercise price of eGroups' employee stock awards
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
The fair value for eGroups' stock awards was estimated at the date of grant
using the minimum value options pricing model. This model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because eGroups' stock-based awards have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock-based awards. The fair value of
awards granted during the period from inception (June 5, 1998) to July 31, 1999,
and the six months ended January 31, 2000,
F-22
<PAGE> 90
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
were determined using a risk-free interest rate of 6.0%, an expected life of
four years, and a dividend yield of zero.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. eGroups' pro
forma information follows:
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
INCEPTION ENDED
(JUNE 5, 1998) TO JANUARY 31,
JULY 31, 1999 2000
----------------- ------------
<S> <C> <C>
Net loss attributable to common stockholders:
As reported...................................... $(6,857,237) $(12,902,983)
Pro forma........................................ $(6,863,101) $(12,949,039)
Basic and diluted net loss per share attributable
to common stockholders:
As reported...................................... $ (1.25) $ (1.61)
Pro forma........................................ $ (1.26) $ (1.62)
</TABLE>
STOCK SPLIT
In December 1998, the board of directors approved a 2-for-1 stock split of
the outstanding shares of eGroups' common and preferred stock. All of the share
information contained in these financial statements and footnotes has been
retroactively adjusted to reflect the stock split.
9. NOTES RECEIVABLE
During the period from inception (June 5, 1998) to July 31, 1999, and for
the six-month period ended January 31, 2000, eGroups issued $14,330 and
$2,148,153, respectively, of full recourse notes receivable from employees which
bear interest at rates ranging from 4.5% to 6.2% per annum in consideration for
the exercise of stock options. The notes are collateralized by the underlying
shares of common stock and mature on various dates through fiscal 2004.
10. INCOME TAXES
As of July 31, 1999 and January 31, 2000, eGroups had federal net operating
loss carryforwards of approximately $5,000,000 and $12,600,000, respectively.
The Company also had federal research and development credit carryforwards of
approximately $100,000 as of January 31, 2000. The net operating loss and credit
carryforwards will expire at various dates beginning in 2019, if not utilized.
Utilization of the net operating losses and credits may be subject to
substantial annual limitation due to the ownership change provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Deferred tax assets and liabilities reflect the net tax effects of net
operating loss and credit carryforwards and of temporary differences between the
carrying amounts of assets and liabilities for
F-23
<PAGE> 91
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
10. INCOME TAXES (CONTINUED)
financial reporting and the amounts used for income tax purposes. Significant
components of eGroups' deferred tax assets and liabilities for federal and state
income taxes are as follows:
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 2000
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................... $ 2,000,000 $ 5,000,000
Research credit carryforwards...................... 100,000 200,000
Other.............................................. 100,000 100,000
----------- -----------
Total deferred tax assets.................. 2,200,000 5,300,000
Valuation allowance.................................. (2,200,000) (5,300,000)
----------- -----------
Net deferred tax assets.............................. $ -- $ --
=========== ===========
</TABLE>
Based upon the weight of available evidence, which includes eGroups'
historical operating performance and the reported cumulative net losses in all
prior periods, eGroups has provided a full valuation allowance against its net
deferred tax assets.
The valuation allowance increased by $2,200,000 in the period from
inception (June 5, 1998) to July 31, 1999.
11. SUBSEQUENT EVENTS (UNAUDITED)
REPURCHASE OF FOUNDERS STOCK
In March 2000, eGroups repurchased 600,478 shares of its common stock from
one of its founders under a repurchase right for $3,003.
INITIAL PUBLIC OFFERING
In March 2000, eGroups' board of directors authorized management to file a
registration statement with the Securities and Exchange Commission to permit
eGroups to sell shares of its common stock to the public. Upon completion of the
initial public offering as described in the registration statement, all
outstanding convertible preferred stock will be converted into 16,539,216 shares
of common stock.
SUBORDINATED DEBT CONVERSION
In March 2000, a lender gave notice to eGroups of its intention to exercise
its option to purchase 437,500 shares of preferred stock upon the conversion of
$3,150,000 of subordinated debt. This conversion and the conversion of such
shares into common stock will occur upon the closing of eGroups' initial public
offering.
DEFERRED STOCK COMPENSATION
In February and March 2000, eGroups granted to its employees options to
purchase a total of 1,773,991 shares of common stock at prices between $5.00 and
$6.00 per share. In connection with
F-24
<PAGE> 92
EGROUPS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JANUARY 31, 1999 IS UNAUDITED)
11. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
these grants, eGroups estimates that it will record additional deferred stock
compensation of approximately $15,912,000.
EGROUPS 2000 EMPLOYEE STOCK PURCHASE PLAN
In March 2000, the board of directors adopted the eGroups 2000 Employee
Stock Purchase Plan, subject to stockholder approval, and reserved 500,000
shares of common stock for issuance under this plan. On each August 1, beginning
in 2001, the aggregate number of shares reserved for issuance under this plan
will increase automatically by the lesser of (i) 420,000 shares, (ii) 1.2% of
the average number of shares outstanding as used to calculate the previous
year's fully diluted earnings per share, or (iii) a lesser amount determined by
the board.
2000 STOCK INCENTIVE PLAN
In March 2000, the board of directors adopted the 2000 Stock Incentive
Plan, subject to stockholder approval, and reserved 5,400,000 shares of common
stock for issuance under the plan, plus any shares reserved but not granted
under the 1998 Stock Option Plan or returned to the 1998 Stock Option Plan upon
termination of options. On each August 1, beginning in 2001, the aggregate
number of shares reserved for issuance under this plan will increase
automatically by the lesser of (i) 2,000,000 shares, (ii) 5% of the average
number of shares outstanding used to calculate the previous year's fully diluted
earnings per share, or (iii) a lesser number determined by the board.
Simultaneous with effectiveness of eGroups' initial public offering, no further
grants may be made under the 1998 Stock Option Plan.
GRANT PROGRAM FOR NON-EMPLOYEE DIRECTORS
In March 2000, the board of directors adopted a stock option grant program
for non-employee directors. The program will be administered under the 2000
Stock Incentive Plan. Each non-employee director will receive a non-qualified
stock option to purchase 50,000 shares of common stock upon initial election or
appointment to the board. Beginning with the annual meeting of stockholders in
2001, each non-employee director will automatically receive an additional option
to purchase 12,500 shares of common stock immediately following each year's
annual meeting of stockholders. The exercise price for all options granted under
the program will be the fair market value of the common stock on the date of
grant.
F-25
<PAGE> 93
[Inside Back Cover]
The top of the page has the following header:
AN EXPANDING GLOBAL PRESENCE
The following three sub-headers are located across the page directly under the
above header:
"Members generate their own content for group communications in their native
languages."
"Over 20% of our members come from international domains."
"The eGroups web site will be available in 14 languages in April 2000."
Below these sub-headers is a centered rendering of planet earth. Domain names
for eGroups' international web sites are arrayed around this photograph.
<PAGE> 94
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
LOGO
SHARES OF COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
CHASE H&Q
ROBERTSON STEPHENS
- --------------------------------------------------------------------------------
We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of eGroups,
Inc., have not changed since the date hereof.
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus),
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 dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant in connection with this offering
are as follows. All amounts are estimates other than the SEC registration fee
and the NASD filing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 19,800
NASD filing fee............................................. 8,000
Nasdaq National Market listing fee.......................... 95,000
Printing fees............................................... 200,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 400,000
Blue sky fees and expenses.................................. 10,000
Transfer agent and registrar fees........................... 7,500
Miscellaneous fees.......................................... *
--------
Total.................................................. $ *
========
</TABLE>
- ------------------------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended ("Securities
Act"). Article VIII of our Amended and Restated Certificate of Incorporation
(Exhibit 3.2 hereto), which will be effective upon the closing of this offering,
and Article XI of our current Bylaws (Exhibit 3.3 hereto) provide for
indemnification of our directors, officers, employees and other agents to the
maximum extent permitted by Delaware law. In addition, we have entered into
Indemnification Agreements (Exhibit 10.1 hereto) with our officers and
directors. The Underwriting Agreement (Exhibit 1.1) also provides for
cross-indemnification among us and the Underwriters with respect to certain
matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our inception in June 1998, we have sold and issued the following
securities:
1. On June 5, 1998, we issued 5,242,500 shares of common stock to
three founders for an aggregate consideration of $26,212.50 paid by cash,
check, or assignment of intellectual property rights and other assets.
2. On June 5, 1998, we issued 337,500 shares of common stock to three
advisors for an aggregate purchase price of $1,687.50.
3. On June 22, 1998, we issued an aggregate of 1,620,000 shares of
Series A preferred stock to two accredited investors for an aggregate
purchase price of $810,000.
4. On December 17, 1998, we issued an aggregate of 3,556,772 shares of
Series B preferred stock to nine accredited investors for an aggregate
purchase price of $5,120,151.13.
II-1
<PAGE> 96
5. On June 22, 1999, we issued a warrant to purchase up to 8,330
shares of Series B preferred stock to one accredited investor in connection
with a certain lease financing.
6. On October 8, 1999, we granted a right to purchase up to 437,500
shares of Series D preferred stock to one investor in connection with
issuance of debt. The purchase right was exercised by the investor on March
16, 2000, and we issued 437,500 shares of Series D preferred stock to such
investor in consideration of cancellation of debt in the principal amount
of $3,150,000.
7. On November 30, 1999, in connection with our acquisition by merger
of ONElist, Inc., we issued an aggregate of 8,318,629 shares of common
stock to twenty shareholders of ONElist and 7,280,811 shares of Series C
preferred stock to seven accredited investors of ONElist.
8. On December 14, 1999, we issued an aggregate of 4,081,633 shares of
Series D preferred stock to twenty-four accredited investors for an
aggregate consideration of $42,000,003.36.
9. Since our incorporation, we have entered into an aggregate of 291
stock option agreements to purchase our common stock to employees,
directors and consultants with exercise prices ranging from $0.02 to $6.00.
No underwriters were involved in the foregoing sales of securities. The
issuance of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering, or Rule 701 of the
Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued
in such transactions. All recipients had adequate access, through their
relationships with us, to information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) THE FOLLOWING EXHIBITS ARE FILED HEREWITH:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization among eGroups, Inc., EG
Acquisition Corporation and ONElist, Inc., dated as of
November 9, 1999.
3.1 Fifth Amended and Restated Certificate of Incorporation.
3.2 Form of Amended and Restated Certificate of Incorporation,
to be effective upon completion of this offering.
3.3 Amended and Restated Bylaws.
4.1 Form of Common Stock Certificate.
4.2 Second Amended and Restated Investors Rights Agreement,
dated as of December 14, 1999, among eGroups, Inc., and the
investors listed on the exhibits thereto.
4.3 Warrant Agreement to purchase shares of the Series B
Preferred Stock, dated as of June 23, 1999, between eGroups,
Inc., and Comdisco, Inc.
4.4* Letter to Purchasers of Preferred Stock regarding
Registration Rights in the Proposed Initial Public Offering.
5.1* Opinion of Perkins Coie LLP regarding the legality of the
common stock being registered.
10.1* Form of Indemnification Agreement between eGroups, Inc., and
each of its officers and directors.
10.2 Form of Lockup Agreement.
</TABLE>
II-2
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.3 eGroups 1998 Stock Option Plan.
10.4* eGroups 2000 Stock Incentive Plan.
10.5 ONElist 1998 Option Plan.
10.6* eGroups 2000 Employee Stock Purchase Plan.
10.7 Form of Stock Option Agreement.
10.8 Form of Early Exercise Notice and Restricted Stock Purchase
Agreement.
10.9 Form of Notice of Stock Option Grant.
10.10 Employment Offer Letter with Michael B. Klein, dated as of
October 11, 1999.
10.11 Employment Offer Letter with Richard J. Carey, dated as of
September 16, 1999.
10.12 Employment Offer Letter with Marjorie T. Sennett, dated as
of June 7, 1999.
10.13 Employment Offer Letter with Steven T. Comfort, dated as of
April 8, 1999.
10.14 Employment Offer Letter with Jacqueline A. Maartense, dated
as of September 1, 1999.
10.15 Form of eGroups Proprietary Information and Inventions
Assignment Agreement.
10.16* Form of ONElist Employment, Confidential Information and
Invention Assignment Agreement.
10.17 Series A Preferred Stock Purchase Agreement, dated as of
December 28, 1998, among ONElist, Inc., and the purchasers
listed on the exhibits thereto.
10.18 Series A Preferred Stock Purchase Agreement, dated as of
June 22, 1998, among FindMail Communications, Inc., and the
purchasers listed on the exhibits thereto.
10.19 Series B Preferred Stock Purchase Agreement, dated as of
December 17, 1998 among eGroups, Inc., and the purchasers
listed on the exhibits thereto.
10.20 Series D Preferred Stock Purchase Agreement, dated as of
December 14, 1999, among eGroups, Inc., and the purchasers
listed on the exhibits thereto.
10.21 Common Stock Purchase Agreement, dated as of June 5, 1998
between FindMail Communications, Inc., and Scott Hassan,
amended as of December 15, 1998.
10.22 Common Stock Purchase Agreement, dated as of June 5, 1998
between FindMail Communications, Inc., and Martin
Roscheisen, amended as of December 15, 1998.
10.23 First Amended and Restated Common Stock Purchase Agreement,
dated as of December 24, 1998 among ONElist, Inc., and the
purchasers listed on the exhibits thereto.
10.24 Employment Agreement, dated as of December 28, 1998, between
eGroups, Inc., and Mark Fletcher.
10.25 Form of Promissory Note between eGroups, Inc., as lender,
and certain executive officers, as borrowers.
10.26* Promissory Note, dated as of July , 1999, between eGroups,
Inc., as lender, and Marjorie T. Sennett, as borrower.
10.27* Lease for 350 Brannan Street, San Francisco, dated May 3,
1999.
10.28* Lease for 2688 Middlefield Road, Redwood City, dated June 9,
1999.
10.29 Subordinated Promissory Note, dated as of March 16, 2000,
between Comdisco, Inc., as lender, and eGroups, Inc., as
borrower.
10.30** Software License and Service Agreement, dated as of March 3,
2000, between eGroups, Inc. and E.piphany, Inc.
10.31 Form of Advertising Insertion Order and standard advertising
terms and conditions.
10.32 Advertising Insertion Order, dated as of December 6, 1999,
between eGroups, Inc., and X.com, Inc.
10.33** Advertising Insertion Order, dated as of February 9, 2000,
between eGroups, Inc., and X.com, Inc.
10.34** Advertising Sales Agreement, dated as of March 1, 2000,
between eGroups, Inc., and beMANY!, Inc.
</TABLE>
II-3
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.35 Master Services Agreement, dated as of February , 2000
between eGroups, Inc., and Global Center, Inc.
10.36 Loan and Security Agreement, dated as of May 19, 1999,
between ONElist, Inc., and Silicon Valley Bank.
10.37 Master Lease Agreement, dated as of June 23, 1999, between
eGroups, Inc., and Comdisco, Inc.
10.38 Subordinated Loan Agreement, dated as of October 8, 1999,
between eGroups, Inc., and Comdisco, Inc.
10.39 Notice of Exercise of Purchase Option by Comdisco, Inc.,
dated as of March 16, 2000.
21.1* List of Subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Perkins Coie LLP (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-6 of the Registration
Statement).
27.1 Financial Data Schedule for the period from inception (June
5, 1998) to July 31, 1999.
27.2 Financial Data Schedule for the six-month period ended
January 31, 2000.
</TABLE>
- ------------------------------
* To be filed by amendment
** Confidential treatment requested as to certain portions of this Exhibit.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are provided because the information
called for is not required or is shown either in the financial statements or the
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 for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation, or the Bylaws of the Registrant, the Underwriting Agreement, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
II-4
<PAGE> 99
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on this 23rd day
of March, 2000.
eGROUPS, INC.
By: /s/ MICHAEL B. KLEIN
------------------------------------
Michael B. Klein
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each individual whose signature
appears below constitutes and appoints Michael B. Klein and Marjorie T. Sennett,
and each of them, such individual's true and lawful attorneys-in-fact and agents
with full power of substitution, for such individual and in such individual's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such individual might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or such individual's or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ MICHAEL B. KLEIN President, Chief Executive March 23, 2000
- -------------------------------------------------------- Officer and Director
Michael B. Klein (Principal Executive
Officer)
/s/ MARJORIE T. SENNETT Chief Financial Officer March 23, 2000
- -------------------------------------------------------- (Principal Financial and
Marjorie T. Sennett Accounting Officer)
/s/ GAYLE A. CROWELL Director March 23, 2000
- --------------------------------------------------------
Gayle A. Crowell
/s/ PETER MILLS Director March 23, 2000
- --------------------------------------------------------
Peter Mills
/s/ MICHAEL J. MORITZ Director March 23, 2000
- --------------------------------------------------------
Michael J. Moritz
/s/ DANIEL D. SPRINGER Director March 23, 2000
- --------------------------------------------------------
Daniel D. Springer
</TABLE>
II-6
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization among eGroups, Inc., EG
Acquisition Corporation and ONElist, Inc., dated as of
November 9, 1999.
3.1 Fifth Amended and Restated Certificate of Incorporation.
3.2 Form of Amended and Restated Certificate of Incorporation,
to be effective upon completion of this offering.
3.3 Amended and Restated Bylaws.
4.1 Form of Common Stock Certificate.
4.2 Second Amended and Restated Investors Rights Agreement,
dated as of December 14, 1999, among eGroups, Inc., and the
investors listed on the exhibits thereto.
4.3 Warrant Agreement to purchase shares of Series B Preferred
Stock, dated as of June 23, 1999, between eGroups, Inc., and
Comdisco, Inc.
4.4* Letter to Purchasers of Preferred Stock regarding
Registration Rights in the Proposed Initial Public Offering.
5.1* Opinion of Perkins Coie LLP regarding the legality of the
common stock being registered.
10.1* Form of Indemnification Agreement between eGroups, Inc., and
each of its officers and directors.
10.2 Form of Lockup Agreement.
10.3 eGroups 1998 Stock Option Plan.
10.4* eGroups 2000 Stock Incentive Plan.
10.5 ONElist 1998 Option Plan.
10.6* eGroups 2000 Employee Stock Purchase Plan.
10.7 Form of Stock Option Agreement.
10.8 Form of Early Exercise Notice and Restricted Stock Purchase
Agreement.
10.9 Form of Notice of Stock Option Grant.
10.10 Employment Offer Letter with Michael B. Klein, dated as of
October 11, 1999.
10.11 Employment Offer Letter with Richard J. Carey, dated as of
September 16, 1999.
10.12 Employment Offer Letter with Marjorie T. Sennett, dated as
of June 7, 1999.
10.13 Employment Offer Letter with Steven T. Comfort, dated as of
April 8, 1999.
10.14 Employment Offer Letter with Jacqueline A. Maartense, dated
as of September 1, 1999.
10.15 Form of eGroups Proprietary Information and Inventions
Assignment Agreement.
10.16* Form of ONElist Employment, Confidential Information and
Invention Assignment Agreement.
10.17 Series A Preferred Stock Purchase Agreement, dated as of
December 28, 1998, among ONElist, Inc., and the purchasers
listed on the exhibits thereto.
10.18 Series A Preferred Stock Purchase Agreement, dated as of
June 22, 1998, among FindMail Communications, Inc., and the
purchasers listed on the exhibits thereto.
10.19 Series B Preferred Stock Purchase Agreement, dated as of
December 17, 1998 among eGroups, Inc., and the purchasers
listed on the exhibits thereto.
10.20 Series D Preferred Stock Purchase Agreement, dated as of
December 14, 1999, among eGroups, Inc., and the purchasers
listed on the exhibits thereto.
10.21 Common Stock Purchase Agreement, dated as of June 5, 1998
between FindMail Communications, Inc., and Scott Hassan,
amended as of December 15, 1998.
10.22 Common Stock Purchase Agreement, dated as of June 5, 1998
between FindMail Communications, Inc., and Martin
Roscheisen, amended as of December 15, 1998.
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.23 First Amended and Restated Common Stock Purchase Agreement,
dated as of December 24, 1998, among ONElist, Inc., and the
purchasers listed on the exhibits thereto.
10.24 Employment Agreement, dated as of December 28, 1998, between
eGroups, Inc., and Mark Fletcher.
10.25 Form of Promissory Note between eGroups, Inc., as lender,
and certain executive officers, as borrowers.
10.26* Promissory Note, dated as of July , 1999, between eGroups,
Inc., as lender, and Marjorie T. Sennett, as borrower.
10.27* Lease for 350 Brannan Street, San Francisco, dated May 3,
1999.
10.28* Lease for 2688 Middlefield Road, Redwood City, dated June 9,
1999.
10.29 Subordinated Promissory Note, dated as of March 16, 2000,
between Comdisco, Inc., as lender, and eGroups, Inc., as
borrower.
10.30** Software License and Service Agreement, dated as of March 3,
2000, between eGroups, Inc., and E.piphany, Inc.]
10.31 Form of Advertising Insertion Order and standard advertising
terms and conditions.
10.32 Advertising Insertion Order, dated as of December 6, 1999,
between eGroups, Inc., and X.com, Inc.
10.33** Advertising Insertion Order, dated as of February 9, 2000,
between eGroups, Inc., and X.com, Inc.
10.34** Advertising Sales Agreement, dated as of March 1, 2000,
between eGroups, Inc., and BeMANY!, Inc.
10.35 Master Services Agreement, dated as of February , 2000
between eGroups, Inc., and Global Center, Inc.
10.36 Loan and Security Agreement, dated as of May 19, 1999,
between ONElist, Inc., and Silicon Valley Bank.
10.37 Master Lease Agreement, dated as of June 23, 1999, between
eGroups, Inc., and Comdisco, Inc.
10.38 Subordinated Loan Agreement, dated as of October 8, 1999,
between eGroups, Inc., and Comdisco, Inc.
10.39 Notice of Exercise of Purchase Option by Comdisco, Inc.,
dated as of March 16, 2000.
21.1* List of Subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Perkins Coie LLP (included in Exhibit 5.1).
24.1* Power of Attorney (see page II-6 of the Registration
Statement).
27.1 Financial Data Schedule for the period from inception (June
5, 1998) to July 31, 1999.
27.2 Financial Data Schedule for the six-month period ended
January 31, 2000.
</TABLE>
- ------------------------------
* To be filed by amendment
** Confidential treatment requested as to certain portions of this Exhibit.
<PAGE> 1
EXHIBIT 1.1
___________ Shares
eGROUPS, INC.
Common Stock
UNDERWRITING AGREEMENT
_______, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
FLEETBOSTON ROBERTSON STEPHENS INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
eGroups, Inc. a Delaware corporation (the "COMPANY"), proposes to issue
and sell _______ shares of common stock (par value $.001 per share) (the "FIRM
SHARES") to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional share of its common stock ($.001 per
share) (the "ADDITIONAL SHARES") if requested by the Underwriters as provided in
Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter
referred to collectively as the "Shares". The shares of common stock of the
Company to be outstanding after giving effect to the sales contemplated hereby
are hereinafter referred to as the "Common Stock".
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "REGISTRATION STATEMENT";
and the prospectus in the form first used to confirm sales of Shares is
1
<PAGE> 2
hereinafter referred to as the "PROSPECTUS". (1)(2) If the Company has filed or
is required pursuant to the terms hereof to file a registration statement
pursuant to Rule 462(b) under the Act registering additional shares of Common
Stock (a "RULE 462(b) REGISTRATION STATEMENT"), then, unless otherwise
specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement.
SECTION 2. Agreements to Sell land Purchase and Lock- Up Agreements. (3)
On the basis of the representations and warranties contained in this Agreement,
and subject to its terms and conditions, the Company agrees to issue and sell,
and each Underwriter agrees, severally and not jointly, to purchase from the
Company at a price per Share of $____ (the "Purchase Price") the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto,
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to _____ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plan and (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also agrees
not to file any registration statement with respect to any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock for a period of 180 days after the date of the Prospectus without
the prior written consent of
2
<PAGE> 3
Donaldson, Lufkin & Jenrette Securities Corporation. The Company shall, prior to
or concurrently with the execution of this Agreement, deliver an agreement in
the form of Exhibit A hereto executed by (i) each of the directors and officers
of the Company an (ii) each stockholder listed on Annex I hereto.
SECTION 3. Terms of Public Offering. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid by
the respective Sellers, to Donaldson, Lufkin & Jenrette Securities Corporation
through the facilities of The Depository Trust Company ("DTC"), for the
respective accounts of the several Underwriters, against payment to the Company
of the Purchase Price therefore by wire transfer of Federal or other funds
immediately available in New York City. The certificates representing the Shares
shall be made available for inspection not later than 9:30 A.M., New York City
time, on the business day prior to the Closing Date or the applicable Option
Closing Date, as the case may be, at the office of DTC or its designated
custodian (the "DESIGNATED OFFICE"). The time and date of delivery and payment
for the Finn Shares shall be 9:00 A.M., New York City time, on _________, 2000
or such other time on the same or such other date as Donaldson, Lufkin &
Jenrette Securities Corporation and the Company shall agree in writing. The time
and date of delivery for the Finn Shares are hereinafter referred to as the
"CLOSING DATE." The time and date of delivery and payment for any Additional
Shares to be purchased by the Underwriters shall be 9:00 A.M., New York City
time, on the date specified in the applicable exercise notice given by you
pursuant to Section 2 or such other time on the same or such other date as
Donaldson, Lufkin & Jenrette Securities Corporation and the Company shall agree
in writing. The time and date of delivery for any Additional Shares are
hereinafter referred to as an "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Pillsbury Madison & Sutro LLP, 50 Fremont
Street, San Francisco, California 94105 and the Shares shall be delivered at the
Designated Office, all on the Closing Date or such Option Closing Date, as the
case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration
3
<PAGE> 4
Statement becomes effective, (iv) if the Company is required to file a Rule
462(b) Registration Statement after the effectiveness of this Agreement, when
the Rule 462(b) Registration Statement has become effective and (v) of the
happening of any event during the period referred to in Section 5(d) below which
makes any statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements therein
not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish to you four signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to famish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to famish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
4
<PAGE> 5
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
_______, 2001 that shall satisfy the provisions of Section 11(a) of the Act,
and to advise you in writing when such statement has been so made available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriters and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
- --------
(1) Insert date one year after the end of the Company's fiscal quarter in which
the closing will occur.
5
<PAGE> 6
for the Underwriters in connection with the review and clearance of the offering
of the Shares by the National Association of Securities Dealers, Inc., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8 -A relating to the Common Stock and all costs
and expenses incident to the listing of the Shares on the Nasdaq National
Market, (vii) the cost of printing certificates representing the Shares, (viii)
the costs and charges of any transfer agent, registrar and/or depositary, and
(ix) all other costs and expenses incident to the performance of the obligations
of the Company hereunder for which provision is not otherwise made in this
Section.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the Nasdaq
National Market for a period of three years.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111 (b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10: 00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no proceedings
for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the
6
<PAGE> 7
Act and (iv) the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(d) Each of the Company and its subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to carry
on its business as described in the Prospectus and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or any of its subsidiaries relating to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of the Company
or any of its subsidiaries, except as otherwise disclosed in the Registration
Statement.
(f) All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights; and the Shares have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor as provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
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<PAGE> 8
(i) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property or (iv) result
in the suspension, termination or revocation of any Authorization (as defined
below) of the Company or any of its subsidiaries or any other impairment of the
rights of the holder of any such Authorization.
(k) There are no legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject that are required
to be described in the Registration Statement or the Prospectus and are not so
described; nor are there any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or any provisions
of the Foreign Corrupt Practices Act, or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a material adverse effect on the business, prospects, financial
condition or results of operation of the Company and its subsidiaries, taken as
a whole.
(m) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of
8
<PAGE> 9
the Company and its subsidiaries, taken as a whole. Each such Authorization is
valid and in full force and effect and each of the Company and its subsidiaries
is in compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows or,
after notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization; and such Authorizations contain no restrictions that
are burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would not,
singly or in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(n) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered by
the Company.
(p) Ernst & Young LLP are independent public accountants with respect to
the Company and its subsidiaries as required by the Act.
(q) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), together
with related schedules and notes, present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated therein at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the supporting schedules, if any, included in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(r) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
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<PAGE> 10
(s) 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 or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, in management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of its subsidiaries
and (iii) neither the Company nor any of its subsidiaries has incurred any
material liability or obligation, direct or contingent.
(u) Each certificate signed by any officer of the Company and delivered
to the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
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<PAGE> 11
SECTION 7. Indemnification.(a) The Company agrees to indemnify and hold
harmless each Underwriter, its directors, its officers and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, 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, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter who failed to deliver a Prospectus, as then
amended or supplemented, (so long as the Prospectus and any amendments or
supplements thereto was provided by the Company to the several Underwriters in
the requisite quantity and on a timely basis to permit proper delivery on or
prior to the Closing Date) to the person asserting any losses, claims, damages,
liabilities or judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in such preliminary prospectus, 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, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the Prospectus, as so amended or supplemented, and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to such Underwriter but only with
reference to information relating to such Underwriter furnished in writing to
the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such
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<PAGE> 12
action and participate in the defense thereof, but `he fees and expenses of such
counsel shall be at the expense of the indemnified party unless the employment
of such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to assume the
defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of parties indemnified pursuant
to Section 7(a), and by the Company, in the case of parties indemnified pursuant
to Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been 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 the indemnified party.
To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (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 hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(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 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, 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 hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (after deducting
underwriting
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<PAGE> 13
discounts and commissions, but before deducting expenses) received by the
Company, and the total underwriting discounts and commissions received by the
Underwriters, bear to the total price to the public of the Shares, in each case
as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Underwriters on the other hand
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 ,statement or omission.
(d) The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares 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 which was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
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<PAGE> 14
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Michael Klein and Marjorie T. Sennett in their
capacities as the President and Chief Executive Officer and Senior Vice
President and Chief Financial Officer of the Company, confirming the matters set
forth in Sections 6(t), 8(a) and 8(b) and that the Company has complied with all
of the agreements and satisfied all of the conditions herein contained and
required to be complied with or satisfied by the Company on or prior to the
Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(d)(i),
8(d)(ii) or 8(d)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.(7)
(e) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Perkins
Coie LLP counsel for the Company in the form of Exhibit B hereto. The opinion of
Perkins Coie LLP described in Exhibit B above shall be rendered to you at the
request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Pillsbury Madison & Sutro LLP counsel for the Underwriters, as
to the matters referred to in Sections 8(e)(iv), 8(e)(vi), 8(e)(ix) (but only
with respect to the statements under the caption "Description of Capital Stock"'
and "Underwriting") and 8(e)(xvii)
In giving such opinions with respect to the matters covered by Section
8(e)(xvii) counsel for the Company and counsel for the Underwriters may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification except as specified.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from Ernst & Young, independent public
accountants, containing the information and statements of the type ordinarily
included in accountants' comfort letters" to Underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
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<PAGE> 15
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(j) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
SECTION 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Finn
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Finn Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or
15
<PAGE> 16
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Firm Shares or Additional Shares, as the
case may be, which any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such number of Finn Shares or Additional Shares, as the case may
be, without the written consent of such Underwriter. If on the Closing Date any
Underwriter or Underwriters shall fail or refuse to purchase Finn Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased by
all Underwriters and arrangements satisfactory to you and the Company for
purchase of such Firm Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter and the Company. In any such case which does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and the Prospectus or any other documents or arrangements may be effected. If,
on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse
to purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase such Additional Shares or (ii) purchase not less than the number of
Additional Shares that such non-defaulting Underwriters would have been
obligated to purchase on such date in the absence of such default. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
SECTION 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) If to the Company, to eGroups,
Inc. and (ii), if to any Underwriter or to you, to you c/o Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10 172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees and expenses (including, without
limitation, the fees disbursements of counsel)
16
<PAGE> 17
incurred by them in connection with enforcing their rights hereunder (including,
without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
eGROUPS, INC.
By:
---------------------------------
Title:
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
FLEETBOSTON ROBERTSON
STEPHENS INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
---------------------------------
17
<PAGE> 18
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
- ------------ ---------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation
Chase Securities Inc.
FleetBoston Roberston Stephens Inc.
Total
</TABLE>
<PAGE> 19
Annex I
The Company, its executive officers, directors,
stockholders and all option holders stockholders
<PAGE> 20
EXHIBIT A
Form of Lock-Up Agreement
<PAGE> 21
EXHIBIT B
Company Counsel Opinion
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
EGROUPS, INC.,
EG ACQUISITION CORPORATION
AND
ONELIST, INC.
Dated as of November 9, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER .................................................................. 1
1.1 The Merger ................................................................ 1
1.2 Effective Time ............................................................ 2
1.3 Effect of the Merger ...................................................... 2
1.4 Articles of Incorporation; Bylaws ......................................... 2
1.5 Directors and Officers .................................................... 2
1.6 Merger Consideration ...................................................... 3
1.7 Dissenting Shares ......................................................... 7
1.8 Surrender of Certificates ................................................. 7
1.9 No Further Ownership Rights in ONElist Common Stock ....................... 8
1.10 Lost, Stolen or Destroyed Certificates ................................... 9
1.11 Tax and Accounting Consequences .......................................... 9
1.12 Taking of Necessary Action; Further Action ............................... 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ONELIST .................................. 9
2.1 Organization of ONElist ................................................... 9
2.2 ONElist Capital Structure ................................................. 9
2.3 Subsidiaries .............................................................. 10
2.4 Authority ................................................................. 10
2.5 Financial Statements ...................................................... 11
2.6 No Undisclosed Liabilities ................................................ 11
2.7 No Changes ................................................................ 12
2.8 Tax and Other Returns and Reports ......................................... 13
2.9 Restrictions on Business Activities ....................................... 14
2.10 Title to Properties; Absence of Liens and Encumbrances ................... 15
2.11 Intellectual Property .................................................... 15
2.12 Agreements, Contracts and Commitments .................................... 17
2.13 Interested Party Transactions ............................................ 19
2.14 Compliance with Laws ..................................................... 19
2.15 Litigation ............................................................... 19
2.16 Insurance ................................................................ 20
2.17 Minute Books ............................................................. 20
2.18 Environmental Matters .................................................... 20
2.19 Brokers' and Finders' Fees ............................................... 20
2.20 Employee Matters and Benefit Plans ....................................... 20
2.21 Accounting and Regulatory Matters ........................................ 24
2.22 Year 2000 Compliance ..................................................... 25
2.23 Representations Complete ................................................. 25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EGROUPS AND MERGER
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUB ........................................................................... 25
3.1 Organization of eGroups and Merger Sub. ................................... 25
3.2 eGroups and Merger Sub Capital Structure .................................. 26
3.3 Subsidiaries .............................................................. 26
3.4 Authority ................................................................. 27
3.5 Financial Statements ...................................................... 27
3.6 No Undisclosed Liabilities ................................................ 28
3.7 No Changes ................................................................ 28
3.8 Tax and Other Returns and Reports ......................................... 29
3.9 Restrictions on Business Activities ....................................... 31
3.10 Title to Properties; Absence of Liens and Encumbrances ................... 31
3.11 Intellectual Property .................................................... 31
3.12 Agreements, Contracts and Commitments .................................... 33
3.13 Interested Party Transactions ............................................ 35
3.14 Compliance with Laws ..................................................... 35
3.15 Litigation ............................................................... 35
3.16 Insurance ................................................................ 35
3.17 Minute Books ............................................................. 36
3.18 Environmental Matters .................................................... 36
3.19 Brokers' and Finders' Fees ............................................... 36
3.20 Employee Matters and Benefit Plans ....................................... 36
3.21 Accounting and Regulatory Matters ........................................ 40
3.22 Year 2000 Compliance ..................................................... 40
3.23 Representations Complete ................................................. 40
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME ........................................ 40
4.1 Conduct of Business of ONElist and eGroups ................................ 40
4.2 No ONElist Solicitation ................................................... 46
4.3 No eGroups or Merger Sub Solicitation ..................................... 46
ARTICLE V ADDITIONAL AGREEMENTS ....................................................... 47
5.1 ONElist Shareholder and eGroups Stockholder Approvals ..................... 47
5.2 Restrictions on Transfer .................................................. 48
5.3 Access to Information ..................................................... 49
5.4 Confidentiality ........................................................... 50
5.5 Expenses .................................................................. 50
5.6 Public Disclosure ......................................................... 50
5.7 Consents .................................................................. 50
5.8 FIRPTA Compliance ......................................................... 51
5.9 Reasonable Efforts ........................................................ 51
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.10 Notification of Certain Matters .......................................... 51
5.11 Certain Benefit Plans .................................................... 51
5.12 Accounting and Tax Treatment ............................................. 51
5.13 Additional Documents and Further Assurances .............................. 52
5.14 ONElist's Auditors ....................................................... 52
5.15 eGroups' Auditors ........................................................ 52
5.16 Agreement of Affiliates .................................................. 52
5.17 Voting Agreements ........................................................ 52
5.18 Indemnification .......................................................... 53
ARTICLE VI CONDITIONS TO THE MERGER ................................................... 53
6.1 Conditions to Obligations of Each Party to Effect the Merger .............. 53
6.2 Additional Conditions to Obligations of ONElist ........................... 55
6.3 Additional Conditions to the Obligations of eGroups and Merger Sub. ....... 57
ARTICLE VII NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES; COVENANTS OF MAJOR
SHAREHOLDERS .................................................................. 58
7.1 Non-Survival of Representations and Warranties ............................ 58
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER ........................................ 59
8.1 Termination ............................................................... 59
8.2 Effect of Termination ..................................................... 59
8.3 Amendment ................................................................. 60
8.4 Extension; Waiver ......................................................... 60
ARTICLE IX GENERAL PROVISIONS ......................................................... 60
9.1 Notices ................................................................... 60
9.2 Interpretation ............................................................ 61
9.3 Counterparts .............................................................. 61
9.4 Entire Agreement; Assignment .............................................. 61
9.5 Severability .............................................................. 61
9.6 Other Remedies ............................................................ 62
9.7 Governing Law ............................................................. 62
9.8 Rules of Construction ..................................................... 62
9.9 Specific Performance ...................................................... 62
</TABLE>
-iii
<PAGE> 5
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
EXHIBIT A List of eGroups Major Stockholders
EXHIBIT B List of ONElist Major Shareholders
EXHIBIT C Form of Agreement of Merger
EXHIBIT D Form of Fourth Amended and Restated Certificate
of Incorporation of eGroups, Inc.
EXHIBIT E ONElist Schedules
EXHIBIT F eGroups and Merger Sub Schedules
EXHIBIT G Form of eGroups Affiliate Agreement
EXHIBIT H Form of ONElist Affiliate Agreement
EXHIBIT I Form of Amendment to First Amended and Restated Investor
Rights Agreement
EXHIBIT J Form of Amendment to First Amended and Restated Co-Sale
Agreement
EXHIBIT K Form of eGroups Voting Agreement
EXHIBIT L Form of ONElist Voting Agreement
EXHIBIT M Letter Agreement Between ONElist and eGroups dated October 14,
1999
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of November 9, 1999 among eGroups, Inc., a Delaware corporation
("eGroups"), EG Acquisition Corporation, a California corporation and a
wholly-owned subsidiary of eGroups ("Merger Sub"), and ONElist, Inc., a
California corporation ("ONElist").
RECITALS
A. The Boards of Directors of each of ONElist and eGroups and the sole
shareholder of Merger Sub believe it is in the best interests of each company
and their respective shareholders that eGroups acquire ONElist through the
statutory merger of Merger Sub with and into ONElist (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of ONElist and all outstanding options, warrants and other rights
to acquire or receive shares of capital stock of ONElist shall be converted into
the right to receive shares of capital stock of eGroups.
C. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and for accounting purposes shall qualify for treatment as a pooling of
interests.
D. ONElist, eGroups and Merger Sub desire to make certain
representations, warranties, covenants and other agreements in connection with
the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California Corporations Code (the "California
Code"), Merger Sub shall be merged with and into ONElist, the separate corporate
existence of Merger Sub shall cease, and ONElist shall continue as the surviving
corporation and as a wholly-owned subsidiary of eGroups. ONElist as the
surviving corporation after the Merger is sometimes referred to hereinafter as
the "Surviving Corporation." The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of ONElist and eGroups, and by eGroups, as the sole
shareholder of Merger Sub.
<PAGE> 7
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than five (5) business days following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Wilson Sonsini Goodrich & Rosati ("WSGR"), 975 Page Mill Road, Palo Alto,
California, unless another place, time or date is agreed to by eGroups and
ONElist. The date upon which the Closing actually occurs is herein referred to
as the "Closing Date." On or before the Closing Date, the parties hereto shall
cause the Merger to be consummated by filing an Agreement of Merger in
substantially the form attached hereto as Exhibit C (the "Agreement of Merger")
with the Secretary of State of the State of California, in accordance with the
relevant provisions of applicable law (the time of acceptance by the Secretary
of State of the State of California of such filing being referred to herein as
the "Effective Time"). The parties currently intend that the Closing Date will
occur on or prior to November 30, 1999. The parties hereto shall also take such
further actions as may be required by the State of California in connection with
the consummation of the Merger.
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the California Code.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
ONElist and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of ONElist and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by eGroups and ONElist prior to
the Effective Time, at the Effective Time, the Articles of Incorporation of
ONElist shall be amended and restated in full as set forth in Exhibit 1 to the
Agreement of Merger until thereafter amended in accordance with the California
Code and as provided in such Articles of Incorporation.
(b) Unless otherwise determined by eGroups and ONElist prior to
the Effective Time, at the Effective Time, the Bylaws of ONElist shall be
amended and restated in full such that the Bylaws of the Merger Sub, as in
effect immediately prior to the Effective Time, shall become the Bylaws of
ONElist as the Surviving Corporation until thereafter amended in accordance with
the California Code and as provided in the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
1.5 Directors and Officers.
(a) Surviving Corporation. Unless otherwise determined by eGroups
and ONElist prior to the Effective Time, the directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
each to hold the office of a director of the Surviving Corporation in accordance
with the provisions of the California Code and the Articles of Incorporation and
Bylaws of the Surviving Corporation until their successors are duly elected and
qualified. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the provisions of the Bylaws of the Surviving Corporation.
2
<PAGE> 8
(b) eGroups. At the Effective Time, the directors of eGroups
shall be as follows:.
Eric Archambeau
Jan Buettner
Mark Fletcher
Martin Roscheisen
Michael Klein
Peter Mills
Michael Moritz
1.6 Merger Consideration.
(a) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Comdisco Securities" shall mean: (i) that certain warrant dated
June 23, 1999, issued by eGroups to Comdisco, Inc. ("Comdisco") for the purchase
of eGroups Series B Preferred Stock; and (ii) that right of Comdisco to purchase
up to $1,800,000 worth of preferred stock sold by eGroups in its next round of
equity financing.
"Consideration Shares" shall mean those shares of eGroups Common
Stock and eGroups Series C Preferred Stock to be received by ONElist
Shareholders pursuant to Section 1.6.
"eGroups Capital Stock" shall mean shares of eGroups Common
Stock, eGroups Preferred Stock and any shares of other capital stock of eGroups.
"eGroups Common Stock" shall mean shares of common stock of
eGroups.
"eGroups Convertible Securities" shall mean all issued and
outstanding rights (other than eGroups Preferred Stock and eGroups Options) to
acquire or receive shares of eGroups Capital Stock.
"eGroups Fully-Diluted Capitalization Number" shall mean all of
the issued and outstanding shares of eGroups Common Stock as of the Effective
Time calculated on a fully-diluted basis as if all outstanding eGroups Preferred
Stock had been fully converted, all outstanding eGroups Options had been fully
exercised and the Comdisco Securities had been fully exercised and/or converted
immediately prior to such issuance (and the resulting securities fully converted
into eGroups Common Stock) as of such date. The foregoing calculation shall be
performed in accordance with Section 1.6(b) hereof.
"eGroups Options" shall mean all issued and outstanding options
to purchase or otherwise acquire eGroups Common Stock (whether or not vested)
held by officers, employees or directors of or consultants to eGroups or other
persons.
-3-
<PAGE> 9
"eGroups Preferred Stock" shall mean shares of Series A Preferred
Stock and Series B Preferred Stock of eGroups.
"eGroups Series C Preferred Stock" shall mean the Series C
Preferred Stock of eGroups with the rights, preferences, privileges and
restrictions set forth in eGroups' Fourth Amended and Restated Certificate of
Incorporation in the form attached as Exhibit D hereto (the "Fourth Amended and
Restated Certificate").
"Exchange Ratio" shall mean the product of (A) the quotient of
(x) the eGroups Fully-Diluted Capitalization Number divided by (y) ONElist
Fully-Diluted Capitalization Number multiplied by (B) the quotient of (a) 57
divided by (b) 43 (with the result rounded to five decimal places).
"GAAP" shall mean U.S. generally accepted accounting principles.
"Knowledge" shall mean, with respect to ONElist or eGroups, what
is within the actual knowledge of any of the officers or directors of ONElist or
eGroups, as the case may be.
"Material Adverse Effect" shall mean any change, event or effect
that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of ONElist or eGroups, as
applicable.
"Michael Klein Option" shall mean, assuming the completion of the
Merger and the next round of equity financing of eGroups, the stock option to be
granted to Michael Klein for that number of shares of eGroups Common Stock that,
upon the completion of such equity financing, would bring his total ownership of
eGroups stock to 3.42% of the total outstanding stock on a fully diluted basis.
"ONElist Capital Stock" shall mean shares of ONElist Common
Stock, ONElist Preferred Stock and any shares of other capital stock of ONElist.
"ONElist Common Stock" shall mean shares of common stock of
ONElist.
"ONElist Fully-Diluted Capitalization Number" shall mean all of
the issued and outstanding shares of ONElist Common Stock as of the Effective
Time calculated on a fully-diluted basis as if all outstanding ONElist Preferred
Stock had been fully converted, all outstanding ONElist Options had been fully
exercised and the Michael Klein Option had been fully exercised as of such date.
The foregoing calculation shall be performed in accordance with Section 1.6(b)
hereof.
"ONElist Options" shall mean all issued and outstanding options
to purchase or otherwise acquire ONElist Common Stock (whether or not vested)
held by officers, employees, directors of or consultants to ONElist or other
persons.
"ONElist Preferred Stock" shall mean shares of Series A Preferred
Stock of ONElist.
-4-
<PAGE> 10
"ONElist Shareholders" shall mean holders of any shares of
ONElist Capital Stock immediately prior to the Effective Time.
(b) Calculation Methodology. The parties have agreed to a method
for estimating the Comdisco Securities and the shares issuable upon exercise of
the Michael Klein Option. Such method is defined in a spreadsheet separately
initialed by ONElist and eGroups. Based upon such method and the agreed upon
formulae and methodology in such spreadsheet ONElist and eGroups have jointly
calculated the Exchange Ratio. Shortly before the Effective Time, ONElist and
eGroups agree to jointly recalculate the Exchange Ratio in accordance with such
method after giving effect to any changes in the eGroups Fully-Diluted
Capitalization Number and/or the ONElist Fully-Diluted Capitalization Number
that occur between the date hereof and the Effective Time.
(c) Effect on ONElist Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of ONElist or the
ONElist Shareholders, each share of ONElist Capital Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares, as
defined in Section 1.7 hereof and any shares owned by eGroups, Merger Sub or
ONElist or any direct or indirect wholly owned subsidiary thereof) shall be
canceled and extinguished and shall be converted automatically into the right to
receive, upon surrender of the certificate representing such shares of ONElist
Capital Stock and upon the terms and subject to conditions set forth below and
throughout this Agreement, including, without limitation, Sections 1.6(f), (g)
and (h) hereof (i) in the case of each share of ONElist Common Stock, a number
of shares of eGroups Common Stock equal to the Exchange Ratio and (ii) in the
case of each share of ONElist Preferred Stock, a number of Shares of eGroups
Series C Preferred Stock equal to the Exchange Ratio.
(d) Assumption of ONElist Options. At the Effective Time, each
outstanding ONElist Option issued pursuant to ONElist's 1998 Stock Plan (the
"ONElist Option Plan") or otherwise, whether vested or unvested, will be assumed
by eGroups in connection with the Merger. Each ONElist Option so assumed by
eGroups under this Agreement shall continue to have, and be subject to, the same
terms and conditions set forth in the ONElist Option Plan and/or as provided in
the respective option agreements immediately prior to the Effective Time
(including, without limitation, any vesting schedule or repurchase rights),
except that (i) each ONElist Option will be exercisable, subject to the same
terms and conditions set forth in the ONElist Option Plan and/or as provided in
the respective option agreements immediately prior to the Effective Time
(including, without limitation, any vesting schedule or repurchase rights), for
that number of whole shares of eGroups Common Stock equal to the product of the
number of shares of ONElist Common Stock that were issuable upon exercise of
such ONElist Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of eGroups
Common Stock, (ii) the per share exercise price for the shares of eGroups Common
Stock issuable upon exercise of such assumed ONElist Option will be equal to the
quotient determined by dividing the exercise price per share of ONElist Capital
Stock at which such ONElist Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent and
(iii) eGroups and its Board of Directors shall be substituted for ONElist and
the Committee
-5-
<PAGE> 11
of ONElist's Board of Directors (including, if applicable, the entire Board of
Directors of ONElist) administering the ONElist Option Plan.
(e) Option Status. It is the intention of the parties hereto that
the ONElist Options assumed by eGroups following the Closing pursuant to this
Section 1.6 will, to the extent permitted by applicable law, qualify as
incentive stock options as defined in Section 422 of the Code, to the extent any
such ONElist Options qualified as incentive stock options immediately prior to
the Effective Time.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into eGroups Capital Stock or ONElist Capital Stock),
reorganization, recapitalization or other like change with respect to eGroups
Capital Stock or ONElist Capital Stock occurring after the date hereof and prior
to the Effective Time. Any such change for which a record date is established
shall be deemed for the purposes of this Section 1.6(f) to have occurred on the
record date.
(g) Fractional Shares. No fractional share of eGroups Common
Stock or eGroups Series C Preferred Stock shall be issued in the Merger. In lieu
thereof, any fractional share shall be rounded to the nearest whole share (with
0.5 being rounded up) of eGroups Common Stock or eGroups Series C Preferred
Stock, as the case may be.
(h) Cancellation of eGroups-owned and ONElist-owned Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
any of the parties hereto, each share of ONElist Capital Stock owned by eGroups,
Merger Sub, ONElist or any direct or indirect wholly-owned subsidiary thereof
immediately prior to the Effective Time, shall be cancelled and extinguished
without any conversion thereof.
(i) Capital Stock of Merger Sub. At the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto,
each share of capital stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership
of any such shares shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
1.7 Dissenting Shares. "Dissenting Shares" shall mean any shares of
ONElist Capital Stock held by a holder who has demanded and perfected appraisal
rights for such shares in accordance with the California Code and who, as of the
Effective Time, has not effectively withdrawn or lost such appraisal rights. Any
Dissenting Shares shall be converted into the right to receive from the
Surviving Corporation such consideration as may be determined to be due with
respect to each such Dissenting Share pursuant to Chapter 13 of the California
Code; provided, however, that shares of ONElist Capital Stock that are
Dissenting Shares at the Effective Time of the Merger and are held by a holder
who shall, after the Effective Time of the Merger, withdraw his demand for
appraisal or lose his right of appraisal as provided in the California Code,
shall be
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deemed to be converted, as of the Effective Time of the Merger, into the right
to receive consideration in accordance with the procedures specified in Section
1.6(c). ONElist shall give eGroups (i) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other instruments served
pursuant to the California Code received by ONElist and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under the California Code. ONElist will not voluntarily make any
payment with respect to any demands for appraisal and will not, except with the
prior written consent of eGroups, settle or offer to settle any such demands. It
is understood and agreed that the obligation to make any payment in connection
with Dissenting Shares under Chapter 13 of the California Code shall be
exclusively that of the Surviving Corporation and that eGroups shall be under no
obligation to perform and discharge any such obligation or to reimburse or make
any contribution to the capital of the Surviving Corporation to enable it to
perform and discharge any such obligation. eGroups shall give ONElist prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to the California Code
received by eGroups.
1.8 Surrender of Certificates.
(a) Exchange Agent. WSGR shall serve as the exchange agent (the
"Exchange Agent") in the Merger.
(b) eGroups to Provide Common Stock and Series C Preferred Stock.
Immediately prior to the Effective Time, eGroups shall make available to the
Exchange Agent for exchange in accordance with this Article I, certificates
representing the shares of eGroups Common Stock and eGroups Series C Preferred
Stock issuable to ONElist Shareholders pursuant to Section 1.6 in exchange for
outstanding shares of ONElist Capital Stock.
(c) Exchange Procedures. As soon as practicable after the Closing
Date, the Surviving Corporation shall cause to be mailed to each ONElist
Shareholder, (i) a letter of transmittal (which shall be in such form and have
such other provisions as eGroups may reasonably specify and shall specify that
delivery shall be effected, and risk of loss and title to the certificates (the
"Certificates") which immediately prior to the Effective Time represent
outstanding shares of ONElist Capital Stock whose shares are converted into the
right to receive such ONElist Shareholder's pro rata portion of the
Consideration Shares pursuant to Section 1.6, shall pass, only upon delivery of
the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing such ONElist Shareholder's pro rata portion of the Consideration
Shares. Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by eGroups, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive, and the Exchange Agent shall promptly deliver in exchange therefor,
a certificate bearing the legend set forth in Section 5.2 hereof representing
the number of whole Consideration Shares to which such holder is entitled
pursuant to Section 1.6, and the Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of ONElist Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the
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payment of dividends, to evidence the ownership of the number of full shares of
eGroups Common Stock and/or eGroups Series C Preferred Stock, as the case may
be, into which such shares of ONElist Capital Stock shall have been so
converted.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to eGroups Common Stock or eGroups Series C Preferred Stock, as the case
may be, with a record date after the Effective Time will be paid to the holder
of any unsurrendered Certificate with respect to the shares of eGroups Common
Stock and/or eGroups Series C Preferred Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
eGroups Common Stock and/or eGroups Series C Preferred Stock issued in exchange
therefor, at the time of such surrender, the amount of dividends or other
distributions (without interest) with a record date after the Effective Time
theretofore paid with respect to such whole shares of eGroups Common Stock
and/or eGroups Series C Preferred Stock.
(e) Transfers of Ownership. If any certificate for shares of
eGroups Common Stock and/or eGroups Series C Preferred Stock is to be issued in
a name other than that in which the Certificate surrendered in exchange therefor
is registered, it will be a condition of the issuance thereof that the
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will have paid to
eGroups or any agent designated by it any transfer or other taxes required by
reason of the issuance of a certificate for shares of eGroups Common Stock
and/or eGroups Series C Preferred Stock, as the case may be, in any name other
than that of the registered holder of the Certificate surrendered.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, neither the Exchange Agent, the Surviving Corporation nor any
party hereto shall be liable to a holder of shares of eGroups Capital Stock or
ONElist Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in ONElist Common Stock. All shares of
eGroups Common Stock and eGroups Series C Preferred Stock issued in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to shares of ONElist Capital Stock outstanding prior to
the Effective Time, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of ONElist Capital Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of ONElist Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making and delivery of an affidavit
of that fact by the holder thereof, such shares of eGroups Common Stock and/or
eGroups Series C Preferred Stock as may be required pursuant to Section 1.6;
provided, however, that eGroups may, in its discretion and as a condition
precedent to the issuance thereof, require the owner
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of such lost, stolen or destroyed Certificates to deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made against
eGroups or the Exchange Agent with respect to the Certificates alleged to have
been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and (ii) qualify for accounting treatment as a
pooling of interests. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations. Each party has consulted with its own tax
advisers and accountants with respect to the tax and accounting consequences of
the Merger.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of ONElist and Merger Sub, the officers and directors of
ONElist and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ONELIST
As of the date hereof, ONElist hereby represents and warrants to eGroups
and Merger Sub, subject to such exceptions as are specifically disclosed in the
disclosure schedules supplied by ONElist to eGroups dated as of the date hereof
and attached hereto as Exhibit E (the "ONElist Schedules"), as follows:
2.1 Organization of ONElist. ONElist is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
ONElist has the corporate power to own its properties and to carry on its
business as now being conducted. ONElist is duly qualified to do business and in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified would have a Material Adverse Effect on ONElist. ONElist has
delivered a true and correct copy of its Articles of Incorporation and Bylaws,
each as amended to date, to eGroups.
2.2 ONElist Capital Structure.
(a) The authorized capital stock of ONElist consists of
10,000,000 shares of authorized Common Stock, no par value, of which 2,457,429
shares are issued and outstanding; 2,400,000 shares of authorized Series A
Preferred Stock, no par value, of which 2,330,665 are issued and outstanding.
The ONElist Capital Stock is held of record by the persons, with the addresses
of record and in the amounts set forth on Schedule 2.2(a). All outstanding
shares of ONElist Capital Stock are duly authorized, validly issued, fully paid
and non-assessable and not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of ONElist or any material agreement to
which ONElist is a party or by which it is bound.
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(b) ONElist has reserved 1,665,000 shares of ONElist Common Stock
for issuance to directors, employees and consultants pursuant to the ONElist
Option Plan, of which 819,322 shares are subject to outstanding, unexercised
options and 444,928 shares remain available for future grant. All of the ONElist
Options have been duly authorized and validly issued, as applicable, in
accordance with the applicable terms of the ONElist Option Plan and Blue Sky
laws. Schedule 2.2(b) sets forth for each outstanding ONElist Option (i) the
name of the holder of such security, (ii) the number of shares of capital stock
subject to such security, (iii) the exercise price of such security, (iv) the
date of grant of such security, (v) the date on which such security expires, and
(vi) whether the exercisability of such security will be accelerated and become
exercisable by reason of the transactions contemplated by this Agreement. Except
as set forth in Schedule 2.2(b), there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which ONElist is
a party or by which it is bound obligating ONElist to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of ONElist or obligating ONElist to
grant, extend, accelerate the vesting of, change the price of, otherwise amend
or enter into any such option, warrant, call, right, commitment or agreement.
The holders of ONElist Options have been or will be given, or shall have
properly waived, any required notice prior to the Merger, and all such rights
will be terminated at or prior to the Effective Time. As a result of the Merger,
eGroups will be the record and sole beneficial owner of all ONElist Capital
Stock and all rights to acquire or receive ONElist Capital Stock.
2.3 Subsidiaries. Except as set forth on Schedule 2.3, ONElist does not
have any subsidiaries and does not otherwise own and has never otherwise owned
any shares of capital stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, limited liability company,
association, joint venture or other business entity.
2.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by ONElist's shareholders, ONElist has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of ONElist, subject
only to the approval of the Merger by ONElist's shareholders. ONElist's Board of
Directors has unanimously approved the Merger and this Agreement. This Agreement
has been duly executed and delivered by ONElist and constitutes the valid and
binding obligation of ONElist, enforceable in accordance with its terms (except
in all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought). Except as set forth on Schedule 2.4, subject only to
the approval of the Merger and this Agreement by ONElist's shareholders, the
execution and delivery of this Agreement by ONElist does not, and, as of the
Effective Time, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "ONElist Conflict") (i) any provision of the
Articles of Incorporation or Bylaws of ONElist or (ii) any material mortgage,
indenture, lease, contract or
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<PAGE> 16
other material agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to ONElist or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any ONElist
Conflict) is required by or with respect to ONElist in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Agreement of Merger with
the California Secretary of State, (ii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and (iii) such other
consents, waivers, authorizations, filings, approvals and registrations which
are set forth on Schedule 2.4.
2.5 Financial Statements. Schedule 2.5 sets forth ONElist's unaudited
balance sheet as of December 31, 1998, and the related unaudited statements of
operations and cash flow for the twelve month period ended December 31, 1998
(the "ONElist Year-End Financials") and ONElist's unaudited balance sheet as of
September 30, 1999 and the related unaudited statements of operations and cash
flows for the nine months then ended (the "ONElist Interim Financials")
(collectively, such financial statements are sometimes referred to herein as
"ONElist Financial Statements"). The ONElist Financial Statements have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other. The ONElist Financial
Statements present fairly the financial condition, operating results and cash
flows of ONElist as of the dates and during the periods indicated therein,
subject to normal year-end adjustments, which will not be material in amount or
significance. ONElist's unaudited balance sheet dated as of September 30, 1999,
shall be referred to as the "ONElist Current Balance Sheet".
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
ONElist does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, (i) has not been reflected
in the ONElist Current Balance Sheet, or (ii) has not arisen in the ordinary
course of ONElist's business since the date of the ONElist Current Balance
Sheet, consistent with past practices.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of
the ONElist Current Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by ONElist except in the ordinary course of
business as conducted as of the date of the ONElist Current Balance Sheet and
consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of ONElist;
(c) capital expenditure or commitment by ONElist, either
individually or in the aggregate, exceeding $50,000;
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(d) destruction of, damage to or loss of any material assets,
business or customer of ONElist (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by ONElist;
(g) revaluation by ONElist of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of ONElist, or any direct or
indirect redemption, purchase or other acquisition by ONElist of any of its
capital stock;
(i) increase in the salary or other compensation payable or to
become payable to any of its officers, directors, employees or advisors, or the
declaration, payment or commitment or obligation of any kind for the payment of
a bonus or other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement or in the ordinary course of business
and consistent with past practices;
(j) sale, lease, license or other disposition of any of the
assets or properties of ONElist, except in the ordinary course of business and
consistent with past practices;
(k) material amendment or termination of any material contract,
agreement or license to which ONElist is a party or by which it is bound;
(l) loan by ONElist to any person or entity, incurring by ONElist
of any indebtedness, guaranteeing by ONElist of any indebtedness, issuance or
sale of any debt securities of ONElist or guaranteeing of any debt securities of
others, except for advances to employees for travel and business expenses in the
ordinary course of business, consistent with past practices;
(m) waiver or release of any right or claim of ONElist, including
any write-off or other compromise of any account receivable of ONElist other
than in the ordinary course of business;
(n) change in pricing or royalties set or charged by ONElist to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to ONElist;
(o) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on ONElist; or
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(p) negotiation or agreement by ONElist or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (o) (other than negotiations with eGroups and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purpose of this Agreement, "Tax"
or "Taxes" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) ONElist as of the Effective Time will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") due on or before the Effective
Time relating to any and all Taxes concerning or attributable to ONElist or its
operations and such Returns are or will be prior to filing true and correct in
all material respects and have been completed in accordance with applicable law.
(ii) ONElist as of the Effective Time: (A) will have paid
or accrued on the ONElist Interim Financials all Taxes it is required to pay or
which are attributable to the period ending September 30, 1999 and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) ONElist has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, assessed, or to its
Knowledge proposed against ONElist, nor has ONElist executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of
ONElist is currently in progress, nor has ONElist been notified of any request
for such an audit or other examination.
(v) ONElist does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
for in accordance with GAAP on the ONElist Current Balance Sheet, whether
asserted or unasserted, contingent or otherwise, and ONElist has no Knowledge of
any basis for the assertion of any such liability attributable to ONElist, its
assets or operations.
(vi) ONElist has provided to eGroups or has made available
to representatives of eGroups for inspection copies of all federal and state
income and all state sales and use Tax Returns for all periods since the date of
ONElist's incorporation.
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(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort on the assets ("Liens") of ONElist
relating to or attributable to Taxes.
(viii) Except as set forth in Schedule 2.8(b)(viii), as of
the Effective Time, there will not be any contract, agreement, plan or
arrangement, excluding any arrangement to which eGroups or any of its employees
is a party, covering any employee or former employee of ONElist that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G, 404 or 162(m) of the Code as a
result of the Merger.
(ix) ONElist has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by ONElist.
(x) ONElist is not a party to a tax sharing or allocation
agreement nor does ONElist owe any amount under any such agreement.
(xi) ONElist is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xii) Except as may be required as a result of the Merger,
ONElist has not been and will not be required to include any adjustment in
taxable income for any Tax period (or portion thereof) pursuant to Section 481
or Section 263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods employed
prior to the Closing.
(xiii) Since September 30, 1999 no Taxes have been
incurred except in the ordinary course of business.
2.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which ONElist is a party or otherwise binding upon ONElist which has or
reasonably could be expected to have the effect of materially prohibiting or
impairing any business practice of ONElist, any acquisition of property
(tangible or intangible) by ONElist or the conduct of business by ONElist.
Without limiting the foregoing, ONElist has not entered into any agreement under
which ONElist is restricted from developing, selling, licensing, marketing,
promoting or otherwise distributing any products, services or technology to any
class of customers, or entering into any strategic alliances, in any geographic
area, during any period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) ONElist owns no real property, nor has it ever owned any real
property. All such leases are in full force and effect, are valid and effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
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(b) ONElist has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the ONElist
Financial Statements or in Schedule 2.10(b) and except for liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
2.11 Intellectual Property.
(a) For purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, URLs, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world; (vi) all databases and data
collections and all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated, throughout the
world and (viii) any similar or equivalent rights to any of the foregoing
anywhere in the world.
"ONElist Intellectual Property" shall mean any Intellectual Property
that is used in the ONElist business as currently conducted and as currently
proposed to be conducted.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
"ONElist Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, ONElist.
(b) No material ONElist Intellectual Property or product or
service of ONElist is subject to any proceeding or outstanding decree, order,
judgment, agreement or stipulation restricting in any manner the use, transfer,
or licensing thereof by ONElist, or which may affect the validity, use or
enforceability of such ONElist Intellectual Property.
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(c) Each material item of ONElist Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees currently due in connection with such Registered Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Registered Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property.
(d) ONElist owns and has good and exclusive title to, or has
license (sufficient for the conduct of its business as currently conducted and
as currently proposed to be conducted) to, each material item of ONElist
Intellectual Property or other Intellectual Property used by ONElist free and
clear of any lien or encumbrance (excluding licenses and related restrictions);
and, to the Knowledge of ONElist, ONElist is the exclusive owner of all
trademarks and trade names used in connection with the operation or conduct of
the business of ONElist, including the sale of any products or the provision of
any services by ONElist.
(e) ONElist owns exclusively, and has good title to, all
copyrighted works that are ONElist products or which ONElist otherwise expressly
purports to own.
(f) To the extent that any material Intellectual Property has
been developed or created by a third party for ONElist, ONElist has a written
agreement with such third party with respect thereto and ONElist thereby either
(i) has obtained ownership of, and is the exclusive owner of or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted and as currently proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment, except to the extent restricted by applicable law.
(g) ONElist has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was
material to ONElist Intellectual Property, to any third party.
(h) Schedule 2.11(h) lists all material contracts, licenses and
agreements to which ONElist is a party as of the date hereof (i) with respect to
ONElist Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course); or (ii) pursuant to which a
third party has licensed or transferred any material Intellectual Property to
ONElist.
(i) All material contracts, licenses and agreements relating to
ONElist Intellectual Property are in full force and effect. The consummation of
the transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. ONElist is in material compliance with, and
has not materially breached any term any of such contracts, licenses and
agreements and, to the Knowledge of ONElist, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of ONElist's rights under such contracts, licenses and agreements
to the same extent ONElist would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment
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of any additional amounts or consideration other than ongoing fees, royalties or
payments which ONElist would otherwise be required to pay.
(j) To the Knowledge of ONElist, the operation of the business of
ONElist as such business currently is conducted, including ONElist's design,
development, manufacture, marketing and sale of the products or services of
ONElist (including with respect to products and services currently under
development) has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party in any respect adverse to such party or
constitute unfair competition or trade practices under the laws of any
jurisdiction in which ONElist currently conducts business.
(k) ONElist has not received notice from any third party that the
operation of the business of ONElist or any act, product or service of ONElist,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction in which ONElist currently conducts business.
(l) To the Knowledge of ONElist, no person has or is infringing
or misappropriating, in any respect materially adverse to ONElist, any ONElist
Intellectual Property.
(m) ONElist has taken reasonable steps to protect ONElist's
rights in ONElist's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to ONElist, and, without limiting the foregoing, ONElist has and
enforces a policy requiring each employee and contractor to execute a
proprietary information/confidentiality and invention assignment agreement and
all current and former employees and contractors of ONElist have executed such
an agreement, except where the failure to do so is not reasonably expected to be
material to ONElist.
2.12 Agreements, Contracts and Commitments.
(a) Except as set forth on Schedule 2.12(a), ONElist does not
have, is not a party to nor is it bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements;
(iv) any material employment or consulting agreement,
contract or commitment with an employee or individual consultant or salesperson
or any material consulting or sales agreement, contract or commitment under
which any firm or other organization provides services to ONElist;
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<PAGE> 23
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a value
individually in excess of $50,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of ONElist to engage in any line of business or to
compete with any person;
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $50,000;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of ONElist's business;
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof;
(xiii) any purchase order or contract for the purchase of
raw materials involving $50,000 or more;
(xiv) any construction contracts;
(xv) any distribution, joint marketing or development
agreement;
(xvi) any agreement pursuant to which ONElist has granted
or may be required to grant in the future, to any party, a source-code license
or option or other right to use or acquire source-code; or
(xvii) any other agreement, contract or commitment that
involves $50,000 or more or is not cancelable without penalty within thirty (30)
days.
(b) Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, as are noted in Schedule 2.12(b), ONElist
has not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule 2.12(a)
or Schedule 2.11(h) (any such
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<PAGE> 24
agreement, contract or commitment, a "ONElist Contract"). Each ONElist Contract
is in full force and effect and, except as otherwise disclosed in Schedule
2.12(b), is not subject to any default thereunder of which ONElist has Knowledge
by any party obligated to ONElist pursuant thereto.
2.13 Interested Party Transactions. Except as set forth on Schedule
2.13, (i) no officer, director or, to the Knowledge of ONElist (without any duty
to investigate), any ONElist Shareholder has, directly or indirectly, an
economic interest worth greater than $25,000 in any entity which furnished or
sold, or furnishes or sells, services or products that ONElist furnishes or
sells, or proposes to furnish or sell, (ii) no officer or director, or to the
Knowledge of ONElist (without any duty to investigate), any ONElist Shareholder
has, directly or indirectly, an economic interest worth greater than $25,000 in
any entity that purchases from or sells or furnishes to, ONElist, any goods or
services or (iii) no officer, director or ONElist Shareholder has, directly or
indirectly, a beneficial interest in any contract or agreement worth greater
than $25,000 set forth in Schedule 2.12(a) or Schedule 2.11(h); provided, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an "economic interest in any
entity" for purposes of this Section 2.13. For the purposes of this subsection,
"officer" and "director" shall include any parent, child, sibling or spouse of
any of such persons, or any trust, partnership or corporation in which such
officer or director has a controlling interest.
2.14 Compliance with Laws. ONElist has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to ONElist's Knowledge
threatened against ONElist, its properties or any of its officers or directors
in their respective capacities as such. Except as set forth in Schedule 2.15, to
ONElist's Knowledge, there is no investigation pending or threatened against
ONElist, its properties or any of its officers or directors (in their respective
capacities as such) by or before any governmental entity. Schedule 2.15 sets
forth, with respect to any pending or threatened action, suit, proceeding or
investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. No Governmental Entity
has at any time challenged or questioned the legal right of ONElist to
manufacture, offer or sell any of its products in the present manner or style
thereof.
2.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of ONElist, there is no claim by ONElist
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid or
will be paid when due and ONElist is otherwise in material compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). ONElist has no Knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
2.17 Minute Books. The minute books of ONElist made available to counsel
for eGroups are the only minute books of ONElist and contain a reasonably
accurate summary of all meetings of
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directors (or committees thereof) and shareholders or actions by written consent
since the time of incorporation of ONElist.
2.18 Environmental Matters. ONElist is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its Knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
2.19 Brokers' and Finders' Fees. ONElist has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees,
investment banking fees, consulting fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.20 Employee Matters and Benefit Plans.
(a) Definitions. For purposes of this Section 2.20 and Section
3.20 of this Agreement, the following terms shall have the meanings set forth
below:
(i) "ONElist Affiliate" shall mean any other corporation,
partnership, limited liability company, trade, business, person or other entity
that, together with ONElist, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code;
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(iii) "ONElist Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan",
within the meaning of Section 3(3) of ERISA which (A) is or has been sponsored,
maintained, contributed to, or required to be contributed to, by ONElist or any
ONElist Affiliate for the benefit of any "ONElist Employee" (as defined below),
or (B) with respect to which ONElist or any ONElist Affiliate has or could have
any material liability or obligation, contingent or otherwise;
(iv) "ONElist Employee" shall mean any current, former, or
retired employee, officer, or director of ONElist or any ONElist Affiliate;
(v) "ONElist Employee Agreement" shall refer to each
written management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between
ONElist or any ONElist Affiliate and any ONElist Employee or consultant. Except
as set forth on Schedule 2.20(a)(v), ONElist represents and warrants that there
are no oral agreements between ONElist or any Affiliate and any ONElist Employee
or consultant pertaining to management, employment, severance, consulting,
relocation, repatriation, expatriation, visas, work permit or similar matters or
arrangements;
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<PAGE> 26
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any Pension Plan (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) or
4001(a)(3) of ERISA or Section 414(f) of the Code;
(viii) "Multiple Employer Plan" means any Pension Plan (as
defined below) which is a "multiple employer plan," within the meaning of
Section 4063 or 4064 of ERISA or Section 413(c) of the Code; and
(ix) "Pension Plan" shall mean any "employee pension
benefit plan," as defined in Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
list of each ONElist Employee Plan and each ONElist Employee Agreement. ONElist
does not have any plan or commitment, whether legally binding or not, to
establish any new ONElist Employee Plan or ONElist Employee Agreement, to modify
any ONElist Employee Plan or ONElist Employee Agreement (except to the extent
required by law or to conform any such ONElist Employee Plan or ONElist Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to eGroups in writing, or as required by this Agreement), or to enter
into any ONElist Employee Plan or ONElist Employee Agreement, nor does it have
any intention or commitment to do any of the foregoing. There has been no
amendment, interpretation or other announcement (written or oral) by ONElist or,
to the Knowledge of ONElist, any other Person relating to, or change in
participation or coverage under, any ONElist Employee Plan or ONElist Employee
Agreement that, either alone or together with other such items or events, could
materially increase the expense of maintaining the ONElist Employee Plans and
ONElist Employee Agreements above the level of expense incurred with respect
thereto for the most recent fiscal year included in the ONElist Financial
Statements.
(c) Documents. ONElist has provided, or will provide within three
(3) days following the execution of this Agreement, to eGroups (i) correct and
complete copies of all documents embodying or materially affecting the
interpretation or application of each ONElist Employee Plan and each ONElist
Employee Agreement including all amendments thereto; (ii) the most recent annual
actuarial valuations, if any, prepared for each ONElist Employee Plan; (iii) the
three most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA or the Code in connection with each ONElist Employee
Plan or related trust; (iv) if the ONElist Employee Plan is funded, the most
recent annual and periodic accounting of ONElist Employee Plan assets; (v) the
most recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
ONElist Employee Plan which has a material adverse effect on such ONElist
Employee Plan; (vi) the most recent IRS determination, opinion, notification or
advisory letters as applicable, and rulings relating to ONElist Employee Plans
and copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any ONElist Employee Plan or ONElist
Employee Agreement; (vii) all material written agreements and contracts relating
to each ONElist Employee Plan and ONElist Employee Agreement, including, but not
limited to, trust agreements,
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<PAGE> 27
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material distributed to any ONElist
Employee or ONElist Employees relating to any ONElist Employee Plan or ONElist
Employee Agreement and any proposed ONElist Employee Plan or ONElist Employee
Agreement, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to ONElist; and (ix) all registration statements and prospectuses prepared in
connection with each ONElist Employee Plan not otherwise publicly available on
the SEC website.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d): (i) ONElist and, to the Knowledge of ONElist, all other Persons have
properly performed in all material respects all obligations required to be
performed by them under each ONElist Employee Plan and ONElist Employee
Agreement; (ii) each ONElist Employee Plan and ONElist Employee Agreement is,
and at all times since inception has been, established, maintained,
administered, operated and funded in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA and the Code; (iii) each
ONElist Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code is, and at all
times since inception has been, so qualified, and has either received a
favorable determination letter from the IRS with respect to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination; (iv) no "prohibited transaction", within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, has occurred with respect to
any ONElist Employee Plan for which an exemption is not applicable; (v) there
are no actions, suits or claims pending, or, to the Knowledge of ONElist,
threatened or anticipated (other than routine claims for benefits) against any
ONElist Employee Plan or against the assets of any ONElist Employee Plan; and
(vi) each ONElist Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
material liability to ONElist, eGroups or any ONElist Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(vii) there are no audits, inquiries or proceedings pending or, to the Knowledge
of ONElist, threatened by the IRS or DOL with respect to any ONElist Employee
Plan or ONElist Employee Agreement; (viii) all contributions, premiums and other
payments due or required to be paid to (or with respect to) each ONElist
Employee Plan have been timely paid, or if not yet due, have been properly
accrued on ONElist's books consistent with past practice; and (ix) neither
ONElist nor any ONElist Affiliate has incurred, and to the Knowledge of ONElist
there exists no condition or set of circumstances in connection with which
either ONElist or any ONElist Affiliate could incur, a material liability or
expense (except for benefit claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable law, statute,
order, rule or regulation with respect to any ONElist Employee Plan or ONElist
Employee Agreement.
(e) Pension Plans. At no time has ONElist or any ONElist
Affiliate sponsored, maintained, participated in, or contributed to (or been
required to contribute to), any Pension Plan
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which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA
or Section 412 of the Code.
(f) Multiemployer Plans. At no time has ONElist or any ONElist
Affiliate contributed to or been requested (or obligated) to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(g), neither ONElist nor any ONElist Employee Plan provides, or has
any liability to provide, life insurance, medical or other employee welfare
benefits to any ONElist Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and ONElist has
never represented, promised or contracted (whether in oral or written form) to
any ONElist Employee (either individually or to ONElist Employees as a group) or
any other person that such ONElist Employee(s) or other person would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute. The term "other employee welfare benefits" means those benefits
traditionally provided under an "employee benefit welfare plan" as defined in
ERISA Section 3(1).
(h) Health Care Compliance. Neither the ONElist nor any ONElist
Affiliate has, prior to the Effective Time and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women's Health and Cancer Rights Act, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such Act, or any similar provisions of state law applicable to
its Employees.
(i) Effect of Transaction. Except as set forth on Schedule
2.20(i), the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any ONElist
Employee Plan, ONElist Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any ONElist Employee.
(j) Employment Matters. ONElist (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
ONElist Employees; (ii) has withheld all amounts required by law or by agreement
to be withheld from the wages, salaries and other payments to ONElist Employees;
(iii) is not liable for any arrears of wages, other than arrears normally
included in its payroll schedule and system, or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for ONElist Employees (other than routine
payments to be made in the normal course of business and consistent with past
practice). There are no pending, threatened or reasonably anticipated claims or
actions against ONElist under any worker's compensation policy or long-term
disability policy.
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To ONElist's Knowledge, no employee of ONElist has violated any employment
contract, nondisclosure agreement or noncompetition agreement by which such
employee is bound due to such employee being employed by ONElist and disclosing
to ONElist or using trade secrets or proprietary information of any other person
or entity.
(k) Labor. To the Knowledge of ONElist, no work stoppage or
labor strike against ONElist is pending or threatened. Except as set forth in
Schedule 2.20(k), ONElist is not involved in or, to the Knowledge of ONElist,
threatened with, any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any ONElist Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in a material liability to ONElist. To the Knowledge of
ONElist, neither ONElist nor any of its subsidiaries has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act which
would, individually or in the aggregate, directly or indirectly result in a
liability to ONElist. Except as set forth in Schedule 2.20(k), ONElist is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to ONElist Employees and no
collective bargaining agreement is being negotiated by ONElist.
2.21 Accounting and Regulatory Matters.
(a) For purposes of this Agreement, the following terms have the
following meanings:
An "Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 5% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity. Notwithstanding the
foregoing, the terms "ONElist Affiliate" and "eGroups Affiliate" as used in
Sections 2.20 and 3.20 hereof, respectively, shall have the meanings assigned to
them in said sections.
"Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, any unincorporated organization, or
a government or political subdivision thereof.
(b) ONElist has no Knowledge of any action taken or agreed to be
taken by ONElist or any Affiliate of ONElist nor has any Knowledge of any fact
or circumstance that is reasonably likely to (a) prevent the Merger from
qualifying for pooling-of-interests accounting treatment, or (b) materially
impede or delay receipt of any consents of regulatory authorities referred to in
Section 6.1(j).
2.22 Year 2000 Compliance. All of ONElist's products and services
(including products and services currently under development) to the extent they
record, store, process, calculate and present dates, if at all, will record,
store, process, calculate and present dates falling on and after January 1,
2000, will calculate any information dependent on or relating to such dates in
the same manner and with the same functionality, data integrity and performance
as the products record, store,
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<PAGE> 30
process, calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively
"Year 2000 Compliant"). All of ONElist's material products and services will
lose no functionality with respect to the introduction of records containing
dates falling on or after January 1, 2000. To the Knowledge of ONElist, all of
ONElist's internal computer systems, including without limitation, its
accounting systems, are Year 2000 Compliant.
2.23 Representations Complete. None of the representations or warranties
made by ONElist (as modified by the ONElist Schedules), nor any statement made
in any schedule or certificate furnished by ONElist pursuant to this Agreement,
or furnished in or in connection with documents mailed or delivered to the
shareholders of ONElist in connection with soliciting their consent to this
Agreement and the Merger, contains or will contain at the Effective Time, any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EGROUPS AND MERGER SUB
As of the date hereof, eGroups and Merger Sub hereby represent and
warrant to ONElist, subject to such exceptions as are specifically disclosed in
the disclosure schedule supplied by eGroups and Merger Sub to ONElist dated as
of the date hereof and attached hereto as Exhibit F (the "eGroups and Merger Sub
Schedules"), as follows:
3.1 Organization of eGroups and Merger Sub. eGroups is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. eGroups has the
corporate power to own its properties and to carry on its business as now being
conducted. eGroups is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on eGroups. eGroups has delivered a true
and correct copy of its Articles of Incorporation and Bylaws, each as amended to
date, to ONElist. Merger Sub has delivered a true and correct copy of its
Articles of Incorporation and Bylaws, each as amended to date, to ONElist.
3.2 eGroups and Merger Sub Capital Structure.
(a) The authorized capital stock of eGroups consists of
20,000,000 shares of authorized Common Stock, of which 7,255,624 shares are
issued and outstanding, 1,620,000 shares of authorized Series A Preferred Stock,
of which 1,620,000 shares are issued and outstanding, and 3,600,000 shares of
authorized Series B Preferred Stock, of which 3,556,772 are issued and
outstanding. The shares of the capital stock of eGroups are held of record by
the persons, with the addresses of record and in the amounts set forth on
Schedule 3.2(a). All outstanding shares of eGroups Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not
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subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of eGroups or any agreement to which eGroups is a party
or by which it is bound.
(b) The authorized capital stock of Merger Sub consists of 1,000
shares of authorized Common Stock, all of which are issued and outstanding and
held of record by eGroups. All outstanding shares of the capital stock of Merger
Sub are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of Merger Sub or any agreement to which the Merger Sub is a party or
by which it is bound.
(c) eGroups has reserved 2,900,000 shares of Common Stock for
issuance to directors, employees and consultants pursuant to eGroups' 1998 Stock
Plan ("eGroups Stock Plan"), of which 873,850 shares are subject to outstanding,
unexercised options ("eGroups Options") and 82,250 shares remain available for
future grant. Schedule 3.2(c) sets forth for each outstanding eGroups Option and
eGroups Convertible Security, (i) the name of the holder of such security, (ii)
the number of shares of capital stock subject to such security, (iii) the
exercise price of such security, (iv) the date of grant of such security, (v)
the date on which such security expires, and (vi) whether the exercisability of
such security will be accelerated and become exercisable by reason of the
transactions contemplated by this Agreement. Except for the eGroups Convertible
Securities described in Schedule 3.2(c), there are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to which
eGroups is a party or by which it is bound obligating eGroups to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of eGroups or obligating eGroups to
grant, extend, accelerate the vesting of, change the price of, otherwise amend
or enter into any such option, warrant, call, right, commitment or agreement.
3.3 Subsidiaries. Other than Merger Sub and except as set forth on
Schedule 3.3, eGroups does not have any subsidiaries and does not otherwise own
and has never otherwise owned any shares of capital stock or any interest in, or
control, directly or indirectly, any other corporation, partnership, limited
liability company, association, joint venture or other business entity.
3.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by eGroups' shareholders and Merger Sub's shareholder, each of
eGroups and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of eGroups and Merger Sub, subject only to the
approval of the Merger by eGroups' stockholders and Merger Sub's shareholder.
Each of eGroups' Board of Directors and Merger Sub's Board of Directors have
unanimously approved the Merger and this Agreement. This Agreement has been duly
executed and delivered by eGroups and Merger Sub and constitutes the valid and
binding obligation of eGroups and Merger Sub, enforceable in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
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<PAGE> 32
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought). Except as set forth on Schedule
3.4, subject only to the approval of the Merger and this Agreement by eGroups'
stockholders and Merger Sub's shareholder, the execution and delivery of this
Agreement by eGroups and Merger Sub does not, and, as of the Effective Time, the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (any such event, a
"eGroups Conflict") (i) any provision of the Third Amended and Restated
Certificate of Incorporation (the "Third Amended and Restated Certificate") or
Bylaws of eGroups, (ii) any provision of the Articles of Incorporation or Bylaws
of Merger Sub, or (iii) any material mortgage, indenture, lease, contract or
other material agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to eGroups or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or any third party (so as not to trigger any eGroups Conflict) is
required by or with respect to eGroups or Merger Sub in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Agreement of Merger with
the California Secretary of State, (ii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws, and (iii) such
other consents, waivers, authorizations, filings, approvals and registrations
which are set forth on Schedule 3.4. eGroups, as the sole shareholder of Merger
Sub, has voted prior to the Effective Time the shares of Merger Sub's Common
Stock in favor of approval of this Agreement, as and to the extent required by
applicable law.
3.5 Financial Statements. Schedule 3.5 sets forth eGroups' unaudited
balance sheet as of July 31, 1999, and the related unaudited statement of income
and cash flow for the twelve month period ended July 31, 1999 (the "eGroups
Year-End Financials"), and eGroups' unaudited balance sheet as of September 30,
1999 and the related unaudited statements of income and cash flows for the two
months then ended (the "eGroups Interim Financials") (collectively, such
financial statements are sometimes referred to herein as "eGroups Financial
Statements"). The eGroups Financial Statements have been prepared in accordance
with GAAP applied on a basis consistent throughout the periods indicated and
consistent with each other. The eGroups Financial Statements present fairly the
financial condition, operating results and cash flows of eGroups as of the dates
and during the periods indicated therein, subject to normal year-end
adjustments, which will not be material in amount or significance. eGroups'
unaudited balance sheet dated as of September 30, 1999 shall be referred to as
the "eGroups Current Balance Sheet."
3.6 No Undisclosed Liabilities. Except as set forth in Schedule 3.6,
eGroups does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, (i) has not been reflected
in the eGroups Current Balance Sheet, or (ii) has not arisen in the ordinary
course of eGroups' business since the date of the eGroups Current Balance Sheet,
consistent with past practices.
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3.7 No Changes. Except as set forth in Schedule 3.7, since the date of
the eGroups Current Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by eGroups except in the ordinary course of
business as conducted as of the date of the eGroups Current Balance Sheet and
consistent with past practices;
(b) amendments or changes to the Third Amended and Restated
Certificate or Bylaws of eGroups;
(c) capital expenditure or commitment by eGroups, either
individually or in the aggregate, exceeding $50,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of eGroups (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by eGroups;
(g) revaluation by eGroups of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of eGroups, or any direct or
indirect redemption, purchase or other acquisition by eGroups of any of its
capital stock;
(i) increase in the salary or other compensation payable or to
become payable to any of eGroups' officers, directors, employees or advisors, or
the declaration, payment or commitment or obligation of any kind for the payment
of a bonus or other additional salary or compensation to any such person except
as otherwise contemplated by this Agreement or in the ordinary course of
business and consistent with past practices;
(j) sale, lease, license or other disposition of any of the
assets or properties of eGroups, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) material amendment or termination of any material contract,
agreement or license to which eGroups is a party or by which it is bound;
(l) loan by eGroups to any person or entity, incurring by eGroups
of any indebtedness, guaranteeing by eGroups of any indebtedness, issuance or
sale of any debt securities of eGroups or guaranteeing of any debt securities of
others, except for advances to employees for travel and business expenses in the
ordinary course of business, consistent with past practices;
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(m) waiver or release of any right or claim of eGroups, including
any write-off or other compromise of any account receivable of eGroups other
than in the ordinary course of business;
(n) change in pricing or royalties set or charged by eGroups to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to eGroups;
(o) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on eGroups; or
(p) negotiation or agreement by eGroups or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (o) (other than negotiations with ONElist and its representatives
regarding the transactions contemplated by this Agreement).
3.8 Tax and Other Returns and Reports.
(a) Tax Returns and Audits. Except as set forth in Schedule 3.8:
(i) eGroups as of the Effective Time will have prepared
and filed all required Returns relating to any and all Taxes concerning or
attributable to eGroups or its operations and such Returns are true and correct
in all material respects and have been completed in accordance with applicable
law.
(ii) eGroups as of the Effective Time: (A) will have paid
or accrued on the eGroups Interim Financials all Taxes it is required to pay or
which are attributable to the period ending September 30, 1999 and (B) will have
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) eGroups has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, assessed, or to its
Knowledge proposed against eGroups, nor has eGroups executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of
eGroups is currently in progress, nor has eGroups been notified of any request
for such an audit or other examination.
(v) eGroups does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the eGroups Current Balance Sheet, whether
asserted or unasserted, contingent or otherwise, and eGroups has no Knowledge of
any basis for the assertion of any such liability attributable to ONElist, its
assets or operations.
(vi) eGroups has provided to ONElist copies of all federal
and state income and all state sales and use Tax Returns for all periods since
the date of eGroups' incorporation.
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(vii) There are (and as of immediately following the
Effective Date there will be) no Liens on the assets of eGroups relating to or
attributable to Taxes.
(viii) Except as set forth in Schedule 3.8(a)(viii), as of
the Effective Time, there will not be any contract, agreement, plan or
arrangement, excluding any arrangement to which ONElist or any of its employees
are a party, covering any employee or former employee of eGroups that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G, 404 or 162(m) of the Code as a
result of the Merger.
(ix) eGroups has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by eGroups.
(x) eGroups is not a party to a tax sharing or allocation
agreement nor does eGroups owe any amount under any such agreement.
(xi) eGroups is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xii) Except as may be required as a result of the Merger,
eGroups has not been and will not be required to include any adjustment in
taxable income for any Tax period (or portion thereof) pursuant to Section 481
or Section 263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods employed
prior to the Closing.
(xiii) Since September 30, 1999, no Taxes have been
incurred except in the ordinary course of business.
3.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which eGroups is a party or otherwise binding upon eGroups which has or
reasonably could be expected to have the effect of materially prohibiting or
impairing any business practice of eGroups, any acquisition of property
(tangible or intangible) by eGroups or the conduct of business by eGroups.
Without limiting the foregoing, eGroups has not entered into any agreement under
which eGroups is restricted from developing, selling, licensing, marketing,
promoting or otherwise distributing any products, services or technology to any
class of customers, or entering into any strategic alliances, in any geographic
area, during any period of time or in any segment of the market.
3.10 Title to Properties; Absence of Liens and Encumbrances.
(a) eGroups owns no real property, nor has it ever owned any real
property. All such leases are in full force and effect, are valid and effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
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(b) eGroups has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the eGroups
Financial Statements or in Schedule 3.10(b) and except for liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
3.11 Intellectual Property.
(a) For purposes of this Agreement, the following terms have the
following definitions:
"eGroups Intellectual Property" shall mean any Intellectual Property
that is used in eGroups business as currently conducted and as currently
proposed to be conducted.
"eGroups Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, eGroups.
(b) No material eGroups Intellectual Property or product or
service of eGroups is subject to any proceeding or outstanding decree, order,
judgment, agreement or stipulation restricting in any manner the use, transfer,
or licensing thereof by eGroups, or which may affect the validity, use or
enforceability of such eGroups Intellectual Property.
(c) Schedule 3.11(c) sets forth a complete and accurate list of
all eGroups Registered Intellectual Property as of the date hereof and
specifies, where applicable, the jurisdictions in which each such item of
eGroups Registered Intellectual Property has been issued or registered or in
which an application for such issuance and registration has been filed,
including the respective registration or application numbers. Each material item
of eGroups Registered Intellectual Property is valid and subsisting, all
necessary registration, maintenance and renewal fees currently due in connection
with such Registered Intellectual Property have been made and all necessary
documents, recordations and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(d) eGroups owns and has good and exclusive title to, or has
license (sufficient for the conduct of its business as currently conducted and
as currently proposed to be conducted) to, each material item of eGroups
Intellectual Property or other Intellectual Property used by eGroups free and
clear of any lien or encumbrance (excluding licenses and related restrictions);
and, to the Knowledge of eGroups, eGroups is the exclusive owner of all
trademarks and trade names used in connection with the operation or conduct of
the business of eGroups, including the sale of any products or the provision of
any services by eGroups.
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(e) eGroups owns exclusively, and has good title to, all
copyrighted works that are eGroups products or which eGroups otherwise expressly
purports to own.
(f) To the extent that any material Intellectual Property has
been developed or created by a third party for eGroups, eGroups has a written
agreement with such third party with respect thereto and eGroups thereby either
(i) has obtained ownership of, and is the exclusive owner of or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted and as currently proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment, except to the extent restricted by applicable law.
(g) eGroups has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was
material to eGroups Intellectual Property, to any third party.
(h) Schedule 3.11(h) lists all material contracts, licenses and
agreements to which eGroups is a party as of the date hereof (i) with respect to
eGroups Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course); or (ii) pursuant to which a
third party has licensed or transferred any material Intellectual Property to
eGroups.
(i) All material contracts, licenses and agreements relating to
eGroups Intellectual Property are in full force and effect. The consummation of
the transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination or suspension of such
contracts, licenses and agreements. eGroups is in material compliance with, and
has not materially breached any term any of such contracts, licenses and
agreements and, to the Knowledge of eGroups, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, eGroups will be permitted to exercise all of
eGroups' rights under such contracts, licenses and agreements to the same extent
eGroups would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which eGroups would
otherwise be required to pay.
(j) To the Knowledge of eGroups, the operation of the business of
eGroups as such business currently is conducted, including eGroups' design,
development, manufacture, marketing and sale of the products or services of
eGroups (including with respect to products and services currently under
development) has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party in any respect adverse to such party or
constitute unfair competition or trade practices under the laws of any
jurisdiction in which eGroups currently conducts business.
(k) eGroups has not received notice from any third party that the
operation of the business of eGroups or any act, product or service of eGroups,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction in which eGroups currently conducts business.
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(l) To the Knowledge of eGroups, no person has or is
infringing or misappropriating, in any respect materially adverse to eGroups,
any eGroups Intellectual Property.
(m) eGroups has taken reasonable steps to protect eGroups' rights
in eGroups' confidential information and trade secrets that it wishes to protect
or any trade secrets or confidential information of third parties provided to
eGroups, and, without limiting the foregoing, eGroups has and enforces a policy
requiring each employee and contractor to execute a proprietary
information/confidentiality and invention assignment agreement and all current
and former employees and contractors of eGroups have executed such an agreement,
except where the failure to do so is not reasonably expected to be material to
eGroups.
3.12 Agreements, Contracts and Commitments.
(a) Except as set forth on Schedule 3.12(a), eGroups does not
have, is not a party to nor is it bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements;
(iv) any material employment or consulting agreement,
contract or commitment with an employee or individual consultant or salesperson
or any material consulting or sales agreement, contract or commitment under
which any firm or other organization provides services to eGroups;
(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement;
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a value
individually in excess of $50,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of eGroups to engage in any line of business or to
compete with any person;
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(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $50,000;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of eGroups' business;
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof;
(xiii) any purchase order or contract for the purchase of
raw materials involving $50,000 or more;
(xiv) any construction contracts;
(xv) any distribution, joint marketing or development
agreement;
(xvi) any agreement pursuant to which eGroups has granted
or may grant in the future, to any party, a source-code license or option or
other right to use or acquire source-code; or
(xvii) any other agreement, contract or commitment that
involves $50,000 or more or is not cancelable without penalty within thirty (30)
days.
(b) Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, as are all noted in Schedule 3.12(b),
eGroups has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any agreement, contract or commitment required to be set forth on Schedule
3.12(a), Schedule 3.11(c) or Schedule 3.11(h) (any such agreement, contract or
commitment, a "eGroups Contract"). Each eGroups Contract is in full force and
effect and, except as otherwise disclosed in Schedule 3.12(b), is not subject to
any default thereunder of which eGroups has Knowledge by any party obligated to
eGroups pursuant thereto.
3.13 Interested Party Transactions. Except as set forth on Schedule
3.13, (i) no officer, director or, to the Knowledge of eGroups (without any duty
to investigate), any stockholder of eGroups has, directly or indirectly, an
economic interest worth greater than $25,000 in any entity which furnished or
sold, or furnishes or sells, services or products that eGroups furnishes or
sells, or proposes to furnish or sell, (ii) no officer, director or, to the
Knowledge of eGroups (without any duty to investigate), any stockholder of
eGroups has, directly or indirectly, an economic interest worth greater than
$25,000 in any entity that purchases from or sells or furnishes to, eGroups, any
goods or services or (iii) no officer, director or stockholder of eGroups has,
directly or indirectly, a beneficial interest worth greater than $25,000 in any
contract or agreement set forth in Schedule 3.12(a), Schedule 3.11(c) or
Schedule 3.11(h); provided, that ownership of no more than
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one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 3.13. For the purposes of this subsection, "officer"
and "director" shall include any parent, child, sibling or spouse of any of such
persons, or any trust, partnership or corporation in which such officer or
director has a controlling interest.
3.14 Compliance with Laws. eGroups has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation.
3.15 Litigation. Except as set forth in Schedule 3.15, there is no
action, suit or proceeding of any nature pending or to eGroups' Knowledge
threatened against eGroups, its properties or any of its officers or directors,
in their respective capacities as such. Except as set forth in Schedule 3.15, to
eGroups' Knowledge, there is no investigation pending or threatened against
eGroups, its properties or any of its officers or directors (in their respective
capacities as such) by or before any governmental entity. Schedule 3.15 sets
forth, with respect to any pending or threatened action, suit, proceeding or
investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. No Governmental Entity
has at any time challenged or questioned the legal right of eGroups to
manufacture, offer or sell any of its products in the present manner or style
thereof.
3.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of eGroups, there is no claim by eGroups
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and eGroups is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). eGroups has no Knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
3.17 Minute Books. The minute books of eGroups made available to counsel
for ONElist are the only minute books of eGroups and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
stockholders or actions by written consent since the time of incorporation of
eGroups.
3.18 Environmental Matters. eGroups is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its Knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.19 Brokers' and Finders' Fees. eGroups has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees,
investment banking fees, consulting fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
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3.20 Employee Matters and Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "eGroups Affiliate" shall mean any other corporation,
partnership, limited liability company, trade, business, person or other entity
that, together with eGroups, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code;
(ii) "eGroups Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan",
within the meaning of Section 3(3) of ERISA, (A) which is or has been sponsored,
maintained, contributed to, or required to be contributed to, by eGroups or any
eGroups Affiliate for the benefit of any "eGroups Employee" (as defined below),
or (B) with respect to which eGroups or any eGroups Affiliate has or could have
any material liability or obligation, contingent or otherwise;
(iii) "eGroups Employee" shall mean any current, former,
or retired employee, officer, or director of eGroups or any eGroups Affiliate;
(iv) "eGroups Employee Agreement" shall refer to each
written management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between
eGroups or any eGroups Affiliate and any eGroups Employee or consultant. Except
as set forth on Schedule 3.20(a)(iv), eGroups represents and warrants that there
are no oral agreements between eGroups or any Affiliate and any eGroups Employee
or consultant pertaining to management, employment, severance, consulting,
relocation, repatriation, expatriation, visas, work permit or similar matters or
arrangements;
(b) Schedule. Schedule 3.20(b) contains an accurate and complete
list of each eGroups Employee Plan and each eGroups Employee Agreement together
with a schedule of all liabilities, whether or not accrued, under each such
eGroups Employee Plan or eGroups Employee Agreement only to the extent not
reflected on the eGroups Current Balance Sheet. eGroups does not have any plan
or commitment, whether legally binding or not, to establish any new eGroups
Employee Plan or eGroups Employee Agreement, to modify any eGroups Employee Plan
or eGroups Employee Agreement (except to the extent required by law or to
conform any such eGroups Employee Plan or eGroups Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
eGroups in writing, or as required by this Agreement), or to enter into any
eGroups Employee Plan or eGroups Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing. There has been no amendment,
interpretation or other announcement (written or oral) by eGroups or, to the
Knowledge of eGroups, any other Person relating to, or change in participation
or coverage under, any eGroups Employee Plan or eGroups Employee Agreement that,
either alone or together with other such items or events, could materially
increase the expense of maintaining the eGroups Employee Plans and eGroups
Employee
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<PAGE> 42
Agreements above the level of expense incurred with respect thereto for the most
recent fiscal year included in the eGroups Financial Statements.
(c) Documents. eGroups has provided, or will provide within three
(3) days following the execution of this Agreement, to ONElist (i) correct and
complete copies of all documents embodying or materially affecting the
interpretation or application of each eGroups Employee Plan and each eGroups
Employee Agreement including all amendments thereto; (ii) the most recent annual
actuarial valuations, if any, prepared for each eGroups Employee Plan; (iii) the
three most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA or the Code in connection with each eGroups Employee
Plan or related trust; (iv) if the eGroups Employee Plan is funded, the most
recent annual and periodic accounting of eGroups Employee Plan assets; (v) the
most recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
eGroups Employee Plan which has a material adverse effect on such eGroups
Employee Plan; (vi) the most recent IRS determination, opinion, notification or
advisory letters as applicable, and rulings relating to eGroups Employee Plans
and copies of all applications and correspondence to or from the IRS or the DOL
with respect to any eGroups Employee Plan or eGroups Employee Agreement; (vii)
all material written agreements and contracts relating to each eGroups Employee
Plan and eGroups Employee Agreement, including, but not limited to, trust
agreements, administrative service agreements, group annuity contracts and group
insurance contracts; (viii) all communications material distributed to any
eGroups Employee or eGroups Employees relating to any eGroups Employee Plan or
eGroups Employee Agreement and any proposed eGroups Employee Plan or eGroups
Employee Agreement, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to eGroups; and (ix) all registration statements and prospectuses prepared in
connection with each eGroups Employee Plan not otherwise publicly available on
the SEC website.
(d) Employee Plan Compliance. Except as set forth on Schedule
3.20(d), (i) eGroups and, to the Knowledge of eGroups, all other Persons have
properly performed in all material respects all obligations required to be
performed by them under each eGroups Employee Plan and eGroups Employee
Agreement; (ii) each eGroups Employee Plan and eGroups Employee Agreement is,
and at all times since inception has been, established, maintained,
administered, operated and funded in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA and the Code; (iii) each
eGroups Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code is, and at all
times since inception has been, so qualified, and has either received a
favorable determination letter from the IRS with respect to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination; (iv) no "prohibited transaction", within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, has occurred with respect to
any eGroups Employee Plan for which an exemption is not applicable;
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<PAGE> 43
(v) there are no actions, suits or claims pending, or, to the Knowledge of
eGroups, threatened or anticipated (other than routine claims for benefits)
against any eGroups Employee Plan or against the assets of any eGroups Employee
Plan; and (vi) each eGroups Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without material liability to ONElist, eGroups or any eGroups Affiliates (other
than ordinary administration expenses typically incurred in a termination
event); (vii) there are no audits, inquiries or proceedings pending or, to the
Knowledge of eGroups, threatened by the IRS or DOL with respect to any eGroups
Employee Plan or eGroups Employee Agreement; (viii) all contributions, premiums
and other payments due or required to be paid to (or with respect to) each
eGroups Employee Plan have been timely paid, or if not yet due, have been
properly accrued on eGroups's books consistent with past practice; and (ix)
neither eGroups nor any eGroups Affiliate has incurred, and to the Knowledge of
eGroups there exists no condition or set of circumstances in connection with
which either eGroups or any eGroups Affiliate could incur, a material liability
or expense (except for benefit claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable law, statute,
order, rule or regulation with respect to any eGroups Employee Plan or eGroups
Employee Agreement.
(e) Pension Plans. At no time has eGroups or any eGroups
Affiliate sponsored, maintained, participated in, or contributed to (or been
required to contribute to), any Pension Plan which is subject to Part 3 of
Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has eGroups or any eGroups
Affiliate contributed to or been requested (or obligated) to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 3.20(g), neither eGroups nor any eGroups Employee Plan provides, or has
any liability to provide, life insurance, medical or other employee welfare
benefits to any eGroups Employee upon his or her retirement or termination of
employment for any reason, except as may be required by statute, and eGroups has
never represented, promised or contracted (whether in oral or written form) to
any eGroups Employee (either individually or to eGroups Employees as a group) or
any other person that such eGroups Employee(s) or other person would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute. The term "other employee welfare benefits" means those benefits
traditionally provided under an "employee benefit welfare plan" as defined in
ERISA Section 3(1).
(h) Health Care Compliance. Neither eGroups nor any eGroups
Affiliate has, prior to the Effective Time and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women's Health and Cancer Rights Act, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such Act, or any similar provisions of state law applicable to
its Employees.
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(i) Effect of Transaction. Except as set forth on Schedule
3.20(i), the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any eGroups
Employee Plan, eGroups Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any eGroups Employee.
(j) Employment Matters. eGroups (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
eGroups Employees; (ii) has withheld all amounts required by law or by agreement
to be withheld from the wages, salaries and other payments to eGroups Employees;
(iii) is not liable for any arrears of wages, other than arrears normally
included in its payroll schedule and system, or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for eGroups Employees (other than routine
payments to be made in the normal course of business and consistent with past
practice). There are no pending, threatened or reasonably anticipated claims or
actions against eGroups under any worker's compensation policy or long-term
disability policy. To eGroups' Knowledge, no employee of eGroups has violated
any employment contract, nondisclosure agreement or noncompetition agreement by
which such employee is bound due to such employee being employed by eGroups and
disclosing to eGroups or using trade secrets or proprietary information of any
other person or entity.
(k) Labor. To the Knowledge of eGroups, no work stoppage or labor
strike against eGroups is pending or threatened. Except as set forth in Schedule
3.20(k), eGroups is not involved in or, to the Knowledge of eGroups, threatened
with, any labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any eGroups Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate, result
in liability to eGroups. To the Knowledge of eGroups, neither eGroups nor any of
its subsidiaries has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act which would, individually or in the aggregate,
directly or indirectly result in a material liability to eGroups. Except as set
forth in Schedule 3.20(k), eGroups is not presently, nor has it been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to eGroups Employees and no collective bargaining
agreement is being negotiated by eGroups.
3.21 Accounting and Regulatory Matters. eGroups has no Knowledge of any
action taken by eGroups or any Affiliate of eGroups or agreed to be taken nor
has any Knowledge of any fact or circumstance that is reasonably likely to (a)
prevent the Merger from qualifying for pooling-of-interests accounting
treatment, or (b) materially impede or delay receipt of any consents of
regulatory authorities referred to in Section 6.1(j).
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3.22 Year 2000 Compliance. All of eGroups' products and services
(including products and services currently under development) to the extent they
record, store, process, calculate and present dates, if at all, are Year 2000
Compliant. All of eGroups' material products and services will lose no
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000. To the Knowledge of eGroups, all of
eGroups' internal computer systems, including without limitation, its accounting
systems, are Year 2000 Compliant.
3.23 Representations Complete. None of the representations or warranties
made by eGroups or Merger Sub (as modified by the eGroups and Merger Sub
Schedules), nor any statement made in any schedule or certificate furnished by
eGroups or Merger Sub pursuant to this Agreement, or furnished in or in
connection with documents mailed or delivered to the stockholders of eGroups or
Merger Sub in connection with soliciting their consent to this Agreement and the
Merger, contains or will contain at the Effective Time, any untrue statement of
a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of ONElist and eGroups.
(a) ONElist Conduct. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, ONElist agrees (except to the extent that eGroups shall
otherwise consent in writing or as expressly contemplated herein) to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay its debts and Taxes when due, to pay or
perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. ONElist
shall promptly notify eGroups of any material event or occurrence or emergency
not in the ordinary course of its business, and any material event involving or
adversely affecting ONElist or its business. Except as expressly contemplated by
this Agreement and except as set forth on Schedule 4.1(a), ONElist shall not,
without the prior written consent of eGroups:
(i) Enter into any commitment, activity or transaction not
in the ordinary course of business;
(ii) Transfer to any person or entity any rights to any
ONElist Intellectual Property (other than pursuant to end-user licenses in the
ordinary course of business);
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(iii) Enter into or amend any agreements pursuant to which
any other party is granted manufacturing, marketing, distribution or similar
rights of any type or scope with respect to any products of ONElist;
(iv) Amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the ONElist Schedules;
(v) Commence any litigation;
(vi) Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of ONElist, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
its capital stock (or options, warrants or other rights exercisable therefor);
(vii) Except as may be required for the issuance of shares
of ONElist Capital Stock upon exercise or conversion of presently outstanding
ONElist Options and except pursuant to agreements previously entered into and
agreements that ONElist will enter into in the ordinary course of business and
consistent with past practice in connection with the employment of non-officer
employees, issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any shares
of its capital stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(viii) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(ix) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of ONElist;
(x) Sell, lease, license or otherwise dispose of any of
its properties or assets, except in the ordinary course of business and
consistent with past practice, or create any security interest in such assets or
properties;
(xi) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of ONElist
or guarantee any debt securities of others;
(xii) Grant any severance or termination pay to any
director, officer, employee or consultant, except payments (a) required by law
or, (b) with respect to non-officer
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employees and consultants (i) made pursuant to written agreements outstanding on
the date hereof (which such agreements are disclosed on Schedule 4.1(a)(xii)),
or (ii) pursuant to ONElist policy in effect on the date hereof and that has
been disclosed to eGroups;
(xiii) Adopt or amend any employee benefit plan, program,
policy or arrangement, or enter into any employment contract, extend any
employment offer, pay or agree to pay any special bonus or special remuneration
to any director, employee or consultant, or increase the salaries or wage rates
of its employees other than in the ordinary course of business and consistent
with past practice;
(xiv) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice;
(xv) Take any action, including the acceleration of
vesting of any options, warrants, restricted stock or other rights to acquire
shares of the capital stock of ONElist which would be reasonably likely to
interfere with eGroups' ability to account for the Merger as a pooling of
interests or any other action that could jeopardize the tax-free reorganization
hereunder;
(xvi) Pay, discharge or satisfy, in an amount in excess of
$25,000, in any one case, or $100,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the ONElist Financial
Statements or incurred in the ordinary course of business since September 30,
1999;
(xvii) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xviii) Enter into any strategic alliance, joint
development or joint marketing arrangement or agreement;
(xix) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;
(xx) Waive or commit to waive any rights with a value in
excess of $10,000, in any one case, or $25,000, in the aggregate;
(xxi) Cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xxii) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which ONElist directly or indirectly holds any interest on the date
hereof; or
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(xxiii) Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(a)(i) through (xxii) above, or any
other action that would prevent ONElist from performing or cause ONElist not to
perform its covenants hereunder.
(b) eGroups Conduct. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, eGroups agrees (except to the extent that ONElist shall
otherwise consent in writing or as expressly contemplated herein) to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay its debts and Taxes when due, to pay or
perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. eGroups
shall promptly notify ONElist of any material event or occurrence or emergency
not in the ordinary course of its business, and any material event involving or
adversely affecting eGroups or its business. Except as expressly contemplated by
this Agreement and except as set forth on Schedule 4.1(b), eGroups shall not,
without the prior written consent of ONElist:
(i) Enter into any commitment, activity or transaction not
in the ordinary course of business;
(ii) Transfer to any person or entity any rights to any
eGroups Intellectual Property (other than pursuant to end-user licenses in the
ordinary course of business);
(iii) Enter into or amend any agreements pursuant to which
any other party is granted manufacturing, marketing, distribution or similar
rights of any type or scope with respect to any products of eGroups;
(iv) Amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the eGroups and Merger Sub Schedules;
(v) Commence any litigation;
(vi) Declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of eGroups, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
its capital stock (or options, warrants or other rights exercisable therefor);
(vii) Except for the issuance of shares of eGroups capital
stock upon exercise or conversion of presently outstanding eGroups Convertible
Securities and except pursuant to agreements previously entered into and
agreements that eGroups will enter into in the ordinary
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course of business and consistent with past practice in connection with the
employment of non-officer employees, issue, grant, deliver or sell or authorize
or propose the issuance, grant, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(viii) Cause or permit any amendments to its Third Amended
and Restated Certificate or Bylaws;
(ix) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of eGroups;
(x) Sell, lease, license or otherwise dispose of any of
its properties or assets, except in the ordinary course of business and
consistent with past practice, or create any security interest in such assets or
properties;
(xi) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of eGroups
or guarantee any debt securities of others;
(xii) Grant any severance or termination pay to any
director, officer, employee or consultant, except payments (a) required by law
or, (b) with respect to non-officer employees and consultants (i) made pursuant
to written agreements outstanding on the date hereof (which such agreements are
disclosed on Schedule 4.1(b)(xii)), or (ii) pursuant to eGroups policy in effect
on the date hereof and that has been disclosed to ONElist;
(xiii) Adopt or amend any employee benefit plan, program,
policy or arrangement, or enter into any employment contract, extend any
employment offer, pay or agree to pay any special bonus or special remuneration
to any director, employee or consultant, or increase the salaries or wage rates
of its employees other than in the ordinary course of business and consistent
with past practice;
(xiv) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice;
(xv) Take any action, including the acceleration of
vesting of any options, warrants, restricted stock or other rights to acquire
shares of the capital stock of eGroups which would be reasonably likely to
interfere with eGroups' ability to account for the Merger as a pooling of
interests or any other action that could jeopardize the tax-free reorganization
hereunder;
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(xvi) Pay, discharge or satisfy, in an amount in excess of
$25,000, in any one case, or $100,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the eGroups Financial
Statements or incurred in the ordinary course of business since September 30,
1999;
(xvii) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xviii) Enter into any strategic alliance, joint
development or joint marketing arrangement or agreement;
(xix) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;
(xx) Waive or commit to waive any rights with a value in
excess of $10,000, in any one case, or $25,000, in the aggregate;
(xxi) Cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xxii) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which eGroups directly or indirectly holds any interest on the date
hereof; or
(xxiii) Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(b)(i) through (xxii) above, or any
other action that would prevent eGroups from performing or cause eGroups not to
perform its covenants hereunder.
4.2 No ONElist Solicitation.
(a) Until the earlier of (i) the Effective Time or (ii) the date
of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, ONElist will not (nor will ONElist permit any of ONElist's employees,
officers, directors, advisors, stockholders, agents, representatives or
Affiliates to) directly or indirectly, take any of the following actions with
any party other than eGroups and its designees: (A) solicit, initiate,
entertain, respond to or encourage any proposals or offers from, or conduct
discussions with or engage in negotiations with, any person relating to any
possible acquisition of ONElist or any of its subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or
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otherwise), any material portion of its or their capital stock or assets or any
equity interest in ONElist or any of its subsidiaries, (B) provide information
with respect to it to any person, other than eGroups, relating to, or otherwise
cooperate with, facilitate or encourage any effort or attempt by any such person
with regard to, any possible acquisition of ONElist (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise), any material
portion of its or their capital stock or assets or any equity interest in
ONElist or any of its subsidiaries, (C) enter into an agreement with any person,
other than eGroups, providing for the acquisition of ONElist (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity interest
in ONElist or any of its subsidiaries, or (D) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of ONElist
or any of its subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its or their capital
stock or assets or any equity interest in ONElist or any of its subsidiaries by
any person, other than by eGroups. ONElist shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties relating to
any such transaction or proposed transaction. In addition to the foregoing, if
ONElist receives prior to the Effective Time or the termination of this
Agreement any offer or proposal relating to any of the above, ONElist shall
immediately notify eGroups thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as eGroups may reasonably request. Except as contemplated by
this Agreement, disclosure by ONElist of the terms hereof (other than the
prohibition of this section) shall be deemed to be a violation of this Section
4.2.
(b) Notwithstanding anything to the contrary contained herein, in
the event that the Closing has not occurred on or before November 30, 1999,
ONElist may engage in the activities set forth in clauses (A) through (D) of
Section 4.2(a) solely for the purpose of effecting a private equity or debt
financing.
4.3 No eGroups or Merger Sub Solicitation.
(a) Until the earlier of (i) the Effective Time or (ii) the date
of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, eGroups and Merger Sub will not (nor will eGroups or Merger Sub permit
any of their employees, officers, directors, advisors, stockholders, agents,
representatives or Affiliates to) directly or indirectly, take any of the
following actions with any party other than ONElist and its designees: (A)
solicit, initiate, entertain, respond to or encourage any proposals or offers
from, or conduct discussions with or engage in negotiations with, any person
relating to any possible acquisition of eGroups or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its or their capital stock or assets or any
equity interest in eGroups or any of its subsidiaries, (B) provide information
with respect to it to any person, other than ONElist, relating to, or otherwise
cooperate with, facilitate or encourage any effort or attempt by any such person
with regard to, any possible acquisition of eGroups (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise), any material
portion of its or their capital stock or assets or any equity interest in
eGroups or any of its subsidiaries, (C) enter into an agreement with any person
providing for the acquisition of eGroups (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in eGroups or any of its
subsidiaries, or (D) make or authorize any statement, recommendation or
solicitation in support of any possible acquisition of eGroups or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its
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or their capital stock or assets or any equity interest in eGroups or any of its
subsidiaries by any person. eGroups shall immediately cease and cause to be
terminated any such contacts or negotiations with third parties relating to any
such transaction or proposed transaction. In addition to the foregoing, if
eGroups receives prior to the Effective Time or the termination of this
Agreement any offer or proposal relating to any of the above, eGroups shall
immediately notify ONElist thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as ONElist may reasonably request. Except as contemplated by
this Agreement, disclosure by eGroups of the terms hereof (other than the
prohibition of this section) shall be deemed to be a violation of this Section
4.3.
(b) Notwithstanding anything to the contrary contained herein, in
the event that the Closing has not occurred on or before November 30, 1999,
eGroups may engage in the activities set forth in clauses (A) through (D) of
Section 4.3(a) solely for the purpose of effecting a private equity or debt
financing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 ONElist Shareholder and eGroups Stockholder Approvals.
(a) As promptly as practicable, ONElist shall submit this
Agreement and the transactions contemplated hereby, including without limitation
the Merger, to ONElist's shareholders for approval as provided by California law
and ONElist's Articles of Incorporation and Bylaws. The materials submitted to
ONElist's shareholders shall be subject to review and approval by eGroups and
include information regarding eGroups and ONElist, the terms of the Merger and
this Agreement and the unanimous recommendation of the Board of Directors of
ONElist in favor of the Merger, this Agreement and the transactions contemplated
hereby.
(b) As promptly as practicable, eGroups shall submit this
Agreement and the transactions contemplated hereby, including without limitation
the Merger, to eGroups' stockholders for approval and adoption as provided by
California law, Delaware law and eGroups' Third Amended and Restated Certificate
and Bylaws. The materials submitted to eGroups' stockholders shall include the
unanimous recommendation of the Board of Directors of eGroups in favor of the
Merger, this Agreement and the transactions contemplated hereby.
5.2 Restrictions on Transfer.
(a) All certificates representing Consideration Shares
deliverable to any ONElist Shareholder pursuant to this Agreement and in
connection with the Merger and any certificates subsequently issued with respect
thereto or in substitution therefor (including any shares issued or issuable in
respect of any such shares upon any stock split stock dividend,
recapitalization, conversion or similar event) shall be stamped or otherwise
imprinted with legends in the following form:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. THE TRANSFER RESTRICTIONS APPLICABLE TO
THESE SHARES ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED DIRECTLY OR
INDIRECTLY FOR SUCH PERIOD OF TIME NOT TO EXCEED ONE HUNDRED
EIGHTY (180) DAYS FOLLOWING THE EFFECTIVE DATE OF ANY
REGISTRATION STATEMENT OF THE ISSUER FILED UNDER THE SECURITIES
ACT IN CONNECTION WITH THE INITIAL PUBLIC OFFERING OF THE
ISSUER'S COMMON STOCK.
(b) The certificates evidencing the Consideration Shares shall
also bear any legend required by the Commissioner of Corporations of the State
of California or such as are required pursuant to any state, local or foreign
law governing such securities.
(c) The Consideration Shares will not be registered under the
Securities Act in connection with the Merger.
(d) No ONElist Shareholder shall be permitted to sell, transfer
or otherwise dispose of any Consideration Shares received in the Merger, unless
(i) such sale, transfer or other disposition is made in conformity with Rule
145(d) promulgated under the Securities Act, (ii) such sale, transfer or other
disposition has been registered under the Securities Act or (iii) eGroups
receives a written opinion of counsel reasonably acceptable to it stating that
the proposed transfer of the Consideration Shares may be effected without
registration under the Securities Act.
(e) Each ONElist Shareholder agrees that, during the period of
duration (up to, but not exceeding, one hundred eighty (180) days) specified by
eGroups and an underwriter of common stock or other securities of eGroups,
following the effective date of a registration statement of eGroups filed under
the Securities Act of 1933, as amended, it shall not, to the extent requested by
eGroups and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of eGroups held by it at any time
during such period except Common Stock included in such registration; provided,
however that
(i) such agreement shall be applicable only to the first
such registration statement of eGroups which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
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(ii) all officers and directors of eGroups, all one
percent security holders, and all other persons with registration rights
(whether or not pursuant to the Investors Rights Agreement (as defined below))
enter into similar agreements.
In order to enforce the foregoing covenant, eGroups may impose
stop-transfer instructions with respect to any registrable securities (and the
shares of securities of every other person subject to the foregoing restriction)
until the end of such period, and each holder of registrable securities shall
execute an agreement in the form provided by the underwriter containing terms
which are essentially consistent with the provisions of this Section
5.2(e)
Notwithstanding the foregoing, the obligations described in this Section
5.2(e) shall not apply to a registration relating solely to employee benefit
plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the
future, or a registration relating solely to an SEC Rule 145 transaction on Form
S-4 or similar forms which may be promulgated in the future.
5.3 Access to Information. Each party shall afford the others and its
accountants, counsel and other representatives, and with respect to clause (b)
below, shall cause its accountants to afford, reasonable access during normal
business hours during the period prior to the Effective Time to: (a) all of its
properties, books, personnel, contracts, commitments and records; (b) the
accountants of the other party, the audit work papers and other records of the
accounts of such party; and (c) all other information concerning the business,
properties and personnel (subject to restrictions imposed by applicable law) of
it as the others may reasonably request. No information or knowledge obtained in
any investigation pursuant to this Section 5.3 shall affect or be deemed to
modify any representation or warranty contained herein.
5.4 Confidentiality. Each of the parties hereto hereby agrees to keep
the terms of this Agreement (except to the extent contemplated hereby) and such
information or knowledge obtained in any investigation pursuant to Section 5.3,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which:
(a) a party can demonstrate, through its written records in existence prior to
the date hereof, was already lawfully in its possession prior to the disclosure
thereof by the other party; (b) is generally known to the public and did not
become so known through any violation of law; (c) became known to the public
through no fault, action or inaction of the party receiving the information; (d)
is later lawfully acquired by the receiving party without confidentiality
restrictions from other sources; (e) is required to be disclosed by order of
court or government agency with subpoena powers (provided that such party shall
have provided the other party with prior notice of such order or subpoena and an
opportunity to object or take other available action); or (f) which is disclosed
in the course of any litigation between any of the parties hereto. In the event
that this Agreement is terminated in accordance with Section 8.1 hereof, the
parties agree that that certain letter agreement by and between ONElist and
eGroups dated October 14, 1999 (a true and complete copy of which is attached
hereto as Exhibit M and is hereby incorporated by reference and made a part
hereof) (the "Letter Agreement") shall remain in full force and effect. In the
event of any conflict between the terms of the Letter Agreement and this
Agreement, the terms of the Letter Agreement shall control.
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5.5 Expenses.
(a) Third Party Expenses. In the event the Merger is not
consummated, all fees and expenses incurred in connection with the Merger
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties incurred by a party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses.
(b) Brokers' or Finders' Fees. Each party hereto shall indemnify
and hold the other party harmless from any claim for brokers' fees or finders'
fees arising out of the transactions contemplated hereby by any Person claiming
to have been engaged by the indemnifying party.
5.6 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
eGroups and ONElist prior to release, provided that such approval shall not be
unreasonably withheld. The parties will mutually agree in advance on the form,
timing and contents of announcements and disclosures regarding the Merger.
5.7 Consents. eGroups and ONElist shall use commercially reasonable
efforts to obtain the consents, waivers and approvals under any of the eGroups
Contracts and ONElist Contracts as may be required in connection with the Merger
(all of such consents, waivers and approvals are set forth in the ONElist
Schedules and eGroups and Merger Sub Schedules) so as to preserve all rights of
and benefits to eGroups and ONElist thereunder.
5.8 FIRPTA Compliance. On or prior to the Closing Date, ONElist shall
deliver to eGroups a properly executed statement in a form reasonably acceptable
to eGroups for purposes of satisfying eGroups' obligations under Treasury
Regulation Section 1.1445-2(c)(3).
5.9 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to ensure that its representations and warranties remain true and
correct in all material respects, and to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations and filings, and
to remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
5.10 Notification of Certain Matters. ONElist shall give prompt notice
to eGroups, and eGroups shall give prompt notice to ONElist, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of ONElist, eGroups or
Merger Sub, respectively, contained in this Agreement to be untrue or
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inaccurate at or prior to the Effective Time and (ii) any failure of ONElist or
eGroups, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.10 shall not
limit or otherwise affect any remedies available to the party receiving such
notice. No disclosure pursuant to this Section 5.10 shall be deemed to amend or
supplement the ONElist Schedules or the eGroups and Merger Sub Schedules, as the
case may be, or prevent or cure any misrepresentation, breach of warranty or
breach of covenant.
5.11 Certain Benefit Plans. Subject to compliance with
pooling-of-interest accounting treatment of the Merger, eGroups shall take such
reasonable actions as are necessary to allow eligible employees of ONElist to
participate in the benefit programs of eGroups provided to similarly situated
employees of eGroups, or alternative benefits programs substantially comparable
to those provided to similarly situated employees of eGroups, as soon as
reasonably practicable after the Effective Time. For purposes of participation
and vesting under eGroups' employee benefit plans, the service with ONElist of
the employees of ONElist prior to the Effective Time shall be treated as service
with eGroups. eGroups shall cause the Surviving Corporation to honor in
accordance with their terms all employment, severance, consulting and other
compensation contracts or agreements disclosed in the ONElist Schedules between
ONElist and any current or former director, officer or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the ONElist Benefit Plans.
5.12 Accounting and Tax Treatment. Each of the parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a pooling of
interests for accounting purposes and each of the parties agrees to take no
action which would cause the Merger not to qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code for federal income
tax purposes.
5.13 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.14 ONElist's Auditors. ONElist will use its commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the review of any ONElist audit work papers for up to the past
three years, including selected interim financial statements and data and (ii)
the delivery of such representations from ONElist's independent accountants as
may be reasonably requested by eGroups or its accountants in order for eGroups'
accountants to render the opinion called for by Section 6.1(m) hereof.
5.15 eGroups' Auditors. eGroups will use its commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the review of any eGroups audit or review work papers for up to
the past three years, including the examination of selected interim financial
statements and data and (ii) the delivery of such representations from eGroups'
independent accountants as may be reasonably requested by ONElist or its
accountants in order for ONElist's accountants to render the opinion called for
by Section 6.1(m) hereof.
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5.16 Agreement of Affiliates. ONElist and eGroups have disclosed in
Schedule 5.16 of the ONElist Schedules and the eGroups and Merger Sub Schedules,
respectively, each Person whom such party reasonably believes is an Affiliate of
such party. If the Merger is accounted for using the pooling-of-interests method
of accounting, shares of eGroups Common Stock held by such Persons shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of eGroups and ONElist have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies (and eGroups shall be entitled to place restrictive legends upon
certificates for shares of eGroups Common Stock issued to Affiliates of ONElist
pursuant to this Agreement to enforce the provisions of this Section 5.16).
5.17 Voting Agreements.
(a) Concurrently with the execution of this Agreement, eGroups
shall cause those of its stockholders listed on Exhibit A hereto to execute
Voting Agreements in the form attached hereto as Exhibit K, whereby each such
stockholder agrees to vote, whether at a meeting of stockholders or pursuant to
a written consent, all shares of eGroups Capital Stock held by such stockholder
and by affiliates controlled by such stockholder in favor of the Merger, this
Agreement and the transactions contemplated by this Agreement.
(b) Concurrently with the execution of this Agreement, ONElist
shall cause those of its shareholders listed on Exhibit B hereto to execute
Voting Agreements in the form attached hereto as Exhibit L, whereby each such
shareholder agrees to vote, whether at a meeting of shareholders or pursuant to
a written consent, all shares of ONElist Capital Stock held by such shareholder
and by affiliates controlled by such shareholder in favor of the Merger, this
Agreement and the transactions contemplated by this Agreement.
5.18 Indemnification.
(a) For a period of three years after the Effective Time, eGroups
shall, and shall cause the Surviving Corporation to, indemnify, defend and hold
harmless the present and former directors, officers, employees and agents of
ONElist (each, an "Indemnified Party") against all liabilities arising out of
actions or omissions arising out of the Indemnified Party's service or services
as directors, officers, employees or agents of ONElist occurring at or prior to
the Effective Time (including the transactions contemplated by this Agreement)
to the fullest extent permitted under California law and by ONElist's Articles
of Incorporation and Bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
litigation and whether or not eGroups is insured against any such matter.
Without limiting the foregoing, in any case in which approval by the Surviving
Corporation is required to effectuate any indemnification, the Surviving
Corporation shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel mutually
and reasonably agreed upon between eGroups and the Indemnified Party.
(b) This Section 5.18 shall survive the Effective Time and is
intended to benefit ONElist, the Surviving Corporation and each of the
Indemnified Parties and shall be binding upon
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all successors and assigns (whether by operation of law or by contract) of
eGroups and the Surviving Corporation for the period specified above.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) ONElist Shareholder Approval. This Agreement and the Merger
shall have been approved by the ONElist Shareholders by the requisite vote under
applicable law and ONElist's Articles of Incorporation and Bylaws.
(b) eGroups Stockholder Approval. This Agreement, the Merger and
the Fourth Amended and Restated Certificate of eGroups shall have been approved
and adopted by the stockholders of eGroups by the requisite vote under
applicable law and eGroups' Third Amended and Restated Certificate and Bylaws.
(c) eGroups Fourth Amended and Restated Certificate. The Fourth
Amended and Restated Certificate of eGroups shall have been filed with the
Secretary of State of the State of Delaware.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(e) Dissenters Rights. Holders of more than ten percent (10%) of
the outstanding shares of ONElist Capital Stock and eGroups Capital Stock, on an
aggregate basis, shall not have exercised, nor shall they have any continued
right to exercise, appraisal rights under applicable law with respect to their
shares by virtue of the Merger.
(f) Tax Opinions. eGroups and ONElist shall each have received
written opinions from their respective tax counsel (Perkins Coie LLP ("Perkins
Coie") and WSGR, respectively), in form and substance reasonably satisfactory to
them, to the effect that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Code and such opinions shall not
have been withdrawn. The parties to this Agreement agree to make reasonable
representations (and to cause their Affiliates to make reasonable
representations) as requested by counsel for the purpose of rendering the
opinions discussed herein.
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(g) Investors Rights Agreement. The First Amended and Restated
Investors Rights Agreement, dated as of December 17, 1998 (the "Investors Rights
Agreement"), by and among eGroups and certain holders of eGroups' securities
shall have been amended, in substantially the form attached hereto as Exhibit I,
and executed by eGroups, the shareholders of ONElist who possess registration
rights pursuant to written agreements existing on the date hereof with respect
to certain securities of ONElist, and a sufficient number of the existing
holders of registration rights with respect to eGroups' securities in order to
permit the granting of such rights to such ONElist shareholders under the
Investors Rights Agreement.
(h) Co-Sale Agreement. The First Amended and Restated Co-Sale
Agreement, dated as of December 17, 1998 (the "Co-Sale Agreement"), by and among
eGroups and certain holders of eGroups' securities shall have been amended, in
substantially the form attached hereto as Exhibit J, and executed by eGroups,
the shareholders of ONElist who possess co-sale rights pursuant to written
agreements existing on the date hereof with respect to certain securities of
ONElist, and a sufficient number of the existing holders of co-sale rights with
respect to eGroups' securities in order to permit the granting of such rights to
such ONElist shareholders under the Co-Sale Agreement.
(i) Termination of Prior Agreements. ONElist shall have
terminated its: (i) Rights Agreement by and among ONElist and certain holders of
its capital stock, dated as of December 28, 1998 and amended as of February 26,
1999; and (ii) Right of First Refusal and Co-Sale Agreement by and among ONElist
and certain holders of its capital stock, dated as of December 28, 1998 and
amended as of February 26, 1999.
(j) Governmental Approvals. All approvals from Governmental
Entities, including without limitation any requisite Blue Sky approvals, which
are appropriate or necessary for the consummation of the Merger, shall have been
obtained.
(k) Litigation. There shall be no bona fide action, suit, claim
or proceeding of any nature pending, or overtly threatened, against eGroups or
ONElist, their respective properties or any of their officers or directors,
arising out of, or in any way connected with, the Merger or other transactions
contemplated by the terms of this Agreement.
(l) Consents and Approvals. Each party hereto shall have obtained
any and all consents required for consummation of the Merger or for the
preventing of any breach of or default under any ONElist Contract or eGroups
Contract, as the case may be, or any other contract or agreement to which either
party is a party or to which it is bound, which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on either ONElist or eGroups, as applicable. No consent so obtained which
is necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of either party would so materially adversely impact the
economic or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such party would not, in its
reasonable judgment, have entered into this Agreement.
(m) Pooling Letters.
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(i) eGroups shall have received from Ernst & Young LLP
("Ernst & Young"), independent auditors for eGroups, a letter dated as of the
Closing Date (which may contain customary qualifications and assumptions), to
the effect that Ernst & Young concurs with eGroups' management's conclusion that
eGroups may account for the Merger as a pooling of interests under Accounting
Principles Board Opinion No. 16, and ONElist shall have received a copy of said
letter.
(ii) ONElist shall have received from
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), independent auditors for
ONElist, a letter dated as of the Closing Date (which may contain customary
qualifications and assumptions), to the effect that PricewaterhouseCoopers
concurs with ONElist's management's conclusion that no conditions exist related
to ONElist that would preclude eGroups from accounting for the Merger as a
pooling of interests under Accounting Principles Board Opinion No. 16.
(n) Affiliate Agreements. Each of the persons and entities listed
as Affiliates of eGroups on Schedule 5.16 shall have executed and delivered
Affiliate Agreements in substantially the form of Exhibit G, and each of the
persons and entities listed as Affiliates of ONElist on Schedule 5.16 shall have
executed and delivered Affiliate Agreements in substantially the form of Exhibit
H, and all such Affiliate Agreements shall be in full force and effect.
6.2 Additional Conditions to Obligations of ONElist. The obligations of
ONElist to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by ONElist:
(a) Representations and Warranties. The representations and
warranties of eGroups and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except for those representations and
warranties that are qualified by references to "material" or "Material Adverse
Effect" which all shall be true and correct in all respects, and except, in all
such cases, for such breaches, inaccuracies or omissions of such representations
and warranties which have neither had nor reasonably would be expected to have a
Material Adverse Effect on eGroups; and ONElist shall have received a
certificate to such effect signed on behalf of eGroups by the chief executive
officer and chief financial officer of eGroups.
(b) Agreements and Covenants. eGroups and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and ONElist shall have received a certificate to such
effect signed by the chief executive officer and chief financial officer of
eGroups.
(c) Third Party Consents. ONElist shall have been furnished with
evidence satisfactory to it that eGroups has obtained the consents, approvals
and waivers set forth in Schedule 6.2(c) to the eGroups and Merger Sub
Schedules.
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(d) Exchange Agent Certification. The Exchange Agent shall have
delivered to ONElist a certificate, dated as of the Effective Time, to the
effect that the Exchange Agent has received from eGroups appropriate
instructions and authorization for the Exchange Agent to issue a sufficient
number of shares of eGroups Common Stock and eGroups Series C Preferred Stock in
exchange for outstanding shares of ONElist Capital Stock.
(e) Legal Opinion. ONElist shall have received a legal opinion
from Perkins Coie, counsel to eGroups, in form and substance mutually agreed
upon with WSGR.
(f) Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets (including intangible assets),
liabilities, financial conditions or results of operations of eGroups since the
date of the eGroups Current Balance Sheet.
(g) Indemnification. The Articles of Incorporation of Merger Sub
shall contain officer and director indemnification provisions that are
substantially similar to the officer and director indemnification provisions
contained in ONElist's Articles of Incorporation in the form delivered to
eGroups on the date of this Agreement.
(h) Due Diligence Investigation. ONElist shall have completed its
due diligence investigation of eGroups to ONElist's reasonable satisfaction,
provided that no information or knowledge obtained in such investigation shall
affect or be deemed to modify any representation or warranty of eGroups
contained herein. In this regard, ONElist's due diligence investigation shall be
conclusively deemed to have been completed to ONElist's reasonable satisfaction
in the event that the preliminary eGroups Schedules attached hereto are not
subsequently modified, or otherwise do not require subsequent modification in
order to make eGroups' representations and warranties true and correct in all
material respects on and as of the Closing Date.
(i) Termination of 401(k) Plan. If agreed to in writing by both
ONElist and eGroups at least three (3) days prior to the Closing Date, eGroups
and its Affiliates, if applicable, shall terminate its or their 401(k) plan(s)
immediately prior to Closing. If the parties so agree, eGroups shall provide to
ONElist evidence that the eGroups' and each Affiliate's (if applicable) 401(k)
plans have been terminated pursuant to resolutions of each such entity's Board
of Directors (the form and substance of which resolutions shall be subject to
review and approval by both ONElist and eGroups, effective immediately preceding
the Closing.
(j) Amendment to Comdisco Agreement. ONElist shall have received
evidence satisfactory to it that eGroups and Comdisco have amended Section 1.33
of that certain Subordinated Loan and Security Agreement dated as of October 8,
1999 between eGroups and Comdisco to read as follows: "`Preferred Stock' means
the Borrower's Series D Preferred Stock."
6.3 Additional Conditions to the Obligations of eGroups and Merger Sub.
The obligations of eGroups and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by eGroups:
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(a) Representations and Warranties. The representations and
warranties of ONElist contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except for those representations and
warranties that are qualified by references to "material" or "Material Adverse
Effect" which all shall be true and correct in all respects, and except, in all
such cases, for such breaches, inaccuracies or omissions of such representations
and warranties which have neither had nor reasonably would be expected to have a
Material Adverse Effect on ONElist or eGroups; and eGroups and Merger Sub shall
have received a certificate to such effect signed on behalf of ONElist by the
chief executive officer and chief financial officer of ONElist.
(b) Agreements and Covenants. ONElist shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and eGroups and Merger Sub shall have received a certificate to
such effect signed by the chief executive officer and chief financial officer of
ONElist.
(c) Third Party Consents. eGroups shall have been furnished with
evidence satisfactory to it that ONElist has obtained the consents, approvals
and waivers set forth in Schedule 6.3(c) to the ONElist Schedules.
(d) Legal Opinion. eGroups shall have received a legal opinion
from WSGR, in form and substance mutually agreed upon with Perkins Coie.
(e) Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets (including intangible assets),
liabilities, financial conditions or results of operations of ONElist since the
date of the eGroups Current Balance Sheet.
(f) Due Diligence Investigation. eGroups shall have completed its
due diligence investigation of ONElist to eGroups' reasonable satisfaction,
provided that no information or knowledge obtained in such investigation shall
affect or be deemed to modify any representation or warranty of ONElist
contained herein. In this regard, eGroups' due diligence investigation shall be
conclusively deemed to have been completed to eGroups' reasonable satisfaction
in the event that the preliminary ONElist Schedules attached hereto are not
subsequently modified, or otherwise do not require subsequent modification, in
order to make ONElist's representations and warranties true and correct in all
material respects on and as of the Closing Date.
(g) Termination of 401(k) Plan. If agreed to in writing by both
ONElist and eGroups at least three (3) days prior to the Closing Date, ONElist
and its Affiliates, if applicable, shall terminate its or their 401(k) plan(s)
immediately prior to Closing. If the parties so agree, ONElist shall provide to
eGroups evidence that the ONElist's and each Affiliate's (if applicable) 401(k)
plans have been terminated pursuant to resolutions of each such entity's Board
of Directors (the form and substance of which resolutions shall be subject to
review and approval by both ONElist and eGroups, effective immediately preceding
the Closing.
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(h) Proprietary Information and Inventions Agreements. Each of
ONElist's employees, including Ed Struzenberg, Scott Shambarger, Marcus Riecke,
Frank Mara and Mark Fletcher, will have executed the ONElist form proprietary
information and inventions agreement.
ARTICLE VII
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 Non-Survival of Representations and Warranties. All of the
representations and warranties of ONElist, eGroups and Merger Sub contained in
this Agreement or in any instrument delivered pursuant to this Agreement (each
as modified by the corresponding schedules thereto) shall terminate at the
Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of ONElist and eGroups;
(b) by eGroups or ONElist if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on December 31, 1999 (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose failure to use its commercially reasonable efforts
to fulfill any obligation hereunder has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date); (ii) there shall
be a final nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by eGroups or ONElist if there shall be any action taken, or
any statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any Governmental Entity, which would: (i) prohibit
eGroups' or ONElist's ownership or operation of all or any portion of the
business of ONElist or (ii) compel eGroups or ONElist to dispose of or hold
separate all or a portion of the business or assets of ONElist or eGroups as a
result of the Merger;
(d) by eGroups if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
ONElist and (i) such breach has not been cured within fifteen (15) days after
written notice to ONElist (provided that, no cure period shall be required for a
breach which by its nature cannot be cured), and (ii) as a result of such breach
the conditions set forth in Section 6.3(a) or 6.3(b), as the case may be, would
not then be satisfied; or
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(e) by ONElist if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
eGroups or Merger Sub and (i) such breach has not been cured within fifteen (15)
days after written notice to eGroups (provided that, no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a result
of such breach the conditions set forth in Section 6.2(a) or 6.2(b), as the case
may be, would not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of eGroups, Merger Sub or
ONElist, or their respective officers, directors or shareholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, the provisions of Sections 5.4, 5.5 and
8.2 and Article IX of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the shareholders of ONElist and the stockholders of eGroups approve this
Agreement, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of each of the parties
hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, eGroups
and Merger Sub, on the one hand, and ONElist, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
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(i) if to ONElist, to:
ONElist, Inc.
2688 Middlefield Road, Unit C
Redwood City, California 94063
Attention: Michael B. Klein
Telephone No.: (650) 216-3379
Facsimile No.: (650) 216-3399
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Henry P. Massey, Jr., Esq.
Michael S. Russell, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(ii) if to eGroups or Merger Sub, to:
eGroups, Inc.
350 Brannan Street
San Francisco CA 94107
Attention: Chief Executive Officer
Telephone No.: (415) 546-2700
Facsimile No.: (415) 546-2801
with a copy to:
Perkins Coie LLP
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Buddy Arnheim, Esq.
Telephone No.: (650) 752-6000
Facsimile No.: (650) 752-6050
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more
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counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder (except with respect to Section
5.18); and (c) shall not be assigned by operation of law or otherwise except as
otherwise specifically provided, except that eGroups and Merger Sub may assign
their respective rights and delegate their respective obligations hereunder to
their respective Affiliates.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
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IN WITNESS WHEREOF, eGroups, Merger Sub, and ONElist have caused this
Agreement to be signed by their duly authorized respective officers and
representatives, all as of the date first written above.
ONELIST, INC. EGROUPS, INC.
By: By:
--------------------------- ---------------------------------
Name: Name:
Title: Title:
EG ACQUISITION CORPORATION
By
----------------------------------
Name:
Title:
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
<PAGE> 1
EXHIBIT 3.1
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EGROUPS, INC.
The undersigned, Michael Klein and Margaret Nibbi hereby certify that:
1. They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of eGroups, Inc., a Delaware corporation (the
"Corporation").
2. The Certificate of Incorporation of the Corporation was originally
filed with the Secretary of State of Delaware on June 5, 1998 under the name
Findmail Communications, Inc.
3. The Certificate of Incorporation of the Corporation shall be amended
and restated to read in full as follows:
ARTICLE I
"The name of this corporation is eGroups, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
(A) CLASSES OF STOCK. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is Sixty
Million Five Hundred Thousand (60,500,000) each with a par value of $0.001 per
share. Forty Three Million (43,000,000) shall be Common Stock and Seventeen
Million Five Hundred Thousand (17,500,000) shall be Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Fifth Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The first
series of Preferred Stock shall be designated "Series A Preferred Stock" and
shall consist of One Million Six Hundred Twenty Thousand
<PAGE> 2
(1,620,000) shares. The second series of Preferred Stock shall be designated
"Series B Preferred Stock" and shall consist of Three Million Six Hundred
Thousand (3,600,000) shares. The third series of Preferred Stock shall be
designated "Series C Preferred Stock" and shall consist of Seven Million Two
Hundred Eighty Thousand Eight Hundred Eleven (7,280,811) shares. The fourth
series of Preferred Stock shall be designated "Series D Preferred Stock" and
shall consist of Four Million Five Hundred Twenty Thousand (4,520,000) shares.
The remaining shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of the corporation (the "Board of
Directors") is expressly authorized to provide for the issue of all or any of
the remaining shares of Preferred Stock in one or more series, and to fix the
number of shares and to determine or alter for each such series, such voting
powers, full or limited, or no voting powers, and such designations,
preferences, and relative, participating, optional, or other rights and such
qualifications, limitations, or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such shares (a "Preferred Stock Designation") and as
may be permitted by the General Corporation Law of the State of Delaware. The
Board of Directors is also expressly authorized to increase or decrease (but not
below the number of shares of such series then outstanding) the number of shares
of any series other than the Series A, Series B, Series C or Series D Preferred
Stock subsequent to the issue of shares of that series. In case the number of
shares of any such series shall be so decreased, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.The rights,
preferences, privileges, and restrictions granted to and imposed on the Series A
Preferred Stock, the Series B Preferred Stock, Series C Preferred Stock and the
Series D Preferred Stock are as set forth below in this Article IV(B).
1. DIVIDEND PROVISIONS. The holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, contemporaneously as to each other and prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock) on the Common Stock of the Corporation, at the rate as follows: (a)
holders of the Series A Preferred Stock shall be entitled to receive dividends
at an annual rate of $0.04 per share of Series A Preferred Stock; (b) holders of
the Series B Preferred Stock shall be entitled to receive dividends at an annual
rate of $0.115 per share of Series B Preferred Stock; (c) holders of the Series
C Preferred Stock shall be entitled to receive dividends at an annual rate of
$0.04994 per share of Series C Preferred Stock; and (d) holders of the Series D
Preferred Stock shall be entitled to receive dividends at an annual rate of $
0.9261 per share (in each case adjusted to reflect subsequent stock dividends,
stock splits or recapitalizations) when, as and if declared by the Board of
Directors. Such dividends shall not be cumulative.
2. LIQUIDATION.
(a) PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be
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<PAGE> 3
entitled to receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of Common Stock by reason of their
ownership thereof, an amount per share equal to $0.50, $1.43955, $0.55626 and
$10.29, respectively, per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares), plus declared but unpaid
dividends on such shares. If, upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Preferred Stock in proportion to the preferential amounts which
would be payable in respect of the shares held by them upon such distribution if
all amounts payable on or with respect to said shares were paid in full.
(b) REMAINING ASSETS. Upon the completion of the
distribution required by Section 2(a) above, the remaining assets of the
Corporation available for distribution to stockholders shall be distributed on a
pro rata basis to the holders of Common Stock based on the number of shares of
Common Stock held by each.
(c) CERTAIN ACQUISITIONS.
(i) DEEMED LIQUIDATION. For purposes of this
Section 2, a liquidation, dissolution or winding up of the Corporation shall be
deemed to be occasioned by, or to include, (A) the acquisition of the
Corporation by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation); or (B) a sale of all or substantially
all of the assets of the Corporation, unless the Corporation's stockholders of
record as constituted immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (by virtue of securities issued as
consideration for the Corporation's acquisition or sale or otherwise) hold at
least 50% of the voting power of the surviving or acquiring entity in
approximately the same relative percentages after such acquisition or sale as
before such acquisition or sale.
(ii) VALUATION OF CONSIDERATION. In the event of a
deemed liquidation as described in Section 2(c)(i) above, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment
letter or other similar restrictions on free marketability:
(1) If traded on a securities
exchange or the Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange over the
thirty-day period ending three (3) days prior to the closing;
(2) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the thirty-day period ending three
(3) days prior to the closing; and
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<PAGE> 4
(3) If there is no active public
market, the value shall be the fair market value thereof, as mutually determined
by the Corporation and the holders of at least a majority of the voting power of
all then outstanding shares of Preferred Stock.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in Section 2(c)(ii)(A) to reflect the
approximate fair market value thereof, as mutually determined by the Corporation
and the holders of at least a majority of the voting power of all then
outstanding shares of Preferred Stock.
(iii) NOTICE OF TRANSACTION. The Corporation shall
give each holder of record of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock written notice of
such impending transaction not later than ten (10) days prior to the
stockholders' meeting called to approve such transaction, or ten (10) days prior
to the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than ten (10) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of each class of Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
series of Preferred Stock.
(iv) EFFECT OF NONCOMPLIANCE. In the event the
requirements of this Section 2(c) are not complied with, the Corporation shall
forthwith either cause the closing of the transaction to be postponed until such
requirements have been complied with, or cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series
D Preferred Stock shall revert to and be the same as such rights, preferences
and privileges existing immediately prior to the date of the first notice
referred to in Section 2(c)(iii) hereof.
3. REDEMPTION. The Preferred Stock is not redeemable.
4. CONVERSION. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Subject to Section 4(c), each share
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing (i)
$0.50, in the case of the Series A Preferred Stock; (ii) $1.43955, in the case
of the Series B Preferred
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<PAGE> 5
Stock; (iii) $0.55626 in the case of the Series C Preferred Stock; and (iv)
$10.29 in the case of the Series D Preferred Stock, by the Conversion Price
applicable to such share, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion. The initial Series A
Conversion Price shall be $0.50 per share, the initial Series B Conversion Price
shall be $1.43955 per share, the initial Series C Conversion Price shall be
$0.55626 per share and the initial Series D Conversion Price shall be $10.29.
The Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price and the Series D Conversion Price shall each be subject to
adjustment as set forth in Section 4(d).
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall automatically be converted into shares of Common Stock at the Series
A Conversion Price, the Series B Conversion Price, the Series C Conversion Price
and the Series D Conversion Price, as applicable, at the time in effect for such
share immediately upon the earlier of (i) except as provided below in Section
4(c), the Corporation's sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act of 1933, as amended, resulting in aggregate gross offering
proceeds to the Corporation (before expenses, discounts or commissions) of at
least $20,000,000 and an offering price of not less than $15.44 per share (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) or (ii) the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock voting together as a single class.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock (as the case may be), and shall give written notice to
the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. In the
event of an automatic conversion pursuant to Section 4(b), the outstanding
shares of the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock and the Series D Preferred Stock shall be converted
automatically without any further action by the holder of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or the transfer agent for the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock (as the
case may be); and the Corporation shall not be obliged to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless the certificates evidencing the shares of Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
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Preferred Stock are either delivered to the Corporation or the transfer agent
for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock (as the case may be) as provided above, or the
holder notifies the Corporation or the transfer agent for the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock (as the case may be) that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable thereafter, issue
and deliver to such address as the holder may direct, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. If the conversion is in connection with a public offering of
securities described in Section 4(b), the conversion shall be conditioned upon
the closing with the underwriters of the sale of securities pursuant to such
offering, and the conversion shall not be deemed to have occurred until
immediately prior to the closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR
CERTAIN SPLITS AND COMBINATIONS. The Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price and the Series D Conversion
Price shall be subject to adjustment from time to time as follows:
(i) In the event the Corporation should at any time
or from time to time after the date on which the Fifth Amended and Restated
Certificate of Incorporation is filed with the Secretary of State of the State
of Delaware (the "Purchase Date") fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Series A
Conversion Price, the Series B Conversion Price, the Series C Conversion Price
and the Series D Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and the
Series D Preferred Stock shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
(ii) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Series A Conversion Price, the Series B Conversion Price, the
Series C Conversion Price and the Series D Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
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(e) OTHER DISTRIBUTIONS. In the event the Corporation
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in Section 4(d)(i), then,
in each such case for the purpose of this Section 4(e), the holders of Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Series D Preferred Stock shall be entitled to a proportionate share of any
such distribution as though they were the holders of the number of shares of
Common Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2), provision shall be made so that the holders of
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or the Series D Preferred Stock the number of
shares of stock or other securities or property of the Corporation or otherwise,
to which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock after
the recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock) shall be
applicable after that event and be as nearly equivalent as practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO
ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock the holder
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is at the time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Series A Conversion Price, the Series B Conversion Price,
the Series C Conversion Price and the Series D Conversion Price pursuant to this
Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Series A Conversion Price, the Series
B Conversion Price, the Series C Conversion Price and the Series D Conversion
Price at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of a share of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock
(i) NOTICES OF RECORD DATE. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, at least ten (10) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Certificate of Incorporation.
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(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.
5. VOTING RIGHTS.
(a) GENERAL. The holder of each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted, and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
(b) VOTING FOR THE ELECTION OF DIRECTORS. The Board of
Directors will consist of seven (7) members, two (2) of which will be elected by
the holders of a majority of the shares of the Common Stock, voting as a
separate class, one (1) of which will be elected by the holders of a majority of
the shares of the Series A Preferred Stock, voting as a separate class, one (1)
of which will be elected by the holders of a majority of the shares of the
Series B Preferred Stock, voting as a separate class, two (2) of which will be
elected by the holders of a majority of the shares of the Series C Preferred
Stock, voting as a separate class, and one (1) of which will be elected by the
holders of a majority of the Common Stock and Preferred Stock, voting together
as one class. Any vacancy in the Board of Directors occurring because of the
death, resignation or removal of a Director shall be filled by the vote or
written consent of the holders of the class entitled to fill such seat as
provided in this Section 5(b).
6. PROTECTIVE PROVISIONS.
(a) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, so long as greater than 4,375,000 shares
of Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at a majority of the then outstanding shares of Preferred Stock,
voting together as a single class:
(i) sell, convey or otherwise dispose of all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty (50%) of the voting power of this Corporation is disposed of;
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(ii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on parity
with, the outstanding Preferred Stock;
(iii) redeem, purchase or otherwise acquire (or pay into
or set funds aside for a sinking fund for such purpose) any share or shares of
Common Stock; provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Corporation or any
subsidiary pursuant to agreements under which the Corporation has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment;
(iv) amend this Corporation's Fifth Amended and Restated
Certificate of Incorporation or Bylaws;
(v) increase the authorized number of directors of this
Corporation; or
(vi) declare or pay dividends on shares of the
Corporation's Common Stock.
(b) So long as at least 405,000 shares of Series A Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval, by vote or written consent, in the manner provided by law, of the
holders of a majority of the total number of shares of Series A Preferred Stock
then outstanding, voting as a single class:
(i) alter or change the rights, preferences and
privileges of the shares of Series A Preferred Stock so as to affect adversely
such shares; or
(ii) increase the total number of authorized shares
of Series A Preferred Stock.
(c) So long as at least 900,000 shares of Series B Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval, by vote or written consent, in the manner provided by law, of the
holders of a majority of the total number of shares of Series B Preferred Stock
then outstanding, voting as a single class:
(i) alter or change the rights, preferences and
privileges of the shares of Series B Preferred Stock so as to affect adversely
such shares; or
(ii) increase the total number of authorized shares
of Series B Preferred Stock.
(d) So long as at least 1,800,000 shares of Series C Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval, by vote or written consent, in the manner provided by law, of the
holders of a majority of the total number of shares of Series C Preferred Stock
then outstanding, voting as a single class:
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(i) alter or change the rights, preferences and
privileges of the shares of Series C Preferred Stock so as to affect adversely
such shares; or
(ii) increase the total number of authorized shares
of Series C Preferred Stock.
(e) So long as at least 1,130,000 shares of Series D Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the
approval, by vote or written consent, in the manner provided by law, of the
holders of a majority of the total number of shares of Series D Preferred Stock
then outstanding, voting as a single class:
(i) alter or change the rights, preferences and
privileges of the shares of Series D Preferred Stock so as to affect adversely
such shares; or
(ii) increase the total number of authorized shares
of Series D Preferred Stock.
7. STATUS OF CONVERTED STOCK. In the event any shares of
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation. The
Fifth Amended and Restated Certificate of Incorporation of the Corporation shall
be appropriately amended to effect the corresponding reduction in the
Corporation's authorized capital stock.
(C) COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
Except as otherwise provided in this Fifth Amended and Restated
Certificate of Incorporation in furtherance and not in limitation of the powers
conferred by statute, the Board of
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Directors of the Corporation is expressly authorized to make, alter or repeal
Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, 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.
(B) The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of the Corporation's Fifth Amended and Restated
Certificate of Incorporation inconsistent with this Article VII, shall eliminate
or reduce the effect of this Article VII in respect of any matter occurring, or
any action or proceeding accruing or arising or that, but for this Article VII,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision."
* * *
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The foregoing Fifth Amended and Restated Certificate of Incorporation
has been duly adopted by this Corporation's Board of Directors and stockholders
in accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at San Francisco, California, on December ___, 1999.
----------------------------------------
Michael Klein
President and Chief Executive Officer
----------------------------------------
Margaret Nibbi
Secretary
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
EGROUPS, INC.
The undersigned, Michael Klein and Margaret Nibbi, certify that:
1. They are the duly elected President and Secretary, respectively, of
eGroups, Inc., a Delaware corporation.
2. The corporation was originally incorporated in Delaware, and the
original certificate of incorporation (the "Original Certificate") was filed
with the Secretary of State of Delaware on June 5, 1998.
3. Pursuant to Sections 228, 242 and 245 of the Delaware General
Corporation Law, this Amended and Restated Certificate of Incorporation amends
and restates the provisions of the Original Certificate.
4. The Certificate of Incorporation of this corporation is hereby
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is "eGroups, Inc."
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 15 East North Street, in the city of Dover, county of Kent, 19909.
The name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
ARTICLE IV
A. CLASSES OF STOCK
The corporation is authorized to issue two classes of stock, to be
designated as "Preferred Stock," $0.001 par value, and "Common Stock," $0.001
par value, respectively. The total number of shares that the corporation is
authorized to issue is 160,000,000 shares. The number of shares of Preferred
Stock authorized is 10,000,000 shares, and the number of shares of Common Stock
authorized is 150,000,000 shares.
<PAGE> 2
B. RIGHTS AND RESTRICTIONS OF COMMON STOCK
(a) The Common Stock is not redeemable.
(b) The holder of each share of Common Stock shall have the right to one
vote and shall be entitled to notice of any stockholders' meeting in accordance
with the Amended and Restated Bylaws of the corporation, and shall be entitled
to vote upon such matters and in such manner as provided by law.
C. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the corporation's Board of Directors (authority to do so being hereby
expressly vested in the Board of Directors). The Board of Directors is further
authorized to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and the designation of any such series of Preferred Stock. The Board of
Directors, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, may increase or decrease (but not below the number of
shares in any such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
D. AUTHORITY OF BOARD OF DIRECTORS WITH RESPECT TO STOCK MATTERS
The authority of the Board of Directors with respect to each class or
series of stock shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the number
of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at the
rate so determined shall be cumulative or accruing, and whether the shares of
such class or series shall be entitled to any participating or other dividends
in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the corporation to redeem shares
of the particular class or series of Preferred Stock and, if redeemable, the
price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of any such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
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(e) the terms and conditions, if any, upon which shares of such class or
series shall be convertible or not, or exchangeable for, shares of capital stock
of any other class or series, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of a
similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
and
(i) such other preferences, powers, qualifications, special or relative
rights and privileges thereof as the Board of Directors of the corporation,
acting in accordance with this Amended and Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Amended and Restated Certificate of Incorporation.
ARTICLE V
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon the stockholders herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpertual existence.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.
ARTICLE VIII
1. Limitation on Directors' Liability. To the fullest extent permitted
by the Delaware General Corporation Law as the same exists or as may hereafter
be amended, 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.
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2. Indemnification. The corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VIII.
nor the adoption of any provision of the corporation's Amended and Restated
Certificate of Incorporation inconsistent with this Article VIII, shall
eliminate or reduce the effect of this Article VIII in respect of any matter
occurring, or any action or proceeding accruing or arising or that, but for this
Article VIII, would accrue or arise, prior to such amendment, repeal, or
adoption of an inconsistent position.
ARTICLE IX
In the event any shares of Preferred Stock shall be redeemed or
converted, the shares so converted or redeemed shall not revert to the status of
authorized but unissued shares, but instead shall be canceled and shall not be
re-issuable by the corporation.
ARTICLE X
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to the Delaware General Corporation Law, in which event each
such holder shall be entitled to as many votes as shall equal the number of
votes which (except for this provision as to cumulative voting) such holder
would be entitled to cast for the election of directors with respect to such
holder's shares of stock multiplied by the number of directors to be elected by
such holder, and the holder may cast all of such votes for a single director or
may distribute them among the number of directors to be voted for, or for any
two or more of them as such holder may see fit, so long as the name of the
candidate for director shall have been placed in nomination prior to the voting
and the stockholder, or any other holder of the same class or series of stock,
has given notice at the meeting prior to the voting of the intention to cumulate
votes.
1. Number of Directors. The number of directors which constitutes the
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. Each director shall serve until the next
annual meeting of the stockholders or until his successor is duly elected.
2. Election of Directors. Elections of directors need not be by written
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
ARTICLE XI
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No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of the stockholders called in accordance with
the Amended and Restated Bylaws and no action shall be taken by the stockholders
by written consent. The affirmative vote of sixty-six and two-thirds percent (66
2/3%) of the then outstanding voting securities of the corporation, voting
together as a single class, shall be required for the amendment, repeal or
modification of the provisions of Article X or Article XI of this Amended and
Restated Certificate of Incorporation.
ARTICLE XII
Any meeting of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
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We further declare under penalty of perjury under the laws of the State
of Delaware that the matters set forth in this certificate are true and correct
of our own knowledge.
Executed at San Francisco, California this ______ day of __________,
2000.
-----------------------------------
Michael B. Klein
Chief Executive Officer
-----------------------------------
Margaret E. Nibbi
Secretary
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS
OF
EGROUPS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle, State of Delaware.
Section 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
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Section 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual 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) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual 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's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business, and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in his
capacity as a proponent to a stockholder proposal. Notwithstanding the
foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in
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accordance with the provisions of this paragraph (b), and, if he should so
determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) 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
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act (including without limitation
such person's written consent to being named in the proxy statement, if any, as
a nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 5. At the request of the Board of Directors, any
person nominated by a stockholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
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Section 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) 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 of
Directors for adoption) or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than as specified in such notice.
The Board of Directors shall determine the time and place of such special
meeting, which shall be held not less than thirty-five (35) nor more than one
hundred twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
Section 7. NOTICE OF MEETINGS; WAIVER OF NOTICE. Except as otherwise
provided by law or the Certificate of Incorporation, written notice of each
meeting of stockholders shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting, such notice to specify the place, date and hour and
purpose or purposes of the meeting. Notice of the time, place and purpose of any
meeting of stockholders may be waived in writing, signed by the person entitled
to notice thereof, either before or after such meeting, and will be waived by
any stockholder by his attendance thereat in person or by proxy, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given.
Section 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of' the outstanding shares
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of stock entitled to vote shall constitute a quorum for the transaction of
business. In the absence of a quorum, any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the vote cast, excluding abstentions, at any meeting at
which a quorum is present shall be valid and binding upon the corporation;
provided, however, that directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Where a separate vote by a class
or classes or series is required, except where otherwise provided by the statute
or by the Certificate of Incorporation or these Bylaws, a majority of the
outstanding shares of such class or classes or series, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and, except where otherwise provided by the
statute or by the Certificate of Incorporation or these Bylaws, the affirmative
vote of the majority (plurality, in the case of the election of directors) of
the votes cast, including abstentions, by the holders of shares of such class or
classes or series shall be the act of such class or classes or series.
Section 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
Section 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members
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of a partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
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(c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
Section 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
DIRECTORS
Section 15. NUMBER AND TERM OF OFFICE. The number of directors that
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors or by the stockholders at the annual meeting of the
stockholders, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
Section 17. ELECTION, QUALIFICATION AND TERM OF OFFICE. Directors shall
be elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
director may be prescribed. Each director, including a directors elected to fill
a vacancy, shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
Section 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold
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office for the unexpired portion of the term of the director whose place shall
be vacated and until his successor shall have been duly elected and qualified.
Section 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock").
Section 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by the Board of
Directors. Unless otherwise restricted by the Certificate of Incorporation,
regular meetings of the Board of Directors may also be held at any place within
or without the State of Delaware which has been designated by resolution of the
Board of Directors or the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board of Directors, the President or any two (2)
of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of
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objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time by the Board of Directors in accordance with
Section 15 hereof, a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with; provided, however, at any meeting whether a
quorum be present or otherwise, a majority of the directors present may adjourn
from time to time until the time fixed for the next regular meeting of the Board
of Directors, without notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
Section 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation therefor.
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Section 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall such committee have the powers denied to the Executive Committee
in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Section 25 may at any time increase or decrease
the number of members of a committee or terminate the existence of a committee.
The membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in
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addition, in the absence or disqualification of any member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. OFFICERS DESIGNATED. The officers of the corporation shall
be a Chief Executive Officer, a President, a Secretary, and a Chief Financial
Officer. The corporation may also have, at the discretion of the Board of
Directors, one or more Vice Presidents, one or more Assistant Secretaries, one
or more Assistant Treasurers, and any such officers as it shall deem necessary.
Any number of offices may be held by the same person.
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Section 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) CHIEF EXECUTIVE OFFICER. Subject to such provisionary
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board of Directors, if any, the Chief Executive Officer of the corporation
shall, subject to the control of the Board of Directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He or she shall preside at all meetings of the stockholders and, in
the absence or nonexistence of a Chairman of the Board of Directors, at all
meetings of the Board of Directors and shall have the general powers and duties
of management usually vested in the office of Chief Executive Officer of a
corporation and shall have such powers and duties as may be prescribed by the
Board of Directors or these Bylaws.
(c) PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the Chairman of the Board of
Directors, if any, or the Chief Executive Officer, the President shall have
general supervision, direction, and control of the business and other officers
of the corporation. He or she shall have the general powers and duties of
management usually vested in the office of President of a corporation and such
other powers and duties as we may be prescribed by the Board of Directors or
these Bylaws.
(d) VICE PRESIDENTS. In the absence or disability of the Chief
Executive Officer and President, the Vice Presidents, if any, in order of their
rank as fixed by the Board of Directors or, if not ranked, a Vice President
designated by the Board of Directors, shall perform all the duties of the
President and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as form time to time may be prescribed for
them respectively by the Board of Directors, these Bylaws, the President or the
Chairman of these Board of Directors
(e) SECRETARY. The Secretary shall keep or cause to be kept, at
the the principal executive office of the corporation or such other place as the
Board of Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof. The Secretary shall keep,
or cause to be kept, at the principal executive office of the corporation or at
the office of the corporation's transfer agent or registrar, as determined by
resolution of the Board of Directors, a share register, or a duplicate share
register, showing the names of all
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stockholders and their addresses, the number and classes of shares held by each,
the number and date of certificates evidencing such shares, and the number and
date of cancellation of every certificate surrendered for cancellation. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors required to be given by law or by
these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
(f) CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital retained earnings and shares. The books of
account shall at all reasonable times be open to inspection by any director. The
Chief Financial Officer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositories as may be designated
by the Board of Directors. He or she shall disburse the funds of the corporation
as may be ordered by the Board of Directors, shall render to the President, the
Chief Executive Officer, or the directors, upon request, an account of all his
or her transactions as Chief Financial Officer and of the financial condition of
the corporation, and shall have other powers and perform such other duties as
may be prescribed by the Board of Directors or these Bylaws.
Section 29. DELEGATION OF AUTHORITY. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officer or agent, notwithstanding any provision hereof.
Section 30. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. REMOVAL. Any officer may be removed from office at
any time, either with or without cause, by the affirmative vote of a majority of
the directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
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Section 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chief
Executive Officer, or the President or any Vice President, and by the Secretary
or Treasurer or any Assistant Secretary or Assistant Treasurer. All other
instruments and documents requiring the corporate signature, but not requiring
the corporate seal, may be executed as aforesaid or in such other manner as may
be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman or Vice Chairman of the Board of Directors or
the Chief Executive Officer, or the President or any
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Vice President and by the Treasurer or Assistant Treasurer or the Secretary or
Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent or
registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. The corporation may require, as a condition precedent
to the issuance of a new certificate or certificates, the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require or to give the corporation
a surety bond in such form and amount as it may direct as indemnity against any
claim that may be made against the corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more
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classes owned by such stockholders in any manner not prohibited by the General
Corporation Law of Delaware.
Section 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
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(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman or Vice Chairman of the
Board of Directors, or the Chief Executive Officer, or the President or any Vice
President, or such other person as may be authorized by the Board of Directors,
and the corporate seal impressed thereon or a facsimile of such seal imprinted
thereon and attested by the signature of the Secretary or an Assistant
Secretary, or the Chief Financial Officer or Treasurer or an Assistant
Treasurer; provided, however, that where any such bond, debenture or other
corporate security shall be authenticated by the manual signature, or where
permissible facsimile signature, of a trustee under an indenture pursuant to
which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the
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person who signed the same or whose facsimile signature shall have been used
thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property or
in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
Section 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
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ARTICLE XI
INDEMNIFICATION
Section 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors to the fullest extent not prohibited by the Delaware
General Corporation Law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors; and,
provided, further, that the corporation shall not be required to indemnify any
director or executive officer or officer in connection with any proceeding (or
part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) 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 (iv) such
indemnification is required to be made under subsection (d).
(b) OTHERS. The corporation shall have power to indemnify its
officers, employees and other agents as set forth in the Delaware General
Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer or officer, of the corporation, or is or was serving at the
request of the corporation as a director or executive officer of another
corporation, partnership, joint venture, trust or other enterprise, prior to the
final disposition of the proceeding, promptly following request therefor, all
expenses incurred by any director or executive officer or officer in connection
with such proceeding upon receipt of an undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal
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counsel in a written opinion, that the facts known to the decision-making party
at the time such determination is made demonstrate clearly and convincingly that
such person acted in bad faith or in a manner that such person did not believe
to be in or not opposed to the best interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers and officers under this Section 43 shall be deemed to be
contractual rights and be effective to the same extent and as if provided for in
a contract between the corporation and the director or executive officer or
officer. Any right to indemnification or advances granted by this Section 43 to
a director or executive officer or officer shall be enforceable by or on behalf
of the person holding such right in any court of competent jurisdiction if (i)
the claim for indemnification or advances is denied, in whole or in part, or
(ii) no disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an executive officer of the corporation
(except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. 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 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. In any suit brought by a director or
executive officer to enforce a right to indemnification or to an advancement of
expenses hereunder, the burden of proving that the director or executive officer
is not entitled to be indemnified, or to such advancement of expenses, under
this Section 43 or otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official
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capacity and as to action in another capacity while holding office. The
corporation is specifically authorized to enter into individual contracts with
any or all of its directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Section 43 shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Section 43.
(h) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Section 43
in effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Section 43 or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director and executive officer
to the full extent not prohibited by any applicable portion of this Section 43
that shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Section 43,
the following definitions shall apply:
(i) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(iii) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so
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that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section 43 with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(v) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
NOTICES
Section 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
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(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two (2) consecutive annual meetings, or (ii) all, and at
least two (2), payments (if sent by first class mail) of dividends or interest
on securities
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during a twelve-(12) month period, have been mailed addressed to such person at
his address as shown on the records of the corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
his then current address, the requirement that notice be given to such person
shall be reinstated. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate need not state that notice was
not given to persons to whom notice was not required to be given pursuant to
this paragraph.
ARTICLE XIII
AMENDMENT
Section 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote 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 Voting Stock. The
Board of Directors shall also have the power to adopt, amend or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE XV
MISCELLANEOUS
Section 47. ANNUAL REPORT.
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(a) Subject to the provisions of paragraph (b) of this Section
47, the Board of Directors shall cause an annual report to be sent to each
stockholder of the corporation not later than one hundred twenty (120) days
after the close of the corporation's fiscal year. Such report shall include a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accounts or, if there is no such report, the
certificate of an authorized officer of the corporation that such statements
were prepared without audit from the books and records of the corporation. When
there are more than one hundred (100) stockholders of record of the
corporation's shares, as determined by Section 605 of the California
Corporations Code, additional information as required by Section 1501(b) of the
California Corporations Code shall also be contained in such report, provided
that if the corporation has a class of securities registered under Section 12 of
the Exchange Act, that Act shall take precedence. Such report shall be sent to
stockholders at least fifteen (15) days prior to the next annual meeting of
stockholders after the end of the fiscal year to which it relates.
(b) If and so long as there are fewer than one hundred (100)
holders of record of the corporation's shares, the requirement of sending of an
annual report to the stockholders of the corporation is hereby expressly waived.
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EXHIBIT 4.1
EGROUPS, INC.
A DELAWARE CORPORATION
NUMBER <<CERTNUMBER>> *<<NOOFSHARES>>* SHARES
COMMON STOCK
This certifies that <<NAME>> is the record holder of <<NOOFSHARES>>
shares of COMMON STOCK of EGROUPS INC. transferable only on the books of said
corporation by the holder, in person, or by duly authorized attorney, upon
surrender of this certificate properly endorsed or assigned.
This certificate and the shares represented hereby are issued and shall
be held subject to all of the provisions of the Certificate of Incorporation and
the Bylaws of the corporation and any amendments thereto, a copy of which is on
file at the officer of the corporation and made part hereof as fully as though
the provisions of the Certificate of Incorporation and Bylaws were imprinted in
full on this certificate, to all of which the holder of this certificate, by
acceptance hereof, assents.
The corporation will furnish without charge to each stockholder who so
requests, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
WITNESS, the Seal of the corporation and the signatures of its duly
authorized officers this <<Day>> day of <<Month>>, 2000.
- ----------------------------------- -----------------------------------
Marjorie Sennett, Chief Financial Michael Klein, President
Officer
<PAGE> 1
EXHIBIT 4.2
EGROUPS, INC.
SECOND AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT
This Second Amended and Restated Investors Rights Agreement (the
"Agreement") is made as of the 14th day of December, 1999, by and among eGroups,
Inc., a Delaware corporation (the "Company"), the investors listed on Exhibit A
hereto, each of which is herein referred to as an "Investor," and Eric
Archambeau, Mark Fletcher, Scott Hassan, Carl Page, Martin Roscheisen, and Scott
Schamberger, each of whom is herein referred to as a "Founder."
RECITALS
WHEREAS, certain of the Investors (the "Existing Investors") hold the
Company's Series A Preferred Stock, Series B Preferred Stock and/or Series C
Preferred Stock and possess certain registration rights, information rights and
other rights pursuant to a First Amended and Restated Investors' Rights
Agreement dated as of December 17, 1998, as amended on November 9, 1999, by and
among the Company and such Existing Investors (the "Prior Agreement");
WHEREAS, the Existing Investors are holders of more than 50% of the
"Registrable Securities" of the Company (as defined in the Prior Agreement) and
desire to terminate the Prior Agreement and to accept the rights created
pursuant hereto in lieu of the rights granted to them under the Prior Agreement;
WHEREAS, the Company and the purchasers of the Series D Preferred Stock
(the "Series D Investors") have entered into a Series D Preferred Stock Purchase
Agreement (the "Series D Purchase Agreement") of even date herewith pursuant to
which the Company desires to sell to the Series D Investors and the Series D
Investors desire to purchase from the Company shares of the Company's Series D
Preferred Stock;
WHEREAS, a condition to the Series D Investors obligations under the
Series D Purchase Agreement is that the Company, the Founders and the Investors
enter into this Agreement in order to provide the Investors with (i) certain
rights to register shares of the Company's Common Stock issuable upon conversion
of the Series D Preferred Stock held by the Investors, (ii) certain rights to
receive or inspect information pertaining to the Company, and (iii) a right of
first offer with respect to certain issuances by the Company of its securities;
WHEREAS, the Company, the Existing Investors and the Founders each
desire to induce the Series D Investors to purchase shares of Series D Preferred
Stock pursuant to the Series D Purchase Agreement by agreeing to the terms and
conditions set forth herein;
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Existing Investors hereby agree that the Prior
Agreement shall be terminated and be
<PAGE> 2
superseded and replaced in its entirety by this Agreement, and the parties
hereto further agree as follows:
1. REGISTRATION RIGHTS. The Company and the Investors covenant
and agree as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Act"), and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the
shares of Common Stock issuable or issued upon conversion of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the Series D Preferred Stock (such shares of Common Stock are collectively
referred to hereinafter as the "Stock"), (ii) any other shares of Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Stock, and (iii) the shares of Common Stock issued to the Founders (the
"Founders' Stock"), provided, however, that for the purposes of Section 1.2 or
1.4 the Founders' Stock shall not be deemed Registrable Securities and the
Founders shall not be deemed Holders and provided, further, that the foregoing
definition shall exclude in all cases any Registrable Securities sold by a
person in a transaction in which his or her rights under this Agreement are not
assigned. Notwithstanding the foregoing, Common Stock or other securities shall
only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the Act
under Section 4(1) thereof so that all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation of such
sale;
(c) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 hereof;
(e) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any successor form under the Act; and
(f) The term "SEC" means the Securities and
Exchange Commission.
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1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after
the earlier of (i) June 19, 2002, or (ii) six (6) months after the effective
date of the first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or an SEC Rule 145 transaction), a written request from
the Holders of a majority of the Registrable Securities then outstanding that
the Company file a registration statement under the Act covering the
registration covering shares of Common Stock to be sold by the Company having an
aggregate offering price of at least $15,000,000, then the Company shall, within
ten (10) days of the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of subsection 1.2(b), use its
reasonable best efforts to effect as soon as practicable, and in any event
within sixty (60) days of the receipt of such request, the registration under
the Act of all Registrable Securities which the Holders request to be registered
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 3.5.
(b) If the Holders initiating the registration
request hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 1.2
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). The underwriter will be selected by a majority in interest
of the Initiating Holders and shall be reasonably acceptable to the Company. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder.
(c) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders;
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<PAGE> 4
provided, however, that the Company may not utilize this right more than once in
any twelve (12)-month period.
(d) In addition, the Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two (2)
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the
date sixty (60) days prior to the Company's good faith estimate of the date of
filing of, and ending on a date (A) one hundred eighty (180) days after the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public, or (B)
ninety (90) days after the effective date of a registration subject to Section
1.3; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iii) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately registered
on Form S-3 pursuant to a request made pursuant to Section 1.4 below.
1.3 COMPANY REGISTRATION. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Act, a registration in which the only stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 FORM S-3 REGISTRATION. In case the Company shall
receive from any Holder or Holders of the Registrable Securities then
outstanding a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
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<PAGE> 5
(b) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within fifteen (15) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 1.4: (i) if Form S-3 is not available for such offering by the
Holders; (ii) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (iii) if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than one
hundred twenty (120) days after receipt of the request of the Holder or Holders
under this Section 1.4; provided, however, that the Company shall not utilize
this right more than once in any twelve (12) month period; (iv) if the Company
has, within the twelve (12) month period preceding the date of such request,
already effected one registration on Form S-3 for the Holders pursuant to this
Section 1.4; (v) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance; or (vi)
during the period one hundred eighty (180) days after the effective date of a
registration statement subject to Section 1.3.
(c) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under
this Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to one
hundred twenty (120) days. The Company shall not be required to file, cause to
become effective or maintain the effectiveness of any registration statement
that contemplates a distribution of securities on a delayed or continuous basis
pursuant to Rule 415 under the Act.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such
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<PAGE> 6
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Use its reasonable best efforts to furnish, at
the request of any Holder requesting registration of Registrable Securities
pursuant to this Section 1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters
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<PAGE> 7
in an underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Securities.
1.6 FURNISH INFORMATION. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.4 of this Agreement
if, as a result of the application of the preceding sentence, the number of
shares or the anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the number of shares
or the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in subsection
1.2(a) or subsection 1.4(b)(ii), whichever is applicable.
1.7 EXPENSES OF REGISTRATION.
(a) DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
(b) COMPANY REGISTRATION. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.11), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements of one counsel for the selling
Holders selected by them with the approval of the Company, which approval shall
not be unreasonably withheld, but excluding underwriting discounts and
commissions relating to Registrable Securities.
(c) REGISTRATION ON FORM S-3. All expenses incurred
in connection with a registration requested pursuant to Section 1.4, including
(without limitation) all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and
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<PAGE> 8
disbursements of counsel for the selling Holder or Holders and counsel for the
Company, but excluding any underwriters' discounts or commissions associated
with Registrable Securities, shall be borne by the Company.
1.8 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders), but in no event shall (a) the amount of
securities (not including Founders' Stock) of the selling Holders included in
the offering be reduced unless the securities of all other selling stockholders
(including Founders) are excluded entirely, and (b) the amount of securities
(not including Founders' Stock) of the selling Holders included in the offering
be reduced below twenty-five percent (25%) of the total amount of securities
included in such offering, unless such offering is the initial public offering
of the Company's securities, in which case, the selling stockholders may be
excluded if the underwriters make the determination described above and no other
stockholder's securities are included. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "Selling
Stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.9 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, each of its officers, directors
and partners, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations
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<PAGE> 9
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Act, the Exchange Act or any
state securities law; and the Company will pay to each such Holder, underwriter
or controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will severally and not jointly indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.9(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.9(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided, that, in no event shall
any indemnity under this subsection 1.9(b) exceed the net proceeds from the
offering received by such Holder, except in the case of willful fraud by such
Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.9 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be
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<PAGE> 10
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided, that, in no event shall any contribution by a Holder
under this Subsection 1.9(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders
under this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public so
long as the Company remains subject to the periodic reporting requirements under
Sections 13 or 15(d) of the Exchange Act;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
necessary to enable the Holders to
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utilize Form S-3 for the sale of their Registrable Securities, such action to be
taken as soon as practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the Exchange Act (at
any time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by a Holder to a
transferee or assignee of at least one hundred fifty thousand (150,000) shares
of such securities (as adjusted to reflect stock dividends, stock splits and
recapitalizations); provided however, that no transfer will be made to a
competitor of the Company (as determined by the Board of Directors); and
provided further, that the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. The provisions of this Section 1.11 shall not apply to
(a) a transfer of any Registrable Securities not involving a change in
beneficial ownership, or (b) transactions involving the distribution without
consideration of Registrable Securities by the Holders to any of its affiliated
funds or entities, partners or members, or retired partners or members, or to
the estate of any of its partners or members or retired partners or members.
1.12 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, excluding Registrable Securities held by the Founders, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in subsection 1.2(a) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2.
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<PAGE> 12
1.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby
agrees that it will not, without the prior written consent of the managing
underwriter, during the period commencing on the date of the final prospectus
relating to the Company's initial public offering and ending on the date
specified by the Company and the managing underwriter (such period not to exceed
one hundred eighty (l80) days) (i) lend, offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock of the Company
(whether such shares or any such securities are then owned by the Holder or are
thereafter acquired), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise; provided, however, that:
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering provided that such registration statement is declared effective; and
(b) all officers and directors of the Company, all
two-percent security holders, and all other persons with registration rights
(whether or not pursuant to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the Registrable Securities
of each Holder (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.13.
Notwithstanding the foregoing, the obligations described
in this Section 1.13 shall not apply to a registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms which may be
promulgated in the future, or a registration relating solely to an SEC Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
1.14 TERMINATION OF REGISTRATION RIGHTS. No Holder shall
be entitled to exercise any right provided for in this Section 1 after the
earlier of (a) three (3) years following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the initial firm commitment underwritten offering of its
securities to the general public, or (b) with respect to any Holder of
Registrable Securities (i) such time as Rule 144 or another similar exemption
under the Act is available for the sale of all of such Holder's shares during a
three (3)-month period without registration or (ii) at such time as such Holder
holds Registrable Securities constituting less than one percent (1%) of the
outstanding voting stock of the Company.
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<PAGE> 13
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall
deliver to each Investor holding, and to transferees of, at least three hundred
thousand (300,000) shares of Registrable Securities (as adjusted to reflect
stock dividends, stock splits and recapitalizations) (each a "Major Investor"):
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP")
and audited and certified by an independent public accounting firm of nationally
recognized standing selected by the Company;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, a
statement of cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter;
(c) with respect to the financial statements called
for in subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
of Directors determines that it is in the best interest of the Company to do so;
and
(d) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
the Major Investor or any assignee of the Investor may from time to time
reasonably request, provided, however, that the Company shall not be obligated
under this subsection (d) or any other subsection of Section 2.1 to provide
information which it deems in good faith to be a trade secret or similar
confidential information.
2.2 INSPECTION. The Company shall permit each Major
Investor, at such Major Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Major Investor; provided, however,
that the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 SBA REGULATORY COMPLIANCE COOPERATION. In the event
that Bank of America Ventures determines that it has a Regulatory Problem (as
defined below), it
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<PAGE> 14
shall have the right to transfer its Registrable Securities without regard to
any restrictions on transfer set forth in this Agreement or the Purchase
Agreement (provided that the transferee agrees to become a party to each such
agreement), and the Company shall take all such actions as are reasonably
requested by Bank of America Ventures in order to (i) effectuate and facilitate
any transfer by it of any securities of the Company then held by it to any
person designated by Bank of America Ventures, (ii) permit Bank of America
Ventures (or any of its affiliates) to exchange all or any portion of any voting
security then held by it on a share-for-share basis for shares of a nonvoting
security of the Company, which nonvoting security shall be identical in all
respects to the voting security exchanged for it, except that it shall be
nonvoting and shall be convertible into a voting security on such terms as are
requested by it in light of regulatory considerations then prevailing, and (iii)
amend this Agreement, as amended from time to time, to effectuate and reflect
the foregoing. The parties to this Agreement agree to vote all of the Company's
securities held by them in favor of such amendments and actions. For purposes of
this Agreement, a "Regulatory Problem" means any set of facts or circumstances
wherein it has been asserted by any governmental regulatory agency that Bank of
America Ventures is not entitled to hold, or exercise any significant right with
respect to, the underlying securities into which the Series D Preferred Stock
are convertible.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this Section 2.4, the Company hereby grants to each
Major Investor a right of first offer with respect to future sales by the
Company of its Shares (as hereinafter defined). For purposes of this Section
2.4, "Major Investor" includes any partners and affiliates of an Investor. A
Major Investor shall be entitled to apportion the right of first offer hereby
granted it among itself and its partners and affiliates in such proportions as
it deems appropriate. Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified
mail ("Notice") to the Major Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such Shares.
(b) Within fifteen (15) calendar days after
delivery of the Notice, the Major Investor may elect to purchase or obtain, at
the price and on the terms specified in the Notice, up to that portion of such
Shares which equals the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion and exercise of all convertible or
exercisable securities then held, by such Major Investor bears to the total
number of shares of Common Stock then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities). The Company shall
promptly, in writing, inform each Major Investor that purchases all the shares
available to it (each, a "Fully-Exercising Investor") of any other Major
Investor's failure to do likewise. During the ten (10)-day period commencing
after receipt of such information, each Fully-Exercising Investor shall be
entitled to obtain that portion of the Shares for which Major Investors were
entitled to subscribe but which were not subscribed for by the Major Investors
that is equal to the proportion that the number of shares of Common Stock issued
and held, or issuable upon conversion and exercise of all convertible or
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<PAGE> 15
exercisable securities then held, by such Fully-Exercising Investor bears to the
total number of shares of Common Stock then outstanding (assuming full
conversion and exercise of all convertible or exercisable securities).
(c) The Company may, during the forty-five (45)-day
period following the expiration of the period provided in subsection 2.4(b)
hereof, offer the remaining unsubscribed portion of the Shares to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree than those specified in the Notice. If the Company does not enter into
an agreement for the sale of the Shares within such period, or if such agreement
is not consummated within sixty (60) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4
shall not be applicable (i) to the issuance or sale of shares of Common Stock
(or options therefor) to employees, consultants and directors, pursuant to plans
or agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, or (ii) to or after consummation of a
bona fide, firmly underwritten public offering of shares of Common Stock, or
(iii) to the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities, or (iv) to the issuance of securities in
connection with a bona fide business acquisition of or by the Company, whether
by merger, consolidation, sale of assets, sale or exchange of stock or
otherwise, or (v) to the issuance of securities to financial institutions or
lessors in connection with commercial credit arrangements, equipment financings,
or similar transactions other than for primarily equity financing purposes, or
(vi) to the issuance or sale of the Series A Preferred Stock, the Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.
2.5 TERMINATION OF INFORMATION, INSPECTION AND SBA
COVENANTS. The covenants set forth in Section 2.1, Section 2.2 and Section 2.3
shall terminate and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act,
whichever event shall first occur.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock or any
Common Stock issued upon conversion thereof). Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
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<PAGE> 16
3.2 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto shall be governed, construed and interpreted in
accordance with the laws of the State of California, without giving effect to
principles of conflicts of laws.
3.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice
required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon delivery, when delivered personally or by overnight courier or
sent by telegram, or confirmed fax or email, or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or on Exhibit A hereto or as subsequently modified by written
notice.
3.6 EXPENSES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement,
including the rights of Major Investors set forth in Section 2, may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding, not including the Founders' Stock;
provided that if such amendment has the effect of affecting the Founders' Stock
(a) in a manner different than securities issued to the Investors and (b) in a
manner adverse to the interests of the holders of the Founders' Stock, then such
amendment shall require the consent of the holder or holders of a majority of
the Founders' Stock. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.
3.8 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (x) such provision shall be excluded from this Agreement, (y)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (z) the balance of the Agreement shall be enforceable in accordance
with its terms.
3.9 AGGREGATION OF STOCK. All shares of the Preferred
Stock held or acquired by affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement.
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<PAGE> 17
[Signature Pages Follow]
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<PAGE> 18
The parties have executed this SECOND AMENDED INVESTORS RIGHTS AGREEMENT
as of the date first above written.
COMPANY:
EGROUPS, INC.
----------------------------------------
Name: Michael Klein
Title: President and Chief Executive
Officer
Address: 350 Brannan Street
San Francisco, CA 94107
INVESTORS:
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE> 19
FOUNDERS:
----------------------------------------
Eric Archambeau
----------------------------------------
Mark Fletcher
----------------------------------------
Scott Hassan
----------------------------------------
Carl Page
----------------------------------------
Martin Roscheisen
----------------------------------------
Scott Schamberger
SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 4.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series B Preferred Stock of
EGROUPS, INC.
Dated as of June 23,1999 (the "Effective Date")
WHEREAS, eGroups, Inc., a Delaware corporation (the "Company") has entered into
a Master Lease Agreement dated as of June 23, 1999, Equipment Schedule No. VL-1
and VL-2 dated as of June 23, 1999, and related Summary Equipment Schedules
(collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the
"Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration for
such Leases, the right to purchase shares of its Series B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and delivering
such Leases and in consideration of mutual covenants and agreements contained
herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, such number of fully paid and
non-assessable shares of the Company's Series B Preferred Stock ("Preferred
Stock") equal to $60,000 divided by the Exercise Price. The Exercise Price shall
be the price per share of the Next Round of financing, provided such financing
is completed on or before December 1, 1999. In the event the Next Round is
completed after December 1, 1999, the Exercise Price shall be $1.43955 per
share. Next Round shall be defined as (i) preferred stock financing of at least
$2,000,000, (ii) the sale, conveyance disposal, or encumbrance of all or
substantially all of the Company's property or business or Company's merger into
or consolidation with any other corporation (other than a wholly-owned
subsidiary corporation).or any other transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
Company is disposed of ("Merger Event"), provided that a Merger Event shall not
apply to a merger effected exclusively for the purpose of changing the domicile
of the company or (iii) an initial public offering of the Company's Common Stock
which such public offering has been declared effective by the SEC.
Notwithstanding the foregoing, in the event the Next Round is a transaction as
defined in (ii) or (iii) above, the Exercise Price shall be the greater of (a) a
30% discount to the price per share in such
<PAGE> 2
financing or (b) $1.43955, The number and purchase price of such shares are
subject to adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement and
the right to purchase Preferred Stock as granted herein shall commence on the
Effective Date and shall be exercisable for a period of (i) five (5) years or
(ii) three (3) years from the effective date of the Company's initial public
offering, whichever is earlier.
Notwithstanding the term of this Warrant Agreement fixed pursuant to the above
paragraph, the right to purchase Preferred Stock as granted herein shall expire,
if not previously exercised immediately upon the closing of a merger or
consolidation of the Company with or into another corporation when the Company
is not the surviving corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person (the "Merger") provided in
which Warrantholder realizes a value for its shares equal to or greater than
$4.31865 per share.
The Company shall notify the Warrantholder if the Merger is proposed in
accordance with the terms of 8(f) hereof, and if the Company fails to deliver
such written notice, then notwithstanding anything to the contrary in this
Warrant Agreement, the rights to purchase the Company's Preferred Stock shall
not expire until the Company complies with such notice provisions. Such notice
shall also contain such details of the proposed Merger as are reasonable in the
circumstances. If such closing does not take place, the Company shall promptly
notify the Warrantholder that such proposed transaction has been terminated, and
the Warrantholder may rescind any exercise of its purchase rights promptly after
such notice of termination of the proposed transaction If the exercise of
Warrants has occurred after the Company notified the Warrantholder that the
Merger was proposed. In the event of such rescission, the Warrants will continue
to be exercisable on the same terms and conditions contained herein.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by the
Warrantholder, in whole or in part, at any time, or from time to time, prior to
the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by
cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined
below. If the Warrantholder elects the Net Issuance method, the Company will
issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
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<PAGE> 3
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of Preferred
Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of the
Company's Common Stock, and if the Company's Registration Statement relating to
such public offering has been declared effective by the SEC, then the fair
market value per share shall be the product of (x) the initial "Price to Public"
specified in the final prospectus with respect to the offering and (y) the
number of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering,and:
(a) if traded on a securities exchange, the fair market value shall be deemed to
be the product of (x) the average of the closing prices over a five (5) day
period ending three days before the day the current fair market value of the
securities is being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise;
or
(b) if actively traded over-the-counter, the fair market value shall be deemed
to be the product of (x) the average of the closing bid and asked prices quoted
on the NASDAQ system (or similar system) over the five (5) day period ending
three days before the day the current fair market value of the securities is
being determined and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities exchange
or quoted in the NASDAQ System or the over-the-counter market, the current fair
market value of Preferred Stock shall be the product of (x) the highest price
per share which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board of
Directors and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise, unless the Company
shall become subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair market
value of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
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<PAGE> 4
Upon partial exercise by either cash or Net Issuance, the Company shall promptly
issue an amended Warrant Agreement representing the remaining number of shares
purchasable hereunder. All other terms and conditions of such amended Warrant
Agreement shall be identical to those contained herein, including, but not
limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this Warrant
Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to be
reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of the Warrant, but in lieu of such fractional shares the
Company shall make a cash payment therefor upon the basis of the Exercise Price
then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting rights
or other rights as a shareholder of the Company prior to the exercise of the
Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the
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<PAGE> 5
Warrantholder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend payable in,
or make any other distribution (except any distribution specifically provided
for in the foregoing subsections (a) or (b)) of the Company's stock, then the
Exercise Price shall be adjusted, from and after the record date of such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction (i) the
numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
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<PAGE> 6
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend or
distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least ten (10) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
ten (10) days' prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least ten (10) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the event
requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by
which such adjustment was calculated, (iv) the Exercise Price, and (v) the
number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by subsection
(f) above shall entitle Warrantholder to retain the benefit of the applicable
notice period notwithstanding anything to the contrary contained in any
insufficient notice received by Warrantholder. The notice period shall begin on
the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon exercise
of the Warrantholders rights has been duly and validly reserved and, when issued
in accordance with the provisions of this Warrant Agreement, will be validly
issued, fully paid and non-assessable, and will be free of any taxes, liens,
charges or encumbrances of any nature whatsoever; provided, however, that the
Preferred Stock issuable pursuant to this Warrant Agreement may be subject to
restrictions on transfer under state and/or Federal securities laws. The Company
has made available to the Warrantholder true, correct and complete copies of its
Charter and Bylaws, as amended. The issuance of certificates for shares of
Preferred Stock upon exercise of the Warrant Agreement shall be made without
charge to the Warrantholder for any issuance tax in respect thereof, or other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock. The Company shall not be required to pay
any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this Warrant
Agreement and the performance of all obligations of the Company hereunder,
including the issuance to
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<PAGE> 7
Warrantholder of the right to acquire the shares of Preferred Stock, have been
duly authorized by all necessary corporate action on the part of the Company,
and the Leases and this Warrant Agreement are not inconsistent with the
Company's Charter or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Leases and this Warrant Agreement constitute legal, valid and binding agreements
of the Company, enforceable in accordance with their respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice to,
registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 20,000,000 shares of
Common Stock, of which 5,812,399 shares are issued and outstanding; (B)
1,620,000 shares of Series A Preferred Stock, of which 1,620,000 shares are
issued and outstanding and are convertible into 1,620,000 shares of Common Stock
at $0.50 per share; and (C) 3,600,000 shares of Series B Preferred Stock, of
which 3,556,772 shares are issued and outstanding and convertible into 3,556,772
shares of Common Stock at $1.43955 per share.
(ii) The Company has reserved (A) 1,900,000 shares of Common Stock for issuance
under its 1998 Stock Option Plan, under which 768,450 options are outstanding.
There are no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(iii) Except as set forth in the First Amended and Restated Investors Rights
Agreement dated December 17, 1998 (the "Rights Agreement"), no shareholder of
the Company has preemptive rights to purchase new issuances of the Company's
capital stock.
(e) Insurance. The Company has in full force and effect insurance policies, with
extended coverage, insuring the Company and its property and business against
such losses and risks, and in such amounts, as are customary for corporations
engaged in a similar business and similarly situated and as otherwise may be
required pursuant to the terms of any other contract or agreement.
M Other Commitments to Register Securities. Except as set forth in the Rights
Agreement, the Company is not, pursuant to the terms of any other agreement
currently in existence, under any obligation to register under the 1933 Act any
of its presently outstanding securities or any of its securities which may
hereafter be issued.
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<PAGE> 8
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder, who
proposes to sell Preferred Stock issuable upon the exercise of the Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to the Warrantholder, within ten days after receipt of
such request, a written statement confirming the Company's compliance with the
filing requirements of the Securities and Exchange Commission as set forth in
such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance upon the
following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the Preferred
Stock issuable upon exercise of the Warrantholder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof, and the Warrantholder has no present intention of selling or
engaging in any public distribution of the same except pursuant to a
registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred Stock
issuable upon exercise of this Warrant is not registered under the 1933 Act or
qualified under applicable state securities laws on the ground that the issuance
contemplated by this Warrant Agreement will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this Section
10.
(c) Disposition of Warrantholder's Rights. In no event will the Warrantholder
make a disposition of any of its rights to acquire Preferred Stock or Preferred
Stock issuable upon exercise of such rights unless and until (i) it shall have
notified the Company of the proposed disposition, and (ii) if requested by the
Company, it shall have furnished the Company with an opinion of counsel (which
counsel may either be inside or outside counsel to the Warrantholder)
satisfactory to the Company and its counsel to the effect that (A) appropriate
action necessary for compliance with the 1933 Act has been taken, or (B) an
exemption from the registration requirements of the 1933 Act is available.
Notwithstanding the foregoing, the restrictions imposed upon the transferability
of any of its rights to acquire Preferred Stock or Preferred Stock issuable on
the exercise of such rights do not apply to transfers from the beneficial owner
of any of the aforementioned securities to its nominee or from such nominee to
its beneficial owner, and shall terminate as to any particular share of
Preferred Stock when (1) such security shall have been effectively registered
under the 1933 Act and sold by the holder thereof in accordance with such
registration or (2) such security shall have been sold without registration in
compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if
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<PAGE> 9
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the Company
does not register with the Securities and Exchange Commission pursuant to
Section 12 of the 1934 Act (the "l 934 Act" ), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within the
meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in
effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this Warrant
Agreement and all rights hereunder are transferable in whole or in part by the
Warrantholder and any successor transferee, provided, however, in no event shall
the number of transfers of the rights and interests in all of the Warrants
exceed three (3) transfers. The transfer shall be recorded on the books of the
Company upon receipt by the Company of a notice of transfer in the form attached
hereto as Exhibit III (the 'Transfer Notice"), at its principal offices and the
payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer.
12. MARKET STANDOFF.
Warrantholder hereby agrees that, during the period of duration (up to, but not
exceeding, one hundred eighty (180) days) specified by the Company and an
underwriter of Common Stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the Act,
it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell(including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:
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<PAGE> 10
(a) such agreement shall be applicable only to the first such registration
statement of the Company which covers Common Stock (or other securities) to be
sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company, all one-percent security holders,
and all other persons with registration rights enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose stop
- -transfer instructions with respect to the securities of each shareholder until
the end of such period, and Warrantholder agrees that, if so requested,
Warrantholder will execute an agreement in the form provided by the underwriter
containing terms which are essentially consistent with the provisions of this
Section 12.
Notwithstanding the foregoing, the obligations described in this Section 12
shall not apply to a registration relating solely to employee benefit plans on
Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or
a registration relating solely to an SEC Rule 145 transaction on Form S-4 or
similar forms which may be promulgated in the future.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be construed
and shall be given effect in all respects as if it had been executed and
delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding between
the Company and the Warrantholder relating hereto, the prevailing party shall be
entitled to attorneys' fees and expenses and all costs of proceedings incurred
in enforcing this Warrant Agreement.
(c) Goveminq Law. This Warrant Agreement shall be governed by and construed for
all purposes under and in accordance with the laws of the State of Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088) and (ii) to the Company at 520
Third Street, Suite 225, San Francisco, CA 94107, Attention: Carl Page (and/or
if by facsimile, (415) 449-3594) cc: Perkins Coie, 135 Commonwealth Drive, Menlo
Park, CA, 94025, Attention: Ralph L Arnheim, III or at such other address as any
such party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting party
may proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including but not limited to an action for damages as a result of
any such default, and/or an action for specific performance for
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<PAGE> 11
any default where Warrantholder will not have an adequate remedy at law and
where damages will not be readily ascertainable. The Company expressly agrees
that it shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its Charter
or through any other means, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of the
respective parties contained herein or made pursuant to this Warrant Agreement
shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this Warrant
Agreement shall for any reason be held invalid, illegal or unenforceable, the
remaining provisions of this Warrant Agreement shall be unimpaired, and the
invalid, illegal or unenforceable provision shall be replaced by a mutually
acceptable valid, legal and enforceable provision, which comes closest to the
intention of the parties underlying the invalid, illegal or unenforceable
provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by a
written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant Agreement,
shall provide the Warrantholder with certified resolutions with respect to the
representations, warranties and covenants set forth in subparagraphs (a) through
(d), (f) and (g) of Section 9 above. If the purchase price for the Leases
referenced in the preamble of this Warrant Agreement exceeds $1,000,000, the
Company will also provide Warrantholder with an opinion from the Company's
counsel with respect to those same representations, warranties and covenants.
The Company shall also supply such other documents as the Warrantholder may from
time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
executed by its officers thereunto duly authorized as of the Effective Date.
Company: EGROUPS, INC.
By:
Title:
Warrantholder: COMDISCO, INC.
By:
Title:
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<PAGE> 1
EXHIBIT 10.2
Exhibit A
LOCK-UP AGREEMENT
March ___, 2000
eGroups, Inc.
350 Brannan Street
San Francisco, CA 94107
Donaldson, Lufkin & Jenrette Securities Corporation
Chase Securities Inc.
FleetBoston Robertson Stephens Inc.
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
The undersigned understands that Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities, Inc. and FleetBoston Robertson Stephens Inc., as
Representatives of the several underwriters (the "UNDERWRITERS"), propose to
enter into an Underwriting Agreement with eGroups, Inc. (the "COMPANY"),
providing for the initial public offering (the "INITIAL PUBLIC OFFERING") of
common stock, par value $.001 per share (the "COMMON STOCK"), of the Company.
To induce the Underwriters that may participate in the Initial Public Offering
to continue their efforts in connection with the Initial Public Offering, the
undersigned, form the date hereof and through the end of the 180-day period
after the date of the final prospectus relating to the Initial Public Offering
(the "FINAL PROSPECTUS"):
(i) agrees not to (x) offer , pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, other wise
transfer or dispose of, directly or indirectly, any shares of
Common Stock (other than shares of common stock purchased in the
open market by the undersigned on or after the closing of the
Initial Public Offering) or any securities convertible into or
exercisable or exchangeable for Common Stock (including, without
limitation, shares of Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock which may be
deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange
<PAGE> 2
Commission) (collectively, "COMPANY SECURITIES") or (y) enter into
any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any
Company Securities (regardless of whether any of the transactions
described in clause (x) or (y) is to be settled by the delivery of
Company Securities, in cash or otherwise), without the prior
written consent of Donaldson, Lufkin & Jenrette Securities
Corporation;
(ii) agrees not to make any demand for, or exercise any right with
respect to, the registration of any Company Securities, without
the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation; and
(iii) authorizes the Company to cause the transfer agent to decline to
transfer and/or to note stop transfer restrictions on the transfer
books and records of the Company with respect to any Company
Securities for which the undersigned is the record holder and, in
the case of any such shares or securities for which the
undersigned is the beneficial but not the record holder, agrees to
cause the record holder to cause the transfer agent to decline to
transfer and/or to note stop transfer restrictions on such books
and records with respect to such shares or securities;
provided further, that the restrictions in clause (i) above shall cease to apply
to (A) 25% of the Company Securities beneficially owned by the undersigned on
the date of the Final Prospectus upon the later to occur of (I) the end of the
90-day period after the date of the Final Prospectus or (II) the second trading
day following the first public release of the Company's quarterly results after
the date of the Final Prospectus, and (B) an additional 25% of the Company
Securities beneficially owned by the undersigned on the date of the Final
Prospectus, upon the end of the 135-day period after the date of the Final
Prospectus if, in the case of both clauses (A) and (B), (X) the reported last
sale price of the Common Stock on the Nasdaq National Market is at least twice
the price per share in the Initial Public Offering for 20 of the 30 trading days
ending on (a) in the case of clause (A) above, the later of (1) the last trading
day of the 90-day period after the date of the Final Prospectus or (2) the
second trading day following the first public release of the Company's quarterly
results after the date of the Final Prospectus and (b) in the case of clause (B)
above, the last trading day of the 135-day period after the date of the Final
Prospectus and (Y) the undersigned is not, and has not been since the date of
the Final Prospectus, an officer of the Company; provided further , that the
undersigned agrees to give Donaldson, Lufkin & Jenrette Securities Corporation
and the Company written notice three business days prior to taking any of the
actions set forth in clause (i) above pursuant to the preceding proviso and to
execute any such action only through Donaldson, Lufkin & Jenrette Securities
Corporation or any of its affiliates acting as broker, unless otherwise agreed
in writing by of Donaldson, Lufkin & Jenrette Securities Corporation.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into the agreements set forth herein, and that,
upon request, the undersigned will execute any additional documents necessary or
desirable in connection with the enforcement
<PAGE> 3
hereof. All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors, and assigns of the undersigned.
Very truly yours,
------------------------------------
Name: (Please Print or type)
Address:
Social Security or Taxpayer Identification No.:
Number of shares of Common Stock owned:
Number and name of securities that are convertible into, or exercisable or
exchangeable for, Common Stock:
Number of shares of Common Stock issuable upon conversion, exercise or exchange
of such securities:
<PAGE> 1
EXHIBIT 10.3
EXHIBIT A
EGROUPS, INC.
1998 STOCK OPTION PLAN
EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of ______________, by and
between eGroups, Inc., a Delaware corporation (the "Company"), and <<Optionee>>
("Purchaser"). To the extent any capitalized terms used in this Agreement are
not defined, they shall have the meaning ascribed to them in the 1998 Stock
Option Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase ______________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
the Company's 1998 Stock Option Plan (the "Plan") and the Stock Option Agreement
dated <<Date_of_Grant>> (the "Option Agreement"). Of these Shares, Purchaser has
elected to purchase _______________ of those Shares which have become vested as
of the date hereof under the Vesting Schedule set forth in the Notice of Stock
Option Grant (the "Vested Shares") and _____________ Shares which have not yet
vested under such Vesting Schedule (the "Unvested Shares"). The purchase price
for the Shares shall be $<<Exercise_Price_Per_Share>> per Share for a total
purchase price of $_______________. The term "Shares" refers to the purchased
Shares and all securities received in replacement of the Shares or as stock
dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) subject to Section 153 of the Delaware General Corporation
Law, delivery of a promissory note in the form attached as Exhibit C to the
Option Agreement (or in any form acceptable to the Company), or (e) a
combination of the foregoing. If Purchaser delivers a promissory note as partial
or full payment of the purchase price, Purchaser will also deliver a Pledge and
Security Agreement in the form attached to Exhibit D to the Option Agreement (or
in any form acceptable to the Company).
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below). After any Shares have
been released from such Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
(a) REPURCHASE OPTION.
(i) In the event of the voluntary or involuntary
termination of Purchaser's employment or consulting relationship with the
Company for any reason (including death or disability),
<PAGE> 2
with or without cause, the Company shall upon the date of such termination (the
"Termination Date") have an irrevocable, exclusive option (the "Repurchase
Option") for a period of 60 days from such date to repurchase all or any portion
of the Unvested Shares held by Purchaser as of the Termination Date which have
not yet been released from the Company's Repurchase Option at the original
purchase price per Share specified in Section 1 (adjusted for any stock splits,
stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the
Company by written notice to Purchaser or Purchaser's executor and, at the
Company's option, (A) by delivery to Purchaser or Purchaser's executor with such
notice of a check in the amount of the purchase price for the Shares being
purchased, or (B) in the event Purchaser is indebted to the Company, by
cancellation by the Company of an amount of such indebtedness equal to the
purchase price for the Shares being repurchased, or (C) by a combination of (A)
and (B) so that the combined payment and cancellation of indebtedness equals
such purchase price. Upon delivery of such notice and payment of the purchase
price in any of the ways described above, the Company shall become the legal and
beneficial owner of the Shares being repurchased and all rights and interest
therein or related thereto, and the Company shall have the right to transfer to
its own name the number of Shares being repurchased by the Company, without
further action by Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares
shall initially be subject to the Repurchase Option. The Unvested Shares shall
be released from the Repurchase Option in accordance with the Vesting Schedule
set forth in the Notice of Stock Option Grant until all Shares are released from
the Repurchase Option. Fractional shares shall be rounded to the nearest whole
share.
(b) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser
or any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (A) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("Proposed Transferee"); (C)
the number of Shares to be transferred to each Proposed Transferee; and (D) the
terms and conditions of each proposed sale or transfer. The Holder shall offer
the Shares at the same price (the "Offered Price") and upon the same terms (or
terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time
within 30 days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("Purchase
Price") for the Shares purchased by the Company or its assignee(s) under this
Section 3(b) shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in
good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
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<PAGE> 3
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section
3(b), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(b) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate Family (as defined below) or a trust for
the benefit of Purchaser's Immediate Family shall be exempt from the provisions
of this Section 3(b). "Immediate Family" as used herein shall mean spouse,
lineal descendant or antecedent, father, mother, brother or sister. In such
case, the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Section 3.
(c) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER.
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(c)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the
transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) ASSIGNMENT. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the Parent or a 100%
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<PAGE> 4
owned Subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and Fair
Market Value, if the original purchase price is less than the Fair Market Value
of the Shares subject to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of
Shares or any interest therein will receive and hold such Shares or interest
subject to the provisions of this Agreement, including, insofar as applicable,
the Repurchase Option. Any sale or transfer of the Shares shall be void unless
the provisions of this Agreement are satisfied.
(f) TERMINATION OF RIGHTS. The Right of First Refusal and the
Company's right to repurchase the Shares in the event of an involuntary transfer
pursuant to Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act").
(g) MARKET STANDOFF AGREEMENT. In connection with the initial
public offering of the Company's securities and upon request of the Company or
the underwriters managing such underwritten offering of the Company's
securities, Purchaser agrees not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) from the effective date of such
registration as may be requested by the Company or such managing underwriters
and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company's initial public offering.
4. ESCROW OF UNVESTED SHARES. For purposes of facilitating the
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Attachment A executed
by Purchaser and by Purchaser's spouse (if required for transfer), in blank, to
the Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable to any party hereof (or to any other party). The escrow holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary's designee, resigns as escrow holder for any or no
reason, the Board of Directors of the Company shall have the power to appoint a
successor to serve as escrow holder pursuant to the terms of this Agreement.
5. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
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<PAGE> 5
(b) Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this
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<PAGE> 6
Agreement or (ii) to treat as owner of such Shares or to accord the right to
vote or pay dividends to any purchaser or other transferee to whom such Shares
shall have been so transferred.
(d) REMOVAL OF LEGEND. When all of the following events have
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 6(a)(ii): (i) the termination of the Right of
First Refusal; (ii) the expiration or termination of the market standoff
provisions of Section 3(g) (and of any agreement entered pursuant to Section
3(g)); and (iii) the expiration or exercise in full of the Repurchase Option.
After such time, and upon Purchaser's request, a new certificate or certificates
representing the Shares not repurchased shall be issued without the legend
referred to in Section 6(a)(ii), and delivered to Purchaser.
7. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
8. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income for a Nonstatutory Stock Option and as alternative minimum taxable income
for an Incentive Stock Option the difference between the amount paid for the
Shares and the Fair Market Value of the Shares as of the date any restrictions
on the Shares lapse. In this context, "restriction" means the right of the
Company to buy back the Shares pursuant to the Repurchase Option set forth in
Section 3(a) of this Agreement. Purchaser understands that Purchaser may elect
to be taxed at the time the Shares are purchased, rather than when and as the
Repurchase Option expires, by filing an election under Section 83(b) (an "83(b)
Election") of the Code with the Internal Revenue Service within 30 days from the
date of purchase. Even if the Fair Market Value of the Shares at the time of the
execution of this Agreement equals the amount paid for the Shares, the election
must be made to avoid income and alternative minimum tax treatment under Section
83(a) in the future. Purchaser understands that failure to file such an election
in a timely manner may result in adverse tax consequences for Purchaser.
Purchaser further understands that an additional copy of such election form
should be filed with his or her federal income tax return for the calendar year
in which the date of this Agreement falls. Purchaser acknowledges that the
foregoing is only a summary of the effect of United States federal income
taxation with respect to purchase of the Shares hereunder, and does not purport
to be complete. Purchaser further acknowledges that the Company has directed
Purchaser to seek independent advice regarding the applicable provisions of the
Code, the income tax laws of any municipality, state or foreign country in which
Purchaser may reside, and the tax consequences of Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Agreement a copy of the Acknowledgment and Statement of
Decision Regarding Section 83(b) Election (the "Acknowledgment") attached hereto
as Attachment B. Purchaser further agrees that he or she will execute and submit
with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C (for income tax purposes in connection with the early exercise of a
Nonstatutory Stock Option) or Attachment D (for alternative minimum tax purposes
in connection with the early exercise of an incentive stock option) if Purchaser
has indicated in the Acknowledgment his or her decision to make such an
election.
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<PAGE> 7
9. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
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<PAGE> 8
The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
EGROUPS, INC.
By:
-----------------------------------------
Marjorie Sennett, Chief Financial Officer
Address:
350 Brannan Street
San Francisco, CA 94107
PURCHASER:
<<Optionee>>
--------------------------------------------
(Signature)
Address:
<<Address>>
I, ______________________, spouse of <<Optionee>>, have read and hereby approve
the foregoing Agreement. In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be bound irrevocably by the Agreement and further agree that any community
property or similar interest that I may have in the Shares shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
--------------------------------------------
Spouse of <<Optionee>>
<PAGE> 1
EXHIBIT 10.5
ONELIST, INC.
1998 STOCK PLAN
(AMENDED AS OF DECEMBER 17, 1998)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means ONElist, Inc., a California corporation.
(h) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board of Directors of the
Company.
<PAGE> 2
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination;
or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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<PAGE> 3
(p) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions' of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(s) "Option Exchange Program" means a program whereby
outstanding Options are exchanged for Options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option
or a Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(v) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1998 Stock Plan.
(x) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(y) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(z) "Service Provider" means an Employee, Director or
Consultant.
(aa) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(bb) "Stock Purchase Right" means a right to purchase Common
Stock pursuant to Section 11 below.
(cc) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the
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<PAGE> 4
Plan is 1,165,000 Shares. The Shares may be authorized but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Board
or a Committee appointed by the Board, which Committee shall be constituted to
comply with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by
each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, of any Option
or Stock Purchase Right granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or Stock Purchase Right or
the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(e) instead of Common Stock;
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<PAGE> 5
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon any Optionee any right with respect to continuing the
Optionee's relationship as a
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<PAGE> 6
Service Provider with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate such relationship at any time,
with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof.
In the case of an Incentive Stock Option granted to an Optionee who, at the time
the Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any other Service Provider, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
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<PAGE> 7
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise, Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Except in the case of Options granted to Officers,
Directors and Consultants, Options shall become exercisable at a rate of no less
than 20% per year over five (5) years from the date the Options are granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence. An Option may not
be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (I)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
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<PAGE> 8
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (of at least six (6) months) to the extent that the
Option is vested on the date of death (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement) by the
Optionee's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, at the time of death, the Optionee is not vested
as to the entire Option, the Shares covered by the unvested portion of the
Option shall immediately revert to the Plan. If the Option is not so exercised
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and
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<PAGE> 9
conditions as the Administrator shall establish and communicate to the Optionee
at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. The
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. The terms of the offer shall comply in
all respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of
purchase.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
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<PAGE> 10
12. Adjustments upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a
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<PAGE> 11
merger or sale of assets, the Administrator shall notify the Optionee in writing
or electronically that the Option or Stock Purchase Right shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the.
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
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<PAGE> 12
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise
of an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Share. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 1
EXHIBIT 10.7
EGROUPS, INC.
1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. eGroups, Inc., a Delaware corporation (the
"Company"), hereby grants to <<OPTIONEE>> ("Optionee") an option (the "Option")
to purchase a total number of shares of Common Stock (the "Shares") set forth in
the Notice of Stock Option Grant, at the exercise price per share set forth in
the Notice of Stock Option Grant (the "Exercise Price") subject to the terms,
definitions and provisions of the eGroups, Inc. 1998 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code. If
the aggregate Fair Market Value of the shares with respect to which the Option
first becomes exercisable during any calendar year (under the Option and all
other Incentive Stock Options you hold) exceeds $100,000, the excess portion
will be treated as a nonstatutory stock option, unless the Internal Revenue
Service changes the rules and regulations governing the $100,000 limit for
Incentive Stock Options.
2. EXERCISE OF OPTION. This Option shall be exercisable during its Term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may be exercised in whole or in part at
any time after the Date of Grant, as to Shares which have not yet vested under
the vesting schedule indicated on the Notice of Stock Option Grant; provided,
however, that Optionee shall execute as a condition to such exercise of this
Option, the Early Exercise Notice and Restricted Stock Purchase Agreement
attached hereto as Exhibit A (the "Early Exercise Agreement"). If Optionee
chooses to exercise this Option solely as to Shares which have vested under the
vesting schedule indicated on the Notice of Stock Option Grant, Optionee shall
complete and execute the form of Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as Exhibit B ( the "Exercise Agreement").
Notwithstanding the foregoing, the Company may in its discretion prescribe or
accept a different form of notice of exercise and/or stock purchase agreement if
such forms are otherwise consistent with this Agreement, the Plan and
then-applicable law.
(ii) This Option may not be exercised for a fraction of a
share.
(iii) In the event of Optionee's death, disability or
other termination of employment or consulting relationship, the exercisability
of the Option is governed by Sections 5, 6 and 7 below, subject to the
limitation contained in Section 2(a)(iv) below.
(iv) In no event may this Option be exercised after the
Expiration Date of this Option as set forth in the Notice of Stock Option Grant.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
execution and delivery of the Early Exercise Agreement or the Exercise
Agreement, whichever is applicable, or of any other
<PAGE> 2
written notice approved for such purpose by the Company which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by Optionee and shall be delivered in person or
by certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
applicable law, including the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company
which (i) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by Optionee for more than 6 months on the date of
surrender, and (ii) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) if there is a public market for the Shares and they are
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the Exercise Price.
(e) subject to Section 153 of the Delaware General Corporation
Law, a promissory note in the form attached to this Agreement as Exhibit C, or
in any other form approved by the Company.
4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set forth in the
Notice of Stock Option Grant. To the extent that Optionee was not entitled to
exercise this Option at such Termination Date, or if Optionee does not exercise
this Option within the Termination Period, the Option shall terminate.
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<PAGE> 3
6. DISABILITY OF OPTIONEE.
(a) Notwithstanding the provisions of Section 5 above, in the
event of termination of Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within twelve months
from the Termination Date (but in no event later than the Expiration Date set
forth in the Notice of Stock Option Grant and in Section 9 below), exercise this
Option to the extent he or she was entitled to exercise it at such Termination
Date. To the extent that Optionee was not entitled to exercise the Option on the
Termination Date, or if Optionee does not exercise such Option to the extent so
entitled within the time specified in this Section 6(a), the Option shall
terminate.
(b) Notwithstanding the provisions of Section 5 above, in the
event of termination of Optionee's consulting relationship or Continuous Status
as an Employee as a result of a disability not constituting a total and
permanent disability (as set forth in Section 22(e)(3) of the Code), Optionee
may, but only within six months from the Termination Date (but in no event later
than the Expiration Date set forth in the Notice of Stock Option Grant and in
Section 9 below), exercise the Option to the extent Optionee was entitled to
exercise it as of such Termination Date; provided, however, that if this is an
Incentive Stock Option and Optionee fails to exercise this Incentive Stock
Option within three months from the Termination Date, this Option will cease to
qualify as an Incentive Stock Option (as defined in Section 422 of the Code) and
Optionee will be treated for federal income tax purposes as having received
ordinary income at the time of such exercise in an amount generally measured by
the difference between the Exercise Price for the Shares and the Fair Market
Value of the Shares on the date of exercise. To the extent that Optionee was not
entitled to exercise the Option at the Termination Date, or if Optionee does not
exercise such Option to the extent so entitled within the time specified in this
Section 6(b), the Option shall terminate.
7. DEATH OF OPTIONEE. In the event of the death of Optionee (a) during
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within 30 days after Optionee's Termination Date,
the Option may be exercised at any time within six months following the date of
death (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant and in Section 9 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the Termination
Date.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. TERM OF OPTION. This Option may be exercised only within the Term set
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
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<PAGE> 4
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option qualifies
as an Incentive Stock Option, there will be no regular federal or California
income tax liability upon the exercise of the Option, although the excess, if
any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject Optionee to the alternative minimum tax
(up to a maximum of 28%) in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does
not qualify as an Incentive Stock Option, there may be a regular federal income
tax liability and a California income tax liability upon the exercise of the
Option. Optionee will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price. If Optionee
is an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) DISPOSITION OF SHARES. In the case of a Nonstatutory Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. In either case, the
long-term capital gain will be taxed for federal income tax and alternative
minimum tax purposes at a maximum rate of 28% if the Shares are held more than
one year but less than 18 months after exercise and at 20% if the Shares are
held more than 18 months after exercise. If Shares purchased under an Incentive
Stock Option are disposed of within one year after exercise or within two years
after the Date of Grant, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the Fair Market
Value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF INCENTIVE STOCK OPTION
SHARES. If the Option granted to Optionee herein is an Incentive Stock Option,
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
11. WITHHOLDING TAX OBLIGATIONS. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Exchange Act. If Optionee is an employee, the Company will be required to
withhold from Optionee's compensation, or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, Optionee may at some point be required to
satisfy tax withholding obligations with respect to the disqualifying
disposition of an Incentive Stock Option. Optionee shall satisfy his or her tax
withholding obligation arising upon the exercise of this Option by one or some
combination of the following methods: (a) by cash payment, (b) out of Optionee's
current compensation, (c) if permitted by the Administrator, in its discretion,
by surrendering to the Company Shares which (i) in the case of Shares previously
acquired from the Company, have been owned by Optionee for more than six months
on the date of surrender, and (ii) have a Fair Market Value on the date
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<PAGE> 5
of surrender equal to or greater than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a Fair Market Value equal to the amount required to be withheld. For this
purpose, the Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
Date").
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval
of the Administrator.
12. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
[Signature Page Follows]
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<PAGE> 6
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
document.
EGROUPS, INC.
By:
--------------------------------------
Marjorie Sennett, Chief Financial
Officer
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:
--------------------- --------------------------------------
<<Optionee>>
<PAGE> 1
EXHIBIT 10.8
EXHIBIT B
EGROUPS, INC.
1998 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of ______________, by and
between eGroups, Inc., a Delaware corporation (the "Company"), and
("Purchaser"). To the extent any capitalized terms used in this Agreement are
not defined, they shall have the meaning ascribed to them in the 1998 Stock
Option Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
the Company's 1998 Stock Option Plan (the "Plan") and the Stock Option Agreement
dated <<Date_of_Grant>>, (the "Option Agreement"). The purchase price for the
Shares shall be $<<Exercise_Price_Per_Share>> per Share for a total purchase
price of $_______________. The term "Shares" refers to the purchased Shares and
all securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) subject to Section 153 of the Delaware General Corporation
Law, delivery of a promissory note in the form attached as Exhibit C to the
Option Agreement (or in any form acceptable to the Company), or (e) a
combination of the foregoing. If Purchaser delivers a promissory note as partial
or full payment of the purchase price, Purchaser will also deliver a Pledge and
Security Agreement in the form attached to Exhibit D to the Option Agreement (or
in any form acceptable to the Company).
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser
or any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (A) the
Holder's bona fide intention to sell or
<PAGE> 2
otherwise transfer such Shares; (B) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (C) the number of Shares to be transferred
to each Proposed Transferee; and (D) the terms and conditions of each proposed
sale or transfer. The Holder shall offer the Shares at the same price (the
"Offered Price") and upon the same terms (or terms as similar as reasonably
possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time
within 30 days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("Purchase
Price") for the Shares purchased by the Company or its assignee(s) under this
Section 3(a) shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in
good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section
3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(a) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate Family (as defined below) or a trust for
the benefit of Purchaser's Immediate Family shall be exempt from the provisions
of this Section 3(a). "Immediate Family" as used herein shall mean spouse,
lineal descendant or antecedent, father, mother, brother or sister. In such
case, the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Section 3.
(b) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER.
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of
-2-
<PAGE> 3
the purchase price paid by Purchaser pursuant to this Agreement or the Fair
Market Value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of 30 days following receipt by the Company of written
notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(b)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the
transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) ASSIGNMENT. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the Parent or a 100%
owned Subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and Fair
Market Value, if the original purchase price is less than the Fair Market Value
of the Shares subject to the assignment.
(d) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of
Shares or any interest therein will receive and hold such Shares or interest
subject to the provisions of this Agreement. Any sale or transfer of the Shares
shall be void unless the provisions of this Agreement are satisfied.
(e) TERMINATION OF RIGHTS. The Right of First Refusal and the
Company's right to repurchase the Shares in the event of an involuntary transfer
pursuant to Section 3(b) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act").
(f) MARKET STANDOFF AGREEMENT. In connection with the initial
public offering of the Company's securities and upon request of the Company or
the underwriters managing such underwritten offering of the Company's
securities, Purchaser agrees not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) from the effective date of such
registration as may be requested by the Company or such managing underwriters
and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company's initial public offering.
4. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
-3-
<PAGE> 4
(b) Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this
-4-
<PAGE> 5
Agreement or (ii) to treat as owner of such Shares or to accord the right to
vote or pay dividends to any purchaser or other transferee to whom such Shares
shall have been so transferred.
(d) REMOVAL OF LEGEND. When all of the following events have
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 5(a)(ii): (i) the termination of the Right of
First Refusal; and (ii) the expiration or termination of the market standoff
provisions of Section 3(f) (and of any agreement entered pursuant to Section
3(f)). After such time, and upon Purchaser's request, a new certificate or
certificates representing the Shares not repurchased shall be issued without the
legend referred to in Section 5(a)(ii), and delivered to Purchaser.
6. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
7. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and
-5-
<PAGE> 6
obligations of Purchaser under this Agreement may only be assigned with the
prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
-6-
<PAGE> 7
The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
EGROUPS, INC.
By:
--------------------------------------
Marjorie Sennett, Chief Financial
Officer
Address:
350 Brannan Street
San Francisco, CA 94107
PURCHASER:
-----------------------------------------
(Signature)
Address:
<<Address>>
I, ______________________, spouse of <<Optionee>>, have read and hereby approve
the foregoing Agreement. In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be bound irrevocably by the Agreement and further agree that any community
property or similar interest that I may have in the Shares shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
----------------------------------------
Spouse of<<Optionee>>
<PAGE> 1
EXHIBIT 10.9
EGROUPS, INC.
1998 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
<<Optionee>>
<<Address>>
You have been granted an option to purchase Common Stock ("Common
Stock") of eGroups, Inc. (the "Company") as follows:
Board Approval Date: <<Board_Approval_Date>>
Date of Grant (Later of Board <<Date_of_Grant>>
Approval Date or
Commencement of
Employment/Consulting):
Vesting Commencement Date: <<Vesting_Commencement_Date>>
Exercise Price Per Share: $<<Exercise_Price_Per_Share>>
Total Number of Shares Granted: <<No_of_Shares>>
Total Exercise Price: $<<Total_Exercise_Price>>
Type of Option: <<ISO>> Incentive Stock Option
-------- ("ISO")
<<NSO>> Nonstatutory Stock Option
-------- ("NSO")
Term/Expiration Date: <<Term_Date>>
Vesting Schedule: This Option may be exercised
immediately, in whole or in part and
shall vest in accordance with the
following schedule: 25% of the Shares
subject to the Option shall vest on
the twelve (12) month anniversary of
the Vesting Commencement Date and
1/48 of the total number of Shares
subject to the Option shall vest on
the <<Monthly_Vest_Date>>day of each
month thereafter.
<PAGE> 2
Termination Period: This Option may be exercised
for 45 days after termination of
employment or consulting relationship
except as set out in Sections 6 and 7
of the Stock Option Agreement (but in
no event later than the Expiration
Date).
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the 1998 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
<<OPTIONEE>> EGROUPS, INC.:
By:
- ------------------------------ ----------------------------------
Signature Marjorie Sennett, Chief Financial
Officer
- ------------------------------
Print Name
-2-
<PAGE> 1
EXHIBIT 10.10
www.onelist.com
October 11, 1999
Michael B. Klein
1475 Terminal Way Suite E
Reno, NV 89502
Dear Michael:
We feel that you have what it takes to help ONElist, Inc. ("ONElist" or the
"Company") achieve its future goals and maintain its success as the world's
leading e-mail community service and would like you to join our team.
I am pleased to offer you the position of President and CEO of ONElist. This
letter (together with the Company's standard form of Employment, Confidential
Information and Invention Assignment Agreement, the execution and delivery of
which will be a condition of your employment) will confirm the terms of your
employment with the Company.
Your annual salary will be $150,000, paid bi-monthly. Additionally, you will be
paid $15,000 for one year for travel expenses between Northern and Southern
California. You are eligible to participate in the ONElist Incentive Stock
Option (ISO) plan and will receive an option grant (in a separate document) to
purchase 330,000 shares of ONElist common stock at $0.18 per share, subject to
the vesting schedule and the terms and conditions of the Company Stock Option
Plan and option agreement. The 330,000 shares equal 6% of ONElist's outstanding
shares on a fully-diluted basis. Additionally, you will be granted a number of
options after the close of the Company's Series B round of funding, with an
exercise price equal to the then-current fair market value of the Company's
common stock, that will bring your total number of granted shares to 6% of the
total outstanding shares on a fully-diluted basis. These grants are subject to
approval by the Company's Board of Directors.
The terms of the Company's standard form of Stock Option Agreement allow for the
exercise of unvested options. If you elect to exercise unvested options, the
shares obtained upon such exercise shall be subject to a right of repurchase on
behalf of the Company. Additionally, in the event you exercise unvested options
you may choose to file an election with the Internal Revenue Service, within 30
days of the purchase of the shares, electing pursuant to Section 83(b) of the
Internal Revenue Code to be taxed currently on any difference between the
purchase price of the shares and their fair market value on the date of
purchase. You should review the Company's form of Stock Option Agreement for the
specific terms relating to the early exercise of stock options, and consult with
your tax advisor regarding the advisability of an early exercise and the filing
of an 83(b) election.
ONElist agrees to use commercially reasonable efforts to obtain Directors and
Officers insurance prior to your start date.
ONElist agrees to make you a member of its Board of Directors. You will be
reporting directly to the Board of Directors.
As the President and CEO of ONElist, you will be expected to achieve the
following objectives:
1) Close the next round of financing within 90 days from your start date,
raising a minimum of $20,000,000 at a valuation acceptable to the Board of
Directors.
2) Hire a CFO with IPO and public company experience within 90 days from your
start date.
<PAGE> 2
3) Meet quarterly revenue objectives for calendar year 2000 as approved by the
Board. Projections will be approved at the first Board meeting after you become
CEO.
In the event that your employment is involuntarily terminated other than for
"cause" or is "constructively terminated" (as such terms are defined below),
twelve additional months of options will become vested and exercisable and you
will be entitled to exercise your vested options for a period of three (3)
months from the date of employment termination; provided, however, that if any
such termination occurs more than eighteen (18) months from the date your
employment commences with the Company (the "Effective Date") and is after a
Change of Control (as defined below), the provisions set forth in the following
paragraph shall control.
If after a Change of Control (as defined below) of the Company, your employment
with the Company is involuntary terminated other than for "cause" or is
"constructively terminated" (as such terms are defined below) more than eighteen
(18) months after the Effective Date, all of your unvested options will become
vested and exercisable and you will be entitled to exercise your vested options
for a period of three (3) months from the date of employment termination.
For purposes of the foregoing:
(a) Termination for "cause" means (i) the failure by you to substantially
perform your material duties after a written demand for substantial performance
is delivered to you by the Board of Director that specifically identifies the
manner in which the Board of Directors believes that you have not substantially
performed your duties, (ii) the failure (in material respect) by you to follow
reasonable policies or directives established by the Board of Directors after
written notice to you by the Board of Directors that you are not following such
policies or directives, (iii) bad faith conduct that is materially detrimental
to the Company, or (iv) the conviction of you of a felony.
(b) Your employment with the Company will be deemed to have been "constructively
terminated" if there shall occur (i) a reduction in your base salary other than
a reduction that is part of a general reduction of officer salaries, (ii) a
material change in your responsibility or authority, or (iii) an office
relocation requiring a commute of greater than 50 miles.
(c) For purposes of the foregoing, a "Change of Control" shall be deemed to have
occurred if (i) the Company sells or otherwise disposes all of substantially all
of its assets; (ii) there is a merger or consolidation of the Company with any
other corporation or corporations, provided that the shareholders of the
Company, as a group, do not hold, immediately after such event, more than 50% of
the voting power of the surviving or successor corporation; or (iii) a person or
entity, including any "person" as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), but other than
any of the investors in the Company as of the Effective Date, becomes the
"beneficial owner" (as defined in the Exchange Act) of Common Stock of the
Company representing 50% or more of the combined voting power of the voting
securities of the Company (exclusive of persons who are now officers or
directors of the Company).
The company shall require any successor or assignee, in connection with any
sale, transfer or other disposition of all substantially all of the Company's
assets or business, whether by purchase, merger, consolidation or otherwise,
expressly to assume and agree to perform the Company's obligations hereunder in
the same manner and to the same extent that the Company would be required to
perform if no such succession or assignment had taken place.
You are also eligible for the following standard Company benefits: medical/
dental/ vision, life insurance, LTD, vacation, and holidays. You will receive
more detailed information about these during your new employee orientation.
<PAGE> 3
Benefits, payroll, and other human resource management services are provided
through TriNet Employer Group, Inc. TriNet is an employer services organization
contracted by the Company to perform selected employer responsibilities on our
behalf. As a result of ONElist's arrangement with TriNet, TriNet will be
considered your employer of record for payroll, benefits, and other functions
involving employer related administration, including your new hire enrollment
processing. However, as ONElist is the company for which you will perform
service, we will retain the right to control and direct your work, its results,
and the manner and means by which your work is accomplished
With the exception of the provision for at will employment described below,
ONElist and/or TriNet may modify, revoke, suspend or terminate any of the terms,
plans, policies and/or procedures described in the employee handbook or as
otherwise communicated to you, in whole or in part, at any time, with or without
notice, and ONElist may change or terminate the TriNet relationship at any time.
As with all employees, your employment with ONElist is at will. This means that
your terms and conditions of employment, including but not limited to
termination, demotion, promotion, transfer, compensation, benefits, duties and
location of work may be changed with or without cause, for any or no reason, and
with or without notice. Your status as an at-will employee cannot be changed by
any statement, promise, policy, course of conduct, writing or manual unless
except through a written agreement signed by an officer authorized by the Board
of Directors.
Michael, we are looking forward to your joining the team and contributing to
this exciting venture. We expect your start date to be 10/13/99. You may
indicate your acceptance of this offer by signing the acknowledgment below and
returning it to me by within five (5) days from the date of this letter, at
which time this offer expires if not previously accepted. If you have any
questions or concerns please do not hesitate to call.
Sincerely,
- ------------------------------
Mark Fletcher
President/ CEO
I accept the offer of employment as stated in this letter.
- ------------------------------- 10/12/99
Addressee's Signature Date
Enclosures:
Duplicate Letter (for your files)
<PAGE> 1
EXHIBIT 10.11
www.onelist.com
SEPTEMBER 16, 1999
RICHARD CAREY
1230 PAYNE DRIVE
LOS ALTOS, CA 94024
DEAR RICHARD:
Congratulations! We feel that you have what it takes to help ONElist
achieve its future goals and maintain its success as the world's leading e-mail
community service and would like you to join our team.
I am pleased to offer you the position of VICE PRESIDENT OF ENGINEERING
at ONElist.
Your salary will be based on an annual salary of $175,000, paid
bi-monthly and you will receive a $5,000 signing bonus. You are eligible to
participate in the ONElist Incentive Stock Option (ISO) plan and will receive an
option grant (in a separate document) to purchase 82,000 shares of ONElist
common stock, subject to the vesting schedule, terms and conditions of the
Company' Stock Option Plan, option agreement. This grant is subject to approval
by the Company's Board of Directors.
In the event that within one year from the effective date of your
employment with the company is involuntarily terminated other than for "cause"
or is "constructively terminated" (as such terms are defined below), the first
25% of the option shares (20,500 shares) will become vested and exercisable and
you will be entitled to exercise such portion of the Option for a period of
three (3) months form the date of employment termination; provided, however,
that if any such provisions of paragraph 6(a) below shall control.
For purposes of the foregoing: Termination for "cause" means (A) the
failure by you substantially to perform your material duties after a written
demand for substantial performance is delivered to you by the Board of Director
that specifically identifies the manner in which the Board of Directors believes
that you have not substantially performed your duties, (B) the failure (in
material respect) by you to follow reasonable policies or directives established
by the board of Directors after written notice to you by the Board of Directors
that you are not following such policies or directives, (C) bad faith conduct
that is materially detrimental to the Company, or (D) the conviction of you of a
felony.
Your employment with the Company will be deemed to have been
"constructively terminated" if there shall occurs (A) a reduction in your base
salary other than a reduction that is part
<PAGE> 2
of a general reduction of officer salaries, (B) a material change in your
responsibility or authority, or (C) an office relocation requiring a commute
greater than 50 miles.
In addition, if within six (6) months after the Change of Control (as
defined below) of the Company, your employment with the Company is involuntary
terminate other than for "cause" of is "constructively terminated" (as such
terms are defined above), a portion of the Option shares equivalent to an
additional one (1) year of vesting (20,500 shares) from the date of portion of
the option for a period of three (3) months from the date of employment
termination; provided, however, that in no event shall such accelerated vesting
permit you to exercise more than Change of Control occurred 18 months after the
Effective Date and your employment were terminated under the circumstances set
forth in this paragraph 20 months after the Effective Date, an additional four
(4) months of vesting would occur.
For purposes of the foregoing, a "Change of Control of the Company"
shall be deemed to have occurred if (i) the Company sells or otherwise disposes
all of substantially all of its assets; (ii) there is a merger or consolidation
of the Company with any other corporation or corporations, provided that the
shareholders of the Company, as a group, do not hold, immediately after such
event, more than 50% of the voting power of the surviving or successor
corporation; or (iii) a person or entity, including any "person" as such term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), but other than any of the investors in the Company as of the
Effective Date, becomes the "beneficial owner" (as defined in the Exchange Act)
of Common Stock of the Company representing 50% or more of the combined voting
power of the voting securities of the Company (exclusive of persons who are now
officers or directors of the Company).
The company shall require any successor of assignee, in connection with
any sale, transfer or other disposition of all substantially all of the
Company's assets or business, whether by purchase, merger, consolidation or
otherwise, expressly to assume and agree to perform the Company's obligations
hereunder in the same manner and to the same extent that the Company would be
required to perform if no such succession or assignment had taken place.
You are also eligible for the following standard Company benefits:
medical/ dental/ vision, life insurance, LTD, vacation, and holidays. You will
receive more detailed information about these during your new employee
orientation.
Benefits, payroll, and other human resource management services are
provided through TriNet Employer Group, Inc. TriNet is an employer services
organization contracted by The Company to perform selected employer
responsibilities on our behalf. As a result of ONElist's arrangement with
TriNet, TriNet will be considered your employer of record for payroll, benefits,
and other functions involving employer related administration, including your
new hire enrollment processing. However, as ONElist is the company for which you
will perform service, we will retain the right to control and direct your work,
its results, and the manner and means by which your work is accomplished.
With the exception of the provision for at will employment described
below, ONElist and/or TriNet may modify, revoke, suspend or terminate any of the
terms, plans, policies and/or procedures described in the employee handbook or
as otherwise communicated to you, in whole or part, at any
-2-
<PAGE> 3
time, with or without notice, and ONElist may change or terminate the TriNet
relationship at any time.
As with all employees, your employment with ONElist is at will. This
means that your terms and conditions of employment, including but not limited to
termination, demotion, promotion, transfer, compensation, benefits, duties and
location of work may be changed with or without cause, for any or no reason, and
with or without notice. Your status as an at-will employee cannot be changed by
any statement, promise, policy, course of conduct, writing or manual unless
except through a written agreement signed by the President/CEO of the company.
RICHARD, we are looking forward to your joining the team and
contributing to this exciting venture. Your start date is SEPTEMBER 27, 1999.
You may indicate your acceptance of this offer by signing the acknowledgment
below and returning it to me by within five (5) days from the date of this
letter, at which time this offer expires if not previously accepted. If you have
any questions or concerns please do not hesitate to call.
Sincerely,
Mark Fletcher
President/ CEO
I accept the offer of employment as stated in this letter.
Addressee's Signature
Enclosures:
Duplicate Letter (for your files)
-3-
<PAGE> 1
EXHIBIT 10.12
June 7th, 1999
Marjorie Sennett
13251 Denara Rd.
San Diego, CA 92130
Dear Marjorie,
It is my pleasure to offer you a position at eGroups Inc., working with us to
make our Internet group communication service pervasive world-wide.
Title: Senior Vice President and Chief Financial Officer
Salary: $200K per annum
Loan: $100K forgiven over 4 years
Stock options: 232,000
The terms of your new position with the Company are as set forth below:
1. POSITION
(a) You will take on the responsibilities of Chief Financial Officer.
You will report to the CFO.
(b) You agree to the best of your ability and experience that you will
at all times conscientiously perform the duties and obligations required of and
from you pursuant to the extent and implicit terms hereof, and to the reasonable
satisfaction of the Company. During the term of your employment, you further
agree that you will devote substantially all of your business time and attention
to the business of the Company, you will not render commercial or professional
services of any nature to any person or organization for compensation, without
the prior written consent of the Company's Chief Executive Officer or Board of
Directors, and you will not directly or indirectly engage or participate in any
business that is directly competitive in any, manner with the business of the
Company. Nothing in this letter agreement will prevent you from accepting
speaking or presentation engagements in exchange for honoraria or from serving
on boards of charitable organizations, or from owning no more than one percent
(1%) of the outstanding equity securities of a corporation whose stock is listed
on a national stock exchange.
2. START DATE. Subject to fulfillment of any conditions imposed by this letter
agreement, you will commence this new position with the Company on July 5th,
1999.
3. PROOF OF RIGHT TO WORK. For purposes of federal immigration law, you will be
required to provide 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.
4. COMPENSATION.
(a) Salary. Your annual salary will be $200,000.00, paid every two weeks
pursuant to the Company's regular payroll policy (or in the same manner as other
employees of the Company).
(b) Loan. You will receive an interest-free loan of $100,000.00, on your
Start Date. This loan is to be paid back within 120 days upon termination of
your employment with the Company, but the amount to be paid back will be reduced
by 1/48th of 100,000 per month of your full time employment with the Company.
<PAGE> 2
(b) Benefits. You will be eligible to Participate in the health,
medical, dental or life insurance programs and the 401(k) and employee stock
purchase programs established by the Company, on the same basis as other
similarly compensated employees.
(c) Vacation. You will be entitled to twenty-one (21) days of paid
vacation after one (1) year of employment with the Company, accruing at a rate
of 1.75 days of vacation per month of service. Your manager may also grant
additional vacation time.
(d) Moving Expenses. The Company will cover reasonable expenses for
moving to the Bay Area, including packing and moving of household goods, up to
three month temporary housing, up to three house hunting trips for the family,
and weekly travel for you to and from San Diego until your family is relocated.
In addition the Company will gross up year end W-2 income to cover nondeductible
relocation expenses.
(e) Termination. Separate from the case of a Merger of the Company, if
your employment is terminated by the Company without Cause, a reasonable
severance package shall be worked out. If Your employment is terminated before
the first anniversary of the commencement of your employment, the Company's
right of repurchase shall immediately lapse with respect to 1/48th of the total
number of Shares or each month of employment completed.
5. OPTION TO PURCHASE COMMON STOCK. In connection with the commencement of your
employment, the Company will recommend that the Board of Directors grant you an
option to purchase 232,000 shares of the Company's Common Stock ("Shares") under
the Company's 1998 Employee Stock Option Plan established by the Board of
Directors. The option shall have an exercise purchase price equal to the fair
market value on the date of the grant as determined in good faith by the Board
of Directors of the Company. These Shares issued upon the exercise of the option
will be subject to the Company's right of repurchase in the event of the
termination of your employment with the Company. This repurchase right will
lapse as to 1/4th of the total number of Shares on the first anniversary of the
commencement of your employment, and shall lapse as to 1/48th of the total
number of Shares each month thereafter. The Company's repurchase, right will
continue to lapse only so long as you continue to be employed by the Company.
The option will be an incentive stock option to the maximum extent allowed by
applicable law and will be subject to the terms of the stock option agreement
between you and the Company.
Notwithstanding the foregoing, the Company's right of repurchase shall
immediately lapse with respect to 50% of the then unvested Shares and a
reasonable severance package shall be worked out if, in connection with or
following the completion of Merger (as defined below), your employment with the
Company (or its successor entity) is terminated by the Company or its successor
without cause (as defined below) or you terminate your employment voluntarily
as a result of a Constructive Termination (as defined below).
- - "Merger" shall mean a merger or consolidation of the Company in
connection with which greater than 50% of the voting power of the
Company is transferred, or a sale of all or substantially all of the
Company's assets or capital stock, excluding a transaction for the sole
purpose of changing the legal domicile of the Company.
- - "Cause" for the termination of your employment with the Company or its
successor will exist at any time upon one or more of the following
events. (i) Your willful misconduct in performance of the duties of your
position with the Company or its successor, including your refusal to
comply in any material respect with the legal directives of the
Company's Chief Executive Officer or the Board of Directors so long as
such directives are not inconsistent with your position and duties, and
such refusal to comply is not remedied within 15 working days after
written notice from the Company or its successor, which written notice
shall state that failure to remedy such conduct may result in
termination for Cause; or (ii) your conduct that materially discredits
the Company or its successor or is materially detrimental to the
reputation of the Company or its successor, including conviction of a
felony involving moral turpitude.
<PAGE> 3
- - "Constructive Termination" shall be deemed to occur if there is (i) an
adverse change in your position or operating responsibilities with the
Company or its successor causing such position to be of materially
reduced stature or responsibility; or (ii) a reduction of your
compensation, taken as a whole.
6. PROPRIETARY INFORMATION AND INVENTION ASSIGNMENT AGREEMENT. Your acceptance
of this offer and commencement of employment with the Company is contingent upon
the execution, and delivery to an officer of the Company, of the Company's
Proprietary Information and Invention Assignment Agreement, a copy of which is
enclosed for your review and execution (the "Confidentiality Agreement") prior
to or on your Start Date.
7. CONFIDENTIALITY OF TERMS. You agree to follow the Company's strict policy
that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding salary,
bonuses, or stock purchase or option allocations to any person, including other
employees of the Company; provided, however, that you may discuss such terms
with members of your immediate family and any legal, tax or accounting
specialists who provide you with individual legal, tax or accounting advice.
8. AT-WILL EMPLOYMENT. Your employment with the Company will be on an "at Will"
basis, meaning that either you or the Company may terminate your employment at
any time for any reason or no reason, without further obligation or liability,
We are all delighted to be able to extend you this offer until 5 pm PST on June
7th, 1999, and look forward to working with you. To indicate your acceptance of
the Company's offer, please sign and date this letter in the space provided
below and return it to me, along with a signed and dated copy of the
Confidentiality Agreement. This letter, together with the Confidentiality
Agreement, sets forth the 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.
If you have any questions about this offer, please call me at 415-284-5245. We
look forward to a favorable reply and to a rewarding and productive association
with you.
Sincerely,
Martin Roscheisen, CEO
Agreed and Accepted
Marjorie Sennett
Date
Enclosure: Proprietary Formation and Invention Assignment Agreement
<PAGE> 1
EXHIBIT 10.13
April 8th, 1999
Steven Comfort
1144 Treat Street
San Francisco, CA 94110
415-282-7597
Dear Steven,
It is my pleasure to offer you a position at eGroups Inc., working with us on
our next-generation Internet group communication and application service.
Title: Vice President of Sales
Salary: $100,000 per annum
Bonus A: $75,000 per annum for reaching 80-100% of target
Bonus B: $75,000 per annum for 100-150%
Stock options: 100,000
Vesting period: 4 years
The terms of your new position with the Company are as set forth below:
1. POSITION.
(a) You will be part of the company's management team as Vice President
of Sales, taking responsibility to spearhead our efforts in building an
advertising sales team, define the company's advertising and direct marketing
products and price points, and convert inventory into revenue according to
target plans agreed upon. You will report to the CEO. You will have a sliding
budget that scales with available inventory.
(b) You agree to the best of your ability and experience that you will
at all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express and implicit terms
hereof, and to the reasonable satisfaction of the Company. During the term of
your employment, you further agree that you will devote all of your business
time and attention to the business of the Company, the Company will be entitled
to all of the benefits and profits arising from or incident to all such work
services and advice, you will not render commercial or professional services of
any nature to any person or organization, whether or not for compensation,
without the prior written consent of the Company's Board of Directors, and you
will not directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company. Nothing in this
letter agreement will prevent you from accepting speaking or presentation
engagements in exchange for honoraria or from serving on boards of charitable
organizations, or from owning no more than one percent (1%) of the outstanding
equity securities of a corporation whose stock is listed on a national stock
exchange.
2. START DATE. Subject to fulfillment of any conditions imposed by this letter
agreement, you will commence this new position with the Company on April 26th,
1999.
3. PROOF OF RIGHT TO WORK. For purposes of federal immigration law, you will be
required to provide to the Company documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided to us within three (3) business days of your date of hire, or our
employment relationship with you may be terminated.
<PAGE> 2
4. COMPENSATION.
(a) Salary. Your annual base salary will be $100,000.00. Your salary
will be paid every two weeks in pursuant to the Company's regular payroll policy
(or in the same manner as other employees of the Company).
(b) Bonus. You will be eligible to receive a bonus of $75,000 per year
for reaching 100% of the target plan. If you reach less than 100% but more than
a minimum of 80%, you will be eligible for a bonus that scales linearly upward
from the 80% minimum to the 100% the target. There will be no bonus for reaching
less than 80% of the target. If you reach more than 100%, you will be eligible
to receive another $75,000 for reaching up to 150% of the target, scaling in the
same way as the other bonus. The target plan will be agreed upon in detail after
you start working with us, but the overall goal will be to reach a revenue of
$500K per month by the end of 1999. Bonus payments will be assessed on a
quarterly basis in each case.
(c) Benefits. You will be eligible to participate in the health,
medical, dental or life insurance programs and the 401(k) and employee stock
purchase programs established by the Company, on the same basis as other
similarly compensated employees.
(d) Vacation. You will be entitled to twenty-one (21) days of paid
vacation after one (1) year of employment with the Company, accruing at a rate
of 1.75 days of vacation per month of service. Your manager may also grant
additional vacation time.
5. OPTION TO PURCHASE COMMON STOCK. In connection with the commencement of your
employment, the Company will recommend that the Board of Directors grant you an
option to purchase One-Hundred Thousand (100,000) shares of the Company's Common
Stock ("Shares") under the Company's 1998 Employee Stock Option Plan established
by the Board of Directors. The option shall have an exercise purchase price
equal to the fair market value on the date of the grant as determined in good
faith by the Board of Directors of the Company. These Shares issued upon the
exercise of the option will be subject to the Company's right of repurchase in
the event of the termination of your employment with the Company. This
repurchase right will lapse as to 1/4th of the total number of Shares on the
first anniversary of the commencement of your employment, and shall lapse as to
1/48th of the total number of Shares each month thereafter. The Company's
repurchase right will continue to lapse only so long as you continue to be
employed by the Company. The option will be an incentive stock option to the
maximum extent allowed by applicable law and will be subject to the terms of the
stock option agreement between you and the Company.
(a) Notwithstanding the foregoing, the Company's right of repurchase
shall immediately lapse with respect to the Shares if, in connection with or
following the completion of Merger (as defined below), your employment with the
Company (or its successor entity) is terminated by the Company or its successor
without Cause (as defined below) or you terminate your employment voluntarily as
a result of a Constructive Termination (as defined below).
(b) "Merger" shall mean a merger or consolidation of the Company in
connection with which greater than 50% of the voting power of the Company is
transferred, or a sale of all or substantially all of the Company's assets or
capital stock, excluding a transaction for the sole purpose of changing the
legal domicile of the Company.
(c) "Cause" for the termination of your employment with the Company or
its successor will exist at any time upon one or more of the following events:
(i) Your willful misconduct in performance of the duties of your position with
the Company or its successor, including your refusal to comply in any material
respect with the legal directives of the Company's Chief Executive Officer or
the Board of Directors so long as such directives are not
<PAGE> 3
inconsistent with your position and duties, and such refusal to comply is not
remedied within 10 working days after written notice from the Company or its
successor, which written notice shall state that failure to remedy such conduct
may result in termination for Cause; or (ii) your conduct that materially
discredits the Company or its successor or is materially detrimental to the
reputation of the Company or its successor, including conviction of a felony
involving moral turpitude.
(d) "Constructive Termination" shall be deemed to occur if there is (i)
an adverse change in your position or operating responsibilities with the
Company or its successor causing such position to be of materially reduced
stature or responsibility (it being understood that your operating
responsibilities, title and reporting relationships may be changed in connection
with integration of the Company's operations with those of an acquiror following
a Merger); or (ii) a reduction of your compensation, taken as a whole.
6. PROPRIETARY INFORMATION AND INVENTION ASSIGNMENT AGREEMENT. Your acceptance
of this offer and commencement of employment with the Company is contingent upon
the execution, and delivery to an officer of the Company, of the Company's
Proprietary Information and Invention Assignment Agreement, a copy of which is
enclosed for your review and execution (the "Confidentiality Agreement"), prior
to or on your Start Date.
7. CONFIDENTIALITY OF TERMS. You agree to follow the Company's strict policy
that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding salary,
bonuses, or stock purchase or option allocations to any person, including other
employees of the Company; provided, however, that you may discuss such terms
with members of your immediate family and any legal, tax or accounting
specialists who provide you with individual legal, tax or accounting advice.
8. AT-WILL EMPLOYMENT Your employment with the Company will be on an "at will"
basis, meaning that either you or the Company may terminate your employment at
any time for any reason or no reason, without further obligation or liability.
We are all delighted to be able to extend you this offer until 2pm on Monday
April 12th, 1999, and look forward to working with you. To indicate your
acceptance of the Company's offer, please sign and date this letter in the space
provided below and return it to me, along with a signed and dated copy of the
Confidentiality Agreement. This letter, together with the* Confidentiality
Agreement, sets forth the 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.
If you have any questions about this offer, please call me at 415.284.5245. We
look forward to a favorable reply and to a rewarding and productive association
with you.
Sincerely,
Martin Roscheisen, CEO
Agreed and Accepted:
- ------------------------------ ------------------------------
Steven Comfort Date
Enclosure: Proprietary Information and Invention Assignment Agreement
<PAGE> 1
EXHIBIT 10.14
September 1st, 1999
Jacqueline Maartense
31 Hancock Street
San Francisco, CA 94114
Jacqueline:
It is my pleasure to offer you a position at eGroups, Inc. working with us to
make our group communication service pervasive worldwide.
<TABLE>
<S> <C>
Title: VP Marketing
Salary: $150,000
Stock Options: 200,000 shares
Sign-on Bonus: $10K
Vesting Period: 4 years, with one-year cliff and monthly vesting thereafter
Start Date: 9/27/99
</TABLE>
The terms of your new position with the Company are as set forth below:
1. POSITION.
(a) We are very pleased to offer you a position as VP Marketing
reporting to the CEO. A description is attached to clarify the scope of this
position.
(b) You agree to the best of your ability and experience that you will
at all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express terms hereof, and
to the reasonable satisfaction of the Company. During the term of your
employment, you further agree that you will devote all of your business time and
attention to the business of the Company, the Company will be entitled to all of
the benefits and profits arising from or incident to all such work services and
advice, you will not render commercial or professional services of any nature to
any person or organization, whether or not for compensation, without the prior
written consent of the Company's Board of Directors, and you will not directly
or indirectly engage or participate in any business that is competitive in any
manner with the business of the Company. Nothing in this letter agreement will
prevent you from accepting speaking or presentation engagements in exchange for
honoraria or from serving on boards of charitable organizations, or from owning
no more than one percent (1%) of the outstanding equity securities of a
corporation whose stock is listed on a national stock exchange.
2. START DATE. Subject to fulfillment of any conditions imposed by this
letter agreement, you will commence this new position with the Company on the
above start date.
3. PROOF OF RIGHT TO WORK. For purposes of federal immigration law, you
will be required to provide to the Company documentary evidence of your identity
and eligibility for employment in the United States. Such documentation must be
provided to us within three (3) business days of your date of hire, or our
employment relationship with you may be terminated.
4. COMPENSATION.
(a) Salary. Your salary will be payable pursuant to the Company's
regular payroll policy (or in the same manner as other employees of the Company)
currently every two weeks.
<PAGE> 2
(b) Benefits. You will be eligible to participate in the health,
medical, dental or life insurance programs and the 401(k) and employee stock
purchase programs established by the Company, on the same basis as other
similarly compensated employees, as those policies may change from time to time.
(c) Sign-on bonus. We will pay you a sign-on bonus of $10,000.00 on the
Start Date of your employment. Eight tenth of this bonus are to be fully repaid
in the event that you terminate your employment with the Company before the
completion of six months of employment with the Company.
(c) Vacation. You will be entitled to twenty-one (21) days of paid
personal leave per year, accruing on a monthly basis according to the Company's
policy, to use for vacation, personal illness, and family illness.
(d) Severance. In the event you are terminated without cause or have
Good Reason, you will receive a lump-sum severance payment iZon the termination
date or date you have Good Reason equal to three months of salary plus our
prorated bonus for the year. In addition, you will receive 3 months of
continuing company benefits. If your employment is terminated before the first
anniversary of the commencement of your employment, the Company's right of
repurchase shall immediately lapse with respect to 1/48th of the total number of
Shares for each month of employment completed.
"Good Reason" means (i) the material reduction or material modification
of your authority, duties, title, salary, employee benefits or responsibilities
without your prior written consent, or (ii) any requirement that you move your
principal place of employment from the San Francisco Bay Area.
5. OPTION TO PURCHASE COMMON STOCK. In connection with the commencement of
your employment, the Company will recommend that the Board of Directors grant
you an option to purchase shares of the Company's Common Stock as stated above
("Shares") under the Company's 1998 Employee Stock Option Plan established by
the Board of Directors. The option shall have an exercise purchase price equal
to the fair market value on the date of the grant as determined in good faith by
the Board of Directors of the Company. These Shares issued upon the exercise of
the option will be subject to the Company's right of repurchase in the event of
the termination of your employment with the Company. This repurchase right will
lapse as to 1/4th of the total number of Shares on the first anniversary of the
commencement of your employment, and shall lapse as to 1/48th of the total
number of Shares each month thereafter. The Company's repurchase right will
continue to lapse only so long as you continue to be employed by the Company.
The option will be an incentive stock option to the maximum extent allowed by
applicable law and will be subject to the terms of the stock option agreement
between you and the Company.
Notwithstanding the foregoing, the Company's right of repurchase shall
immediately lapse with respect to 25% of the Shares if, in connection with or
following the completion of Merger (as defined below), your employment with the
Company (or its successor entity) is terminated by the Company or its successor
without Cause (as defined below) or you terminate your employment voluntarily as
a result of a Constructive Termination (as defined below).
"Merger" shall mean a merger or consolidation of the Company in
connection with which greater than 50% of the voting power of the Company is
transferred, or a sale of all or substantially all of the Company's assets or
capital stock, excluding a transaction for the sole purpose of changing the
legal domicile of the Company.
"Cause" for the termination of your employment with the Company or its
successor will exist at any time upon one or more of the following events: (i)
Your willful misconduct in performance of the duties of your position with the
Company or its successor, including your refusal to comply in any material
respect with the legal directives of the Company's Chief Executive Officer or
the Board of Directors so long as such directives are not inconsistent
2
<PAGE> 3
with your position and duties, and such refusal to comply is not remedied within
15 working days after written notice from the Company or its successor, which
written notice shall state that failure to remedy such conduct may result in
termination for Cause; or (ii) your conduct that materially discredits the
Company or its successor or is materially detrimental to the reputation of the
Company or its successor, including conviction of a felony involving moral
turpitude.
"Constructive Termination" shall be deemed to occur if there is (i) an
adverse change in your position or operating responsibilities with the Company
or its successor causing such position to be of materially reduced stature or
responsibility; or (ii) a reduction of your compensation, taken as a whole; or
(iii) you are required to move your principal place of employment from the San
Francisco Bay Area.
6. PROPRIETARY INFORMATION AND INVENTION ASSIGNMENT AGREEMENT. Your
acceptance of this offer and commencement of employment with the Company is
contingent upon the execution, and delivery to an officer of the Company, of the
Company's Proprietary Information and Invention Assignment Agreement, a copy of
which is enclosed for your review and execution (the "Confidentiality
Agreement"), prior to or on your Start Date.
7. CONFIDENTIALITY OF TERMS. You agree to follow the Company's strict
policy that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding salary,
bonuses, or stock purchase or option allocations to any person, including other
employees of the Company; provided, however, that you may discuss such terms
with members of your immediate family and any legal, tax or accounting
specialists who provide you with individual legal, tax or accounting advice.
8. AT-WILL EMPLOYMENT. Your employment with the Company will be on an "at
will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason, without further liability.
This at-will nature of your employment may be changed only by a written
agreement signed by you and the Chief Executive Officer of the Company that
refers expressly to the at-will nature of your employment.
We are delighted to extend you this offer until 8pm PST on August __,
1999 and look forward to working with you. To indicate your acceptance of the
Company's offer, please sign and date this letter in the space provided below
and return it to me, along with a signed and dated copy of the Confidentiality
Agreement. This letter, together with the Confidentiality Agreement, sets forth
the 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.
If you have any questions about this offer, please call me. We look
forward to a favorable reply and to a rewarding and productive association with
you.
Sincerely,
Martin Roscheisen
CEO
Agreed and Accepted:
- ------------------------------- -------------------------------
Employee Name Date
3
<PAGE> 4
Enclosure: Proprietary Information and Invention Assignment Agreement
4
<PAGE> 1
EXHIBIT 10.15
EGROUPS, INC.
PROPRIETARY INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my becoming employed (or my employment being
continued) by or retained as a consultant (or my consulting relationship being
continued eGroups, Inc., a Delaware corporation, with any of its current or
future subsidiaries, affiliates, successors or assigns (collectively, the
"Company", and in consideration of my employment or consulting relationship with
the Company and my receipt of the compensation now and hereafter paid to me by
the Company, I agree to the following:
1. EMPLOYMENT OR CONSULTING RELATIONSHIP. I understand and acknowledge
that this Agreement does not alter, amend or expand upon any rights I may have
to continue in the employ of, or in a consulting relationship with, or the
duration of my employment or consulting relationship with, the Company under any
existing agreements between the Company and me or under applicable law. Any
employment or consulting relationship between the Company and me, whether
commenced prior to or upon the date of this Agreement, shall be referred to
herein as the "Relationship."
2. AT-WILL EMPLOYMENT. I understand and acknowledge that my Relationship
with the Company is and shall continue to be at-will, as defined under
applicable law, meaning that either I or the Company may terminate the
Relationship at any time for any reason or no reason, without further obligation
or liability.
3. PROPRIETARY INFORMATION.
(a) COMPANY INFORMATION. I agree at all times during the term of
my Relationship with the Company and thereafter, to hold in strictest
confidence, and not to use, except for the benefit of the Company, or to
disclose to any person, firm, corporation or other entity without written
authorization of the Board of Directors of the Company, any Proprietary
Information of the Company which I obtain or create. I further agree not to make
copies of such Proprietary Information except as authorized by the Company. I
understand that "Proprietary Information" means any Company proprietary
information, technical. data, trade secrets or know how, including, but not
limited to, research, product plans, products, services, suppliers, customer
lists and customers (including, but not limited to, customers of the Company on
whom I called or with whom I became acquainted during the Relationship), prices
and costs, markets, software, developments, inventions, laboratory notebooks,
processes, formulas, technology, designs, drawings, engineering, hardware
configuration information, marketing, licenses, finances, budgets or other
business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment or created by me during the period of the Relationship, whether or not
during working hours. I understand that "Proprietary Information" includes, but
is not limited to, information pertaining to any aspects of the Company's
business which is either information not known by actual or potential
competitors of the Company or is proprietary information of the Company or its
customers or suppliers, whether of a technical nature or otherwise. I further
understand that Proprietary Information does not include any of the foregoing
items which has become publicly and widely known and made generally available
through no wrongful act of mine or of others who were under confidentiality
obligations as to the item or items involved.
(b) FORMER EMPLOYER INFORMATION. I represent that my performance
of all terms of this Agreement as an employee or consultant of the Company have
not breached and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by me in confidence or trust prior or
subsequent to the commencement of my Relationship with the Company, and I will
not disclose to the Company, or induce the Company to use, any inventions,
confidential or proprietary information or material belonging to any previous
employer or any other party.
(c) THIRD PARTY INFORMATION. I recognize that the Company has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in' carrying out my work for the
Company consistent with the Company's agreement with such third party.
4. INVENTIONS.
(a) INVENTIONS RETAINED AND LICENSED. I have attached hereto, as
Exhibit A a list describing with particularity all inventions, original works of
authorship, developments, improvements, and trade secrets which were made by me
prior to the commencement of the Relationship (collectively referred to as
"Prior Inventions"),
<PAGE> 2
which belong solely to me or belong to me jointly with another, which relate in
any way to any of the Company's proposed businesses, products or research and
development, and which are not assigned to the Company hereunder; or, if no such
list is attached, I represent that there are no such Prior Inventions. If, in
the course of my Relationship with the Company, I incorporate into a Company
product, process or machine a Prior Invention owned by me or in which I have an
interest, the Company is hereby granted and shall have a non-exclusive,
royalty-free, irrevocable, perpetual, worldwide license (with the right to
sublicense) to make, have made, copy, modify, make derivative works of, use,'
sell and otherwise distribute such Prior Invention as part of or in connection
with such product, process or machine.
(b) ASSIGNMENT OF INVENTIONS. I agree that I will promptly make
full written disclosure to the Company, will hold in trust for the sole right
and benefit of the Company, and hereby assign to the Company, or' its designee,
all my right, title and interest throughout the world in and to any and all
inventions, original works of authorship, developments, concepts, know-how,
improvements or trade secrets, whether or not patentable or registrable under
copyright or similar laws, which I may solely or jointly conceive or develop or
reduce to practice, or cause to be conceived or developed or reduced to
practice, during the period of time in which I am employed by or a consultant of
the Company (collectively referred to as "Inventions"), except as provided in
Section 4(e) below. I further acknowledge that all inventions, original works of
authorship, developments, concepts, know-how, improvements or trade secrets
which are made by me (solely or jointly with others) within the scope of and
during the period of my Relationship with the Company are "works made for hire"
(to the greatest extent permitted by applicable law) and are compensated by my
salary (if I am an employee) or by such amounts paid to me under any applicable
consulting agreement or consulting arrangements (if I am a consultant), unless
regulated otherwise by the mandatory law of the state of California.
(c) MAINTENANCE OF RECORDS. I agree to keep and maintain adequate
and current written records of. all Inventions made by me (solely or jointly
with others) during the term of my Relationship with the Company. The records
may be in the form of notes, sketches, drawings, flow charts, electronic data or
recordings, laboratory notebooks, and any other format. The records will be
available to and remain the sole property of the Company at all times. I agree
not to remove such records from the Company's place of business except as
expressly permitted by Company policy which may, from time to time, be revised
at the sole election of the Company for the purpose of furthering the Company's
business.
(d) PATENT AND COPYRIGHT RIGHTS. I agree to assist the Company,
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, trademarks, mask
work rights, moral rights, or other intellectual property rights relating
thereto in any and all countries, including the disclosure to the Company of all
pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments, recordations, and all other
instruments which the Company shall deem necessary in order to apply for,
obtain, maintain and transfer such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and exclusive rights,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto. I further
agree that my obligation to execute or cause to be executed, when it is in my
power to do so, any such instrument or papers shall continue after the
termination of this Agreement until the expiration of the last such intellectual
property right to expire in any country of the world. If the Company is unable
because of my mental or physical incapacity or unavailability or for any other
reason to secure my signature to apply for or to pursue any application for any
United States or foreign patents or copyright registrations covering Inventions
or original works of authorship assigned to the Company as above, then I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney in fact, to act for and in my behalf and
stead to execute and file any such applications and to do all other lawfully
permitted acts to further the application for, prosecution, issuance,
maintenance or transfer of letters patent or copyright registrations thereon
with the same legal force and effect as if originally executed by me. I hereby
waive and irrevocably quitclaim to the Company any and all claims, of any nature
whatsoever, which I now or hereafter have for infringement of any and all
proprietary rights assigned to the Company.
(e) EXCEPTION TO ASSIGNMENTS. I understand that the provisions of
this Agreement requiring assignment of Inventions to the Company do not apply to
any. invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet such provisions and
are not otherwise disclosed on Exhibit A.
5. RETURNING COMPANY DOCUMENTS. I agree that, at the time of termination
of my Relationship with the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, laboratory notebooks, materials, flow charts,
equipment, other documents or property, or reproductions of any aforementioned
items developed by me pursuant to the Relationship or otherwise belonging to the
Company, its successors or assigns. I further agree that to any property
situated on the Company's premises and owned by the Company, including disks and
other storage media, filing cabinets or other work areas, is subject to
<PAGE> 3
inspection by-Company personnel at any time with or without notice. In the event
of the termination of the Relationship, I agree to sign and deliver the
"Termination Certification" attached hereto as Exhibit C.
6. NOTIFICATION TO OTHER PARTIES.
(a) EMPLOYEES. In the event that I leave the employ of the
Company, I hereby consent to notification by the Company to my new employer
about my rights and obligations under this Agreement.
(b) CONSULTANTS. I hereby grant consent to notification by the
Company to any other parties besides the Company with whom I maintain a
consulting relationship, including parties with whom such relationship commences
after the effective date of this Agreement, about my rights and obligations
under this Agreement.
7. SOLICITATION OF EMPLOYEES, CONSULTANTS AND OTHER PARTIES. I agree
that during the term of my Relationship with the Company, and for a period of
twenty-four (24) months immediately following the termination of my Relationship
with the Company for any reason, whether with or without cause, I shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees or consultants to terminate their relationship with the
Company, or take away such employees or consultants, or attempt to solicit,
induce, recruit, encourage or take away employees or consultants of the Company,
either for myself or for any other person or entity. Further, for a period of
twenty-four (24) months following termination of my Relationship with the
Company for any reason, with or without cause, I shall not solicit any licensor
to or customer of the Company or licensee of the Company's products, in each
case, that are known to me, with respect to any business, products or services
that are competitive to the products or services offered by the Company or under
development as of the date of termination of my Relationship with the Company.
8. REPRESENTATIONS AND COVENANTS.
(a) FACILITATION OF AGREEMENT. I agree to execute promptly any
proper oath or verify any proper document required to carry out the terms of
this Agreement upon the Company's written request to do so.
(b) CONFLICTS. I represent that my performance of all the terms
of this Agreement will not breach any agreement to keep in confidence
proprietary information acquired by me in confidence or in trust prior to
commencement of my Relationship with the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict with any
of the provisions of this Agreement.
(c) VOLUNTARY EXECUTION. I certify and acknowledge that I have
carefully read all of the provisions of this Agreement and that I understand and
will fully and faithfully comply with such provisions.
9. GENERAL PROVISIONS.
(a) GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(b) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the Company and me relating to the subject
matter herein and merges all prior discussions between us. No modification or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, obligations, rights or compensation
will not affect the validity or scope of this Agreement.
(c) SEVERABILITY. If one or more of the provisions in this
Agreement are deemed void by law, then the remaining provisions will continue in
fall force and effect.
(d) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon
my heirs, executors, administrators and other legal representatives and will be
for the benefit of the Company, its successors, and its assigns.
(e) SURVIVAL. The provisions of this Agreement shall survive the
termination of the Relationship and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
(f) ADVICE OF COUNSEL. I ACKNOWLEDGE THAT, IN EXECUTING THIS
AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL
COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF
THE DRAFTING OR PREPARATION HEREOF.
<PAGE> 4
[Signature Page Follows]
<PAGE> 5
The parties have executed this Agreement on the respective dates set forth
below:
COMPANY:
EGROUPS, INC.
Signature
By:
Title:
Address:
350 Brannan Street
San Francisco, CA 94107
EMPLOYEE:
________________, an Individual:
Signature
Name
Date:
Address:
<PAGE> 1
EXHIBIT 10.17
ONElist, Inc.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
First Closing: December 28, 1998
Second Closing: April 29, 1999
<PAGE> 2
ONElist, Inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 28,1998, by and between ONElist,
Inc., a California corporation, with headquarters at 951 Old County Road #107,
Belmont, CA 94002, and its predecessor (the "Company"), and each of the
investors listed on Schedule 1.2 hereto (as such Schedule may be updated from
time to time) (collectively, the "Purchasers"). In consideration of mutual
promises, covenants and conditions hereinafter set forth, the parties hereby
agree as follows:
1. Authorization and Sale of the Shares.
1.1 Authorization, Filing of Restated Articles of Incorporation.
On or prior to the Closing (as defined below), the Company shall have authorized
the issuance and sale at the Closing (as defined below) pursuant to the terms
and conditions hereof of up to 2,316,289 shares of its Series A Preferred Stock
(the "Preferred Shares"), having the rights, restrictions, privileges and
preferences as set forth in the form of the Amended and Restated Articles of
Incorporation of the Company (the "Restated Articles") attached hereto as
Exhibit A. The Company shall adopt and file the Restated Articles with the
Secretary of State of California on or before the Closing.
1.2 Sale and Issuance of the Preferred Shares. Subject to the
terms and conditions hereof, at the Closing the Company will issue and sell to
each Purchaser and each Purchaser will purchase from the Company the number of
Preferred Shares set forth opposite such Purchaser's name on Schedule 1.2
attached hereto for a consideration of $1.7377 per share (the "Purchase Price").
2. Closing, Delivery.
2.1 Closing Date.
(a) Closing. The closing (the "Closing") of the purchase
and sale of the Preferred Shares to the Purchasers shall take place at the
offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California 94304 at 10:00 a.m., on December 28, 1998, or at such other time and
place as the Company and the Purchasers may agree. The date of the Closing shall
be referred to as the "Closing Date."
2.2 Delivery. Subject to the terms of this Agreement, at the
Closing, the Company shall deliver to each of the Purchasers a certificate (or
certificates) registered in such Purchaser's name representing the number of
Preferred Shares purchased against payment of the Purchase Price therefor by
check payable to the Company, wire transfer per the Company's instructions, or
any combination of the foregoing payable to the Company.
2.3 Use of Proceeds. The Company shall use the proceeds upon the
sale of the Preferred Shares for general working capital purposes.
3. Representations and Warranties of the Company. In order to induce the
Purchasers to purchase the Preferred Shares, the Company makes the following
representations and warranties which are true, correct and complete in all
respects on the date hereof and shall be true, correct and complete in all
respects as of the
<PAGE> 3
Closing, subject to the exceptions set forth on the Disclosure Schedule attached
hereto as Exhibit B (the "Disclosure Schedule").
3.1 Organization, Good Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to own its properties and to carry on its business as currently conducted. The
Company is duly licensed or qualified to do business as a foreign corporation in
each jurisdiction where the failure to do so would constitute a Material Adverse
Change (as defined in Section 3.6 below).
3.2 Authorization. The Company has all necessary corporate power
and has taken or will take prior to the Closing all necessary corporate action
required for the due authorization, execution, delivery and performance by the
Company of this Agreement, the Rights Agreement (the "Rights Agreement")
referred to in Section 5.1 and the Right of First Refusal and Co-Sale Agreement
(the "Co-Sale Agreement") referred to in Section 5.1 (collectively, the "Related
Agreements") and any other agreements or instruments to be executed by the
Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Preferred Shares. The issuance of the Preferred
Shares does not require any further corporate action and is not and will not,
except as provided in the Related Agreements, be subject to any preemptive
right, right of first refusal or the like. This Agreement, the Related
Agreements and the other agreements and instruments to be executed by the
Company in connection herewith or therewith will each, when executed by the
Company, be a valid and binding obligation of the Company enforceable in
accordance with its respective terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar federal or state laws affecting the rights of creditors, (ii)
rules of law governing specific performance, injunctive relief or other
equitable remedies (whether considered in a proceeding at law or in equity) or
(iii) indemnification provisions to the extent limited by statutes, judicial
decisions or public policy considerations.
3.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Preferred Shares the failure of which would cause a
Material Adverse Change except for (i) those which have already been made or
granted, (ii) those required to be made pursuant to (A) Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder (the "Law"), or (b) the securities laws of any other state in which
the Preferred Shares will be issued or sold hereunder and (iii) any applicable
state securities commissions as specifically provided for in the Rights
Agreement described in Section 5. 1 (f).
3.4 Capitalization. The authorized capital stock of the
Company as of the Closing Date and immediately prior to the Closing Date is
10,000,000 shares of Common Stock and 2,400,000 shares of Preferred Stock, all
of which have been designated Series A Preferred Stock (the "Series A Shares").
There are issued and outstanding 2,000,000 shares of the Company's Common Stock.
There are no issued and outstanding shares of Series A Preferred Stock
immediately prior to the Closing. The holders of record of the currently issued
and outstanding shares of Common Stock immediately prior to the Closing are as
set forth in Section 3.4 of the Disclosure Schedule. All such issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable, and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. Except as set forth in the
Related Agreements and in Section 3.4 of the Disclosure Schedule, there are no
other outstanding rights, options, warrants, conversion rights or agreements
<PAGE> 4
for the purchase or acquisition from the Company of any shares of its capital
stock (and a list of holders of such outstanding rights, options, warrants,
conversion rights and agreements for the purchase or acquisition from the
Company of any shares of its capital stock is set forth in Section 3.4 of the
Disclosure Schedule), except that the Company has (i) reserved 1,165,000 shares
of its Common Stock for issuance under the Company's 1998 Stock Option Plan to
its employees, consultants, directors or officers and (ii) reserved 2,316,279
shares of its Common Stock for issuance upon conversion of the Series A Shares
of the Company to Common Stock of the Company. Except as set forth in Section
3.4 of the Disclosure Schedule, the Company is not a party or subject to any
agreement or understanding between any persons or entities which affects or
relates to the voting or giving of written consents with respect to any
securities or by any director of the Company, except as provided for in the
Related Agreements.
3.5 Subsidiaries. The Company has neither any subsidiaries nor
any joint venture relationships nor any investment or other equity or
equity-like interest in, or any outstanding loan or advance to or from, any
person, including, without limitation, any officer, director or shareholder of
the Company except travel, meal and similar reimbursement obligations created in
the ordinary course of business.
3.6 Financial Information. The Company has attached hereto as
Schedule 3.6 to the Disclosure Schedule the unaudited financial statements of
the Company for the period ended December 15, 1998 (the "Unaudited Financial
Statements"). The Unaudited Financial Statements are in accordance with the
books and records of the Company and present fairly in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
the financial condition and results of operations of the Company as of the dates
and for the periods shown, subject to year end adjustments which will not be
material, and subject to the absence of footnotes otherwise required. The
Company has no liability, contingent or otherwise, that is not adequately
reflected in or reserved against in the Unaudited Financial Statements that
could materially and adversely affect the financial condition of the Company.
Since the date of the Unaudited Financial Statements, (i) there has been no
Material Adverse Change (as defined below) in the business, assets, liabilities,
condition (financial or otherwise) or operations of the Company or its
predecessor except for changes in the ordinary course of business which,
individually or in the aggregate, have not been materially adverse and (ii)
none of the business, financial condition, operations, property or affairs of
the Company has been materially adversely affected by any occurrence or
development, individually or in the aggregate, whether or not insured against.
"Material Adverse Change" means any change in, or effect on, the business,
conditions, affairs or operations of the Company (including all subsidiaries, if
any) or in any of its properties or assets, or any material impairment of the
right or ability of the Company (including all subsidiaries, if any) to carry on
its business as now conducted or as proposed to be conducted in the future (the
"Business") (x) that is, or is reasonably likely to be, materially adverse to
the results of the operations or the financial condition of the Company (or any
subsidiary) or the Business or (y) that requires or is reasonably likely to
require the expenditure of Ten Thousand Dollars ($10,000) or more, individually
or in the aggregate.
3.7 Events Subsequent to the Date of the Financial Statements.
Since November 30, 1998, the Company has not (i) issued any capital interest,
stock, bond or other security, (ii) borrowed any amount or incurred or become
subject to any liability (absolute, accrued or contingent), except liabilities
under contracts entered into in the ordinary course of business except travel,
meal and similar reimbursement obligations created in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Unaudited Financial Statements and current
liabilities incurred since November 30, 1998, in the ordinary course of
business, (iv) declared or made any payment or distribution to shareholders or
purchased or redeemed any shares of its capital stock, capital interest or other
securities, (v) mortgaged, pledged or subjected to lien any of
<PAGE> 5
its assets, tangible or intangible, other than liens of current real property
taxes not yet due and payable or mechanics' or materialmen's or similar inchoate
liens relating to amounts not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or canceled any debt or claim, except in the ordinary course of
business, (vii) sold, assigned, transferred or granted any license with respect
to any patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset, except pursuant to license or other agreements entered
into in the ordinary course of business, (viii) suffered any loss of property or
waived any right of substantial value whether or not in the ordinary course of
business, (ix) made any change in officer compensation other than in the
ordinary course of business, (x) made any material change in the manner of
business or operations of the Company, its predecessor or any of their
respective subsidiaries, (xi) entered into any transaction except in the
ordinary course of business or as otherwise contemplated hereby or (xii) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
3.8 Litigation . There is no litigation or governmental
proceeding pending or, to the knowledge of the Company, threatened against the
Company or its predecessor or affecting any of the Company's properties or
assets, or against any officer, key employee or shareholder of the Company or
its predecessor in his capacity as such, nor, to the knowledge of the Company,
has there occurred any event which questions the validity of this Agreement and
the Related Agreements or any action taken or to be taken in connection
herewith, including in each case, without limitation, actions pending or, to the
knowledge of the Company, threatened, involving the prior employment of any of
the Company's employees, the use in connection with the Business of any
information or techniques allegedly proprietary to any of its former employees,
or their obligations under any agreements with prior employers. There is no
governmental investigation pending or, to the best knowledge of the Company,
threatened against the Company or its predecessor or affecting any of the
Company's properties or assets, or against any officer, key employee or
shareholder of the Company or its predecessor in his capacity as such. Neither
the Company, nor, to the best of its knowledge, any officer, key employee or
shareholder of the Company or its predecessor, in his capacity as such, is in
default with respect to any order, writ, injunction, decree, ruling or decision
of any court, commission, board or other government agency which may materially
and adversely affect the Business or assets of the Company. There is no action,
suit, proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate.
3.9 Compliance with Laws and Other Instruments. The Company is as
of the Closing Date in compliance with all of the provisions of this Agreement
and of its Restated Articles and in all material respects with the provisions of
(i) each judgment, decree and judicial order by which it is bound or to which it
or any of its properties are subject and to its knowledge, each statute, rule or
regulation applicable to the Company and (ii) each mortgage, indenture, lease,
license, other agreement or instrument by which it is bound or to which it or
any of its properties are subject. Neither the execution, delivery or
performance of this Agreement and the Related Agreements, nor the offer,
issuance, sale or delivery of the Preferred Shares in accordance with the
provisions of this Agreement and the Restated Articles, with or without the
giving of notice or passage of time, or both, will violate, or result in any
breach of, or constitute a default under, or result in the imposition of any
encumbrance in any material respect upon any asset of the Company pursuant to
any provision of the Company's Restated Articles, or, to the best knowledge of
the Company, any statute, rule or regulation applicable to the Company, or any
judgment, decree, judicial order, mortgage, indenture, lease, license or other
agreement or instrument by which the Company is bound or to which the Company or
any of its properties are subject, or, to the best knowledge of the Company,
will cause the Company to lose the benefit of any material right or privilege it
currently enjoys or cause any person who is expected to normally do business
with the Company to discontinue to do so on substantially the same basis.
<PAGE> 6
3.10 Taxes. The Company has filed all tax returns (including
statements of estimated taxes owed) required to be filed within the applicable
periods for such filings and has paid all taxes required to be paid (other than
those contested in good faith for which adequate reserves have been
established), and has established adequate reserves (net of estimated tax
payments already made) for the payment of all taxes payable in respect of the
period subsequent to the last periods covered by such returns. There is no
pending dispute with any taxing authority relating to any of such returns and
the Company has not received notice of any proposed liability for any tax to be
imposed upon the properties or assets of the Company. No deficiencies for any
tax are currently assessed against the Company, and no tax returns of the
Company have ever been audited, and, to the actual knowledge of the Company,
there is no such audit pending or threatened. There is no tax lien, whether
imposed by any federal, state or local taxing authority, outstanding against the
assets, properties or business of the Company or its predecessor, except such
liens for taxes not yet due and payable as may accrue in the ordinary course of
business and for which the Company has established reasonable reserves and as
would not, in any case, constitute a Material Adverse Change. For the purposes
of this Agreement, the term "tax" shall include all federal, state and local
taxes, including income, franchise, property, sales, withholding, payroll and
employment taxes.
3.11 Real Property.
(a) Schedule 3.11 to the Disclosure Schedule sets forth
the addresses and uses of all real property that the Company owns, leases or
subleases, and any material lien or encumbrance on any such owned real property
or the Company's leasehold interest therein, specifying in the case of each such
lease or sublease, the name of the lessor or sublessor, as the case may be, and
the lease term. Copies of all leases have been provided to special counsel to
the Purchasers.
(b) The Company has good and marketable title to, and owns
free and clear of all liens and encumbrances, all property listed as owned by
the Company on Schedule 3.11, and, to the knowledge of the Company, there is no
material violation of any law, regulation or ordinance (including without
limitation laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) relating to any real property owned, leased or
subleased by the Company.
(c) There are no defaults by the Company or, to the
knowledge of the Company, by any other party thereto, which might curtail in any
material respect the current use of the Company's property listed on Schedule
3.11. The performance by the Company of this Agreement and the Related
Agreements will not result in the termination of, or in any increase of any
amounts payable under, any lease listed on Schedule 3.11.
3.12 Personal Property. Except for property sold or otherwise
disposed of in the ordinary course of business since September 30, 1998, the
Company owns free and clear of any liens or encumbrances, all of the personal
property reflected as owned by the Company in the balance sheet contained in the
Unaudited Financial Statements, and all other material items of personal
property acquired by the Company through the date hereof. All material items of
such personal property are in good operating condition, normal wear and tear
excepted.
3.13 Patents, Trademarks, etc.
(a) Set forth on Schedule 3.13 is a list of all patents,
patent rights, patent applications, trademarks, trademark applications, service
marks, service mark applications, trade names and registered copyrights, and all
applications for such that are in the process of being prepared, owned by or
registered in the
<PAGE> 7
name of the Company, or of which the Company is a licensor or licensee or in
which the Company has any right, except licenses to commercially available
software legally in the possession of the Company and having a purchase price of
less than $2,000 per copy. The Company owns and possesses sufficient right,
title and interest in and to, or has obtained licenses to use, all software,
software tools, works of authorship, copyrights, know-how, trade secrets and
registered trade names (and to its best knowledge owns and possesses sufficient
right, title and interest in and to, or has obtained licenses to use, all
patentable inventions and common law tradenames) used in or necessary for the
conduct of its Business, free and clear of all liabilities, charges, liens,
pledges, mortgages, restrictions, adverse claims, security interests, rights of
others and encumbrances (including, without limitation, distribution rights)
(all of which are referred to as "Proprietary Rights"), except, in each case,
where such failure would not constitute a Material Adverse Change. The foregoing
representation as it relates to Third Party Technology (as defined herein) is
limited to the Company's interest pursuant to the Third Party Licenses (as
defined herein), all of which are, to the best knowledge of the Company, valid
and enforceable and in full force and effect and which grant the Company such
rights to Third Party Technology as are employed in or necessary to the
Business. Schedule 3.13 contains (i) an accurate and complete description of all
registered and unregistered trademarks and trade names owned or licensed to the
Business, and a list of all licenses and other agreements relating thereto and
(ii) a list of all licenses and other agreements with third parties (the "Third
Party Licenses") relating to any software, copyrights, works of authorship,
technology, know-how or processes that the Company is licensed or otherwise
authorized by such third parties to use, market, distribute or incorporate into
products distributed by the Company, except licenses to commercially available
software legally in the possession of the Company and having a purchase price of
less than $2,000 per copy (such software, technology, know-how and processes are
collectively referred to as the "Third Party Technology"). All of the copyrights
in any of the Company Products (including but not limited to any works of
authorship incorporated in or distributed with such products) used by the
Company in connection with the Business are owned by the Company, or licensed to
the Company, and are in full force and effect, and the consummation of the
transactions contemplated hereby will not alter or impair any such rights. No
claims have been asserted against the Company, and to the best knowledge of the
Company (actual knowledge in the case of common law trademarks and tradenames
and patents) there are no claims which are reasonably likely to be asserted
against the Company or which have been asserted against others by any person
challenging the Company's use or distribution of any trademarks, tradenames,
copyrights, works of authorship, trade secrets, software, technology, know-how
or processes utilized by the Company (including, without limitation, the Third
Party Technology) or challenging or questioning the validity or effectiveness of
any license or agreement relating thereto (including, without limitation, the
Third Party Licenses). The use of any trademarks, tradenames, copyrights, works
of authorship, software, technology, know-how or processes by the Company in its
Business does not infringe on the rights of, constitute misappropriation of, or
in any way involve unfair competition with respect to, any proprietary
information or intangible property right of any third person or entity,
including, without limitation, any patent, trade secret, copyright, trademark or
tradename; provided, however, that such representation is made only to the
Company's actual knowledge with respect to common law trademarks and tradenames,
technology, patent or similar intangible property right where infringement is
possible without wrongful taking and where no readily accessible and exhaustive
search process would serve to have warned the Company.
(b) To the best knowledge of the Company, all designs,
drawings, specifications, source code, object code, documentation, flow charts
and diagrams incorporated in any of the Company's Proprietary Rights (the
"Company Components") constitute original creations of and were written,
developed and created solely and exclusively by employees of the Company
without the assistance of any third party or entity or were created by, or with
the assistance of, third parties who assigned ownership of or licensed their
rights to the Company in valid and enforceable agreements. The Company has at
all times used commercially
<PAGE> 8
reasonable efforts to treat its trade secrets as confidential and has not
disclosed or otherwise dealt with such items in such a manner as to cause the
loss of such trade secrets by release into the public domain.
(c) To the best knowledge of the Company, no employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement, confidentiality agreement or any other contract or
agreement relating to the relationship of any such employee with the Company or,
to the best knowledge of the Company, any other party because of the nature of
the Business.
3.14 Agreements of Directors, Officers and Employees. To the best
knowledge of the Company, no director, officer or employee of or consultant to
the Company is in violation of any restrictive covenants contained in any
employment contract, non-competition agreement, non-disclosure agreement, patent
disclosure or assignment agreement or other contract or agreement relating to
the right of any such director, officer, employee or consultant to be employed
or engaged by the Company because of the nature of the Business, or relating to
the use of trade secrets or proprietary information of others.
3.15 Governmental Approvals. The Company has all the permits,
licenses, orders, franchises and other rights and privileges of all federal,
state, local or foreign governmental or regulatory bodies necessary for the
Company to conduct its business as presently conducted, except, in each case,
where such failure would not constitute a Material Adverse Change. All such
permits, licenses, orders, franchises and other rights and privileges are in
full force and effect except, in each case, where such failure would not
constitute a Material Adverse Change and, to the best knowledge of the Company,
no suspension or cancellation of any of them is threatened, and none of such
permits, licenses, orders, franchises or other rights and privileges will be
adversely affected by the Closing.
3.16 Contracts and Commitments. All contracts, obligations or
commitments to which the Company is a party or by which it is bound (including
purchase orders to the Company or placed by the Company) which involve
obligations of, or payments to, the Company in excess of Five Thousand Dollars
($5,000) and all agreements between the Company and its officers, directors,
consultants and employees are set forth on the list attached hereto as Schedule
3.17 (the "Contracts"), copies of which have been delivered to special counsel
to the Purchasers. All of the Contracts are valid and binding obligations of the
Company and in full force and effect in all material respects and enforceable by
the Company in accordance with their respective terms in all material respects,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors, (ii) rules of law governing specific
performance, injunctive relief or other equitable remedies (whether considered
in a proceeding at law or in equity) or (iii) indemnification provisions to the
extent limited by statutes, judicial decisions or public policy considerations.
The Company is not in material default under any of such Contracts. To the best
knowledge of the Company, no other party to any of the Contracts is in material
default thereunder.
3.17 Securities Act. The Company has complied and will comply
with all applicable federal or state securities laws in connection with the
issuance and sale of the Preferred Shares, and, in reliance on the
representations and warranties of the Purchasers in Section 4 hereof, the
Company hereby asserts that (i) the offer, sale and issuance of the Preferred
Shares in conformity with the terms of this Agreement will not result in a
violation of the requirements of Section 5 of the Securities Act of 1933, as
amended (the "Act"), or the qualification or registration requirements of the
Law or other applicable blue sky laws and (ii) neither the Company nor, to the
best knowledge of the Company, anyone acting on its behalf has offered any of
the Preferred Shares, or similar securities, or solicited any offers to purchase
any of such securities, in such a manner as to bring the issuance and sale of
the Preferred Shares under the registration provisions of the Act.
<PAGE> 9
3.18 Registration Rights. The Company has not granted or agreed
to grant any rights relating to registration of its capital stock under the Act
or state securities laws other than those contained in this Agreement or the
Related Agreements.
3.19 Insurance Coverage. Schedule 3.20 to the Disclosure Schedule
contains an accurate summary of the insurance policies currently maintained by
the Company. There are currently no claims in excess of Ten Thousand Dollars
($10,000) in the aggregate pending against the Company under any insurance
policies currently in effect and covering the property, business or employees of
the Company, and all premiums due and payable with respect to the policies
maintained by the Company have been paid to date.
3.20 Employee Matters. Except as set forth in Schedule 3.21
hereof, the Company does not have in effect, and its assets are not subject to,
any employment agreements, consulting agreements, deferred compensation, pension
or retirement agreements or arrangements, bonus, incentive or profit-sharing
plans or arrangements, or labor or collective bargaining agreements, written or
oral. The Company is in compliance, and its predecessor was in compliance, in
all material respects, with all applicable laws and regulations relating to
labor, employment, fair employment practices, terms and conditions of
employment, and wages and hours. Each officer, director, employee and consultant
of the Company has executed an agreement regarding confidentiality and
proprietary information, the form of which is attached hereto as Exhibit C.
Except as set forth in Schedule 3.21 hereof, the Company is not aware that any
officer, director or employee is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere in any material way with the use of his or her best efforts to
promote the interests of the Company, conflict with the Company's Business or
prevent any such employee from assigning inventions to the Company. Neither the
execution nor delivery of this Agreement or the Related Agreements, nor the
carrying on of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. Furthermore, the
Company does not believe that it will be necessary for the Company to utilize
any inventions of any of its employees made prior to their employment by the
Company except in cases where obtaining a license to do such is expected to be
routine and license fees are not material to the Business.
3.21 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties are bound by or subject to) any
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives or agents of the Company. There is no strike or
other labor dispute involving the Company pending, or to the knowledge of the
Company threatened, which could constitute a Material Adverse Change, nor is the
Company aware of any labor organization activity involving its employees. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate his, her or its employment with the Company, nor
does the Company have a current intention to terminate the employment of any of
the foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company.
3.22 No Brokers or Finders. No person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or claim against or upon the Company for any commission, fee or other
compensation as a finder or broker because of any act or omission by the
Company. -
<PAGE> 10
3.23 Transactions with Affiliates. There are no loans, leases or
other continuing transactions involving more than $10,000 (in the aggregate)
annually between the Company, any officer or director of the Company or any
person owning five percent (5%) or more of the voting power of the Company on
the one hand and any respective family member or affiliate of such officer,
director or shareholder on the other hand.
3.24 Assumptions, Guarantees, etc. of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on or for any indebtedness of any other person,
except guarantees by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
3.25 Disclosures. Neither this Agreement, any Schedule or Exhibit
to this Agreement, the Related Agreements, the Unaudited Financial Statements,
nor any other agreement, document or written statement made by the Company and
furnished by the Company to the Purchasers or the Purchasers' special counsel in
connection with the transactions contemplated hereby, contains any untrue
statement of material fact or, when taken as a whole, omits to state any
material fact necessary to make the statements contained herein or therein not
misleading. There is no fact known to the Company that has not been disclosed
herein or in any other agreement, document or written statement furnished by the
Company to the Purchasers or their special counsel in connection with the
transactions contemplated hereby which is specific to the Company, as opposed to
the industry in which the Company operates, and which materially adversely
affects or is reasonably likely to materially and adversely affect the business,
properties, assets or financial condition of the Company.
4. Representations and Warranties of Purchasers and Restrictions on
Transfer Imposed by the Securities Act.
4.1 Representations and Warranties by the Purchasers. Each of the
Purchasers, severally and not jointly, represents and warrants to the Company as
follows:
(a) Investment Intent. This Agreement is made with each
Purchaser in reliance upon such Purchaser's representations to the Company,
evidenced by such Purchaser's execution of this Agreement, that such Purchaser
is acquiring the Preferred Shares and the Common Stock issuable upon conversion
of the Preferred Shares (collectively the "Securities") for investment for such
Purchaser's own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the Act
and the Law (or other applicable blue sky laws). Each Purchaser has the full
right, power and authority to enter into and perform this Agreement and the
Related Agreements, and this Agreement and the Related Agreements constitute
valid and binding obligations upon it enforceable in accordance with their
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors, (ii) rules of law governing
specific performance, injunctive relief or other equitable remedies (whether
considered in a proceeding at law or in equity) or (iii) indemnification
provisions to the extent limited by statutes, judicial decisions or public
policy considerations.
(b) Shares Not Registered . Each Purchaser understands and
acknowledges that the offering of the Preferred Shares pursuant to this
Agreement will not be registered under the Act or qualified under the Law (or
other applicable blue sky laws) on the grounds that the offering and sale of
securities contemplated by this Agreement are exempt from registration under the
Securities Act and exempt from qualification pursuant to the applicable
provisions of the Law (and the relevant provisions of other applicable blue sky
laws), and that the Company's reliance upon such exemptions is predicated upon
such Purchaser's
<PAGE> 11
representations set forth in this Agreement. Each Purchaser acknowledges and
understands that the Securities must be held indefinitely unless the Securities
are subsequently registered under the Act and qualified under the Law (or other
applicable blue sky laws) or an exemption from such registration and such
qualification is available.
(c) No Transfer . Each Purchaser covenants that in no
event will it dispose of any of the Securities (other than in conjunction with
an effective registration statement for the Securities under the Act) unless and
until (i) such Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition and (ii) if reasonably
requested by the Company, such Purchaser shall have furnished the Company with
an opinion of counsel reasonably satisfactory in form and substance to the
Company to the effect that (X) such disposition will not require registration
under the Act and (y) appropriate action necessary for compliance with the Act,
the Law and any other applicable state, local or foreign law has been taken. It
is agreed that the Company will not require opinions of counsel for transactions
by a Purchaser made pursuant to Rule 144.
(d) Permitted Transfers. Notwithstanding the provisions of
subsection (b) above, no registration statement or opinion of counsel shall be
necessary for a transfer by such Purchaser, if it is a partnership, to a partner
of such partnership or a former partner of such partnership who leaves such
partnership after the date hereof, or to the estate of any such partner or
former partner or the transfer by gift, will or intestate succession of any
partner to his spouse or lineal descendants or ancestors, if the transferee
agrees in writing to be bound by the terms of this Agreement and the Related
Agreements to the same extent as if he were an original Purchaser hereunder
provided that the Company shall receive written notice of such transfer within
thirty (30) days of its completion.
(e) Knowledge and Experience. Each Purchaser (i) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of such Purchaser's prospective investment in
the Securities, (ii) has the ability to bear the economic risks of such
Purchaser's prospective investment, (iii) has been furnished with and has had
access to such information as such Purchaser has considered necessary to make a
determination as to the purchase of the Securities together with such additional
information as is necessary to verify the accuracy of the information supplied,
(iv) has had all questions which have been asked by such Purchaser
satisfactorily answered by the Company and (v) has not been offered the
Securities by any form of advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any such media.
(f) Accredited Investor . Each Purchaser is an "accredited
investor" within the meaning of Rule 501 promulgated by the Securities and
Exchange Commission ("SEC") under the Act.
(g) Authorization. All action on the part of each of the
Purchaser's partners, board of directors, and shareholders, as applicable,
necessary for the authorization, execution, delivery and performance of this
Agreement and the Related Agreements by each Purchaser, the purchase of and
payment for the Preferred Shares and the performance of all of each Purchaser's
obligations hereunder and under the Related Agreements has been taken or will be
taken prior to the Closing. This Agreement and the Related Agreements, when
executed and delivered by each Purchaser, shall constitute valid and binding
obligations of the Purchasers, enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other
<PAGE> 12
equitable remedies; provided, however, that the Purchaser makes no
representation as to the enforceability of the indemnification provisions
contained in the Rights Agreement.
(h) Holding Requirements. Each Purchaser understands that
if the Company does not (i) register its Common Stock with the SEC pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
(ii) become subject to Section 15(d) of the Exchange Act, (iii) supply
information pursuant to Rule 15c2-11 thereunder or (iv) have a registration
statement covering the Securities (or a filing pursuant to the exemption from
registration under Regulation A of the Act covering the Securities) under the
Securities Act in effect when it desires to sell the Securities, such Purchaser
may be required to hold the Securities for an indeterminate period. Each
Purchaser also understands that any sale of the Securities that might be made by
such Purchaser in reliance upon Rule 144 under the Act may be made only in
limited amounts in accordance with the terms and conditions of that rule.
4.2 Legends. Each certificate representing the Securities shall
be endorsed with the following legends:
(a) Federal Legend. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT OR (ii) IN COMPLIANCE WITH RULE 144, OR
(iii) PURSUANT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
(b) Other Legends. Any other legends required by the Law
or other applicable state blue sky laws. The Company need not register a
transfer of legended Securities, and may also instruct its transfer agent not to
register the transfer of the Securities, unless the conditions specified in each
of the foregoing legends are satisfied.
Removal of Legend and Transfer Restrictions. Any legend
endorsed on a certificate pursuant to subsection 4.2(a) and the stop transfer
instructions with respect to such legend Securities shall be removed, and the
Company shall issue a certificate without such legend to the holder of such
Securities if such Securities are registered under the Act and a prospectus
meeting the requirements of Section 10 of the Act is available or if such holder
satisfies the requirements of Rule 144(k) and, where reasonably deemed necessary
by the Company, the holder of the Securities provides the Company with an
opinion of counsel for such holder, reasonably satisfactory to the Company, to
the effect that (i) such holder meets the requirements of Rule 144(k) or (ii) a
public sale, transfer or assignment of such Securities may be made without
registration.
4.4 Rule 144. Each Purchaser is aware of the adoption of Rule 144
by the SEC promulgated under the Act, which permits limited public resales of
securities acquired in a nonpublic offering, subject to the satisfaction of
certain conditions. Each Purchaser understands that under Rule 144, the
conditions include, among other things, the availability of certain current
public information about the issuer and the resale occurring not less than one
(1) year after the party has purchased and paid for the securities to be sold.
5. Conditions to Closing
<PAGE> 13
5.1 Conditions to Each Purchaser's Obligations at the Closing.
The obligation of each Purchaser to purchase the Preferred Shares at the Closing
is subject to the fulfillment to each Purchaser's satisfaction, on or prior to
the Closing Date, of the following conditions, any of which may be waived in
accordance with the provisions of Section 7.3 hereof.
(a) Representations and Warranties, Correct Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof, when read together with Exhibit B, shall be true and correct when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Company's
Business and assets shall not have been subject to any Material Adverse Change
prior to the Closing Date. The Company shall have performed in all respects all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing Date.
(b) Consents and Waivers. The Company shall have obtained
in a timely fashion any and all consents, permits and waivers necessary or
appropriate for consummation of the transactions contemplated by this Agreement.
(c) Board of Directors; Board Committees. Effective on the
Closing (i) the Board of Directors of the Company shall initially be set at five
(5). The holders of Common Stock, voting together as a single class, shall be
entitled to elect two (2) directors. The holders of Series A Preferred Stock,
voting together as a single class, shall be entitled to elect two (2) directors,
which shall include one CMG@Ventures director and one Bertlesmann Ventures
director. The holders of Common Stock and the holders of Preferred Stock voting
together shall elect the remaining director. The members of the Compensation
Committee of the Board of Directors of the Company shall include a CMG@Ventures
director, an outside director and the Chief Executive Officer, and the members
of the Audit Committee of the Board of Directors of the Company shall include a
CMG@Ventures director and two outside directors.
(d) No Material Adverse Change. The business, properties,
assets or condition (financial or otherwise) of the Company and its respective
subsidiaries, if any, shall not have been materially adversely affected since
the date of this Agreement, whether by fire, casualty, act of God or otherwise,
and there shall have been no other changes in the Business, properties, assets,
condition (financial or otherwise), management or prospects of the Company or
any of its respective subsidiaries, if any, that would have a Material Adverse
Change.
(e) Filing of the Restated Articles. The Restated Articles
shall have been filed with the Secretary of State of the State of California.
(f) Rights Agreement. The Company and each Purchaser shall
have executed the Rights Agreement attached hereto as Exhibit D.
(g) Co-Sale Agreement. The Company, each Purchaser and
each Founder (as defined in the Co-Sale Agreement) shall have executed the
Co-Sale Agreement attached hereto as Exhibit E.
(h) Compliance Certificate. The Company shall have
delivered a Certificate, executed by the President of the Company and dated the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a) and (b) of this Section 5.1.
<PAGE> 14
(i) Opinion of Counsel. The Purchasers shall have received
an opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation, the
Company's counsel, in substantially the form attached hereto as Exhibit F.
5.2 Conditions to Obligations of the Company at the Closing. The
Company's obligation to sell and issue the Preferred Shares at the Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
Closing Date of the following conditions, any of which may be waived in
accordance with the provisions of Section 7.3 hereof.
(a) Representations and Warranties Correct. The
representations and warranties made by the Purchasers in Section 4 hereof shall
be true and correct when made, and shall be true and correct on the Closing Date
with the same force and effect as if they had been made on and as of said date.
(b) Conditions Fulfilled. The conditions set forth in
subsections (b), (d), (e), (f) and (g) of Section 5.1 shall have been fulfilled.
(c) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. Termination.
6.1 Termination by Mutual Written Consent. This Agreement may be
terminated, and the transactions contemplated hereby abandoned, at any time
prior to the Closing by the written agreement of the Company and the Purchasers.
6.2 Termination for Breach. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time before the
Closing (or any date to which the Closing may have been extended by the written
agreement of the parties obligated to perform on such Closing) by any party
obligated to perform on the Closing if the conditions for its benefit set forth
in Sections 5.1 and 5.2, as the case may be, have not been satisfied on or prior
to the Closing and if the conditions for the benefit of the other parties have
been satisfied or waived, and if such performing party shall have given written
notice of termination to the non-performing party.
6.3 Termination for Delay. Unless earlier terminated in
accordance with Section 6.1 or 6.2, this Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company or the
Purchasers if the Closing does not occur by January 15, 1999; provided, however,
that the right to terminate this Agreement under this Section 6.3 shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date.
6.4 Rights After Termination. Upon termination of this Agreement
under this Section 6, the parties shall be released from all obligations arising
hereunder, except as to any liability for misrepresentations, breach or default
in connection with any warranty, representation, covenant, duty or obligation
given, occurring or arising prior to the date of termination if the
non-breaching party has detrimentally relied thereon.
<PAGE> 15
7. Miscellaneous.
7.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.
7.2 Parties in Interest. Except as otherwise set forth herein,
all covenants, agreements, representations, warranties and undertakings
contained in this Agreement shall be binding on and shall inure to the benefit
of the respective successors and assigns of the parties hereto (including
transferees of any of the Preferred Shares).
7.3 Amendments and Waivers. Amendments or additions to this
Agreement may be made, agreements with any decision of the Company may be made,
and compliance with any term, covenant, agreement, condition or provision set
forth herein may be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively) upon the written consent of
the Company and the holders of a majority of the Preferred Shares (or Common
Stock issued upon conversion of the Preferred Shares). Prompt notice of any such
amendment or waiver shall be given to any person who did not consent thereto.
This Agreement (including the Schedules and Exhibits annexed hereto, which are
an integral part of this Agreement) constitutes the full and complete agreement
of the parties with respect to the subject matter hereof.
7.4 Notices. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Company or to the
Purchasers at the address set forth below each party's signature to this
Agreement or to such other address as may be furnished in writing to the other
parties hereto.
7.5 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby; provided, however, that if
and only if the acquisition of the Preferred Shares is consummated, the Company
shall pay all reasonable costs and expenses of the Purchasers in connection with
the investigation, preparation, execution and delivery of this Agreement (and
due diligence related thereto) and the other instruments and documents to be
delivered hereunder and the transactions contemplated hereby and thereby,
including the reasonable fees and disbursements of special counsel to the
Purchasers, not to exceed $10,000 in the aggregate for all such costs and
expenses.
7.6 Counterparts. This Agreement and any Exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any Exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
7.7 Effect of Headings. The article and section headings herein
are for convenience only and shall not affect the construction hereof.
7.8 Adjustments. All provisions of this Agreement shall be
automatically adjusted to reflect any split of capital interests (in the nature
of a stock split), distribution of additional capital interests to the existing
holders of capital interests (in the nature of a stock dividend) or other such
form of recapitalization.
<PAGE> 16
7.9 Governing Law. This Agreement shall be deemed a contract made
under the laws of California and together with the rights and obligations of the
parties hereunder, shall be construed under and governed by the laws of
California.
7.10 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
7.11 Severability. In case any provision of this Agreement shall
be found by a court of law to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Series A
Preferred Stock Purchase Agreement as of the date first written above.
ONELIST, INC.
a California Corporation
Name: Mark Fletcher
Title: Chief Executive Officer and
President
Address: 951 Old County Road # 107
Belmont, CA 94002
Signature Page to Series A Preferred Stock Purchase Agreement
<PAGE> 1
EXHIBIT 10.18
FINDMAIL COMMUNICATIONS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "Agreement") is made as of
the 22nd day of June, 1998, by and between FindMail Communications, Inc., a
Delaware corporation (the "Company"), and the investors listed on Exhibit A
attached hereto (each a "Purchaser" and together, if more than one, the
"Purchasers").
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
1.1 Sale and Issuance of Series A Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State of the State of
Delaware on or before the Closing (as defined below) the First Amended and
Restated Certificate of Incorporation, in the form attached hereto as Exhibit B
(the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each Purchaser agrees
to purchase at the Closing and the Company agrees to sell and issue to each
Purchaser at the Closing that number of shares of Series A Preferred Stock set
forth opposite each such Purchaser's name on Exhibit A attached hereto at a
purchase price of $1.00 per share. The shares of Series A Preferred Stock issued
to the Purchaser pursuant to this Agreement shall be hereinafter referred to as
the "Stock."
1.2 Closing; Delivery.
(a) The purchase and sale of the Stock shall take place at the offices of
Venture Law Group, 2800 Sand Hill Road, Menlo Park, California, at 10:00 a.m.,
on June 22, 1998, or at such other time and place as the Company and the
Purchasers mutually agree upon, orally or in writing (which time and place are
designated as the "Closing").
(b) At the Closing, the Company shall deliver to each Purchaser a certificate
representing the Stock being purchased thereby against payment of the purchase
price therefor by check or by wire transfer to the Company's bank account.
2. Representations, Warranties and Covenants of the Company. The Company hereby
represents, warrants and covenants to each Purchaser that, except as set forth
on a Schedule of Exceptions attached hereto as Exhibit C, which exceptions shall
be deemed to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as now conducted and
<PAGE> 2
a proposed to be conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so- to qualify
would have a material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company consists, or will
consist, immediately prior to the Closing, of:
(a) Eight Hundred Fifty Thousand (850,000) shares of Preferred Stock, all of
which have been designated Series A Preferred Stock, none of which are issued
and outstanding immediately prior to the Closing. The rights, privileges and
preferences of the Preferred Stock are as stated in the Restated Certificate.
(b) Four Million Five Hundred Forty Thousand (4,540,000) shares of Common Stock,
Two Million Seven Hundred Ninety Thousand (2,790,000) shares of which are issued
and outstanding immediately prior to the Closing. All of the outstanding shares
of Common Stock have been duly authorized, fully paid and are nonassessable and
issued in compliance with all applicable federal and state securities laws. The
Company has reserved (i) Eight Hundred Fifty Thousand (850,000) shares of Common
Stock for issuance upon conversion of the Preferred Stock and (ii) Nine Hundred
Thousand (900,000) shares of Common Stock for issuance to officers, directors,
employees and consultants of the Company under the Company's 1998 Stock Option
Plan.
2.3 Subsidiaries. The Company does not currently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Investors Rights Agreement, in the form
attached hereto as Exhibit D (the "Investors Rights Agreement"), the Co-Sale
Agreement in the form attached hereto as Exhibit E (the "Co-Sale Agreement"),
and the Voting Agreement in the form attached hereto as Exhibit F (the "Voting
Agreement" and collectively with this Agreement, the Investors Rights Agreement
and the Co-Sale Agreement, the "Agreements"), the performance of all obligations
of the Company hereunder and thereunder and the authorization, issuance and
delivery of the Stock and the Common Stock issuable upon conversion of the Stock
(together, the "Securities") has been taken or will be taken prior to the
Closing, and the Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or (b) to
the extent the indemnification provisions contained in the Investors Rights
Agreement may be limited by
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<PAGE> 3
applicable federal or state securities laws. The issuance of the Stock is not
subject to any pre-emptive rights or rights of first refusal.
2.5 Valid Issuance of Securities. The Stock that is being issued to the
Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors Rights
Agreement and applicable state and federal securities laws. Based in part upon
the representations of the Purchasers in this Agreement and subject to the
provisions of Section 2.6 below, the Stock will be issued in compliance with all
applicable federal and state securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption. The Common Stock issuable upon conversion of
the Stock has been duly and validly reserved for issuance, and upon issuance in
accordance with the terms of the Restated Certificate, shall be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors Rights
Agreement and applicable federal and state securities laws and will be issued in
compliance with all applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for filings pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder, other applicable state securities laws and Regulation D of the
Securities Act of 1933, as amended (the "Securities Act").
2.7 Litigation. There is no action, suit, proceeding or investigation pending
or, to the Company's knowledge, currently threatened against the Company that
questions the validity of the Agreements or the right of the Company to enter
into them, or to consummate the transactions contemplated hereby or thereby, or
that might result, either individually or in the aggregate, in any material
adverse changes in the assets, condition or affairs of the Company, financially
or otherwise, or any change in the current equity ownership of the Company, nor
is the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
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<PAGE> 4
2.8 Patents and Trademarks. The Company owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, domain names,
copyrights, trade secrets, licenses, information and proprietary rights and
processes necessary for its business as now conducted and as proposed to be
conducted without any conflict with, or infringement of, the rights of others,
which conflict or infringement would have a material adverse effect on the
assets, condition or affairs of the Company, financially or otherwise. There are
no outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity. The Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business as proposed to be conducted.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant or instrument under which any such
employee is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company.
2.9 Compliance with Other Instruments.
(a) The Company is not in violation or default of any provisions of its
Restated Certificate or Bylaws or of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is bound, or of any
provision of federal or state statute, rule or regulation applicable to the
Company which would have a material adverse effect on the assets, condition or
affairs of the Company, financially or otherwise. The execution, delivery and
performance of the Agreements and the consummation of the transactions
contemplated hereby or thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company, its business or
operations or of its assets or properties.
(b) The Company has avoided every condition, and has not performed any
act, the occurrence of which would result in the Company's loss of any right
granted under any
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<PAGE> 5
license, distribution agreement or other agreement which would have a material
adverse effect on the assets, condition or affairs of the Company, financially
or otherwise.
2.10 Agreements; Action.
(a) Except for the Agreements, there are no agreements, understandings
or proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the Agreements,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company is a party or by which it is bound that
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of, $10,000, (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person or affect the Company's exclusive fight to develop,
manufacture, assemble, distribute, market or sell its products.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $10,000 or in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
(e) The Company is not a party to and is not bound by any contract
agreement or instrument, or subject to any restriction under its Restated
Certificate or Bylaws, that materially and adversely affects its business as now
conducted or as proposed to be conducted, its properties or its financial
condition.
2.11 Disclosure. The Company has provided the Purchasers with all the
information which the Purchasers have requested for deciding whether to acquire
the Stock and all information which the Company believes is reasonably necessary
to enable the Purchasers to make such a decision, including certain of the
Company's projections describing its proposed business (collectively, the
"Business Plan"). The representations and warranties of the Company contained in
this Agreement and the exhibits attached hereto and in any certificate furnished
or to be furnished to Purchasers at the Closing do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements
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<PAGE> 6
contained herein or therein not misleading in light of the circumstances under
which they were made. To the extent the Business Plan was prepared by management
of the Company, the Business Plan and the financial and other projections
contained in the Business Plan were prepared in good faith and the Company
reasonably believes there is a reasonable basis for such projections.
2.12 No Conflict of Interest. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business. None of the
Company's officers; or directors, or any members of their immediate families,
are, directly or indirectly, indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or stockholders of the Company may own stock in (but not exceeding two
percent of the outstanding capital stock of) any publicly traded companies that
may compete with the Company. To the Company's knowledge, none of the Company's
officers or directors or any members of their immediate families are, directly
or indirectly, interested in any material contract with the Company. The Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
2.13 Rights of Registration and Voting. Except as contemplated in the Investors
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity. Except
as contemplated in the Voting Agreement, no stockholders of the Company have
entered into any agreements with respect to the voting of capital shares of the
Company.
2.14 Title to Program and Assets. The Company owns its property and assets free
and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to its knowledge, holds a valid leasehold interest free of
any liens, claims or encumbrances.
2.15 Manufacturing and Marketing Rights. The Company has not granted rights to
manufacture, produce, assemble, license, market, or sell its products to any
other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.16 No Financial Statements. The Company has not prepared any historical
balance sheet, income statement, statement of cash flows or stockholders' equity
or other financial statement. The Company has no material liability or
obligation, absolute or contingent (individually or in the aggregate), except
(a) obligations and liabilities incurred after the date of incorporation in the
ordinary course of business that are not material, individually or in the
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<PAGE> 7
aggregate, and (b) obligations under contracts made in the ordinary course of
business that would not be required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles.
2.17 Employee Benefit Plans. The Company does not have any Employee Benefit Plan
as defined in the Employee Retirement Income Security Act of 1974.
2.18 Tax Returns and Payments. The Company has filed all tax returns and reports
as required by law. These returns and reports are true and correct in all
material respects. The Company has paid all taxes and other assessments due.
2.19 Labor Agreements and Actions. The Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the knowledge of the Company, has
sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which would have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company. To
its knowledge, the Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment.
2.20 Proprietary Information and Inventions Agreements. Each employee,
consultant and officer of the Company has executed an agreement with the Company
regarding confidentiality and proprietary information substantially in the form
or forms delivered to the counsel for the Purchasers. The Company, after
reasonable investigation, is not aware that any of its employees or consultants
is in violation thereof, and the Company will use its best efforts to prevent
any such violation. All consultants to or vendors of the Company with access to
confidential information of the Company are parties to a written agreement
substantially in the form or forms provided to counsel for the Purchasers under
which, among other things, each such consultant or vendor is obligated to
maintain the confidentiality of confidential information of the Company. The
Company, after reasonable investigation, is not aware that any of its
consultants or vendors are in violation thereof, and the Company will use its
best efforts to prevent any such violation.
2.21 Permits. The Company has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which would materially and adversely affect the business,
properties, prospects, or financial condition of the Company, and believes that
it can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. The
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<PAGE> 8
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.22 Corporate Documents. The Restated Certificate and Bylaws of the Company are
in the form provided to counsel for the Purchasers. The copy of the minute books
of the Company provided to the Purchasers' counsel contains minutes of all
meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.23 Real Property Holding Corporation. The Company is not a United States real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.24 Qualified Small Business Stock. The Company represents and warrants to the
Purchasers that, to the Company's knowledge, the Stock should qualify as
"Qualified Small Business Stock" as defined in Section 1202(c) of the Internal
Revenue Code of 1986, as amended as of the date hereof.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby
represents and warrants to the Company that:
3.1 Authorization. The Agreements, when executed and delivered by the Purchaser,
will constitute valid and legally binding obligations of the Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and
any other laws of general application affecting enforcement of creditors' rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies, or (b) to the
extent the indemnification provisions contained in the Investors Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the Purchaser
in reliance upon the Purchaser's representation to the Company, which by the
Purchaser's execution of this Agreement, the Purchaser hereby confirms, that the
Securities to be acquired by the Purchaser will be acquired for investment for
the Purchaser's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Purchaser represents that it has full power and authority to
enter into this Agreement. The Purchaser has not been formed for the specific
purpose of acquiring the Securities.
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<PAGE> 9
3.3 Disclosure of Information. The Purchaser has had an opportunity to discuss
the Company's business, management, financial affairs and the terms and
conditions of the offering of the Stock with the Company's management and has
had an opportunity to review the Company's facilities. The Purchaser understands
that such discussions, as well as the written information issued by the Company,
were intended to describe the aspects of the Company's business which it
believes to be material. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Purchaser to rely thereon.
3.4 Restricted Securities. The Purchaser understands that the Securities have
not been, and will not be, registered, under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the Securities are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the Securities indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the Company has no
obligation to register or qualify the Securities for resale, except as set forth
in the Investors Rights Agreement. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Securities, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under, no obligation and may not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no public market now exists
for any of the securities issued by the Company, and that the Company has made
no assurances that a public market will ever exist for the Securities.
3.6 Legends. The Purchaser understands that the Securities and any securities
issued in respect of or exchange for the Securities, may bear one or all of the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
(b) Any legend required by the Blue Sky laws of any state to the extent such
laws are applicable to the shares represented by the certificate so
legended.
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<PAGE> 10
3.7 Accredited Investor. The Purchaser is an "accredited investor" as defined in
Rule 501 (a) of Regulation D promulgated under the Securities Act.
3.8 Foreign Investors. If the Purchaser is not a United States person (as
defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe: for the Stock or any use of this Agreement, including
(a) the legal requirements within its jurisdiction for the purchase of the
Stock, (b) any foreign exchange restrictions applicable to such purchase, (c)
any governmental or other consents that may need to be obtained, and (d) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Stock. Such Purchaser's
subscription and payment for and continued beneficial ownership of the Stock,
will not violate any applicable securities or other laws of the Purchaser's
jurisdiction.
4. Conditions of the Purchasers' oblations at Closing. The obligations of each
Purchaser to the Company under this Agreement are subject to the fulfillment, on
or before the Closing, of each of the following conditions, unless otherwise
waived:
4.1 Representations and Warranties. The representations and warranties of the
Company contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
4.3 Compliance Certificate. The President of the Company shall deliver to the
Purchasers at the Closing a certificate certifying that the conditions specified
in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Stock
pursuant to this Agreement shall be obtained and effective as of the Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received from Venture
Law Group, counsel for the Company, an opinion, dated as of the Closing, in
substantially the form of Exhibit G.
4.6 Board of Directors. The Bylaws of the Company shall provide that the Board
of Directors of the Company shall consist of five (5) persons. As of the
Closing, the Board shall be comprised of Eric Archambeau, Scott Hassan, Carl
Page, and Martin Roscheisen, with one
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<PAGE> 11
vacancy to be filled by an independent industry executive approved by the
Purchasers and a majority of Scott Hassan, Carl Page and Martin Roscheisen
(collectively, the "Founders").
4.7. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions, contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Purchasers' counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.
This may include, without limitation, good standing certificates and
certification by the Company's Secretary regarding the Restated Certificate and
Bylaws and Board of Director and stockholder resolutions approving the
transactions contemplated by this Agreement.
4.8 Proprietary Information and Employee Stock Purchase Agreements. Each
employee of and consultant to the Company shall have entered into a Proprietary
Information and Inventions Agreement in the form previously provided to counsel
for the Purchasers. Each holder of Common Stock of the Company shall have
entered into a Common Stock Purchase Agreement in the form previously provided
to counsel for the Purchasers.
4.9 Investors Rights Agreement. The Company, each Purchaser and the Founders
shall have executed and delivered the Investors Rights Agreement.
4.10 Co-Sale Agreement. The Company, each Purchaser and the Founders shall have
executed and delivered the Co-Sale Agreement.
4.11 Voting Agreement. The Company, each Purchaser and the Founders shall have
executed and delivered the Voting Agreement.
4.12 Restated Certificate. The Company shall have filed the Restated Certificate
with the Secretary of State of Delaware on or prior to the Closing Date, which
shall continue to be in full force and effect as of the Closing Date.
5. Conditions of the Company's Obligations at Closing. The obligations of the
Company to each Purchaser under this Agreement are subject to the fulfillment,
on or before the Closing, of each of the following conditions, unless otherwise
waived.
5.1 Representations and Warranties. The representations and warranties of each
Purchaser contained in Section 3 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the Closing shall
have been performed or compiled with in all material respects.
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<PAGE> 12
5.3 Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Stock
pursuant to this Agreement shall be obtained and effective as of the Closing.
5.4 Investors Rights Agreement. Each Purchaser shall have executed the Investors
Rights Agreement.
5.5 Co-Sale Agreement. Each Purchaser shall have executed the Co-Sale Agreement.
5.6 Voting Agreement. Each Purchaser shall have executed the Voting Agreement.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and covenants of the
Company and Purchasers contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement for a period of one (1)
year, and the Closing and shall in no way be affected by any investigation of
the subject matter thereof made by or on behalf of the Purchasers or the
Company.
6.2 Transfer; Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Governing Law. This Agreement and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
6.4 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.6 Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or by overnight courier or sent by telegram, confirmed fax or email, or
forty-eight (48) hours after being deposited in the U.S. mail; as certified or
registered mail, with postage prepaid, addressed to the party to be notified at
such party's address as set forth below or on Exhibit A hereto, or as
subsequently modified by written notice, and (a) if to the Company, with a copy
to Venture
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Law Group, 2800 Sand Hill Road, Menlo Park, CA 94025, fax (650) 233-8386, Attn:
Robert V. W. Zipp or (b) if to the Purchasers, with a copy to Wilson, Sonsini,
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, CA 94304, fax (650) 493-6811,
Attn: Anton Commissaris.
6.7 Finder's Fee. Each party represents that it neither is nor will be obligated
for any finder's fee or commission in connection with this transaction. Each
Purchaser agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which each Purchaser or any of its officers, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 Fees and Expenses. The Company shall pay the reasonable fees and expenses of
counsel for the Purchasers, incurred with respect to this Agreement, the
documents referred to herein and the transactions contemplated hereby and
thereby (such fees and expenses not to exceed $10,000.00).
6.9 Attorney's Fees. If any action at law or in equity (including arbitration)
is necessary to enforce or interpret the terms of any of the Agreements, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
6.10 Amendments and Waivers. Any term of this Agreement may be amended with the
written consent of the Company and the holders of at least a majority of the
Common Stock issued or issuable upon conversion of the Stock. Any amendment or
waiver effected in accordance with this Section 6.10 shall be binding upon the
Purchasers and each transferee of the Stock (or the Common Stock issuable upon
conversion thereof), each future holder of all such securities, and the Company.
6.11 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
6.12 Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any holder of any of the Stock, upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
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<PAGE> 14
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
6.13 Entire Agreement. This Agreement, and the documents referred to herein
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements existing
between the parties hereto are expressly canceled.
6.14 Cooperate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT
OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHT'S
OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE
QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6.15 Confidentiality. Each party hereto agrees that, except with the prior
written permission of the other party, it shall at all times keep confidential
and not divulge, furnish or make accessible to anyone any confidential
information, knowledge or data concerning or relating to the business or
financial affairs of the other parties to which such party has been or shall
become privy by reason of this Agreement, discussions or negotiations relating
to this Agreement, the performance of its obligations hereunder or the ownership
of Stock purchased hereunder. The provisions of this Section 6.15 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to the
transactions contemplated hereby.
6.16 Exculpation Among Purchasers. Each Purchaser acknowledges that it is not
relying upon any person, firm or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Purchaser agrees that no Purchaser nor the respective controlling
persons, officers, directors, partners, agents, or employees of any Purchaser
shall be liable for any action heretofore or hereafter taken or omitted to be
taken by any of them in connection with the Securities.
[Signature Pages Follow]
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<PAGE> 15
The parties have executed this Series A Preferred Stock Purchase Agreement as of
the date first written above.
COMPANY:
FINDMAIL COMMUNICATIONS, INC.
By:
------------------------------------
Name:
----------------------------------
(print)
Title:
---------------------------------
Address: 961 Duncan Street
San Francisco, CA 94131
PURCHASERS:
ATLAS VENTURE FUND III, L.P.
By: Atlas Venture Associates III, LLC
Its: General Partner
By:
------------------------------------
Member Manager
Name:
----------------------------------
(print)
Address: 222 Berkeley Street
Boston, MA 02116
ATLAS VENTURE ENTREPRENEURS' FUND
III, L.P.
By: Atlas Venture Associates III, LLC
Its: General Partner
By:
------------------------------------
Member Manager
Name:
----------------------------------
(print)
Address: 222 Berkeley Street
Boston, MA 02116
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<PAGE> 16
The parties have executed this Series A Preferred Stock Purchase Agreement as of
the date first written above.
FINDMAIL COMMUNICATIONS, INC.
By:
------------------------------------
Name:
----------------------------------
(print)
Title:
---------------------------------
Address: 961 Duncan Street
San Francisco, CA 94131
PURCHASERS:
ATLAS VENTURE FUND III, L.P.
By: Atlas Venture Associates III, LLC
Its: General Partner
By:
------------------------------------
Member Manager
Name:
----------------------------------
(print)
Address: 222 Berkeley Street
Boston, MA 02116
ATLAS VENTURE ENTREPRENEURS' FUND
III, L.P.
By: Atlas Venture Associates III, LLC
Its: General Partner
By:
------------------------------------
Member Manager
Name:
----------------------------------
(print)
Address: 222 Berkeley Street
Boston, MA 02116
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<PAGE> 1
EXHIBIT 10.19
EGROUPS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is
made as of the 17th day of December 1998, by and between eGroups, Inc. (formerly
FindMail Communications, Inc.), a Delaware corporation (the "Company"), and the
investors listed on Exhibit A attached hereto (each a "Purchaser" and together,
if more than one, the "Purchasers").
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
1.1 Sale and Issuance of Series B Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State
of the State of Delaware on or before the Closing (as defined below) the Second
Amended and Restated Certificate of Incorporation, in the form attached hereto
as Exhibit B (the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to each Purchaser at the Closing that number of shares of Series B
Preferred Stock set forth opposite each such Purchaser's name on Exhibit A
attached hereto at a purchase price of $2.8791 per share. The shares of Series B
Preferred Stock issued to the Purchaser pursuant to this Agreement shall be
hereinafter referred to as the "Stock."
1.2 Closing; Delivery.
(a) The purchase and sale of the Stock shall take place at the
offices of Perkins Coie, LLP, 250 Montgomery Street, 16th Floor, San Francisco,
California, at 10:00 a.m., on December 17, 1998, or at such other time and place
as the Company and the Purchasers mutually agree upon, orally or in writing
(which time and place are designated as the "Closing").
(b) At the Closing, the Company shall deliver to each Purchaser
a certificate representing the Stock being purchased thereby against payment of
the purchase price therefor by check or by wire transfer to the Company's bank
account.
2. Representations, Warranties and Covenants of the Company. The Company
hereby represents, warrants and covenants to each Purchaser that, except as set
forth on a Schedule of Exceptions attached hereto as Exhibit C, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
<PAGE> 2
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:
(a) Two Million Six Hundred Ten Thousand (2,610,000) shares of
preferred stock (the "Preferred Stock"), of which (i) Eight Hundred Ten Thousand
(810,000) have been designated Series A Preferred Stock, all of which are issued
and outstanding immediately prior to the Closing (the "Series A Preferred
Stock"); and (ii) One Million Eight Hundred Thousand (1,800,000) have been
designated Series B Preferred Stock (the "Series B Preferred Stock"), none of
which are issued and outstanding immediately prior to the Closing. The rights,
privileges and preferences of the Preferred Stock are as stated in the Restated
Certificate.
(b) Ten Million (10,000,000) shares of Common Stock, Three
Million Thirty Thousand Five Hundred (3,030,500) shares of which are issued and
outstanding immediately prior to the Closing. All of the outstanding shares of
Common Stock have been duly authorized, fully paid and are nonassessable and
issued in compliance with all applicable federal and state securities laws. The
Company has reserved (i) Two Million Six Hundred Ten Thousand (2,610,000) shares
of Common Stock for issuance upon conversion of the Preferred Stock and (ii)
Nine Hundred Fifty Thousand (950,000) shares of Common Stock for issuance to
officers, directors, employees and consultants of the Company under the
Company's 1998 Stock Option Plan, of which (A) Two Hundred Forty Thousand Five
Hundred (240,500) shares have been issued and are outstanding upon the exercise
of options granted, (B) Eighteen Thousand Two Hundred (18,200) shares are
issuable upon the exercise of options currently outstanding, and (C) Six Hundred
Ninety One Thousand Three Hundred (691,300) shares are available for future
grants.
Except for (i) conversion privileges of the Preferred Stock, and (ii)
outstanding options under the Company's 1998 Stock Option Plan and except as set
forth in the Agreements and the Restated Certificate, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal or similar rights) or agreements, oral or in writing, for the
purchase or acquisition from the Company of any shares of its capital stock.
2.3 Subsidiaries. The Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
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<PAGE> 3
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the First Amended and Restated Investors Rights
Agreement, in the form attached hereto as Exhibit D (the "Investors Rights
Agreement"), the First Amended and Restated Co-Sale Agreement in the form
attached hereto as Exhibit E (the "Co-Sale Agreement"), and the First Amended
and Restated Voting Agreement in the form attached hereto as Exhibit F (the
"Voting Agreement" and collectively with this Agreement, the Investors Rights
Agreement and the Co-Sale Agreement, the "Agreements"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Stock and the Common Stock issuable upon conversion
of the Stock (together, the "Securities") has been taken or will be taken prior
to the Closing, and the Agreements, when executed and delivered by the Company,
shall constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, or (b) to the extent the indemnification provisions contained in the
Investors Rights Agreement may be limited by applicable federal or state
securities laws. The issuance of the Stock is not subject to any pre-emptive
rights or rights of first refusal.
2.5 Valid Issuance of Securities. The Stock that is being issued to the
Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors Rights
Agreement and applicable state and federal securities laws. Based in part upon
the representations of the Purchasers in this Agreement and subject to the
provisions of Section 2.6 below, the Stock will be issued in compliance with all
applicable federal and state securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption. The Common Stock issuable upon conversion of
the Stock has been duly and validly reserved for issuance, and upon issuance in
accordance with the terms of the Restated Certificate, shall be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors Rights
Agreement and applicable federal and state securities laws and will be issued in
compliance with all applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for filings pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as
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<PAGE> 4
amended, and the rules thereunder, other applicable state securities laws and
Regulation D of the Securities Act of 1933, as amended (the "Securities Act").
2.7 Litigation. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of the Agreements or the right of the Company to
enter into them, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse changes in the assets, condition or affairs of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened involving the prior employment of any of
the Company's employees, their use in connection with the Company's business of
any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Patents and Trademarks. The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, domain
names, copyrights, trade secrets, licenses, information and proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted without any conflict with, or infringement of, the rights of others,
which conflict or infringement would have a material adverse effect on the
assets, condition or affairs of the Company, financially or otherwise. There are
no outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity. The Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business as proposed to be conducted.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant or instrument under which any such
employee is now obligated. The Company does not believe it is or will be
necessary
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<PAGE> 5
to use any inventions of any of its employees (or persons it currently intends
to hire) made prior to their employment by the Company.
2.9 Compliance with Other Instruments.
(a) The Company is not in violation or default of any provisions
of its Restated Certificate or Bylaws or of any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound, or of
any provision of federal or state statute, rule or regulation applicable to the
Company which would have a material adverse effect on the assets, condition or
affairs of the Company, financially or otherwise. The execution, delivery and
performance of the Agreements and the consummation of the transactions
contemplated hereby or thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Company, its business or
operations or of its assets or properties.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution agreement or other agreement
which would have a material adverse effect on the assets, condition or affairs
of the Company, financially or otherwise.
2.10 Agreements; Action.
(a) Except for the Agreements, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof
(b) Except for agreements explicitly contemplated by the
Agreements, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of, $10,000, (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person or affect the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $ 10,000 or in excess
of $25,000 in the aggregate, (iii) made any loans or
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<PAGE> 6
advances to any person, or (iv) sold, exchanged or otherwise disposed of any of
its assets or rights, other than the sale of its inventory in the ordinary
course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws, that materially and adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
2.11 Disclosure. The Company has provided the Purchasers with all the
information which the Purchasers have requested for deciding whether to acquire
the Stock and all information which the Company believes is reasonably necessary
to enable the Purchasers to make such a decision, including certain of the
Company's projections describing its proposed business (collectively, the
"Business Plan"). The representations and warranties of the Company contained in
this Agreement and the exhibits attached hereto and in any certificate furnished
or to be furnished to Purchasers at the Closing do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances under which they were made. To the extent the Business Plan
was prepared by management of the Company, the Business Plan and the financial
and other projections contained in the Business Plan were prepared in good faith
and the Company reasonably believes there is a reasonable basis for such
projections.
2.12 No Conflict of Interest. The Company is riot indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business. None of the
Company's officers or directors, or any members of their immediate families,
are, directly or indirectly, indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company, except that officers, directors
and/or stockholders of the Company may own stock in (but not exceeding two
percent of the outstanding capital stock of) any publicly traded companies that
may compete with the Company. To the Company's knowledge, none of the Company's
officers or directors or any members of their immediate families are, directly
or indirectly, interested in any material contract with the Company. The Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
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2.13 Rights of Registration and Voting. Except as contemplated in the
Investors Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity. Except
as contemplated in the Voting Agreement, no stockholders of the Company have
entered into any agreements with respect to the voting of capital shares of the
Company.
2.14 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens, which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.15 Manufacturing and Marketing Rights. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
2.16 Financial Statements. The Company has made available to each
Purchaser its unaudited balance sheet for the period from inception to October
31, 1998 and its unaudited income statement and statement of cash flows and
stockholders' equity from the period from inception to October 31, 1998
(collectively, the "Financial Statements"). The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein. Except as set forth in the
Financial Statements, the Company has no material liability or obligation,
absolute or contingent (individually or in the aggregate), except (a)
obligations and liabilities incurred after October 31, 1998 in the ordinary
course of business that are not material, individually or in the aggregate, and
(b) obligations under contracts made in the ordinary course of business that
would not be required to be reflected in financial statements prepared in
accordance with generally accepted accounting principles.
2.17 Employee Benefit Plans. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.18 Tax Returns and Payments. The Company has filed all tax returns and
reports as required by law. These returns and reports are true and correct in
all material respects. The Company has paid all taxes and other assessments due.
2.19 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor
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<PAGE> 8
dispute involving the Company pending, or to the knowledge of the Company
threatened, which would have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. The employment of each officer and employee of the Company is
terminable at the will of the Company. To its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
employment opportunity laws and with other laws related to employment.
2.20 Proprietary Information and Inventions Agreements. Each employee,
consultant and officer of the Company has executed an agreement with the Company
regarding confidentiality and proprietary information substantially in the form
or forms delivered to the counsel for the Purchasers. The Company, after
reasonable investigation, is not aware that any of its employees or consultants
is in violation thereof, and the Company will use its best efforts to prevent
any such violation. All consultants to or vendors of the Company with access to
confidential information of the Company are parties to a written agreement
substantially in the form or forms provided to counsel for the Purchasers under
which, among other things, each such consultant or vendor is obligated to
maintain the confidentiality of confidential information of the Company. The
Company, after reasonable investigation, is not aware that any of its
consultants or vendors are in violation thereof, and the Company will use its
best efforts to prevent any such violation.
2.21 Permits. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and
believes that it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.22 Corporate Documents. The Restated Certificate and Bylaws of the
Company are in the form provided to counsel for the Purchasers. The copy of the
minute books of the Company provided to the Purchasers' counsel contains minutes
of all meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.23 Real Property Holding Corporation. The Company is not a United
States real property holding corporation within the meaning of Internal Revenue
Code Section 897(c)(2) and any regulations promulgated thereunder.
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2.24 Qualified Small Business Stock. The Company represents and warrants
to the Purchasers that, to the Company's knowledge, the Stock should qualify as
"Qualified Small Business Stock" as defined in Section 1202(c) of the Internal
Revenue Code of 1986, as amended as of the date hereof.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby
represents and warrants to the Company that:
3.1 Authorization. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investors
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement, the Purchaser hereby confirms,
that the Securities to be acquired by the Purchaser will be acquired for
investment for the Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Purchaser represents that it has full power and authority to
enter into this Agreement. The Purchaser has not been formed for the specific
purpose of acquiring the Securities.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
discuss the Company's business, management, financial affairs and the terms and
conditions of the offering of the Stock with the Company's management and has
had an opportunity to review the Company's facilities. The Purchaser understands
that such discussions, as well as the written information issued by the Company,
were intended to describe the aspects of the Company's business which it
believes to be material. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Purchaser to rely thereon.
3.4 Restricted Securities. The Purchaser understands that the Securities
have not been, and will not be, registered under the Securities Act, by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's
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<PAGE> 10
representations as expressed herein. The Purchaser understands that the
Securities are "restricted securities" under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Purchaser must hold the
Securities indefinitely unless they are registered with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the
Securities for resale, except as set forth in the Investors Rights Agreement.
The Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of the Purchaser's control, and which the Company is under no obligation
and may not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no public market
now exists for any of the securities issued by the Company, and that the Company
has made no assurances that a public market will ever exist for the Securities.
3.6 Legends. The Purchaser understands that the Securities and any
securities issued in respect of or exchange for the Securities, may bear one or
all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.8 Foreign Investors. If the Purchaser is not a United States person
(as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Stock or any use of this Agreement, including
(a) the legal requirements within its jurisdiction for the purchase of the
Stock, (b) any foreign exchange restrictions applicable to such purchase, (c)
any governmental or other consents that may need to be obtained, and (d) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption,
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<PAGE> 11
sale, or transfer of the Stock. Such Purchaser's subscription and payment for
and continued beneficial ownership of the Stock, will not violate any applicable
securities or other laws of the Purchaser's jurisdiction.
4. Conditions of the Purchasers' Obligations at Closing. The obligations of each
Purchaser to the Company under this Agreement are subject to the fulfillment, on
or before the Closing, of each of the following conditions, unless otherwise
waived:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance. The Company shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
4.3 Compliance Certificate. The President of the Company shall deliver
to the Purchasers at the Closing a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 Opinion of Company Counsel. The Purchasers shall have received from
Perkins Coie LLP, counsel for the Company, an opinion, dated as of the Closing,
in substantially the form of Exhibit G.
4.6 Board of Directors. The Bylaws of the Company shall provide that the
Board of Directors of the Company shall consist of five (5) persons. As of the
Closing, the Board shall be comprised of Eric Archambeau, Scott Hassan, Michael
Moritz and Martin Roscheisen, with one vacancy to be filled in accordance with
the terms of the Voting Agreement.
4.7 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Purchasers' counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.
This may include, without limitation, good standing certificates and
certification by the Company's Secretary regarding the Restated Certificate and
Bylaws and Board of Director and stockholder resolutions approving the
transactions contemplated by this Agreement.
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<PAGE> 12
4.8 Proprietary Information and Employee Stock Purchase Agreements. Each
employee of and consultant to the Company shall have entered into a Proprietary
Information and Inventions Agreement in the form previously provided to counsel
for the Purchasers. Each holder of Common Stock of the Company shall have
entered into a Common Stock Purchase Agreement in the form previously provided
to counsel for the Purchasers.
4.9 Investors Rights Agreement. The Company, each Purchaser and the
Founders shall have executed and delivered the Investors Rights Agreement.
4.10 Co-Sale Agreement. The Company, each Purchaser and the Founders
shall have executed and delivered the Co-Sale Agreement 4.11 Voting Agreement.
The Company, each Purchaser and the Founders shall have executed and delivered
the Voting Agreement.
4.12 Restated Certificate. The Company shall have filed the Restated
Certificate with the Secretary of State of Delaware on or prior to the Closing
Date, which shall continue to be in full force and effect as of the Closing
Date.
4.13. Amendments to Founders' Agreements. The Company and each of the
Founders shall have executed an Amendment to that certain Common Stock Purchase
Agreement dated June 5, 1998, between each Founder and the Company, in
substantially the form attached hereto as Exhibit H.
5. Conditions of the Company's Obligations at Closing. The obligations of the
Company to each Purchaser under this Agreement are subject to the fulfillment,
on or before the Closing, of each of the following conditions, unless otherwise
waived:
5.1 Representations and Warranties. The representations and warranties
of each Purchaser contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
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<PAGE> 13
5.4 Investors Rights Agreement. Each Purchaser shall have executed the
Investors Rights Agreement.
5.5 Co-Sale Agreement. Each Purchaser shall have executed the Co-Sale
Agreement.
5.6 Voting Agreement. Each Purchaser shall have executed the Voting
Agreement.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Purchasers contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement for a
period of one (1) year, and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchasers or the Company.
6.2 Transfer; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
6.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram, confirmed fax or email,
or forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth below or on Exhibit A hereto, or as
subsequently modified by written notice, and if to the Company, with a copy to
Perkins Coie LLP, c/o 188 The Embarcadero, Third Floor, San Francisco, CA 94105,
fax (415) 704-3152, Attn.: Robert v. W. Zipp .
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<PAGE> 14
6.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.8 Fees and Expenses. The Company shall pay the reasonable fees and
expenses of counsel for the Purchasers, incurred with respect to this Agreement,
the documents referred to herein and the transactions contemplated hereby and
thereby (such fees and expenses not to exceed $ 10,000.00).
6.9 Attorney's Fees, If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.10 Amendments and Waivers. Any term of this Agreement may be amended
with the written consent of the Company and the holders of at least a majority
of the Common Stock issued or issuable upon conversion of the Stock. Any
amendment or waiver effected in accordance with this Section 6. 10 shall be
binding upon the Purchasers and each transferee of the Stock (or the Common
Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.
6.11 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
6.12 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any of the Stock, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the
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<PAGE> 15
part of any holder of any breach or default under this Agreement, or any waiver
on the part of any holder of any provisions or conditions of this Agreement,
must be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
6.13 Entire Agreement. This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled.
6.14 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6.15 Confidentiality. Each party hereto agrees that, except with the
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. The provisions of this Section 6.15
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.
6.16 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities.
[Signature Pages Follow]
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<PAGE> 16
The parties have executed this Series B Preferred Stock Purchase
Agreement as of the date first written above.
COMPANY:
EGROUPS, INC.
By:
Martin Roescheisen,
Chief Executive Officer
Address: 520 Third Street, Suite 225
San Francisco, CA 94107
PURCHASERS:
Sequoia Capital VIII
Sequoia International Technology Partners VIII
Sequoia International Technology Partners VM (Q)
By: SC VIII Management, LLC
A California Limited Liability Company
its General Partner
By:
Managing Member
CMS Partners LLC Sequoia 1997
By:
Address: 3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
SIGNATURE PAGE TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT
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<PAGE> 1
EXHIBIT 10.20
EGROUPS, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Series D Preferred Stock Purchase Agreement (the "Agreement") is
made as of the 14th day of December, 1999, by and between eGroups, Inc., a
Delaware corporation (the "Company"), and the investors listed on Exhibit A
attached hereto (each a "Purchaser" and together, if more than one, the
"Purchasers").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK.
1.1 SALE AND ISSUANCE OF SERIES D PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of
State of the State of Delaware on or before the Closing (as defined below) the
Fifth Amended and Restated Certificate of Incorporation, in the form attached
hereto as Exhibit B (the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement,
each Purchaser severally agrees to purchase at the Closing and the Company
agrees to sell and issue to each Purchaser at the Closing that number of shares
of Series D Preferred Stock set forth opposite each such Purchaser's name on
Exhibit A attached hereto at a purchase price of $10.29 per share. The shares of
Series D Preferred Stock issued to the Purchaser pursuant to this Agreement
shall be hereinafter referred to as the "Stock."
1.2 CLOSING; DELIVERY.
(a) The purchase and sale of the Stock shall take place at
the offices of Perkins Coie, LLP, 250 Montgomery Street, 16th Floor, San
Francisco, California, at 10:00 a.m., on December 14th, 1999, or at such other
time and place as the Company and the Purchasers mutually agree upon, orally or
in writing (which time and place are designated as the "Closing").
(b) At the Closing, the Company shall deliver to each
Purchaser a certificate representing the Stock being purchased thereby against
payment of the purchase price therefor by check or by wire transfer to the
Company's bank account, inclusive of any fees for delivery or receipt thereof.
(c) The Company may sell up to the balance of the
authorized number of shares of Series D Preferred Stock not sold at the Closing
to such purchasers as it shall select, provided the agreement for sale is
executed not later than January 31, 2000. Any such purchaser shall become a
party to this Agreement and the other Agreements (as defined below), by and
among the Company and the Investors, and shall have the rights and obligations
hereunder and thereunder.
<PAGE> 2
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents, warrants and covenants to each Purchaser that, except as set
forth on a Schedule of Exceptions attached hereto as Exhibit C, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:
(a) Seventeen Million Five Hundred Thousand (17,500,000)
shares of preferred stock (the "Preferred Stock"), of which (i) One Million Six
Hundred Twenty Thousand (1,620,000) have been designated Series A Preferred
Stock, all of which are issued and outstanding immediately prior to the Closing
(the "Series A Preferred Stock"); (ii) Three Million Six Hundred Thousand
(3,600,000) have been designated Series B Preferred Stock (the "Series B
Preferred Stock"), Three Million Five Hundred Fifty Six Thousand Seven Hundred
Seventy Two (3,556,772) of which are issued and outstanding immediately prior to
the Closing; (iii) Seven Million Two Hundred Eighty Thousand Eight Hundred
Eleven (7,280,811) have been designated Series C Preferred Stock, Seven Million
Two Hundred Eighty Thousand Eight Hundred Eleven (7,280,811) of which are issued
and outstanding immediately prior to the Closing; and (iv) Four Million Five
Hundred Twenty Thousand (4,520,000) have been designated Series D Preferred
Stock, none of which are issued and outstanding prior to the Closing. The
rights, privileges and preferences of the Preferred Stock are as stated in the
Restated Certificate.
(b) Forty Three Million (43,000,000) shares of Common
Stock, Fifteen Million Seven Hundred Sixty Two Thousand One Hundred Eighty Nine
(15,762,189) shares of which are issued and outstanding immediately prior to the
Closing. All of the outstanding shares of Common Stock and Preferred Stock have
been duly authorized, fully paid and are nonassessable and issued in compliance
with all applicable federal and state securities laws. The Company has reserved
Seventeen Million Twenty Thousand Eight Hundred Eleven (17,020,811) shares of
Common Stock for issuance upon conversion of the Preferred Stock. Two Million
Three Hundred Thirty Four Thousand Seven Hundred Sixty Two (2,334,762) shares
are issuable upon the exercise of options currently outstanding, and Nine
Hundred Thirty Thousand Three Hundred Forty (930,340) shares are available for
future grants under the Company's 1998 Stock Option Plan.
Except for (i) conversion privileges of the Preferred
Stock, and (ii) outstanding options under the Company's 1998 Stock Option Plan
and except as set forth in the Agreements and the Restated Certificate, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or
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<PAGE> 3
agreements, oral or in writing, for the purchase or acquisition from the Company
of any shares of its capital stock.
2.3 SUBSIDIARIES. Except for a subsidiary incorporated under the
laws of each of Japan (eGroups KK), Germany (ONElist Europe GmbH), and
California (ONElist, Inc.) the Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Second Amended and
Restated Investors Rights Agreement, in the form attached hereto as Exhibit D
(the "Investors Rights Agreement"), the Second Amended and Restated Co-Sale
Agreement in the form attached hereto as Exhibit E (the "Co-Sale Agreement"),
and the Second Amended and Restated Voting Agreement in the form attached hereto
as Exhibit F (the "Voting Agreement" and collectively with this Agreement, the
Investors Rights Agreement and the Co-Sale Agreement, the "Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance and delivery of the Stock and the Common Stock issuable
upon conversion of the Stock (together, the "Securities") has been taken or will
be taken prior to the Closing, and the Agreements, when executed and delivered
by the Company, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, or (b) to the extent the indemnification provisions contained in the
Investors Rights Agreement may be limited by applicable federal or state
securities laws. The issuance of the Stock is not subject to any pre-emptive
rights or rights of first refusal.
2.5 VALID ISSUANCE OF SECURITIES. The Stock that is being issued
to the Purchasers hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under this Agreement, the Investors
Rights Agreement and applicable state and federal securities laws. Based in part
upon the representations of the Purchasers in this Agreement and subject to the
provisions of Section 2.6 below, the Stock will be issued in compliance with all
applicable federal and state securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption. The Common Stock issuable upon conversion of
the Stock has been duly and validly reserved for issuance, and upon issuance in
accordance with the terms of the Restated Certificate, shall be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors Rights
Agreement and applicable federal and state securities laws and will be issued in
compliance with all applicable federal and state securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local
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governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by the Agreements, except for
filings pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, and the rules thereunder, other applicable state securities
laws and Regulation D of the Securities Act of 1933, as amended (the "Securities
Act").
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of the Agreements or the right
of the Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition or
affairs of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or threatened involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 PATENTS AND TRADEMARKS. The Company owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade names,
domain names, copyrights, trade secrets, licenses, information and proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with, or infringement of, the rights of
others, which conflict or infringement would have a material adverse effect on
the assets, condition or affairs of the Company, financially or otherwise. There
are no outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity. The Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business as proposed to be conducted.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions, or provisions of, or constitute
a default under, any contract, covenant or instrument under which any such
employee is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company.
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2.9 COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company is not in violation or default of any
provisions of its Restated Certificate or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound,
or of any provision of federal or state statute, rule or regulation applicable
to the Company which would have a material adverse effect on the assets,
condition or affairs of the Company, financially or otherwise. The execution,
delivery and performance of the Agreements and the consummation of the
transactions contemplated hereby or thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture or nonrenewal of
any material permit, license, authorization or approval applicable to the
Company, its business or operations or of its assets or properties.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution agreement or other agreement
which would have a material adverse effect on the assets, condition or affairs
of the Company, financially or otherwise.
2.10 AGREEMENTS; ACTION.
(a) Except for the Agreements and salary and stock option
arrangements negotiated and executed in the ordinary course of business, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the
Agreements, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of, $50,000, (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person or affect the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $100,000 or
in excess of $500,000 in the aggregate, (iii) made any loans or advances to any
person in excess of $25,000, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to
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believe are affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws, that materially and adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
2.11 DISCLOSURE. The Company has provided the Purchasers with all
the information which the Purchasers have requested for deciding whether to
acquire the Stock and all information which the Company believes is reasonably
necessary to enable the Purchasers to make such a decision. The representations
and warranties of the Company contained in this Agreement and the exhibits
attached hereto and in any certificate furnished or to be furnished to
Purchasers at the Closing do not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
2.12 NO CONFLICT OF INTEREST. The Company is not indebted,
directly or indirectly, to any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business. None of the Company's officers or directors, or any members of
their immediate families, are, directly or indirectly, indebted to the Company
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a material
business relationship, or any firm or corporation which competes with the
Company, except that officers, directors and/or stockholders of the Company may
own stock in (but not exceeding two percent of the outstanding capital stock of)
any publicly traded companies that may compete with the Company. To the
Company's knowledge, none of the Company's officers or directors or any members
of their immediate families are, directly or indirectly, interested in any
material contract with the Company. The Company is not a guarantor or indemnitor
of any indebtedness of any other person, firm or corporation.
2.13 RIGHTS OF REGISTRATION AND VOTING. Except as contemplated in
the Investors Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
Except as contemplated in the Voting Agreement, no stockholders of the Company
have entered into any agreements with respect to the voting of capital shares of
the Company.
2.14 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens, which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
2.15 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, license, market, or sell its
products to any other person
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and is not bound by any agreement that affects the Company's exclusive right to
develop, manufacture, assemble, distribute, market or sell its products.
2.16 FINANCIAL STATEMENTS. Section 2.16 to Exhibit C sets forth
the Company's unaudited balance sheet as of September 30, 1999, and the related
unaudited statements of operations and cash flow for the nine month period ended
September 30, 1999 (the "Company's Interim Financials") (collectively, such
financial statements are sometimes referred to herein as "Company's Financial
Statements"). The Company's Financial Statements are true and correct in all
material respects and have been prepared in accordance with GAAP applied on a
basis consistent throughout the periods indicated and consistent with each
other. The Company's Financial Statements present fairly the financial
condition, operating results and cash flows of Company as of the dates and
during the periods indicated therein, subject to normal year-end adjustments,
which are not expected to be material in amount or significance. Company's
unaudited balance sheet dated as of September 30, 1999, shall be referred to as
the "Company's Current Balance Sheet".
2.17 TAX RETURNS AND PAYMENTS. The Company has timely filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due.
2.18 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which would have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company. To
its knowledge, the Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment.
2.19 PROPRIETARY INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS.
Each employee, consultant and officer of the Company has executed an agreement
with the Company regarding confidentiality/proprietary information and invention
assignment substantially in the form or forms delivered to the counsel for the
Purchasers. The Company, after reasonable investigation, is not aware that any
of its employees, consultants or officers is in violation thereof, and the
Company will use its best efforts to prevent any such violation. All consultants
to or vendors of the Company with access to confidential information of the
Company are parties to a written agreement substantially in the form or forms
provided to counsel for the Purchasers under which, among other things, each
such consultant or vendor is obligated to maintain the confidentiality of
confidential information of the Company. The Company, after reasonable
investigation, is not aware that any of its consultants or vendors are in
violation thereof, and the Company will use its best efforts to prevent any such
violation.
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2.20 NO UNDISCLOSED LIABILITIES. Except as set forth in the
Schedule of Exceptions, the Company does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, or unmatured (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles), which individually or in the aggregate exceeds
$100,000 and (i) has not been reflected in the Company's Current Balance Sheet,
or (ii) has not arisen in the ordinary course of the Company's business since
the date of the Company's Current Balance Sheet.
2.21 PERMITS. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and
believes that it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.22 CORPORATE DOCUMENTS. The Restated Certificate and Bylaws of
the Company are in the form provided to counsel for the Purchasers. The copy of
the minute books of the Company provided to the Purchasers' counsel contains
minutes of all meetings of directors and stockholders and all actions by written
consent without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.23 REAL PROPERTY HOLDING CORPORATION. The Company is not a
United States real property holding corporation within the meaning of Internal
Revenue Code Section 897(c)(2) and any regulations promulgated thereunder.
2.24 YEAR 2000 COMPLIANCE. All of the Company's products and
services (including products and services currently under development) to the
extent they record, store, process, calculate and present dates, if at all, are
Year 2000 Compliant. All of the Company's material products and services will
lose no functionality with respect to the introduction of records containing
dates falling on or after January 1, 2000. To the knowledge of the Company, all
of the Company's internal computer systems, including without limitation, its
accounting systems, are Year 2000 Compliant. Any breach of this representation
can be cured within a 15-day period ending January 15, 2000.
2.25 SMALL BUSINESS INVESTMENT ACT. The Company, together with
its "affiliates" (as that term is defined in Section 121.103 of Title 13 of the
Code of Federal Regulations (the "Federal Regulations")), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended (the "Small Business Act"), and the regulations thereunder, including
Section 121.301 of Title 13 of the Federal Regulations (a "Small Business
Concern"). The information delivered to Bank of America Ventures on SBA Forms
480, 652 and 1031 delivered in connection herewith is true and correct. The
Company
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acknowledges that Bank of America Ventures is a Federal licensee under the Small
Business Investment Act of 1958, as amended.
2.26 QUALIFIED SMALL BUSINESS STOCK. The Company is a "qualified
small business" within the meaning of Section 1202(d) of the Internal Revenue
Code of 1986, as amended (the "Code") as of the date hereof and the Series D
Preferred Stock should qualify as "qualified small business stock" as defined in
Section 1202(c) of the Code as of the date hereof. The Company further
represents and warrants that, as of the date hereof, it meets the "active
business requirement" of Section 1202(e) of the Code and it has made no
"significant redemptions" within the meaning of Section 1202(c)(3)(B) of the
Code.
2.27 ACTIVITIES SINCE DECEMBER 1, 1999. Since December 1, 1999,
there has not been:
(a) any material change or amendment to any contract or
arrangement (involving obligations (contingent or otherwise) of, or payments to,
the Company in excess of $50,000) by which the Company or any of its assets or
properties is bound or subject, except for changes or amendments which are
expressly provided for or disclosed in this Agreement;
(b) to the Company's knowledge, any other event or
condition of any character which would materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company;
(c) any change in the assets, liabilities, financial
condition or operations of the Company from that reflected in the Company
Financial Statements, other than changes in the ordinary course of business,
none of which individually or in the aggregate has had or is expected to have a
material adverse effect on such assets, liabilities, financial condition,
operations or prospects of the Company; or
(d) any arrangement or commitment by the Company to do any
of the acts described in subsection (a) through (c) above.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby severally represents and warrants to the Company that:
3.1 AUTHORIZATION. The Agreements, when executed and delivered by
the Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investors
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with the Purchaser in reliance upon the Purchaser's representation to the
Company, which by the Purchaser's execution of this Agreement, the Purchaser
hereby confirms, that the Securities to be
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acquired by the Purchaser will be acquired for investment for the Purchaser's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Purchaser further represents that the
Purchaser does not presently have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Securities. The
Purchaser represents that it has full power and authority to enter into this
Agreement. The Purchaser has not been formed for the specific purpose of
acquiring the Securities.
3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Stock with the Company's
management and has had an opportunity to review the Company's facilities. The
Purchaser understands that such discussions, as well as the written information
issued by the Company, were intended to describe the aspects of the Company's
business which it believes to be material. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 2
of this Agreement or the right of the Purchaser to rely thereon.
3.4 RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale,
except as set forth in the Investors Rights Agreement. The Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and on requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
3.5 NO PUBLIC MARKET. The Purchaser understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
3.6 LEGENDS. The Purchaser understands that the Securities and
any securities issued in respect of or exchange for the Securities, may bear one
or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR
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DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) Any legend required by the Blue Sky laws of any state
to the extent such laws are applicable to the shares represented by the
certificate so legended.
3.7 ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
3.8 FOREIGN INVESTORS. If the Purchaser is not a United States
person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Stock or any use of this Agreement, including
(a) the legal requirements within its jurisdiction for the purchase of the
Stock, (b) any foreign exchange restrictions applicable to such purchase, (c)
any governmental or other consents that may need to be obtained, and (d) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Stock. Such Purchaser's
subscription and payment for and continued beneficial ownership of the Stock,
will not violate any applicable securities or other laws of the Purchaser's
jurisdiction.
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing.
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4.5 OPINION OF COMPANY COUNSEL. The Purchasers shall have
received from Perkins Coie LLP, counsel for the Company, an opinion, dated as of
the Closing, in substantially the form of Exhibit G.
4.6 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Purchasers' counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request. This may include, without limitation, good standing
certificates and certification by the Company's Secretary regarding the Restated
Certificate and Bylaws and Board of Director and stockholder resolutions
approving the transactions contemplated by this Agreement.
4.7 INVESTORS RIGHTS AGREEMENT. The Company, each Purchaser and
the Founders shall have executed and delivered the Investors Rights Agreement.
4.8 CO-SALE AGREEMENT. The Company, each Purchaser and the
Founders shall have executed and delivered the Co-Sale Agreement.
4.9 VOTING AGREEMENT. The Company, each Purchaser and the
Founders shall have executed and delivered the Voting Agreement.
4.10 RESTATED CERTIFICATE. The Company shall have filed the
Restated Certificate with the Secretary of State of Delaware on or prior to the
Closing Date, which shall continue to be in full force and effect as of the
Closing Date.
4.11 SBA FORMS. The Company shall have executed and delivered to
Bank of America Ventures a "Size Status Declaration" on SBA Form 480 and an
"Assurance of Compliance" on SBA Form 652, and shall have provided to Bank of
America Ventures information necessary for the preparation of a "Portfolio
Financing Report" on SBA Form 1031.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to the
Closing shall have been performed or complied with in all material respects.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in
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connection with the lawful issuance and sale of the Stock pursuant to this
Agreement shall be obtained and effective as of the Closing.
5.4 INVESTORS RIGHTS AGREEMENT. Each Purchaser shall have
executed the Investors Rights Agreement.
5.5 CO-SALE AGREEMENT. Each Purchaser shall have executed the
Co-Sale Agreement.
5.6 VOTING AGREEMENT. Each Purchaser shall have executed the
Voting Agreement.
6. ADDITIONAL COVENANTS OF THE COMPANY.
6.1 CERTAIN COVENANTS RELATING TO SBA MATTERS.
(a) USE OF PROCEEDS. The proceeds from the issuance and
sale of the Stock (the "Proceeds") shall be used by the Company for working
capital and other general corporate purposes. The Company shall provide Bank of
America Ventures and the Small Business Administration (the "SBA") reasonable
access to the Company's books and records for the purpose of confirming the use
of the Proceeds.
(b) BUSINESS ACTIVITY. For a period of one (1) year after
the date hereof the Company shall not change the nature of its business activity
if such change would render the Company ineligible to be a small business
concern as provided in 13 C.F.R. Section 107.720.
(c) COMPLIANCE. So long as Bank of America Ventures holds
any securities of the Company, the Company will at all times comply with the
non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
(d) INFORMATION. Within forty-five (45) days after the end
of each fiscal year and at such other times as Bank of America Ventures may
reasonably request, the Company shall deliver to Bank of America Ventures a
written assessment, in form and substance satisfactory to Bank of America
Ventures, of the economic impact of Bank of America Ventures' financing
specifying the full-time equivalent jobs created or retained in connection with
such investment, and the impact of the financing on the Company's business in
terms of profits and on taxes paid by the Company and its employees. Upon
request, the Company agrees to promptly provide Bank of America Ventures with
sufficient information to permit such Investor to comply with their obligations
under the Small Business Investment Act of 1958, as amended, and the regulations
promulgated thereunder and related thereto. Any submission of financial
information to Bank of America Ventures pursuant to this section 6.1(d) shall
include a certificate of the Company's president, chief executive officer,
treasurer or chief financial officer.
6.2 QUALIFIED SMALL BUSINESS STOCK. The Company will use its best
efforts to comply with the reporting and recordkeeping requirements of Section
1202 of the Code, any regulations promulgated thereunder and any similar state
laws and regulations, and agrees not to
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<PAGE> 14
repurchase any stock of the Company if such repurchase would cause the Shares
not to so qualify as "Qualified Small Business Stock." The Company further
covenants to submit to its shareholders and to state and federal taxation
authorities such form and filings as may be required to document such
compliance, with its franchise or income tax return for the current income year.
6.3 PERMITTED TRANSFERS. In the event Bank of America Ventures
decides to transfer all (but not less than all) of the Series D Preferred Stock
or (Common Stock issued upon conversion thereof) then held by Bank of America
Ventures to Bank of America Ventures II L.P., the Company shall take all
necessary actions, including amending any or all of the Agreements, to effect
such transfer; provided that the terms and conditions of all of the Agreements
shall inure to the benefit of and be binding upon Bank of America Ventures II
L.P. upon the effective date of such transfer. In the event that CMG@Ventures
III, LLC, @Ventures III, L.P., @Ventures Foreign Fund III, L.P. or @Ventures
Investors, LLC (collectively "@Ventures") decides to transfer any or all of the
Series D Preferred Stock or (Common Stock issued upon conversion thereof) then
held by such Purchaser to affiliated funds or entities of @Ventures, the Company
shall take all necessary actions, including amending any or all of the
Agreements, to effect such transfer; provided that the terms and conditions of
all of the Agreements shall inure to the benefit of and be binding upon the
transferee upon the effective date of such transfer.
6.4 TERMINATION OF COVENANTS. The covenants set forth in Section
6.1, Section 6.2 and Section 6.3 shall terminate and be of no further force or
effect when the sale of securities pursuant to a registration statement filed by
the Company under the Act in connection with the firm commitment underwritten
offering of its securities to the general public is consummated or when the
Company first becomes subject to the periodic reporting requirements of Sections
13 or 15(d) of the Exchange Act, whichever event shall first occur.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Purchasers contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement for a
period of one (1) year after the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchasers or the Company.
7.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
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<PAGE> 15
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram, confirmed fax or email,
or forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth below or on Exhibit A hereto, or as
subsequently modified by written notice, and if to the Company, with a copy to
Perkins Coie LLP, 250 Montgomery Street, 16th Floor, San Francisco, CA 94104,
fax (415) 781-2525, Attn.: John S. Wills.
7.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Purchaser from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.8 FEES AND EXPENSES. The Company shall pay the reasonable fees
and expenses of one counsel for the Purchasers, incurred with respect to the
negotiation of this Agreement, the documents referred to herein and the
transactions contemplated hereby and thereby (such fees and expenses not to
exceed $15,000.00).
7.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended with the written consent of the Company and the holders of at least a
majority of the Common Stock issued or issuable upon conversion of the Stock.
Any amendment or waiver effected in accordance with this Section 7.10 shall be
binding upon the Purchasers and each transferee of the Stock (or the Common
Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.
7.11 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith.
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<PAGE> 16
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be excluded from
this Agreement, (b) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.
7.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any holder of any of the Stock, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any holder of any breach or default under
this Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
7.13 ENTIRE AGREEMENT. This Agreement, and the documents referred
to herein constitute the entire agreement between the parties hereto pertaining
to the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled.
7.14 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
7.15 CONFIDENTIALITY. Each party hereto agrees that, except as
required by law or with the prior written permission of the other party, it
shall at all times keep confidential and not divulge, furnish or make accessible
to anyone any confidential information, knowledge or data concerning or relating
to the business or financial affairs of the other parties to which such party
has been or shall become privy by reason of this Agreement, discussions or
negotiations relating to this Agreement, the performance of its obligations
hereunder or the ownership of Stock purchased hereunder. The provisions of this
Section 7.15 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto with respect to the transactions contemplated hereby.
7.16 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges
that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment or decision to
invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling persons, officers, directors, partners, agents, or
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<PAGE> 17
employees of any Purchaser shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Securities.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 18
The parties have executed this SERIES D PREFERRED STOCK PURCHASE
AGREEMENT as of the date first written above.
COMPANY:
EGROUPS, INC.
By:
-------------------------------------
Michael Klein
President and Chief Executive Officer
Address: 350 Brannan Street
San Francisco, CA 94107
PURCHASERS:
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 1
Exhibit 10.21
FINDMAIL COMMUNICATIONS, INC.
AMENDMENT TO COMMON STOCK PURCHASE AGREEMENT
This Amendment to Common Stock Purchase Agreement (the "Agreement") is
made as of December 15, 1998 to the Common Stock Purchase Agreement dated June
5, 1998 (the "Purchase Agreement") by and between FindMail Communications,
Inc., a Delaware corporation (the "Company") and Scott Hassan (the
"Purchaser"). Unless specifically designated otherwise, the capitalized terms
herein shall have the same meanings given them in the Purchase Agreement.
RECITAL
The Purchase Agreement provides for the sale and issuance of 1,344,321
shares of the Company's Common Stock to Purchaser, which sale took place on
June 5, 1998. The Company and the Purchaser desire to amend the Purchase
Agreement to modify the terms of the Company's repurchase option under Sections
3(a) and 3(f) of the Purchase Agreement.
AMENDMENT
In consideration of the mutual promises and covenants hereinafter set
forth, the parties hereto mutually agree as follows:
A. Section 3(a)(iii) of the Purchase Agreement shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
"(iii) Subject to Section 3(a)(iv) below, the Repurchase Option shall
be in effect with respect to sixty-seven percent (67%) of the Shares and shall
lapse as to 1/36th of such Shares on each monthly anniversary of the Vesting
Commencement Date (as set forth on the signature page of this Agreement), until
all Shares are released from the Repurchase Option (provided in each case that
Purchaser's employment or consulting relationship with the Company has not been
terminated prior to the date of any such release). The remaining thirty-three
percent (33%) shall not be subject to the Repurchase Option. Fractional shares
shall be rounded to the nearest whole share. Shares as to which the Repurchase
Option has not lapsed are referred to as "Unvested Shares."
(iv) Notwithstanding the foregoing, the Repurchase Option shall immediately
lapse with respect to all remaining Unvested Shares if, in connection with or
following the completion of Merger (as defined below), Purchaser's employment
with the Company (or its successor entity) is terminated by the Company or its
successor without Cause (as defined below) or Purchaser terminates his
employment voluntarily as a result of a Constructive Termination (as defined
below).
(v) "Merger" shall mean a merger or consolidation of the Company in
connection with which greater than 50% of the voting power of the Company is
transferred, or a
<PAGE> 2
sale of all or substantially all of the Company's assets or capital stock,
excluding a transaction for the sole purpose of changing the legal domicile of
the Company.
(vi) "Cause" for the termination of Purchaser's employment with the
Company or its successor will exist at any time one or more of the following
events: (A) Purchaser's willful misconduct in performance of the duties of his
position with the Company or its successor, including Purchaser's refusal to
comply in any material respect with the legal directives of the Company's Chief
Executive Officer or the Board of Directors so long as such directives are not
inconsistent with the Purchaser's position and duties, and such refusal to
comply is not remedied within 10 working days after written notice from the
Company or its successor, which written notice shall state that failure to
remedy such conduct may result in termination for Cause; or (B) conduct that
materially discredits the Company or its successor or is materially detrimental
to the reputation of the Company or its successor, including conviction of a
felony involving moral turpitude."
(vii) "Constructive Termination" shall be deemed to occur if there is
(A) an adverse change in the Purchaser's position or operating responsibilities
with the Company or its successor causing such position to be of materially
reduced stature or responsibility (it being understood that Purchaser's
operating responsibilities, title and reporting relationships may be changed in
connection with integration of the Company's operations with those of an
acquiror following a Merger); or (B) a reduction of the Purchaser's
compensation, taken as a whole."
B. Section 3(f) of the Purchase Agreement shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
"(f) Termination of Rights. The right of first refusal granted the
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntarily transfer granted the Company by Section 3(c) above
shall terminate upon the first sale of Common Stock of the Company pursuant to
a registration statement filed with and declared effective by the Securities
and Exchange Commission under the Securities Act. Upon termination of the right
of first refusal described in Section 3(b) and the expiration or exercise of
the Repurchase Option, a new certificate or certificates representing the
Shares not repurchased shall be issued, on request, without the legend referred
to in Section 6(a)(ii) below and delivered to the Purchaser."
Except as specifically amended herein, the Purchase Agreement shall remain
in full force and effect.
This Amendment may be executed in counterparts, each of which shall
constitute an original and all of which together constitute one instrument.
This Amendment shall be governed by California law.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year above first written.
COMPANY: PURCHASER:
FindMail Communications, Inc. Scott Hassan
By: ___________________________________ ____________________________________
Martin Roscheisen, (Signature)
Chief Executive Officer
<PAGE> 4
FINDMAIL COMMUNICATIONS, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of June 5,
1998, by and between FindMail Communications, Inc., a Delaware corporation (the
"Company"), and Scott Hassan ("Purchaser").
1. SALE OF STOCK. Subject to the terms and conditions of this Agreement, on the
Purchase Date (as defined below) the Company will issue and sell to Purchaser,
and Purchaser agrees to purchase from the Company, 1,344,321 shares of the
Company's Common Stock (the "Shares") at a purchase price of $0.01 per Share for
a total purchase price of $13,443.21. The term "Shares" refers to the purchased
Shares and all securities received in replacement of or in connection with the
Shares pursuant to stock dividends or splits, all securities received in
replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. PURCHASE. The purchase and sale of the Shares under this Agreement shall
occur at the principal office of the Company simultaneously with the execution
of this Agreement or at such other time and place as the Company and Purchaser
shall agree (the "Purchase Date"). On the Purchase Date, the Company will
deliver to Purchaser a certificate representing the Shares to be purchased by
Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by cash, check or an assignment of certain assets as set
forth in the Bill of Sale and Instrument of Assignment in the form attached to
this Agreement as Exhibit A.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on transfer
created by applicable securities laws, Purchaser shall not assign, encumber or
dispose of any interest in the Shares while the Shares are subject to the
Company's Repurchase Option (as defined below), except as provided below. After
any Shares have been released from the Repurchase Option, Purchaser shall not
assign, encumber or dispose of any interest in such Shares except in compliance
with the provisions below and applicable securities laws.
(a) REPURCHASE OPTION.
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
exclusive option (the "Repurchase Option") for a period of 60 days from such
date to repurchase all or any portion of the Shares held by Purchaser as of the
Termination Date which have not yet been released from the Company's Repurchase
Option at the original purchase price per Share specified in Section 1 (adjusted
<PAGE> 5
for any stock splits, stock dividends and the like); provided, however, that the
Repurchase Option shall continue for a period of up to one year from the
Termination Date to the extent that the Company reasonably determines that such
an extension of time is necessary to prevent the repurchase of Purchaser's
Shares from causing other capital stock of the Company to not qualify as "small
business stock" under Section 1202 of the Internal Revenue Code of 1986, as
amended.
(ii) The Repurchase Option shall be exercised by the Company by written
notice to Purchaser or Purchaser's executor and, at the Company's option, (A) by
delivery to Purchaser or Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being purchased, or (B) in the event
Purchaser is indebted to the Company, by cancellation by the Company of an
amount of such indebtedness equal to the purchase price for the Shares being
repurchased, or (C) by a combination of (A) and (B) so that the combined payment
and cancellation of indebtedness equals such purchase price. Upon delivery of
such notice and payment of the purchase price in any of the ways described
above, the Company shall become the legal and beneficial owner of the Shares
being repurchased and all rights and interest therein or related thereto, and
the Company shall have the right to transfer to its own name the number of
Shares being repurchased by the Company, without further action by Purchaser.
(iii) The Repurchase Option shall be in effect with respect to sixty-
seven percent (67%) of the Shares and shall lapse as to 1/36 of such Shares on
each monthly anniversary of the Vesting Commencement Date (as set forth on the
signature page of this Agreement), until all Shares are released from the
Repurchase Option (provided in each case that Purchaser's employment or
consulting relationship with the Company has not been terminated prior to the
date of any such release). The remaining thirty-three percent (33%) shall not be
subject to the Repurchase Option. Fractional shares shall be rounded to the
nearest whole share.
(b) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or any
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall deliver
to the Company a written notice (the "Notice") stating: (A) the Holder's bona
fide intention to sell or otherwise transfer such Shares; (B) the name of each
proposed purchaser or other transferee ("Proposed Transferee"); (C) the number
of Shares to be transferred to each Proposed Transferee; and (D) the terms and
conditions of each proposed sale or transfer. The Holder shall offer the Shares
at the same price (the "Offered Price") and upon the same terms (or terms as
similar as reasonably possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the
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<PAGE> 6
Holder, elect to purchase all, but not less than all, of the Shares proposed to
be transferred to any one or more of the Proposed Transferees, at the purchase
price determined in accordance with subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section 3(b) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), in cash (by check), by cancellation of all or
a portion of any outstanding indebtedness of the Holder to the Company (or, in
the case of repurchase by an assignee, to the assignee), or by any combination
thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(b), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 60 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section 3(b) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this
Section 3.
(c) INVOLUNTARY TRANSFER.
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<PAGE> 7
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER. In the event,
at any time after the date of this Agreement, of any transfer by operation of
law or other involuntary transfer (including death or divorce, but excluding a
transfer to Immediate Family as set forth in Section 3(b)(vi) above) of all or a
portion of the Shares by the record holder thereof, the Company shall have an
option to purchase all of the Shares transferred at the greater of the purchase
price paid by Purchaser pursuant to this Agreement or the fair market value of
the Shares on the date of transfer. Upon such a transfer, the person acquiring
the Shares shall promptly notify the Secretary of the Company of such transfer.
The right to purchase such Shares shall be provided to the Company for a period
of 30 days following receipt by the Company of written notice by the person
acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any stock to be
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify Purchaser or his or her executor of the price so
determined within 30 days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with
the valuation as determined by the Board of Directors of the Company, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(d) ASSIGNMENT. The right of the Company to purchase any part of the Shares may
be assigned in whole or in part to any stockholder or stockholders of the
Company or other persons or organizations; provided, however, that an assignee,
other than a corporation that is the parent or a 100% owned subsidiary of the
Company, must pay the Company, upon assignment of such right, cash equal to the
difference between the original purchase price and fair market value, if the
original purchase price is less than the fair market value of the Shares subject
to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares or any
interest therein will receive and hold such Shares or interest subject to the
provisions of this Agreement, including, insofar as applicable, the Repurchase
Option. Any sale or transfer of the Company's Shares shall be void unless the
provisions of this Agreement are met.
(f) TERMINATION OF RIGHTS. The rights granted the Company in this Section 3
shall terminate upon the earlier to occur of (i) the first sale of Common Stock
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act, or (ii) the completion of a "Change of Control Transaction."
Upon such termination, a new certificate or certificates representing the Shares
not repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) below and delivered to Purchaser. As used herein, the term
"Change of Control Transaction" shall include: (x) a merger or consolidation in
which the Company is not the surviving entity, except for a transaction the
principal purpose of which
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<PAGE> 8
is to change the State of the Company's incorporation; (y) the sale, transfer or
other disposition of all or substantially all of the assets of the Company in
complete liquidation or dissolution of the Company; (z) any reverse merger in
which the Company is the surviving entity but in which all of the Company's
outstanding voting stock is transferred to the acquiring entity or its
wholly-owned subsidiary.
4. ESCROW OF UNVESTED SHARES. For purposes of facilitating the enforcement of
the provisions of Section 3 above, Purchaser agrees, immediately upon receipt of
the certificate(s) for the Shares subject to the Repurchase Option, to deliver
such certificate(s), together with an Assignment Separate from Certificate in
the form attached to this Agreement as Exhibit B executed by Purchaser and by
Purchaser's spouse (if required for transfer), in blank, to the Secretary of the
Company, or the Secretary's designee, to hold such certificate(s) and Assignment
Separate from Certificate in escrow and to take all such actions and to
effectuate all such transfers and/or releases as are in accordance with the
terms of this Agreement. Purchaser hereby acknowledges that the Secretary of the
Company, or the Secretary's designee, is so appointed as the escrow holder with
the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly
irrevocable. Purchaser agrees that said escrow holder shall not be liable to any
party hereof (or to any other party). The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary's designee, resigns as escrow holder for any or no
reason, the Board of Directors of the Company shall have the power to appoint a
successor to serve as escrow holder pursuant to the terms of this Agreement.
5. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the purchase of
the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial condition
and has acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Shares. Purchaser is purchasing the
Shares for investment for his or her own account only and not with a view to, or
for resale in connection with, any "distribution" thereof within the meaning of
the Securities Act.
(b) Purchaser understands that the Shares have not been registered under the
Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Shares must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Purchaser further acknowledges
and understands that the Company is under no obligation to register the Shares.
Purchaser understands that the certificate evidencing the Shares will be
imprinted with a legend which prohibits the transfer
-5-
<PAGE> 9
of the Shares unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of issuance of the securities, such
issuance will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), the securities
exempt under Rule 701 may be resold by Purchaser 90 days thereafter, subject to
the satisfaction of certain of the conditions specified by Rule 144, including,
among other things: (1) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is-defined under the Exchange Act); and (2) in the case of an affiliate,
the availability of certain public information about the Company, and the amount
of securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable. Notwithstanding this
Section 5(d), Purchaser acknowledges and agrees to the restrictions set forth in
Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time of
purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than one year after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than two years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to sell the
Shares there may be no public market upon which to make such a sale, and that,
even if such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144 or 701, and that, in such
event, Purchaser would be precluded from selling the Shares under Rule 144 or
701 even if the one-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the applicable
requirements of Rule 144 or 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule
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<PAGE> 10
144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax consequences as
a result of Purchaser's purchase or disposition of the Shares. Purchaser
represents that Purchaser has consulted any tax consultants Purchaser deems
advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the Shares shall bear
the following legends (as well as any legends required by applicable state and
federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY.
(iii) Any legend required to be placed thereon by the California
Commissioner of Corporations.
(b) STOP TRANSFER. Purchaser agrees that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate "stop
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to transfer on
its books any Shares that have sold or otherwise transferred in violation of any
of the provisions of this Agreement or (ii) to treat as owner of such Shares or
to accord the right to vote or pay
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<PAGE> 11
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.
7. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the
Company, to terminate Purchaser's employment, for any reason, with or without
cause.
8. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the amount paid for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with this
executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
Exhibit C. Purchaser further agrees that Purchaser will execute and submit with
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit D if
Purchaser has indicated in the Acknowledgment his or her decision to make such
an election.
9. MARKET STANDOFF AGREEMENT. In connection with the initial public offering of
the Company's securities and upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, Purchaser agrees
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Shares (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
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<PAGE> 12
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
shall be effective unless in writing signed by the parties to this Agreement.
The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations between and has
been reviewed by each of the parties hereto and their respective counsel, if
any; accordingly, this Agreement shall be deemed to be the product of all of the
parties hereto, and no ambiguity shall be construed in favor of or against any
one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this Agreement shall
inure to the benefit of, and be enforceable by the Company's successors and
assigns. The rights and obligations of Purchaser under this Agreement may only
be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
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<PAGE> 13
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE.OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.
[Signature Page Follows]
The parties have executed this Agreement as of the date first set forth above.
FINDMAIL COMMUNICATIONS, INC.
By:
---------------------------------
Title:
------------------------------
Address:
961 Duncan Street
San Francisco, CA 94131
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT
THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING
IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH RESPECT TO
CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR
WITHOUT CAUSE.
PURCHASER:
SCOTT HASSAN
------------------------------------
(Signature)
-10-
<PAGE> 1
EXHIBIT 10.22
FINDMAIL COMMUNICATIONS, INC.
AMENDMENT TO COMMON STOCK PURCHASE AGREEMENT
This Amendment to Common Stock Purchase Agreement (this "Amendment") is
made as of December 15, 1998, to the Common Stock Purchase Agreement dated June
5, 1998 (the "Purchase Agreement") by and between FindMail Communications,
Inc., a Delaware corporation (the "Company") and Martin Roscheisen (the
"Purchaser"). Unless specifically designated otherwise, the capitalized terms
herein shall have the same meanings given them in the Purchase Agreement.
RECITAL
The Purchase Agreement provides for the sale and issuance of 607,582
shares of the Company's Common Stock to Purchaser, which sale took place on
June 5, 1998. The Company and the Purchaser desire to amend the Purchase
Agreement to modify the terms of the Company's repurchase option under Sections
3(a) and 3(f) of the Purchase Agreement.
AMENDMENT
In consideration of the mutual promises and covenants hereinafter set
forth, the parties hereto mutually agree as follows:
A. Section 3(a)(iii) of the Purchase Agreement shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
(iii) Subject to Section 3(a)(iv) below, the Repurchase
Option shall be in effect with respect to sixty-seven percent (67%) of the
Shares and shall lapse as to 1/36th of such Shares on each monthly anniversary
of the Vesting Commencement Date (as set forth on the signature page of this
Agreement), until all Shares are released from the Repurchase Option (provided
in each case that Purchaser's employment or consulting relationship with the
Company has not been terminated prior to the date of any such release). The
remaining thirty-three percent (33%) shall not be subject to the Repurchase
Option. Fractional shares shall be rounded to the nearest whole share. Shares as
to which the Repurchase Option has not lapsed are referred to as "Unvested
Shares."
(iv) Notwithstanding the foregoing, the Repurchase Option
shall immediately lapse with respect to all remaining Unvested Shares if, in
connection with or following the completion of Merger (as defined below),
Purchaser's employment with the Company (or its successor entity) is terminated
by
<PAGE> 2
the Company or its successor without Cause (as defined below) or Purchaser
terminates his employment voluntarily as a result of a Constructive Termination
(as defined below).
(v) "Merger" shall mean a merger or consolidation of the Company in
connection with which greater than 50% of the voting power of the Company is
transferred, or a sale of all or substantially all of the Company's assets or
capital stock, excluding a transaction for the sole purpose of changing the
legal domicile of the Company.
(vi) "Cause" for the termination of Purchaser's employment with the
Company or its successor will exist at any time upon one or more of the
following events: (A) Purchaser's willful misconduct in performance of the
duties of his position with the Company or its successor, including Purchaser's
refusal to comply in any material respect with legal directives of the Company's
Chief Executive Officer or the Board of Directors so long as such directives
are not inconsistent with the Purchaser's position and duties, and such refusal
to comply is not remedied within 10 working days after written notice from the
Company or its successor, which written notice shall state that failure to
remedy such conduct may result in termination for Cause; or (B) conduct that
materially discredits the Company or its successor or is materially detrimental
to the reputation of the Company or its successor, including conviction of a
felony involving moral turpitude."
(vii) "Constructive Termination" shall be deemed to occur if there is
(A) an adverse change in Purchaser's position or operating responsibilities
with the Company or its successor causing such position to be of materially
reduced stature or responsibility (it being understood that Purchaser's
operating responsibilities, title and reporting relationships may be changed in
connection with integration of the Company's operations with those of an
acquiror following a Merger); or (B) a reduction of the Purchaser's
compensation, taken as a whole."
B. Section 3(f) of the Purchase Agreement shall be deleted in its entirety
and the following shall be inserted in lieu thereof:
"(f) Termination of Rights. The right of first refusal granted the
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(c) above
shall terminate upon the first sale of Common Stock of the Company pursuant to
a registration statement filed with and declared effective by the Securities
and Exchange Commission under the Securities Act. Upon termination of the right
of first refusal described in Section 3(b) and the expiration or exercise of
the Repurchase Option, a
<PAGE> 3
new certificate or certificates representing the Shares not repurchased shall
be issued, on request, without the legend referred to in Section 6(a)(ii) below
and delivered to the Purchaser."
Except as specifically amended herein, the Purchase Agreement shall remain
in full force and effect.
This Amendment may be executed in counterparts, each of which shall
constitute an original and all of which together shall constitute one
instrument. This Amendment shall be governed by California law.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year above first written.
COMPANY: PURCHASER:
FINDMAIL COMMUNICATIONS, INC. MARTIN ROSCHEISEN
By:
---------------------------------- ----------------------------------------
Martin Roscheisen, (Signature)
Chief Executive Officer
<PAGE> 5
FINDMAIL COMMUNICATIONS, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of June
5, 1998, by and between FindMail Communications, Inc., a Delaware corporation
(the "Company"), and Martin Roscheisen ("Purchaser").
1 . SALE OF STOCK. Subject to the terms and conditions of this Agreement,
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, 607,582 shares of
the Company's Common Stock (the "Shares") at a purchase price of $0.01 per Share
for a total purchase price of $6,075.82. The term "Shares" refers to the
purchased Shares and all securities received in replacement of or in connection
with the Shares pursuant to stock dividends or splits, all securities received
in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. PURCHASE. The purchase and sale of the Shares under this Agreement
shall occur at the principal office of the Company simultaneously with the
execution of this Agreement or at such other time and place as the Company and
Purchaser shall agree (the "Purchase Date"). On the Purchase Date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by cash, check or an assignment of certain assets as set
forth in the Bill of Sale and Instrument of Assignment in the form attached to
this Agreement as Exhibit A.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from the Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) REPURCHASE OPTION.
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including
<PAGE> 6
death or disability), with or without cause, the Company shall upon the date of
such termination (the "Termination Date") have an irrevocable, exclusive option
(the "Repurchase Option") for a period of 60 days from such date to repurchase
all or any portion of the Shares held by Purchaser as of the Termination Date
which have not yet been released from the Company's Repurchase Option at the
original purchase price per Share specified in Section 1 (adjusted for any stock
splits, stock dividends and the like); provided, however, that the Repurchase
Option shall continue for a period of up to one year from the Termination Date
to the extent that the Company reasonably determines that such an extension of
time is necessary to prevent the repurchase of Purchaser's Shares from causing
other capital stock of the Company to not qualify as "small business stock"
under Section 1202 of the Internal Revenue Code of 1986, as amended.
(ii) The Repurchase Option shall be exercised by the Company by written
notice to Purchaser or Purchaser's executor and, at the Company's option, (A) by
delivery to Purchaser or Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being purchased, or (B) in the event
Purchaser is indebted to the Company, by cancellation by the Company of an
amount of such indebtedness equal to the purchase price for the Shares being
repurchased, or (C) by a combination of (A) and (B) so that the combined payment
and cancellation of indebtedness equals such purchase price. Upon delivery of
such notice and payment of the purchase price in any of the ways described
above, the Company shall become the legal and beneficial owner of the Shares
being repurchased and all rights and interest therein or related thereto, and
the Company shall have the right to transfer to its own name the number of
Shares being repurchased by the Company, without further action by Purchaser.
(iii) The Repurchase Option shall be in effect with respect to
sixty-seven percent (67%) of the Shares and shall lapse as to 1/36 of such
Shares on each monthly anniversary of the Vesting Commencement Date (as set
forth on the signature page of this Agreement), until all Shares are released
from the Repurchase Option (provided in each case that Purchaser's employment or
consulting relationship with the Company has not been terminated prior to the
date of any such release). The remaining thirty-three percent (33%) shall not be
subject to the Repurchase Option. Fractional shares shall be rounded to the
nearest whole share.
(b) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or any
transferee of Purchaser (either being sometimes referred to herein as the
"Holder") May be sold or otherwise transferred (including transfer by gift or
operation of law),
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<PAGE> 7
the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares on the terms and conditions set forth in this Section 3(b) (the
"Right of First Refusal").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall deliver
to the Company a written notice (the "Notice") stating: (A) the Holder's bona
fide intention to sell or otherwise transfer such Shares; (B) the name of each
proposed purchaser or other transferee ("Proposed Transferee"); (C) the number
of Shares to be transferred to each Proposed Transferee; and (D) the terms and
conditions of each proposed sale or transfer. The Holder shall offer the Shares
at the same price (the "Offered Price") and upon the same terms (or terms as
similar as reasonably possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price, determined in accordance with subsection
(iii) below.
(iii) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section 3(b) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), in cash (by check), by cancellation of all or
a portion of any outstanding indebtedness of the Holder to the Company (or, in
the case of repurchase by an assignee, to the assignee), or by any combination
thereof within 30 days after receipt of the Notice or in the manner and at the
times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(b), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 60 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if
-3-
<PAGE> 8
the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section 3(b) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER. In the event,
at any time after the date of this Agreement, of any transfer by operation of
law or other involuntary transfer (including death or divorce, but excluding a
transfer to Immediate Family as set forth in Section 3(b)(vi) above) of all or a
portion of the Shares by the record holder thereof, the Company shall have an
option to purchase all of the Shares transferred at the greater of the purchase
price paid by Purchaser pursuant to this Agreement or the fair market value of
the Shares on the date of transfer. Upon such a transfer, the person acquiring
the Shares shall promptly notify the Secretary of the Company of such transfer.
The right to purchase such Shares shall be provided to the Company for a period
of 30 days following receipt by the Company of written notice by the person
acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any stock to be
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify Purchaser or his or her executor of the price so
determined within 30 days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with
the valuation as determined by the Board of Directors of the Company, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
-4-
<PAGE> 9
(d) ASSIGNMENT. The right of the Company to purchase any part of the
Shares may be assigned in whole or in part to any stockholder or stockholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares or any
interest therein will receive and hold such Shares or interest subject to the
provisions of this Agreement, including, insofar as applicable, the Repurchase
Option. Any sale or transfer of the Company's Shares shall be void unless the
provisions of this Agreement are met.
(f) TERMINATION OF RIGHTS. The rights granted the Company in this Section
3 shall terminate upon the earlier to occur of (i) the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act, or (ii) the completion of a "Change of Control
Transaction." Upon such termination, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without the
legend referred to in Section 6(a)(ii) below and delivered to Purchaser. As used
herein, the term "Change of Control Transaction" shall include: (x) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the State of the
Company's incorporation; (y) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company; (z) any reverse merger in which the Company is the
surviving entity but in which all of the Company's outstanding voting stock is
transferred to the acquiring entity or its wholly-owned subsidiary.
4. ESCROW OF UNVESTED SHARES. For purposes of facilitating the
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit B executed by
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee,
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<PAGE> 10
is so appointed as the escrow holder with the foregoing authorities as a
material inducement to make this Agreement and that said appointment is coupled
with an interest and is accordingly irrevocable. Purchaser agrees that said
escrow holder shall not be liable to any party hereof (or to any other party).
The escrow holder may rely upon any letter, notice or other document executed by
any signature purported to be genuine and may resign at any time. Purchaser
agrees that if the Secretary of the Company, or the Secretary's designee,
resigns as escrow holder for any or no reason, the Board of Directors of the
Company shall have the power to appoint a successor to serve as escrow holder
pursuant to the terms of this Agreement.
5. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under
the Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.
(c) Purchaser further acknowledges and understands that the Shares must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the Shares. Purchaser understands that the certificate evidencing the
Shares will be imprinted with a legend which prohibits the transfer of the
Shares unless they are registered or such registration is not required in the
opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of issuance of the securities, such
issuance will be exempt from registration under the Securities Act. In the event
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 (the
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<PAGE> 11
"Exchange Act"), the securities exempt under Rule 701 may be resold by Purchaser
90 days thereafter, subject to the satisfaction of certain of the conditions
specified by Rule 144, including, among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Exchange Act);
and (2) in the case of an affiliate, the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
if applicable. Notwithstanding this Section 5(d), Purchaser acknowledges and
agrees to the restrictions set forth in Section 5(f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the Shares may be resold by Purchaser in certain limited
circumstances subject to the provisions of Rule 144, which requires, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than one year after the party has purchased,
and made full payment of (within the meaning of Rule 144), the securities to be
sold; and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than two years, (3) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as such term is defined under the Exchange Act) and the amount of
securities being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(e) Purchaser further understands that at the time he or she wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the Shares under
Rule 144 or 701 even if the one-year minimum holding period had been satisfied.
(f) Purchaser further understands that in the event all of the applicable
requirements of Rule 144 or 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
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<PAGE> 12
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(iii) Any legend required to be placed thereon by the California
Commissioner of Corporations.
(b) STOP-TRANSFER NOTICE. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
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<PAGE> 13
7. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
Exhibit C. Purchaser further agrees that Purchaser will execute and submit with
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit D,
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
9. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the
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<PAGE> 14
purchase of, or otherwise dispose of any Shares (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets forth
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations between
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement shall be
in writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
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<PAGE> 15
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this Agreement
shall ensure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
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<PAGE> 16
The parties have executed this Agreement as of the date first set forth
above.
FINDMAIL COMMUNICATIONS, INC.
By:
------------------------------------
Title:
---------------------------------
Address:
961 Duncan Street
San Francisco, CA 94131
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP
AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
MARTIN ROSCHEISEN
----------------------------------------
(Signature)
Address:
961 Duncan Street
San Francisco, CA 94131
Vesting Commencement
Date:
----------------------------
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<PAGE> 1
EXHIBIT 10.23
ONELIST, INC.
FIRST AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
December 24, 1998, at Palo Alto, California, by and among ONElist, Inc., a
California corporation (the "Company"), and the individuals set forth on the
Schedule of Purchasers attached hereto as Schedule I (collectively, the
"Purchasers" and individually a "Purchaser").
WHERE AS, the Purchasers purchased shares of the Company's Common Stock
in exchange for cash or the contribution of assets to the Company pursuant to
that certain Common Stock Purchase Agreement by and among the Company and the
Purchasers dated as of July 10, 1998 (the "Prior Agreement").
WHEREAS, the Purchasers are employees of the Company, and the
Purchaser's continued participation is considered by the Company to be important
for the Company's continued growth.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Sale of Stock. Subject to the terms and conditions hereof, the
Company hereby agrees to issue and sell to the Purchasers, and Purchasers hereby
agree to purchase from the Company, up to Two Million (2,000,000) shares of
Common Stock, $0.001 par value (the "Shares"), for the price of Ten Cents
($0.10) per share, to be allocated among the Purchasers and for the aggregate
consideration set forth on Schedule I attached hereto across from each
Purchaser's name.
2. Repurchase Option
(a) Subject to the provisions of Section 3, below, in the event the
Purchaser's continuous status as an employee terminates for any or no reason
(including death or disability) before all of the Shares are released from the
Company's repurchase option (see Section 3), the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company) have an
irrevocable, exclusive option for a period of sixty (60) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section 3) at the original purchase price per share (the
"Repurchase Price"). Said option shall be exercised by the Company by delivering
written notice to the Purchaser or the Purchaser's executor (with a copy to the
Escrow Holder (as defined in Section 5)) AND, at the Company's option, (i) by
delivering to the Purchaser or the Purchaser's executor a check in the amount of
the aggregate Repurchase Price, or (ii) by the Company canceling an amount of
the Purchaser's indebtedness to the Company equal to the aggregate Repurchase
Price, or (iii) by a combination of (i) and (ii) so that the combined payment
and cancellation of indebtedness equals such aggregate Repurchase Price. Upon
delivery of such notice and the payment of the aggregate Repurchase Price in any
of the ways described above, the Company shall become the legal and beneficial
owner of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or apart of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares to
be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
3. Release of Shares From Repurchase Option.
(a) Twenty Five percent (25%) of the Shares shall be released from
the Company's repurchase option as of the date of this Agreement. 1/48th of the
Shares shall be released on the first day of each month commencing on the
thirteenth month after the date of this Agreement and each month thereafter,
provided in each case that the Purchaser's continuous status as an employee has
not terminated prior to the date of any such release. Any of the Shares which
have not yet been released from the Company's repurchase option are referred to
herein as "Unreleased Shares."
(b) In addition, if the Employee's employment with the Company
terminates as a result of Involuntary Termination (as that terms is defined in
that certain Employment Agreement between the Company and the Purchaser of even
date
<PAGE> 2
herewith), within one year of a Change in Control (as defined below), the
Unreleased Shares, if any, shall be automatically released. For purposes of this
Agreement, the term "Change of Control" shall mean the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
seventy five percent (75%) or more of the total voting power represented by the
Company's then outstanding voting securities; provided, however, that a Change
in Control shall be deemed to occur in the event any one individual becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing seventy percent (70%)
or more of the voting power represented by the Company's then outstanding voting
securities; or
(ii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least seventy percent (70%)
of the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
(c) In addition, if the Purchaser's employment with the Company
terminates as a result of Involuntary Termination (as that terms is defined in
that certain Employment Agreement between the Company and the Purchaser of even
date herewith), then that number of shares as would have been released from the
Company's repurchase option had the Purchaser remained an employee of the
Company for a period of ninety (90) days from the date of termination shall be
immediately released from the Company's repurchase option.
(d) The Shares which have been released from the Company's
repurchase option shall be delivered to the Purchaser at the Purchaser's request
(see Section 5).
4. Restriction on Transfer. Except for the escrow described in Section
5 or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's repurchase option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
5. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Company's
repurchase option under Section 2 above, the Purchaser shall, upon execution of
this Agreement, deliver and deposit with an escrow holder designated by the
Company (the "Escrow Holder") the share certificates representing the Unreleased
Shares, together with the stock assignment duly endorsed in blank, attached
hereto as Exhibit A-2. The Unreleased Shares and stock assignment shall be held
by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company
and Purchaser attached as Exhibit A-3 hereto, until such time as the Company's
repurchase option expires. As a further condition to the Company's obligations
under this Agreement, the spouse of Purchaser, if any, shall execute and deliver
to the Company the Consent of Spouse attached hereto as Exhibit A4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its repurchase option
hereunder, the Escrow Holder, upon receipt of written notice of such option
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option, upon Purchaser's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split
<PAGE> 3
or other change in the Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and all
new, substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Company's repurchase option.
6. Closing. The closing of the purchase and sale of the Shares pursuant
to Section I hereof (the "Closing") shall be held at the offices of Wilson
Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California at
1:00 p.m. local time, on July 10, 1998 or at such other time and place as the
Company and the Purchasers shall agree (the "Closing Date").
7. Delivery. At the Closing, the Company will deliver to each Purchaser
a certificate or certificates, registered in such Purchaser's name as set forth
on the Schedule of Purchasers, representing the number of Shares designated in
the Schedule of Purchasers to be purchased by such Purchaser at the Closing,
against payment of the purchase price therefor, by check payable to the Company
or contribution of assets, as described in the Schedule of Purchasers.
8. Representations and Warranties of the Company. In connection with the
issuance and sale of Shares, the Company represents to the Purchasers the
following:
(a) Corporate Existence. Seller is a corporation duly incorporated
and validly existing under the laws of the State of California.
(b) Corporate Authority. The execution, delivery and performance of
this Agreement, and all other instruments or documents required in connection
herewith are authorized, are within the corporate powers of the Company and are
not in contravention of law, of the Articles of Incorporation of the Company, or
its By Laws, or any amendment thereto, or of any indenture, agreement, or
undertaking to which the Company is a party or may otherwise be bound.
(c) Binding Obligations. This Agreement and each other instrument
or document required in connection herewith are valid and binding obligations of
the Company and each is fully enforceable in accordance with its terms and
conditions, except as limited by applicable bankruptcy, insolvency,
reorganization and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
(d) Section 351 Filings. The Company shall comply with the tax
filing requirements which are necessary to qualify the transfer of assets to the
Company by Mark Fletcher under Section 351 of the I.R.C.
9. Investment Representations. In connection with the purchase of the
Shares, each Purchaser represents to the Company the following (except with
respect to 5(f)):
(a) Information. Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Shares. The Purchaser is purchasing the Shares for investment for Purchaser's
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) RU. Purchaser recognizes that the investment in the Shares
involves substantial risks, among other matters: (i) the speculative nature of
the investment in the Shares; (ii) the fact that no public market now exists for
any of the securities issued by Company and that a public market may never exist
for the same; (iii) the financial hazards involved; (iv) the lack of liquidity
of the Shares and the restrictions upon transferability thereof; and (v) tax
consequences of the investment.
(c) Financial Ability. Purchaser has adequate means for providing
for Purchaser's current needs and possible contingencies and Purchaser has no
need for liquidity in this investment. Purchaser can, for an indefinite period
of time, bear the economic risks of this investment in the Shares.
(d) Registration. Purchaser understands that the Shares have not
been registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in view of the Securities and Exchange Commission
("Commission"), the statutory basis for such exemption may not be present if
Purchaser's representations meant that Purchaser's present intention was to hold
the Shares for a minimum capital gains period under applicable tax statutes, for
a deferred sale, for a market rise, for a sale if the market does not rise, or
for a year or any other fixed period in the future.
<PAGE> 4
(e) Liquidity; Restriction on Transfer. Purchaser further
acknowledges and understands that the Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or an exemption from
such registration is available. Purchaser further acknowledges and understands
that the Company is under no obligation to register the Shares. Purchaser
understands that the certificate evidencing the Shares will be imprinted with a
legend which prohibits the transfer of the Shares unless they are registered or
such registration is not required in the opinion of counsel satisfactory to the
Company.
(f) Title to Property and Assets. Mark Fletcher has good and
marketable title to all of the properties and assets listed on Schedule II
attached hereto, free and clear of all mortgages, liens and encumbrances. Such
properties and assets are in good condition and repair in all material respects.
(g) Section 351. Mark Fletcher shall comply with the tax filing
requirements which are necessary to qualify his transfer of assets to the
Company under Section 351 of the I.R.C.
10. Closing Conditions. The Company's obligation to sell and issue the
Shares at the Closing is, at the option of the Company, subject to the
assignment by Mark Fletcher of any and all rights held by him to the property
listed on Schedule II attached hereto.
11. Stock Certificate Legends. The share certificate evidencing the
Shares issued hereunder shall be endorsed with the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE
COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT."
(b) "SALE, TRANSFER OR HYPOTHECATION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY CERTAIN PROVISIONS OF THE COMPANY'S BYLAWS, A
COPY OF WHICH MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY, AND ALL
OF SUCH PROVISIONS ARE HEREBY INCORPORATED BY REFERENCE."
(c) Any legend required by any applicable state securities laws.
12. Market Stand Off Agreement. Each Purchaser agrees in connection with
any registration of the Company's securities (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
pledge (or otherwise encumber or hypothecate), grant any option for the purchase
of, or otherwise dispose of any shares (other than those included in the
registration) without the prior written consent of the managing underwriter of
such offering (for a period not to exceed 180 days) from the effective date of
such registration.
13. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, reverse stock split or stock dividend or
other similar change in the Shares which may be made by the Company after the
date of this Agreement.
14. Tax Consequences. Each Purchaser has reviewed with such Purchaser's
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Each Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents.
15. CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA
<PAGE> 5
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
16. General Provisions.
(a) Governing law. This Agreement shall be governed by the laws of
the State of California.
(b) Notices. Any notice, demand or request required or permitted to
be given by either the Company or a Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed, if to the Company, then to the address below and if to the Purchasers
at the addresses of the Purchasers set forth in the Schedule of Purchasers or
such other address as the Purchasers may request by notifying the Company in
writing.
Onelist, Inc.
Attn: Mark Fletcher
374 Genoa Drive
Redwood City, CA 94065
with a copy to:
Wilson. Sonsini Goodrich & Rosati
Professional Corporation
Attn: Henry P. Massey, Jr., Esq.
650 Page Mill Road
Palo Alto, California 94304
(c) Successors and Assigns. The rights and benefits of the Company
under this Agreement shall be transferable to any one or more persons or
entities, and all covenants and agreements hereunder shall inure to the benefit
of, and be enforceable by the Company's successors and assigns. The rights and
obligations of the Purchasers under this Agreement may only be assigned with the
prior written consent of the Company and any purported transfer otherwise shall
be null and void.
(d) Waive. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(e) Further Documents. Each Purchaser agrees upon request to
execute any further documents or instruments necessary or desirable to carry out
the purposes or intent of this Agreement.
(f) Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
holders of a majority of the Shares purchased hereunder.
(g) Expenses. The Company and each Purchaser shall each bear his,
her or its own expenses and legal fees incurred on his, her or its behalf with
respect to this Agreement and the transactions contemplated hereby.
(h) Counterparts. This Agreement may be executed in any number of
Counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(i) Termination of Prior Agreement. This Agreement terminates the
Prior Agreement, supersedes the Prior Agreement and the Prior Agreement is
hereby rendered void.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first set forth above.
Onelist INC. a California corporation
<PAGE> 6
By:
Mark Fletcher, Chief Executive Officer
PURCHASERS:
By:
--------------------------------------
Mark Fletcher
By:
--------------------------------------
<PAGE> 7
SCHEDULE
SCHEDULE OF PURCHASERS
Name and Address of Purchaser Shares Purchase Price
Mark A. Fletcher 1,500,000 $150,000*
374 Genoa Drive
Redwood City, CA 94065
Scott M. Shambarger 500,000 $50,000
811 Lombardi Lane
Hillsborough, CA 94010
Totals 2,000,000 $200,000
* Purchaser transferred property and assets to the Company as consideration
for the shares.
<PAGE> 1
EXHIBIT 10.24
ONELIST, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of December 28, 1998, by and between ONElist,
Inc., a California corporation (the "Company") and Mark Fletcher (the
"Employee").
WHEREAS the parties hereto desire and agree to enter into an employment
relationship by means of this Agreement;
NOW THEREFORE in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. Position and Duties. The Employee shall be employed as President and Chief
Executive Officer of the Company, reporting to the Board of Directors of the
Company (the "Board") and assuming and discharging such responsibilities as are
commensurate with the Employee position. The employee shall perform his duties
faithfully and to the best of his ability and shall devote his full business
time and effort to the performance of his duties hereunder, provided, however,
that the foregoing shall not preclude the Employee from engaging in civic,
charitable or religious activities, from devoting a reasonable amount of time to
private investments, or from being employed by, rendering services to or serving
on the boards of directors of other entities, so long as such activities,
employment and/or service do not materially interfere or conflict with his
responsibilities to the Company.
2. Employment Relationship. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at Employee's employment
terminates for any reason, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with the Company's
established employee plans and policies at the time of termination.
3. Compensation.
(a) Base Salary. For all services to be rendered by the Employee pursuant to
this Agreement, the Employee shall receive a minimum annual base salary of
$86,000, payable monthly in accordance with the Company's normal payroll
practices, increased from time to time by the Board consistent with past
practices.
(b) Bonus. Beginning with the Company's current fiscal year, and for each fiscal
year thereafter during the term of this Agreement the Employee shall be eligible
to receive a target bonus of up to fifty percent of Employee's base salary based
on performance of the Company
<PAGE> 2
as set forth in the Company's annual operating plan established by the Chief
Executive officer of the Company and the Board (the "Target Bonus").
(c) Repurchase Option. The Employee shall execute an Amended and Restated Stock
Purchase Agreement (the "Purchase Agreement") of even date herewith whereby the
Employee shall grant to the Company a right of repurchase on 1,500,000 shares of
the Company's Common Stock owned by Employee (the "Shares"). Subject to the
provisions of Section 6, below, Twenty-Five percent (25%) of the Shares shall be
released from the Company's repurchase option as of the date of this Agreement.
1/48th of the Shares shall be released on the first day of each month commencing
on the thirteenth month after the date of this Agreement and each month
thereafter, provided in each case that the Purchaser's continuous status as an
employee has not terminated prior to the date of any such release.
4. Other Benefits. The Employee shall be entitled to participate in the employee
benefit plans and programs of the Company, if any, to the extent that his
position, tenure, salary, age, herewith and other qualifications make him
eligible to participate in such plans or programs, subject to the rules and
regulations applicable thereto. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time.
5. Expenses. The Company shall reimburse the Employee for reasonable travel
entertainment or other expenses incurred by the Employee in the furtherance of
or in connection with the performance of the Employee's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.
6. Termination.
(a) Involuntary Termination. If the Employee's employment with the Company
terminates as a result of Involuntary Termination (as defined below), then: (i)
the Employee shall be entitled to receive a severance payment equal to ninety
(90) days of the Employee's Current Compensation, and (ii) the Company's
repurchase option shall immediately lapse as to that number of shares as would
be released from the repurchase option had the Employee remained employed by the
Company for a period of ninety (90) days from the date of the termination of
Employee's employment with the Company. Any severance payments to which the
Employee is entitled pursuant to this Section 7(a) shall be paid in lieu of any
other severance or severance-type benefits to which the Employee may be entitled
under any other company-sponsored plan, and shall be paid to the Employee in a
lump sum within fifteen (15) days of the Employee's Involuntary Termination.
(b) Termination Following a Change In Control. In addition, if the Employee's
employment with the Company terminates as a result of Involuntary Termination
(as defined below), within one year of a Change in Control (as defined below),
the Unreleased Shares, if any, shall be automatically released. For purposes of
this Agreement, the term "Change of Control" shall mean the occurrence of any of
the following events:
-2-
<PAGE> 3
(1) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing seventy five
percent (75%) or more of the total voting power represented by the Company's
then outstanding voting securities; provided, however, that a Change in Control
shall be deemed to occur in the event any one individual becomes the "beneficial
owner" (as defined in Rule l3d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing seventy percent (70%) or
more of the voting power represented by the Company's then outstanding voting
securities; or
(2) A merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least seventy percent (70%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(c) Other Termination. If the Employee's employment terminates other than in an
Involuntary Termination, or upon the Employee's Death or Disability, then the
Employee shall not be entitled to receive severance or other benefits pursuant
to this Agreement, but may be eligible for those benefits (if any) as may then
be established under the Company's severance and benefits plans and policies
existing at the time of such termination.
7. Definitions.
(a) Cause. "Cause" shall mean the occurrence of any one or more of the
following: (i) the Employee's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of final jurisdiction for any crime which
constitutes a felony in the jurisdiction involved (other than a felony traffic
offense), which felony materially injures the Company, its prospects or its
reputation; (ii) the Employee's misappropriation of funds or commission of a
material act of fraud, whether prior or subsequent to the date hereof, upon the
Company; (iii) gross negligence by the Employee in the scope of the Employee's
services to the Company; (iv) a willful breach by the Employee of a material
provision of this Agreement; or (v) a willful failure of the Employee to
substantially perform his duties hereunder. Notwithstanding the foregoing, the
Employee shall not be deemed to have been terminated for Cause under clause
(iii), (iv) or (v) of this Section 7(a) unless the Board delivers a written
notice to the Employee setting forth the reasons for the Company's intention to
terminate for Cause and specifically identifying the manner in which the Board
believes that the Employee has engaged in such conduct, which conduct is not
substantially corrected by the Employee within 10 days following his receipt of
such notice, and provides the Employee with an opportunity, together with his
counsel, if any, to be heard before the Board.
-3-
<PAGE> 4
(b) Current Compensation. "Current Compensation" shall mean an amount equal to
the sum of (i) the Employee's average annual (or annualized) base salary over
the three preceding fiscal years (or such lesser number of years as may be
applicable to the Employee); and (ii) the Employee's average annual (or
annualized) bonus over the three preceding fiscal years; provided, however that
if there are fewer than three years of actual bonus history, the Employee's
average bonus shall be calculated by including the Employee's Target Bonus for
the fiscal year in which the termination occurs. For example, if the termination
occurs in 2000, average bonus shall be calculated based on actual bonuses earned
for 1999 and 1999 and Target Bonus for 1999.
(c) Disability. The Employee shall be considered to have suffered a "Disability"
for purposes of this Agreement if, at the end of any calendar month during the
term of this Agreement, the Employee is and has been for the four consecutive
full calendar months then ending, or for fifty percent or more of the normal
working days during the eight consecutive full calendar months then ending,
unable due to mental or physical illness or injury to perform his duties under
this Agreement in his normal and regular manner.
(d) Involuntary Termination. "Involuntary Termination" shall mean (i) without
the Employee's express written consent, a reduction of the Employee's duties,
position or responsibilities relative to the Employee's duties, position Or
responsibilities in effect immediately prior to such reduction, or the removal
of the Employee from such position, duties and responsibilities, unless the
Employee is provided with comparable duties, position and responsibilities; (ii)
without the Employee's express written consent, a reduction of the Employee's
base salary or Target Bonus (as set forth in Section 3) in effect immediately
prior to such reduction; (iii) a reduction in the kind or level of employee
benefits to which the Employee is entitled immediately prior to such reduction
with the result that the Employee's overall benefits package is significantly
reduced; (iv) without the Employee's express written consent, the relocation of
the Employee to a facility or a location more than fifty (50) miles from his
current location; (v) any purported termination of the Employee which is not
effected for Cause or for which the grounds relied upon are not valid; or (vi)
the failure of the Company to obtain the assumption of this Agreement by any
successors contemplated in Section 9 below; provided, however, that an event
described above shall not constitute Involuntary Termination unless it is
communicated by the Employee to the Company in writing and is not corrected by
the Company in a manner that is reasonably satisfactory to the Employee
(including full retroactive correction with respect to any monetary matter)
within ten days of the Company's receipt of such written notice from the
Employee.
8. Right to Advice of Counsel. The Employee acknowledges that he has had the
right to consult with counsel and is fully aware of his rights and obligations
under this Agreement.
9. Successors.
(a) Company's Successors Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or
-4-
<PAGE> 5
substantially all of the Company's business and/or assets shall assume the
obligations under this Agreement and agree expressly to perform the obligations
under this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a succession.
For all purposes under this Agreement, the term "Company," shall include any
successor to the Company's business and/or assets which executes and delivers
the assumption agreement described in this subsection (a) or which becomes bound
by the terms of this Agreement by operation of law.
(b) Employee's Successors Without the written consent of the Company, the
Employee shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity. Notwithstanding the
foregoing, the terms of this Agreement and all rights of the Employee hereunder
shall inure to the benefit of, and be enforceable by, the Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
10. Notice Clause.
(a) Manner. Any notice hereby required or permitted to be given shall be
sufficiently given if in writing and upon mailing by registered or certified
mail, postage prepaid, to either party at the address of such party or such
other address as shall have been designated by written notice by such party to
the other party.
(b) Effectiveness. Any notice or other communication required or permitted to be
given under this Agreement will be deemed given on the day when delivered in
person, or the third business day after the day on which such notice was mailed
in accordance with Section 12(a).
11. Disputes. In the event that a dispute arises over the terms or enforcement
of this Agreement, the parties agree to submit such dispute to binding
arbitration in San Jose, California by a single arbitrator engaged through
JAMS-Endispute, Inc., its successor firm or another private dispute resolution
firm acceptable to both parties. The arbitrator shall be selected as follows:
the arbitration firm shall present its panel of available arbitrators, and each
party shall sign rank of preference to each of such panel with number 1 being
the highest rank. The person on the panel with the lowest total score shall be
the arbitrator for a dispute. The arbitrator shall have absolute discretion or
authority to limit discovery relevant to the matter and the length of the
proceeding before the arbitrator. The parties may not submit written briefs. The
arbitrator shall rule on the dispute in writing within ten (10) days after the
close of hearings. The time specified in this Section may be extended upon
mutual agreement of the parties. The decision of the arbitrator may be entered
or registered in any court of competent jurisdiction for execution and
enforcement. The arbitrator shall have the power to allocate between the parties
the costs of the proceeding and the attorneys' fees incurred in the proceeding
as he or she deem appropriate.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, but not the choice of law rules,
of the state of California.
-5-
<PAGE> 6
13. Severability. The invalidity or unenforceability of any provision of this
Agreement, or any terms hereof, shall not affect the validity or enforceability
of any other provision or term of this Agreement.
14. Integration. This Agreement represents the entire agreement and undemanding
between the parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral. No waiver, alteration, or
modification of any of the provisions of this Agreement shall be binding unless
in writing and signed by duly authorized representatives of the parties hereto.
15. Taxes. All payments made pursuant to this Agreement shall be subject to
withholding of applicable income and employment taxes.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by a duly authorized officer, as of the day and year first above
written.
ONELIST, INC.
By:
----------------------------------
Title:
-------------------------------
EMPLOYER
- --------------------------------------
-6-
<PAGE> 1
EXHIBIT 10.25
PROMISSORY NOTE
$_________.00 San Francisco, California
_____________, 2000
For value received, the undersigned promises to pay eGroups, Inc., a
Delaware corporation (the "Company"), at its principal office the principal sum
of $___________ (representing the total exercise price minus the par value of
the total number of shares) with interest from the date hereof at a rate of
____% per annum, compounded annually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable on __________________.
If the undersigned's employment or consulting relationship with the
Company is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States
of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith. The undersigned, however, shall remain personally liable for payment
of this Note, and assets of the undersigned, in addition to the collateral under
the Pledge and Security Agreement, may be applied to the satisfaction of the
undersigned's obligations hereunder.
---------------------------------
---------------------
<PAGE> 1
EXHIBIT 10.29
SUBORDINATED PROMISSORY NOTE
$862,833.33 Date: March 16, 2000
Maturity Date: October 1, 2002
FOR VALUE RECEIVED, eGroups, Inc, a Delaware corporation (the "Borrower") hereby
promises to pay to the order of Comdisco, Inc., a Delaware corporation (the
"Lender"), at P.O. Box 91744, Chicago, IL 60693, or such other place of payment
as the holder of this Subordinated Promissory Note (the "Note") may specify from
time to time in writing, in lawful money of the United States of America, the
principal amount of Eight Hundred, Sixty Two Thousand, Eight Hundred and Thirty
Three and 33/100 Dollars ($862,833.33) together with interest at Eight and One
Quarter percent (8.25%) per annum from the date of this Note to maturity of each
installment on the principal hereof remaining from time to time unpaid, such
amounts to be paid as follows: 1 monthly installment of interest only of
$3,163.72 commencing April 1, 2000, followed by 18 monthly installments of
interest only of $5,931.98 each, commencing May 1, 2000, and on the same day of
each month thereafter to and including October 1, 2001, followed by twelve (12)
equal monthly installments of principal and interest of $75,156.29 payable on
the first day of each month thereafter to and including October 1, 2002, such
latter installments to be applied first to accrued and unpaid interest and the
balance to unpaid principal. Interest shall be computed on the basis of a year
consisting of twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement dated
October 8, 1999 by and between Borrower and Lender (as the same may from time to
time be amended, modified or supplemented in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same definitions
when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL
CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and enforced
in accordance with, the laws of the State of Illinois, excluding any conflicts
of law rules or principles that would cause the application of the laws of any
other jurisdiction.
BORROWER:
EGROUPS, INC.
<PAGE> 2
Signature:
Print Name:
Title:
eGroups, Inc.
Prepared by Nancy Talarski
Loan Amount: 862,833.33
Interest Rate 8.250%
Payment 75,156.29
<TABLE>
<CAPTION>
Payment No. Date Principal Interest Payment Balance
<S> <C> <C> <C> <C> <C>
03/16/00 862,833.33
1 04/01/00 0.00 3,163.72 3,163.72 862,833.33
2 05/01/00 0.00 5,931.98 5,931.98 862,833.33
3 06/01/00 0.00 5,931.98 5,931.98 862,833.33
4 07/01/00 0.00 5,931.98 5,931.98 862,833.33
5 08/01/00 0.00 5,931.98 5,931.98 862,833.33
6 09/01/00 0.00 5,931.98 5,931.98 862,833.33
7 10/01/00 0.00 5,931.98 5,931.98 862,833.33
8 11/01/00 0.00 5,931.98 5,931.98 862,833.33
9 12/01/00 0.00 5,931.98 5,931.98 862,833.33
10 01/01/01 0.00 5,931.98 5,931.98 862,833.33
11 02/01/01 0.00 5,931.98 5,931.98 862,833.33
12 03/01/01 0.00 5,931.98 5,931.98 862,833.33
13 04/01/01 0.00 5,931.98 5,931.98 862,833.33
14 05/01/01 0.00 5,931.98 5,931.98 862,833.33
15 06/01/01 0.00 5,931.98 5,931.98 862,833.33
16 07/01/01 0.00 5,931.98 5,931.98 862,833.33
17 08/01/01 0.00 5,931.98 5,931.98 862,833.33
18 09/01/01 0.00 5,931.98 5,931.98 862,833.33
19 10/01/01 0.00 5,931.98 5,931.98 862,833.33
20 11/01/01 69,224.31 5,931.98 75,156.29 793,609.02
21 12/01/01 69,700.23 5,456.06 75,156.29 723,908.79
22 01/01/02 70,179.42 4,976.87 75,156.29 653,729.38
23 02/01/02 70,661.90 4,494.39 75,156.29 583,067.48
24 03/01/02 71,147.70 4,008.59 75,156.29 511,919.78
25 04/01/02 71,636.84 3,519.45 75,156.29 440,282.94
26 05/01/02 72,129.34 3,026.95 75,156.29 368,153.59
27 06/01/02 72,625.23 2,531.06 75,156.29 295,528.36
28 07/01/02 73,124.53 2,031.76 75,156.29 222,403.83
29 08/01/02 73,627.26 1,529.03 75,156.29 148,776.57
30 09/01/02 74,133.45 1,022.84 75,156.29 74,643.12
31 10/01/02 74,643.12 513.17 75,156.29 0.00
</TABLE>
<PAGE> 3
EGROUPS
CONVERT SCHEDULE
PREPARED: 3/15/00
INTEREST THRU 3/15/00
Principal Balance: 4,000,000.00
<TABLE>
<CAPTION>
Interest Started Accruing CONVERT DATE # of Days Int Rate Interest Due Per Diem
<S> <C> <C> <C> <C> <C>
3/1/00 3/15/00 14 8.250% $ 12,833.33 $916.67
</TABLE>
24 MOS. OF INTEREST ONLY
PAID INTEREST THRU 2/29/00
<TABLE>
<S> <C>
ORIGINAL NOTE $ 4,000,000.00
CONVERT AMOUNT $ (3,150,000.00)
REMAINING PRINCIPAL $ 850,000.00
INTEREST THRU 3/15/00 $ 12,833.33
REMAINING NOTE $ 862,833.33
</TABLE>
<PAGE> 1
EXHIBIT 10.30
SOFTWARE LICENSE AND SERVICES AGREEMENT
This Software License and Services Agreement ("Agreement") is between
E.piphany, Inc., a Delaware corporation ("E.piphany") and eGroups, Inc., a
Delaware corporation ("Customer.") The terms of this Agreement shall apply to
each Application license granted and to all services provided by E.piphany under
this Agreement, which will be identified on one or more Order Forms.
I. DEFINITIONS
1.1. "APPLICATION" means the software application(s) in object code form
distributed by E.piphany for which Customer is granted a license
pursuant to this Agreement, and Updates therefore.
1.2. "COMMENCEMENT DATE" means the date on which the Applications are
delivered by E.piphany to Customer, or if no delivery is necessary, the
Effective Date set forth on the relevant Order Form.
1.3 "DESIGNATED SYSTEM" means the computer hardware and operating system
designated on the relevant Order Form
1.4 "DOCUMENTATION" means the user guides and manuals for installation and
use of the Application.
1.5 "ORDER FORM" means the document attached as Exhibit A in hard copy or
electronic form by which Customer orders Application licenses and
services, and which is agreed to and signed by the parties. Each Order
Form shall reference the Effective Date of this Agreement.
1.6 "SOLUTION" means the Technical Support and consulting services.
1.7 "TECHNICAL SUPPORT" means the application support services provided
under E.piphany's policies in effect on the date Technical Support is
ordered.
1.8. "UPDATE" means a subsequent release of the Application that E.piphany
generally makes available for Application licensees at no additional
license fee other than media and handling charges provided Customer has
ordered Technical Support for such licenses for the relevant time
period. Update shall not include any release, option or future product
that E.piphany licenses separately
II. LICENSE
2.1. RIGHTS GRANTED
We have requested confidential treatment of this exhibit pursuant to Rule 406,
promulgated by the Securities and Exchange Commission, under the Securities Act
of 1933, as amended.
<PAGE> 2
A. E.piphany grants to Customer a nonexclusive license to use the
Application(s) specified on an Order Form under this Agreement
and Documentation as follows:
i. to use the Applications solely for Customer's operations
on the Designated System and on a backup system which may
run simultaneously with the Designated System, consistent
with the use limitations specified or referenced in this
Agreement, an Order Form, or the Documentation;
ii. to use the Documentation provided with the Applications in
support of Customer's use of the Applications as
authorized under this Agreement;
iii. to copy the Applications for archival or backup purposes,
and to make a sufficient number of copies for the use
specified in the Order Form. All titles, trademarks, and
copyright and restricted rights notices shall be
reproduced in such copies; and
iv. to allow third parties to use the Applications for
Customers operations so long as Customer ensures that use
of the Applications is in accordance with the terms of
this Agreement.
B. Customer shall not copy or use the Applications or Documentation
except as specified in this Agreement or an Order Form. Customer
shall have no right to use any other software applications that
may be delivered with ordered Application(s). Customer agrees not
to cause or permit the reverse engineering, disassembly or
decompilation of Applications, except to the extent required to
obtain interoperability with other independently created software
or as specified by law. Customer may not relicense, rent or lease
the Applications or use Applications for third-party training,
commercial time-sharing or service bureau use.
C. E.piphany shall retain all title, copyright and other proprietary
rights in the Applications. Customer does not acquire any rights,
express or implied, in the Applications, other than those
specified in this Agreement.
2.2. TRANSFER AND ASSIGNMENT
A. Customer may transfer an Application license within its
organization provided Customer gives reasonable prior notice to
E.piphany.
B. Neither party may assign this Agreement, in whole or in part,
without the prior written consent of the other (which will not be
unreasonably withheld or
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<PAGE> 3
delayed), provided however that either party may assign this
Agreement: (1) to a transferee of substantially all of the
business operations of such party (whether by asset sale, stock
sale, merger, reorganization, operation of law, or otherwise)
unless such entity is a competitor of the other party, or (2) to
any entity that is controlled by, or is under common control
with, such party. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by and against the respective
heirs, executors, administrators, personal representatives,
successors and permitted assigns of any of the parties to this
Agreement. Any attempt to assign this Agreement other than as
permitted above will be null and void.
2.3. VERIFICATION
At E.piphany's written request, not more frequently than annually,
Customer shall furnish E.piphany with a signed certification verifying
that the Applications are being used pursuant to the provisions of this
Agreement and applicable Order Forms. E.piphany may audit Customer's use
of the Applications. Any such audit shall be conducted during regular
business hours at Customer's facilities and shall not unreasonably
interfere with Customer's business activities. If an audit reveals that
Customer has underpaid fees to E.piphany, Customer shall be invoiced for
such underpaid fees and shall also pay E.piphany for the cost of the
audit if the underpayment exceeds 5% of fees due during the audited
period. Audits shall be conducted no more than once annually.
III. TECHNICAL SERVICES
3.1. TECHNICAL SUPPORT SERVICES
Technical Support services may be ordered by Customer in the Order Form
and will be provided under E.piphany's Technical Support terms and
conditions in effect on the date Technical Support is ordered. A copy of
E.piphany's current Technical Support terms and conditions are attached
hereto as Exhibit B and incorporated herein.
3.2. CONSULTING AND TRAINING SERVICES
E.piphany will provide consulting and training services agreed to by the
parties under the terms of this Agreement. All consulting services shall
be billed on a time and materials basis unless the parties expressly
agree otherwise in writing.
3.3. INCIDENTAL EXPENSES
For any on-site services requested by Customer, Customer shall reimburse
E.piphany for actual, reasonable travel and out-of-pocket expenses
approved in advance by Customer.
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<PAGE> 4
IV. TERM AND TERMINATION
4.1. TERM
If not otherwise specified on the Order Form, this Agreement and each
Application license granted under this Agreement shall continue
perpetually unless terminated under this Article IV.
4.2. TERMINATION BY CUSTOMER
Customer may terminate any Application license at any time; however,
termination shall not relieve Customers obligations specified in Section
4.4.
4.3. TERMINATION BY E.PIPHANY
E.piphany may terminate this Agreement or any Application license upon
written notice if Customer materially breaches this Agreement and fails
to correct the breach within thirty (30) days following written notice
specifying the breach.
4.4. EFFECT OF TERMINATION
Termination of this Agreement or any license shall not limit either
party from pursuing other remedies available to it, including injunctive
relief, nor, shall such termination relieve Customer's obligation to pay
all fees that have accrued or are otherwise owed by Customer under any
Order Form. The parties' rights and obligations under Sections 2.1.B,
2.1.C, and 2.2.B, and Articles IV, V, VI, and VII (excluding Section
7.3) shall survive termination of this Agreement. Upon termination,
Customer shall cease using, and shall return or destroy, all copies of
the applicable Applications.
V. INDEMNITY, WARRANTIES, REMEDIES
5.1. INFRINGEMENT INDEMNITY
E.piphany will defend and indemnify Customer against any, cost, expense
(including reasonable attorneys fees incurred as a result of any third
party claim that the Applications infringe a copyright, patent, trade
secret or other intellectual property right, provided that: (a) Customer
notifies E.piphany in writing within thirty (30) days of the claim; (b)
E.piphany has sole control of the defense and all related settlement
negotiations; and (c) Customer provides E.piphany with the assistance,
information and authority necessary to perform E.piphany's obligations
under this Section. E.piphany will reimburse Customer's reasonable
out-of-pocket expenses incurred in providing such assistance. E.piphany
shall have no liability for any claim of infringement based on use of a
superseded or altered release of the Applications if the infringement
would have been avoided by the use of a current unaltered release of the
Applications provided that E.piphany has provided such release prior to
the date of alleged infringement without charge to Customer.
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<PAGE> 5
If the Applications are held or believed by E.piphany to infringe,
E.piphany shall have the option, at its expense, to (a) modify the
Applications to be noninfringing; or (b) obtain for Customer a license
to continue using the Applications. If it is not commercially reasonable
to perform either of the above options, (then E.piphany may terminate
the license for the infringing Applications and refund the license fees
paid for the Applications, prorated over a five (5) year term from the
date of this Agreement). THIS SECTION 5.1 STATES E.PIPHANY'S ENTIRE
LIABILITY AND CUSTOMER'S EXCLUSIVE REMEDY FOR INFRINGEMENT.
5.2. WARRANTIES AND DISCLAIMERS
A. APPLICATION WARRANTY
E.piphany warrants for a period of one (1) year from the
Commencement Date that each Application licensed will perform
substantially as described in the Documentation (unless modified
by a party other than E.piphany in which case this warranty is
void.) E.piphany warrants for a period of one (1) year from the
delivery of any Upgrade, Patch or Enhancement (as defined in this
Agreement and the Technical Services Agreement) that such
Upgrade, Patch or Enhancement will perform substantially as
described in the Documentation therefore if any.
B. MEDIA WARRANTY
E.piphany warrants the tapes, diskettes or other media to be free
of material defects in materials and workmanship under normal use
for ninety (90) days from the Commencement Date.
C. SERVICES WARRANTY
E-piphany warrants that its Technical Support, training and
consulting services will be performed consistent with generally
accepted industry standards. This warranty shall be valid for
ninety (90) days from performance of service.
D. YEAR 2000 WARRANTY
E.piphany warrants that Applications will be Year 2000 Compliant.
"Year 2000 Compliant" means that Applications will perform
without error, loss of data or loss of functionality arising from
any failure to process, calculate, compare or sequence date data
accurately if all associated products, such as hardware, software
and firmware, used in combination with Applications properly
exchange date data with Applications. In addition, Year 2000
Compliant Applications will not cause any associated products or
systems in which they may be used to fail in any of the ways
described above. THIS WARRANTY SHALL NOT APPLY TO ANY THIRD PARTY
PRODUCTS USED IN COMBINATION WITH APPLICATIONS.
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<PAGE> 6
E. DISCLAIMERS
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF AND E.PIPHANY
DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. E.PIPHANY DOES NOT WARRANT THAT THE
APPLICATIONS WILL OPERATE IN COMBINATIONS OTHER THAN AS SPECIFIED
IN THE DOCUMENTATION OR THAT THE OPERATION OF THE APPLICATIONS
WILL BE UNINTERRUPTED OR ERROR-FREE. PRE-PRODUCTION RELEASES OF
APPLICATIONS, COMPUTER-BASED TRAINING PRODUCTS ARE DISTRIBUTED
"AS IS."
5.3. EXCLUSIVE REMEDIES
For any breach of the warranties contained in Section 5.2, Customers
exclusive remedy, and E.piphany's entire liability, shall be:
A. FOR APPLICATIONS
The correction of Application errors that cause breach of the
warranty, or if E.piphany is unable to make the Application
operate as warranted, Customer shall be entitled to terminate the
Application license and recover the fees paid to E.piphany for
the Application license.
B. FOR MEDIA
The replacement of defective media returned within ninety (90)
days of the Commencement Date.
C. FOR SERVICES
The reperformance of the services, or if E.piphany is unable to
perform the services as warranted, Customer shall be entitled to
recover the fees paid to E.piphany for the unsatisfactory
services.
5.4 ACKNOWLEDGEMENT
Customer acknowledges that: (i) Customer has requested that E.piphany
integrate the Applications with software and systems owned or licensed
by Customer; (ii) Customer has valid existing rights to any and all such
third party software and systems; (iii) E.piphany is not an agent or
otherwise acting on behalf of any such third party licensor; and (iv)
except pursuant to the indemnification provided above, Customer will not
sue or seek to hold E.piphany liable for any third party claim that such
integration activities violate such third party's patent, copyright or
other right in such software or systems.
VI. PAYMENT PROVISIONS
6.1. INVOICING AND PAYMENT
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<PAGE> 7
All undisputed fees shall be due and payable thirty (30) days from
receipt invoice date. Any amounts payable by Customer hereunder which
remain unpaid after the due date shall be subject to a late charge equal
to 1% per month from the due date until such amount is paid. Customer
agrees to pay applicable media and shipping charges. Customer shall
issue a purchase order, or alternative document acceptable to E.piphany,
on or before the Effective Date of the applicable Order Form.
6.2. TAXES
The fees listed in this Agreement do not include taxes; if E.piphany is
required to pay sales, use, property, value-added or other taxes based
on the licenses or services granted in this Agreement or on Customer's
use of the Solutions or training, then such taxes shall be billed to and
paid by Customer. This Section shall not apply to taxes based on
E.piphany's income. E.piphany shall deliver the Applications and
Documentation in electronic form.
VII. GENERAL TERMS
7.1. NONDISCLOSURE
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the Applications,
Documentation, the terms and pricing under this Agreement, all
information clearly identified as confidential, a parties' code,
processes, architecture and any other information that may be accessed
by a party hereunder that should reasonably be deemed as confidential. A
party's Confidential Information shall not include information that: (a)
is or becomes a part of the public domain through no act or omission of
the other party; (b) was in the other party's lawful possession prior to
the disclosure and had not been obtained by the other party either
directly or indirectly from the disclosing party; (c) is lawfully
disclosed to the other party by a third party without restriction on
disclosure; or (d) is independently developed by the other party without
reference to the Confidential Information. Customer shall not disclose
the results of any benchmark tests of the Applications to any third
party without E.piphany's prior written approval.
The parties agree to hold each others Confidential Information in
confidence for a period of five years after disclosure of the
Confidential Information or for a period of two years after termination
of this Agreement, whichever is earlier. The parties agree, unless
required by law, not to make each other's Confidential Information
available in any form to any third party for any purpose other than the
implementation of this Agreement. Each party agrees to take all
reasonable steps to ensure that Confidential Information is not
disclosed or distributed by its employees or agents in violation of the
terms of this Agreement.
7.2. GOVERNING LAW AND JURISDICTION
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<PAGE> 8
This Agreement, and all matters arising out of or relating to this
Agreement, shall be governed by the laws of the State of California
without reference to conflicts of laws principles. Any legal action or
proceeding relating to this Agreement shall be instituted in a state or
federal court in San Francisco or San Mateo County, California.
E.piphany and Customer agree to submit to the jurisdiction of, and agree
that venue is proper in, these courts in any such legal action or
proceeding.
7.3 PUBLICITY.
Upon execution of the Agreement, E.piphany shall be entitled to
represent that Customer is a customer, disclose that the parties have
entered into an Agreement to the extent necessary to comply with SEC
requirements and issue a press release mutually acceptable to the
parties.
7.4. NOTICES
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given
when mailed by first class mail to the first address listed in the
relevant Order Form (if to Customer) or to the E.piphany address on the
Order Form (if to E.piphany).
To expedite order processing, Customer agrees that both parties may
treat documents faxed one to the other as original documents;
nevertheless, either party may require the other to exchange original
signed documents.
7.5. LIMITATION OF LIABILITY
EXCEPT FOR E.PIPHANY'S OBLIGATIONS UNDER SECTION 5.1 (INFRINGEMENT
INDEMNITY), IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF
PROFITS, REVENUE, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NEITHER PARTY'S
LIABILITY FOR DAMAGES HEREUNDER SHALL EXCEED THE AMOUNT OF FEES PAID BY
CUSTOMER UNDER THIS AGREEMENT.
The provisions of this Agreement allocate the risks between E.piphany
and Customer. E.piphany's pricing reflects this allocation of risk and
the limitation of liability specified herein.
7.6. SEVERABILITY
If any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions of this Agreement will remain in
full force.
7.7. WAIVER
-8-
<PAGE> 9
The waiver by either party of any default of breach of this Agreement
shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for nonpayment or breach of E.piphany's
proprietary rights in the Applications, no action, regardless of form,
arising out of this Agreement may be brought by either party more than
two years after the cause of the action has accrued.
7.8. EXPORT ADMINISTRATION
Customer agrees to comply fully with all relevant export laws and
regulations of the United States ("Export Laws") to assure that neither
the Applications nor any direct product thereof are (1) exported,
directly or indirectly, in violation of Export Laws; or (2) are intended
to be used for any purposes prohibited by the Export Laws, including,
without limitation, nuclear, chemical, or biological weapons
proliferation.
7.9. ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties
and supercedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject matter of this
Agreement. This Agreement may not be modified or amended except in
writing signed by a duly authorized representative of each party; no
other act, document, usage or custom shall be deemed to amend or modify
this Agreement.
It is expressly agreed that the terms of this Agreement and any Order
Form shall supersede the terms in any Customer purchase order or other
ordering document. This Agreement shall also supersede all terms of any
unsigned or "shrinkwrap" license included in any package, media, or
electronic version of E.piphany-furnished software and any such software
shall be licensed under the terms of this Agreement, provided that the
use limitations contained in an unsigned ordering document shall be
effective for the specified licenses.
7.10. FORCE MAJEURE
Neither party shall be liable to the other for any delay or failure to
perform any obligation under this Agreement if the delay or failure is
due to circumstances beyond the reasonable control of the non-performing
party.
THE EFFECTIVE DATE OF THIS AGREEMENT SHALL BE MARCH 3, 2000.
Executed by eGroups, Inc.: Executed by E.piphany, Inc.:
Authorized Signature: Authorized Signature:
-------------- --------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
Address: 2688 Middlefield Road Address: 1900 Norfolk Street
San Mateo, CA 94403 Ste. 310 Redwood City, CA 94063
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<PAGE> 10
EXHIBIT A
Order Form
This Order Form to the Software License and Services Agreement ("Order Form") is
made between E.piphany, Inc. ("E.piphany") and eGroups, Inc. ("Customer.") This
Order Form is part of the Software License and Services Agreement between the
parties dated March 3, 2000 ("Agreement"). It is expressly agreed that the terms
of the Agreement and the Order Form shall supersede the terms in any Customer
purchase order or other ordering document. The Agreement and the Order Form
shall also supersede all terms of any unsigned or "shrinkwrap" license included
in any package, media, or electronic version of E.piphany furnished software and
any such software shall be licensed under the terms of this Agreement, provided
that the use limitations contained in an unsigned ordering document shall be
effective for the specified licenses.
1. Agreement Effective Date: March 3, 2000
2. Order Form Effective Date: March 3, 2000
3. Licenses/Services Support:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ITEM PRICE
- --------------------------------------------------------------------------------
<S> <C>
Current E.4 Tier 1 Reporting and Analysis Program
BBB - Sales Reporting Analysis & application
Channel Sell Through Management application
Call Center Reporting & Analysis application
Customer Profitability application
Current E.4 Tier 1 Distributed Database Marketing Programs
Loyalty Program Management application
Campaign Performance Measurement application
Current E.4 Tier 2 Distributed Database Marketing Programs
Cross-Sell/Up-Sell application
Attrition Management application
Customer Acquisition application
Current E.4 Tier 3 E-Commerce Programs
E-Commerce Campaigns application
Current E.4 Tier 4 E-Mailer application
Subtotal [ * ]
Name Users - 15 Names Users for Tier 1-4 applications [ * ]
Extractors (unlimited) [ * ]
Current Realtime Personalization Campaign Management
</TABLE>
An * indicates that information has been redacted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
-10-
<PAGE> 11
<TABLE>
<S> <C>
Programs
RTM Server (4CPUs) included
Web Point (4CPUs)
Control Center (5 Users)
Campaign Workshop (5 Users)
Subtotal License and Per Seat $[*]
Less Discount $[*]
Total License $[*]
First Year Enterprise Support (at 18%) $[*]
Training (2 persons for 5 days at $500 each) included
Professional Services (Phase 1 implementation services
described in attached Statement of Work) $[*]
Total $[*]
</TABLE>
Unless otherwise specified, all Software Licenses listed above are licensed for
UNIX Applications and the application release generally available as of the
Order Form Effective Date.
3.1. Technical Services. Technical Support Services fees shall be subject to
change by E.piphany from time to time upon ninety (90) days' written notice to
Customer; provided, however, for the second, third and fourth year terms of the
Agreement, E.piphany shall not increase the Technical Support Fees payable by
Customer in excess of nine percent (9%) over the prior year's fees. After the
first year term of the Agreement, Technical Services fees shall be due net
thirty (30) days from the first day of the applicable Technical Services term.
3.2 Expenses. The professional services fees are exclusive of actual, reasonable
travel and out-of-pocket expenses for which Customer shall reimburse E.piphany.
4.0 Designated System: 1 server with Oracle UNIX Database Server, MS ISS
Application Server; 2688 Middlefield Road, Redwood City, CA 94063
4. Notice Addresses:
Customer Contact E.piphany, Inc.
Jiff Winner & Rikk Carey Director of Legal Affairs
VP, Engineering E.piphany, Inc.
eGroups, Inc. 1900 S. Norfolk St., Suite 310
2688 Middlefield Road San Mateo, CA 94403
Redwood City, CA 94063 650-356-3800 (phone)
650-868-3158 (phone) 650-356-3907 (fax)
650-303.8260 (phone)
__________ 650-216-3999 (fax)
An * indicates that information has been redacted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
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<PAGE> 12
Technical Technical
Rikk Carey Director, Technical Support
VP, Engineering E.piphany, Inc.
eGroups, Inc. 1900 S. Norfolk St., Suite 310
2688 Middlefiled Road San Mateo, CA 94403
Redwood City, CA 94063 650-356-3800 (phone)
650-303-8260 (phone) 650-356-3801 (fax)
650-216-3399 (fax)
6. Technical Support. Notwithstanding anything to the contrary in Exhibit B,
E.piphany shall provide 7 x 24 support for Realtime Personalization and respond
with in two (2) hours for Critical Errors for such programs.
7. Payment Terms: all fees set forth above are due and payable in three equal
installments of $[*] as follows:
Net 30 days from Effective Date of the Agreement
Net 60 days from Effective Date of the Agreement
Net 90 days from Effective Date of the Agreement
8. Marketing. As a partial consideration for the license and net fees charged to
Customer, Customer agrees that, immediately upon execution of the Agreement,
Customer will participate in a joint release with E.piphany regarding the
Agreement which shall not be released prior to obtaining written approval from
Customer (such approval not to be unreasonably withheld or delayed); and
thereafter, Customer will allow E.piphany to use it as a reference account for
marketing purposes, including (i) allowing E.piphany to reference Customer on
its reference account customer lists in print and on its website; (ii) providing
quotes for E.piphany's press releases and website, subject to Customer's prior
review and approval of text; and (iii) participating in four (4) pre-approved
reference conference calls and one (1) site visit per month.
Executed by eGroups, Inc.: Executed by E.piphany, Inc.:
Authorized Signature: Authorized Signature:
-------------- --------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
Address: 2688 Middlefield Road Address: 1900 Norfolk Street
San Mateo, CA 94403 Ste. 310 Redwood City, CA 94063
An * indicates that information has been redacted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
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<PAGE> 13
EXHIBIT B Technical Support Services Terms and Conditions
These Technical Support Terms and Conditions ("Terms") are referenced in and
incorporated into the Software License and Service Agreement ('Agreement")
between E.piphany, Inc. ("E.piphany") and eGroups, Inc. ("Licensee.") Upon
reasonable notice, E.piphany reserves the right to modify the Terms under which
it provides Support Services to reflect current market conditions.
1.0. DEFINITIONS. Unless otherwise defined in the Terms, the capitalized terms
used herein shall have the same meaning as set forth in the Agreement and
applicable Schedule.
1. 1. "Critical" means an Error that: (1) renders the Software inoperative; or
(2) causes the Software to fail catastrophically.
1.2. "Dial In Access" means direct connection to the designated System, via
PPTP, SLIP/PPP, direct TCP/IP, or other such point-to-point network access.
1.3. "Enhancement" means technical or functional additions to the Software to
improve software functionality and/or operations. Enhancements are delivered
with new releases of the Software.
1.4. "Error" means a malfunction in the Software that degrades the use of the
Software.
1.5. "Major" means an Error that seriously affects performance of the Software,
but does not prohibit Licensee's use of the Software.
1.6. "Minor" means an Error that causes only minor impact to the use of the
Software.
1.7. "Patch" means the repair or replacement of source or object or executable
code versions of the Software to remedy an Error.
1.8. "Previous Sequential Release" means a release of the Software for use in a
particular operating environment that has been replaced by a subsequent release
of the Software in the same operating environment. E.piphany will support a
Previous Sequential Release for a period of one hundred eighty (180) days after
the release of the subsequent release. Multiple Previous Subsequent Releases may
be supported at any given time.
1.9. "Schedule" means the schedule set forth in the Order Form that describes
when the Services will be provided.
1.10. "Site" means the single centralized location set forth in the Schedule
where E.piphany will provide the Support Services.
1.11 "Software" means the application software programs licensed to Licensee
under the Agreement.
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<PAGE> 14
1.12. "Support Services" means the maintenance and support services described
herein.
1.13. "System" means the computer running the E.piphany application server and
E.piphany database server.
1.14. "Update" means all published revisions to the Documentation and one (1)
copy of the new release of the Software that are not designated by E.piphany as
new products for which it charges separately
1.15. "Workaround" means a change in the procedures followed or data supplied,
to avoid an Error without significantly impairing performance of the Software.
2.0. COVERAGE. In consideration for Licensee's payment of the applicable Support
Services fees to E.piphany, E.piphany will provide Licensee with the Support
Services for the Software for the Site. Only designated Licensee employees may
contact E.piphany to receive the Support Services. Licensee may acquire Support
Services for additional Licensee sites by paying to E.piphany the applicable
annual fee.
3.0. E.PIPHANY SOFTWARE MAINTENANCE AND SUPPORT SERVICE OFFERINGS. E.piphany
offers the following two (2) levels of Annual Support Services for its Products:
Enterprise Support Priority Enterprise Support
2 named contacts, 2 backup contacts Hot Line 6AM - 6PM Pacific
1st call log via web only Down System Hot Line 7 x 24
Patches 4 named contacts, 2 backup contacts
Updates and Enhancements 1st call log phone or web
Priority Levels: Urgent, Major and Minor Patches
Updates and Enhancements Priority
Levels: All
Regardless of the level of support, E.piphany will periodically issue Patches,
Updates, and Enhancements to improve the operation of Software. All Patches,
Updates and Enhancements provided to Licensee are subject to the terms and
conditions of the Agreement.
4.0. PRIORITY LEVEL OF ERRORS. E.piphany shall reasonably determine the priority
level of Error in accordance with the following protocols: Critical: 4 Hour
Response Time. E.piphany promptly initiates the following procedures: (1) assign
E.piphany specialist(s) to correct the Error; (2) provide ongoing communication
on the status of the correction; and (3) immediately begin to provide a
Workaround or Patch.
Urgent: 8 Hour Response Time. E.piphany will:
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<PAGE> 15
(1) assign a specialist to commence correction of the Error; and (2) provide
escalation procedures as reasonably determined by E.piphany Support staff.
E.piphany exercises all commercially reasonable efforts to include the Patch for
the Error in the next Software Update release.
Major: 2 Day Response: E.piphany will:
(1) assign a specialist to commence correction of the Error; and (2) provide
escalation procedures as reasonably determined by E.piphany support staff.
E.piphany may include the Patch for the Error in the next Update.
Minor: 5 Day Initial Response Time/ Monthly Update Response. E.piphany may
include the Patch for the Error in the next major Software release.
5.0. TELEPHONE SUPPORT. E.piphany provides telephone support concerning
installation and use of the Software. Except for designated holidays, Priority
Enterprise telephone support hours are Monday through Friday, 6:OOAM to 6:OOPM,
Pacific Time. Telephone support is also available for Priority Enterprise
customers 24 hours a day, 7 days a week for in-production customers who need to
resolve downs problems outside of normal support hours.
6.0. DIAL IN ACCESS. To provide timely service, E.piphany requires that Licensee
provide Dial-in Access to all systems covered under the Agreement. In the event
Licensee does not provide Dial-in Access, E.piphany will not be held liable for
failure to meet the response times set forth in Section 4 above. If Licensee
does not provide Dial-in Access, E.piphany may, at its sole discretion, elect to
provide on-Site support to Licensee for Errors reported by Licensee. In such
case, Licensee will reimburse E.piphany for the reasonable travel and living
expenses related to on-Site support activity.
7.0. ACCOUNT MANAGER. E.piphany may assign an Account Manager to assist with the
on-going support relationship between E.piphany and Licensee. Licensee will
reimburse E.piphany for the reasonable travel and living expenses of the Account
Manager for on-Site support activity.
8.0. ECSWEB. ECSWeb is an on-line, self-service system that features postings by
E.piphany and E.piphany Software users regarding technical and non- technical
topics of interest. Licensee may access ECSWeb via the Internet. At Licensee's
expense, Licensee is responsible for independently acquiring appropriate
Internet access.
a. All Software maintenance releases and Patches may be delivered to Licensee
through ECSWeb or by mail from E.piphany upon Licensee's written request. All
information provided by E.piphany in ECSWeb is confidential and proprietary to
E.piphany and shall only be used in connection with Licensee's use of the
Software and informational communications with other ECSWeb participants.
E.piphany reserves the right to modify
-15-
<PAGE> 16
information posted to ECSWeb. E.piphany shall have the right to publish and
distribute only through ECSWeb in all languages and in association with
Licensee's name any material or Software Applications provided by Licensee to
ECSWeb. Licensee shall not use ECSWeb for advertising or public relations
purposes and shall only submit information to ECSWeb which is owned by Licensee
or which Licensee has third party permission to submit to ECSWeb for use by all
other ECSWeb users,
b. In the interest of diminishing the exposure to software viruses, E.piphany
tests and scans for software viruses all information entered by E.piphany prior
to posting information to ECSWeb. Licensee shall also use a reliable virus
detection system on any software or information posted to ECSWeb, utilize backup
procedures, monitor access to ECSWeb, promptly notify E.piphany of any virus
detected within Licensee's systems associated with ECSWeb and generally exercise
a reasonable degree of caution when utilizing information from ECSWeb. E.piphany
provides the ECSWeb "AS IS" and does not warrant that ECSWeb will operate
without interruption or without errors. E.piphany reserves the right to modify
or suspend ECSWeb service in connection with E.piphany's provision for Support
Services.
9.0. FEES. The initial period of Support Services for the Site is included in
the Agreement; thereafter, in the event Licensee elects to continue to receive
Support Services, Licensee shall pay E.piphany the annual Support Services fee,
as set forth in the Schedule. Support Services are billed on an annual basis,
payable in advance. Licensee shall be responsible for all taxes associated with
Support Services, exclusive of taxes based on E.piphany's income. Licensee's
payment shall be due within thirty (30) days of receipt of the E.piphany
invoice. In the event Licensee elects not to renew Support Services and
subsequently requests Support Services, E.piphany shall reinstate Support
Services only after Licensee pays E.piphany the then-current annual fee plus all
cumulative fees that would have been payable had Licensee not suspended Support
Services.
10. 0. TERM AND TERMINATION. Support Services shall be provided for the Initial
Support Services Term as set forth in the Schedule, and shall be extended each
additional year unless terminated by either party. Each one (1) year term shall
commence on the anniversary of the Schedule Effective Date. Licensee may
terminate the Support Services provisions at the end of the original term or at
the end of any renewal term by giving E.piphany written notice at least ninety
(90) days prior to the end of any term. In the event Licensee fails to make
payment pursuant to the section titled "Fees", or in the event Licensee breaches
the Support Services provisions and such breach has not been cured within thirty
(30) days of written receipt of notice of breach, E.piphany may suspend or
cancel Support Services without further notice.
11.0. EXCLUSIONS. E.piphany shall have no obligation to support:
A. Altered, damaged or substantially modified software;
B. Software that is not the then-current release, or a Previous Sequential
Release;
-16-
<PAGE> 17
C. Errors caused by Licensee's gross negligence, hardware malfunction, or
other causes beyond the reasonable control of E.piphany;
D. Software installed in a hardware or operating environment not supported
by E.piphany; or
E. Third party software not licensed through E.piphany.
-17-
<PAGE> 18
EXHIBIT C
Statement of Work
-18-
<PAGE> 1
EXHIBIT 10.31
[GRAPHIC OMITTED]
Advertising Insertion Order
HTTP:WWW.EGROUPS.COM
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
Sales Contact: ______________ e-mail: ___________ Phone: (415) 546-2793 Fax: (415) 546-2801
- ------------------------------------------------------------------------------------------------------------------
ORDER INFORMATION
Order Date: ____________________ Order #: ______________
- ---------------- ------------------------------------------- -------------------- --------------------------------
ADVERTISER AGENCY
FAX FAX
ADDRESS ADDRESS
CONTACT CONTACT
PHONE PHONE
EMAIL EMAIL
- ---------------- -------------- ------------- -------------- -------------------- --------------------------------
START DATE END DATE CONTRACT LENGTH
- ---------------- -------------- ------------- -------------- -------------------- --------------------------------
- ------------------------------------------------------------------------------------------------------------------
Bill To: __ Advertiser __ Agency
- ------------------------------------------------------------------------------------------------------------------
AD PLACEMENT
- ----------------- ------------ ------------------------------------- ------------------------ --------------------
Ad Type Position Target Total Insertions Total Amount
------- -------- ------ ---------------- ------------
COST:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
DELIVERY: All materials must be delivered at least 4 business days in advance to
the e-mail address below ____________________. In all correspondence, an eGroups
insertion order number and flight dates must be referenced.
Insertion orders are subject to the approval of eGroups, Inc., which retains
sole discretion to accept or reject any order. Once accepted, the Insertion
Order may not be cancelled by Advertiser. Acceptance does not obligate eGroups
to accept subsequent orders. This insertion order is subject to and incorporates
eGroups Standard Terms and Conditions for Advertisers which are attached hereto.
AUTHORIZED BY: ______________________________________
PHONE: ______________ DATE: _________
PRODUCTION CONTACT: __________________________________
PHONE: ______________ DATE: _________
- ----------------------------------------------------------
PLEASE RETURN TO EGROUPS SALES DEPT. FAX # (415) 546-2801
- ----------------------------------------------------------
<PAGE> 2
ACCEPTED AND AGREED TO:
ACCEPTED AND AGREED TO:
EGROUPS, INC.
BY:
--------------------------------
NAME:
------------------------------
DATE:
------------------------------
<PAGE> 3
EGROUPS, INC.
STANDARD TERMS AND CONDITIONS FOR ADVERTISERS
THE FOLLOWING TERMS AND CONDITIONS ("STANDARD TERMS AND CONDITIONS FOR
ADVERTISERS") ARE DEEMED TO BE INCORPORATED INTO EACH ADVERTISING INSERTION
ORDER ACCEPTED BY EGROUPS ("INSERTION ORDER"):
1. TERMS OF PAYMENT. The Advertiser (as defined in the Insertion Order) will be
invoiced on the first day of the contract period set out in the Insertion Order.
Unless otherwise expressly agreed by the parties in writing, the Advertiser must
ensure that payment is made to eGroups, Inc. ("eGroups") in U.S. dollars within
thirty days after the date of the invoice, subject to credit policies that may
be in effect with respect to an individual Advertiser. Advertising agencies are
responsible for payment of all advertising ordered on behalf of their clients,
and by signing an Insertion Order acknowledge that they are jointly and
severally liable with their clients for payment. Advertiser's default in payment
entitles eGroups to cancel any advertising run remaining under the Insertion
Order.
2. CREATION, DELIVERY AND RUNNING OF ADVERTISING MATERIALS. Advertiser is solely
responsible for the creation of all advertising materials (including GIF or JPEG
files), and for the content of such advertising including compliance with all
applicable international, federal, state, or local laws and regulations that may
apply to the subject advertising. Advertiser will deliver the materials to
eGroups in electronic form at least four (4) business days before the scheduled
run date, or as otherwise instructed. Advertiser hereby grants eGroups a
non-exclusive, worldwide, fully paid right and license to use, reproduce,
publish, publicly perform and publicly display all such materials on the eGroups
Site. Advertiser acknowledges that positioning of advertisements on the eGroups
Site will be determined by eGroups in its sole discretion. eGroups does not
warrant the date or dates of insertion of the advertisement(s) and does not
warrant that the advertisement(s) will not be displayed after the end date
specified. However, eGroups will use reasonable efforts to comply with
Advertiser's request in this regard.
3. RIGHT TO REJECT ADVERTISEMENTS. All contents of advertisements are subject to
eGroups' approval. eGroups does not undertake to review the content of any
advertisement and any such review or approval shall not be deemed to constitute
an acceptance by eGroups that such advertisement is provided in accordance with
these Standard Terms and Conditions for Advertisers nor will it constitute a
waiver of eGroups' rights hereunder. eGroups reserves the right, in its sole
discretion, to reject or remove any advertisement, insertion order, URL link,
space reservation or position commitment at any time in its absolute discretion.
4. RATES. eGroups reserves the right to revise its advertising rate card at any
time. Rate card changes will not apply to Insertion Orders already signed by
eGroups.
5. USAGE STATISTICS. Notwithstanding the provisions of the Insertion Order, the
Advertiser acknowledges that eGroups makes no guarantees with respect to the
usage statistics or levels of impressions for any advertisement. eGroups
provides the Advertiser with estimated usage statistics as a courtesy to
Advertiser and eGroups will not be held liable for any claims relating to any
usage statistics however supplied.
6. ADVERTISER'S REPRESENTATIONS AND WARRANTIES. Advertiser represents and
warrants to eGroups that 1) it has the right to publish all of the content of
the advertisements provided under the Insertion Order and that such publication
will not infringe the rights of any third party, including without limitation,
intellectual property rights and rights of privacy or violate any applicable law
or regulation; and 2) the advertisements do not contain anything that is
defamatory, obscene, false or
<PAGE> 4
misleading.
7. INDEMNITY. Advertiser agrees to indemnify, defend and hold harmless eGroups,
and its employees, representatives and agents, from and against any and all
losses, damages, suits, judgments, costs and expenses, including reasonable
attorney's fees, arising out of or in connection with any claims, suits,
actions, or other proceedings actual or threatened based on or arising from: (a)
advertisements or other content supplied by Advertiser, including any claim that
it infringes any copyright, trademark or other intellectual property right of a
third party or contains any material that is obscene, defamatory, violates any
law or regulation, or breaches the rights of any person or entity, including,
without limitation, rights of publicity, privacy or personality, or is otherwise
actionable; (b) Advertiser's products or services, including any claim that they
are illegal or harm or may harm a third party in any manner; (c) a breach by
Advertiser of any representation or warranty contained in Paragraph 6; or (d)
the development, operation, maintenance or content contained on Advertiser's web
site.
8. LIMITATION OF LIABILITY. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE SERVICES
PROVIDED BY EGROUPS HEREUNDER ("ADVERTISING SERVICES") ARE PROVIDED "AS IS" AND
"AS AVAILABLE." EGROUPS DISCLAIMS ALL WARRANTIES OF ANY KIND, WHETHER EXPRESS OR
IMPLIED, REGARDING THE ADVERTISING SERVICES AND THE EGROUPS SITE OR ANY OTHER
ITEMS OR SERVICES IT MAY PROVIDE, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING, COURSE
OF PERFORMANCE OR USAGE OF TRADE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EGROUPS DOES NOT WARRANT THAT ITS SITE WILL BE FREE FROM BUGS,
DEFECTS OR ERRORS, OR THAT IT WILL BE ACCESSIBLE WITHOUT INTERRUPTION. IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR INDIRECT, EXEMPLARY, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, OR COSTS, SUFFERED BY THE OTHER, INCLUDING BUT NOT
LIMITED TO, ANY LOST PROFITS OR REVENUES, LOSS OF USE OR GOODWILL, EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
9. LIMITATION OF DAMAGES. If eGroups fails to publish any advertisement or
deliver the number of impressions as provided in the Insertion Order (or in the
event of any other failure, technical or otherwise, of such advertisement to
appear as provided in the Insertion Order), eGroups' liability will be limited
(at the option of eGroups) to either: (a) publishing the advertisement (or a
replacement advertisement if provided by the Advertiser) as soon as is
reasonably practicable in the period following the period during which the
advertisement was scheduled to run and for such time as is necessary to generate
a number of substitute impressions equal to the shortfall, or (b) refund to the
Advertiser that proportion of the amounts paid which relate to those
advertisements and/or impressions which were not provided, or, if the relevant
amounts were not paid by the Advertiser, agree that such amounts will not be due
or payable.
10. GENERAL. (a) These Standard Terms and Conditions for Advertisers together
with the Insertion Order ("Agreement"), constitute the entire agreement between
the parties and supersede any prior agreements and representations between the
parties, whether written or oral, regarding the subject matter contained herein;
(b) Advertiser may not assign, resell or otherwise transfer, any rights or
obligations under these Standard Terms and Conditions for Advertisers or the
Insertion Order, without the prior written consent of eGroups; (c) this
agreement shall be construed and interpreted according to the laws of the State
of California without regard to choice of law principles, and all disputes
arising under these terms shall be heard exclusively in the state courts of
California in the county of San Francisco or in the federal courts of the
Northern District of California, to which the parties consent to jurisdiction
and venue; (d) the prevailing party in any action or proceeding arising under
the Agreement shall be entitled to reasonable attorney's fees and costs; (e) the
waiver of a breach or right under the
<PAGE> 5
Agreement shall not constitute a waiver of any other or subsequent breach or
right; (f) if any provision of the Agreement is found to be invalid or
unenforceable by a court of competent jurisdiction, such provision shall be
severed from the remainder of the Agreement, which shall remain in full force
and effect; (g) eGroups shall not be in default or otherwise liable for any
delay in or failure of its performance under the Agreement arising by reason of
any Act of God, disruptions of the Internet, telecommunications facilities or
public utilities, or any government or any governmental body, acts of war, the
elements, strikes or labor disputes, or other causes beyond its control; and (h)
Advertiser shall keep the terms of the Insertion Order confidential.
<PAGE> 1
EXHIBIT 10.32
Advertising Insertion Order
HTTP:WWW.EGROUPS.COM
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------
Sales Contact: Jill Benloff e-mail [email protected] Phone: (415) 546-2813 Fax: (415) 546-2801
- ----------------------------------------------------------------------------------------------------------
ORDER INFORMATION
Order Date: December 6, 1999
- ----------------------------------------------------------------------------------------------------------
Advertiser X.Com
Agency
Fax (650) 833-5470
Fax
394 University Avenue
Address Palo Alto, CA 94301 Address
Contact Julie Anderson
Contact
Phone (650) 833-5460
Phone
Email [email protected]
Email
- ----------------------------------------------------------------------------------------------------------
Start Date 12/15/99 End Date 1/15/00 Contract Length 12/15-1/15
Bill To: [X] Advertiser [ ] Agency
- ----------------------------------------------------------------------------------------------------------
AD PLACEMENT
- ----------------------------------------------------------------------------------------------------------
Ad Type Position Target Total Clicks Total Amount
- ------- -------- ------ ------------ ------------
See Attached
COST: $225,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
DELIVERY: All materials must be delivered at least 4 business days in advance to
the email address [email protected]. In all correspondence, a eGroups
insertion order number and flight dates must be referenced.
This agreement is non-cancelable.
AUTHORIZED BY: PHONE: DATE:
----------------------------- ----------- --------
PRODUCTION CONTACT: PHONE: DATE:
------------------------ ----------- --------
- -------------------------------------------------------------
Please return to eGroups Sales Dept. Fax # (415) 546-2801
- -------------------------------------------------------------
EGROUPS, INC. 350 BRANNAN SAN FRANCISCO, CA 94107
<PAGE> 1
EXHIBIT 10.33
eGroups
Advertising Insertion Order
http:www.eGroups.com
Sales Contact: Jill Benioff e-mail: [email protected] Phone: (415) 546-2813
Fax: (415) 546-2601
ORDER INFORMATION
Order Date: February 9, 2000
Advertiser X.Com Agency
Fax (650) 752-6960 Fax
Address 394 University Avenue Address
Palo Alto, CA 94301
Contact Julie Anderson Contact
Phone (650) 752-6900 Phone
Email [email protected] Email
Start Date 2/10/00 End Date 3/8100 Contract Length 2/8/00-3/8/00
Bill To: [X] Advertiser [ ] Agency
AD PLACEMENT
<TABLE>
<CAPTION>
Ad Type Position Target CPM Total Impressions Total Amount
------- -------- ------ --- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Collectables
Elerts (2) Feb 10th and Collectables [*] [*] $4,000
21 st
Business & Finance: [*] [*]
impressions
Buying & Trading
Merchandise, Auctions, Bartering,
120x440's Collecting, Fantasy
text WEB Sports: [*] impressions [*] $46,500
Electronic Commerce/Shopping
Purchasing Goods: [*]
impressions
Cultures & Lifestyles: [*]
impressions Cost: $50,500
</TABLE>
DELIVERY: All materials must be delivered at least 4 business days in advance to
the e-mail address [email protected]. In all correspondence, a eGroups
Insertion order number and flight dates must be referenced.
This agreement Is non-cancelable.
Authorized By: Phone: 650-752-6907 Date: 02/08/2000
----------------------
We have requested confidential treatment of this exhibit pursuant to Rule 406,
promulgated by the Securities and Exchange Commission, under the Securities and
Exchange Act of 1933, as amended.
An * indicates that information has been redacted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 10.34
Advertising Insertion Order
http:www.eGroups.com
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
Sales Contact: _________ e-mail:_________ Phone: (212) 229-9599 Fax: (212) 229-9913
- ------------------------------------------------------------------------------------------------
</TABLE>
ORDER INFORMATION
Order Date:_________________ Order #_______________
- --------------------------------------------------------------------------------
Advertiser EVulkan (BeMany.com) Agency N/A
Fax Fax
Address Address
Contact Bill Robinson Contact
Phone Phone
Email [email protected] Email
- --------------------------------------------------------------------------------
Start Date 3/1/00 End Date 2/28/01 Contract Length 12 Months
- --------------------------------------------------------------------------------
Bill To: [x] Advertiser [ ] Agency
- --------------------------------------------------------------------------------
Ad Placement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL TOTAL
AD TYPE POSITION TARGET INSERTIONS CPM AMOUNT
- ------- -------- ------ ---------- --- ------
<S> <C> <C> <C> <C> <C>
HTML Email 468x60 Students, News, [*] [*] $42,000
Regional, Small
Business, Expatriates,
Regional Cooking,
Nationalities, Ethnic
Groups, Fraternities &
Sororities
Text Email 3 Lines "" [*] [*] $52,500
+ Link
Vault Sponsorship 468x60 "" [*] [*] $19,500
</TABLE>
We have requested confidential treatment of this exhibit pursuant to Rule 406,
promulgated by the Securities and Exchange Commission, under the Securities and
Exchange Act of 1933, as amended.
An * indicates that information has been redacted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C> <C>
Chat Sponsorship 468x60 "" [*] [*] $3000
Database Sponsorship 468x60 "" [*] [*] $3000
Links Sponsorship 468x60 "" [*] [*] $3000
Poll Sponsorship 468x60 "" [*] [*] $3000
Category Sponsorship 120x240 Education & Alumni, News [*] [*] $105,000
& Publications, Regions
& Languages
Group Info Page 120x90 All Groups [*] [*] $420,000
Sponsorship
Mgr. Newsletter 468x60 All Group Managers [*] [*] $35,000
Sponsorship
User Newsletter 468x60 All Subscribed Users [*] [*] $131,250
Sponsorship
Opt-In Email Stand Categories and Mailing [*] [*] $187,500
Alone Dates to Be Determined
Email Throughout the lifespan
Msg. of the campaign
Total: [*] $1,004,750
</TABLE>
DELIVERY: All materials must be delivered at least 4 business days in advance to
the e-mail address below ______________. In all correspondence, an eGroups
insertion order number and flight dates must be referenced.
Insertion orders are subject to the approval of eGroups, Inc., which retains
sole discretion to accept or reject any order. Once accepted, the Insertion
Order may not be cancelled by Advertiser. Acceptance does not obligate eGroups
to accept subsequent orders. This insertion order is subject to and incorporates
eGroups Standard Terms and Conditions for Advertisers which are attached hereto.
Authorized By: Phone: Date:
------------------------ ----------- -----------
Production Contact: Phone: Date:
------------------- ----------- -----------
Please return to eGroups Sales Dept. Fax (212) 229-9913
An * indicates that information has been redacted pursuant to a request for
confidential treatment filed separately with the Securities and Exchange
Commission.
-2-
<PAGE> 3
ACCEPTED AND AGREED TO:
EGROUPS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-3-
<PAGE> 1
EXHIBIT 10.35
GLOBAL CENTER, INC., A GLOBAL CROSSING COMPANY
MASTER SERVICE AGREEMENT NO.
================================================================================
This Master Service Agreement (this "Agreement") is entered into on the ________
day of ___________, 2000 ("Effective Date") by and between ___________________,
on behalf of itself and the subsidiary, affiliate, division and/or business unit
("Client") indicated on the Service Order Form attached hereto, with an office
at the address listed on the Service Order Form, and Global Center, Inc., a
Delaware Corporation with offices at 141 Caspian Court, Sunnyvale, CA 94089, to
set forth the terms and conditions pursuant to which Global Center, Inc. shall
provide to Client certain Services (as defined in the Service Order). The entire
contract between the parties shall consist of this Agreement and one or more
Service Order(s). Unless otherwise agreed to by both parties, all future Service
Orders entered into between the Client and Global Center, Inc. will be bound by
this Agreement.
In consideration of the mutual promises and upon the terms and conditions set
forth below, the parties agree as follows:
1. NATURE OF AGREEMENT
Pursuant to this Agreement, Global Center, Inc. shall sell and provide to
Client, in consideration for the applicable fees as set forth in a Service Order
the following: (i) Internet connectivity services (the "Bandwidth"); (ii) the
lease (if so indicated on the Service Order) or purchase by Client of equipment
to provide such services (the "Hardware") and the installation of such
equipment; (iii) the lease of space to store and operate such Hardware
("Space"); (iv) management, planning and consulting resources to support these
services, including maintenance and operation of the Hardware ("Support"), (v)
the licensing of software to provide such Services (the "Software"), including,
without limitation, monitoring software, billing software, trouble ticketing
software, data collection and process control software, which together,
including all telecommunication and digital transmission connections and links,
all electrical and physical requirements, comprise an Internet connectivity and
co-location package to support Client's web site(s) ("Client's Web Sites") under
this Agreement and are referred to hereinafter as the "Services".
The Services will be provided in accordance with the specifications set forth in
the Service Specification attached to this Agreement and in the Service Order(s)
hereto and made a part hereof.
2. SERVICE ORDERS
2.1. ORDERS. Client and Global Center, Inc. may execute one or more Service
Orders describing the Services that Client desires to purchase from Global
Center, Inc. Each Service Order shall set forth the Services to be provided by
Global Center, Inc., the specifications applicable to each item, the prices and
payment schedule, the initial term of such Services (the "Initial Service Term")
and other information the parties may mutually agree upon. No Service Order
shall be effective until executed by Global Center, Inc. All Service Orders will
be subject to the terms and conditions of this Agreement, provided however, that
in the event of conflict between the terms contained in any Service Order and
terms in this Agreement, the terms contained in the Service Order shall control.
2.2. In the event of conflict between terms in this Agreement and Service Order,
and any terms contained in client-issued order form or purchase order, the terms
of this Agreement and Service Order shall supersede any terms and conditions
that may appear in such client-issued order form or purchase order.
2.3. CANCELLATION. In the event that Client cancels or terminates a Service
Order at any time for any reason, other than expiration of a Service Order or a
Service Interruption (as defined below), Client agrees to pay Global Center,
Inc. all Monthly Recurring Charges specified in the Service Order for the
balance of the term therefore, which shall become due and owing as of the
effective date of cancellation or termination. Upon the cancellation or
termination of a Service Order by Client, Global Center, Inc., shall upon
Client's written request and at no additional cost, give full cooperation and
assistance to Client to assure an orderly and efficient transition.
2.4. IP ADDRESSES. Global Center, Inc. will assign on a temporary basis a
reasonable number of Internet Protocol Addresses ("IP Addresses") from the
address space assigned to the Global Center, Inc. by InterNIC. Client
acknowledges that the IP Addresses are the sole property of Global Center, Inc.,
are assigned to Client as part of the Service, and are not "portable," as such
term is used by InterNIC. Global Center, Inc., reserves the right to change the
IP Address assignments at any time; however, Global Center, Inc. shall use
reasonable efforts to avoid any disruption to Client resulting from such
renumbering requirement. Global Center, Inc., will give Client reasonable notice
of any such renumbering. Client agrees that it will have no right to IP
Addresses upon termination of this Agreement, and that any renumbering required
of Client after termination shall be the sole responsibility of Client.
2.5. STAFFING. Except as otherwise agreed in any Service Order, Global Center,
Inc. shall be responsible for staffing decisions with respect to its personnel
and the provision of any Services under this Agreement, and shall have the right
to remove or replace any of its personnel assigned to perform Services under
this Agreement. Global Center, Inc., shall use reasonable efforts to maintain
the continuity of its personnel assigned to perform Services under this
Agreement.
3. SOFTWARE LICENSE AND RIGHTS
3.1. LICENSE. During the term of the applicable Service Order, Global Center,
Inc., grants Client a non-transferable, nonexclusive license to use the Software
in object code form only, solely on the Hardware, or Global Center, Inc.,
equipment, in conjunction with the Services.
3.2. PROPRIETARY RIGHTS. This Agreement transfers to Client neither title nor
any proprietary or intellectual property rights to the Software, documentation,
or any copyrights, patents, or trademarks, embodied or used in connection
therewith, except for the rights expressly granted herein.
3.3. LICENSE RESTRICTIONS. Client agrees that it will not itself, or through any
parent, subsidiary, affiliate, agent or other third party.
3.3.1. Copy the Software except as expressly allowed under this Agreement. In
the event Client makes any copies of the Software, Client shall reproduce all
proprietary notices of Global Center, Inc., on any such copies;
3.3.2. reverse, engineer, decompile, disassemble, or otherwise attempt to derive
source code from the software;
3.3.3. sell, lease, license or sublicense the Software or the documentation;
3.3.4. write or develop any derivative software or any other software program
based upon the Software or any Confidential Information (as defined below); or
3.3.5. use the Software to provide processing services to third parties, or
otherwise use the Software on a 'service bureau' basis.
3.4. SOFTWARE REPRESENTATIONS AND WARRANTIES. Global Center, Inc., represents
and warrants that: (i) it has the right, power and authority to license the
Software to Client pursuant to this Agreement free of all liens, encumbrances
and other restrictions; (ii) the Software shall operate and run in accordance
with the Service Specifications indicated in the Agreement or referenced in the
Service Order, (iii) the license furnished by Global Center, Inc., hereunder
and/or the use of the Software by Client in accordance with the terms and
conditions herein or in any Service Order, will not infringe upon nor violate
any patent, copyright, trade secret, or other proprietary right of any third
party; (iv) Client's use and possession of the Software consistent with the
terms of this Agreement, shall not be adversely affected, interrupted or
disturbed
Page 1 of 6
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GLOBAL CENTER, INC., A GLOBAL CROSSING COMPANY
Master Service Agreement No.
================================================================================
by Global Center, Inc., or any entity asserting a claim under or through Global
Center, Inc.; (v) the installation and use of the Software and any Upgrades
shall not degrade, impair or otherwise adversely affect the performance or
operation of the Hardware.
4. HARDWARE TERMS AND CONDITIONS
4.1. INSTALLATION. If so indicated on the Service Order, Global Center, Inc.,
will use commercially reasonable efforts to install the Hardware as the Hardware
is shipped to Global Center, Inc., Global Center, Inc., will work with the
Client on an installation plan to define installation time frame and
requirements.
4.2. PURCHASE AND TITLE OF HARDWARE. If so indicated on the Service Order,
Client shall purchase the Hardware and deliver, at Client's expense, the
Hardware to the Space. Client agrees that the Hardware shall reside at the Space
during the term of this Agreement.
4.3. LEASE OF HARDWARE. If so indicated on the Service Order, Client shall lease
the Hardware, and Global Center, Inc., shall obtain and deliver the Hardware to
the Space. In the event Client leases the Hardware, the following terms and
conditions shall apply: The Hardware is and shall remain the property of Global
Center, Inc. Client shall not have taken, or attempt to take, any right, title
or interest therein or permit any third party to take any interest therein.
Client will not transfer, sell, assign, sublicense, pledge, or otherwise dispose
of, encumber or suffer a lien or encumbrance upon or against the Hardware or any
interest in the Hardware. Client will use the Hardware only at the Space. Client
will not move the Hardware from that facility without Global Center, Inc.'s
prior written permission. Client shall be responsible for any damage to the
Hardware caused by Client negligent or willful acts or omissions. Client will
use the Hardware only for the purpose of exercising its rights under this
Agreement.
4.4. RENT TO OWN. If so indicated on the Service Order, Client shall lease the
Hardware on a "rent to own" plan. In such event, all of the terms and conditions
in Section 4.3 shall apply, and the following terms and conditions shall also
apply. At the end of the term of the Service Order, providing Client is not in
breach of this Agreement, Client shall have the option to purchase the Hardware.
The purchase price shall be as indicated on the Service Order. Upon payment by
Client of the purchase price, title of the Hardware shall pass to Client at the
Space. Unless the Service Order is extended by mutual Agreement, Client shall
immediately delete, or shall allow Global Center, Inc., to delete all copies of
the Software and associated documentation owned by Global Center, Inc., or any
other materials of Global Center, Inc., resident on the Hardware.
5. SPACE
5.1. Global Center, Inc., represents and warrants that (i) it has obtained all
necessary approvals to lease the Space to Client and to allow Client to occupy
and have access to the Space for the purpose of receiving the Services set forth
in the Service Order, (ii) it has the authority to grant Client a royalty-free,
non-transferable, non-exclusive license to occupy and have access to the Space,
and that the grant of such license shall not constitute a violation of the lease
or separate Agreement to which Global Center, Inc., is a party and/or by which
it is bound, and (iii) the Space shall conform with the Service Specifications
set forth in this Agreement or any Service Order.
5.2. LICENSE TO OCCUPY. Global Center, Inc. grants to Client a non-exclusive
license to occupy the Space. Client acknowledges that it has been granted only a
license to occupy the Space and that it has not been granted any real property
interests in the Space. Global Center, Inc., represents and warrants that it has
obtained all approvals necessary, including but not limited to, permissions from
the landlord and any regulatory authorities, to operate the facility in this
manner contemplated by this Agreement.
5.3. MATERIAL AND CHANGES. Client shall not make any construction changes or
material alterations to the interior or exterior portions of the Space,
including any material alteration to cabling or power supplies for the Hardware,
without obtaining Global Center, Inc.'s prior written approval for Client to
have the work performed. Alternatively, Client may request Global Center, Inc.
to perform the work. Global Center, Inc., reserves the right to perform and
manage any construction or alterations within the Space areas at rates to be
negotiated between the Parties hereto, so long as the rates are commercially
reasonable. Client agrees not to erect any signs or devices to the exterior
portion of the Space without submitting the request to Global Center, Inc. and
obtaining Global Center, Inc.'s prior written approval.
5.4. DAMAGE. Client agrees to reimburse Global Center, Inc., for all reasonable
repair or restoration costs associated with damage or destruction in the Space
directly caused by the negligence or willful misconduct of Client's personnel,
Client's agents, Client's suppliers/contractors, or Client's visitors to the
Space during the term or as a consequence of Client's removal of the Hardware or
property installed in the Space, provided that Client shall not be liable for
any damage or destruction occurring from or out of any negligent act or omission
of Global Center, Inc., its officers, directors, agents and employees.
5.5. INSURANCE. Unless otherwise agreed, Client agrees to maintain, at Client's
expense, for each Space, (i) Comprehensive General Liability Insurance in an
amount not less than One Million Dollars ($1,000,000) per occurrence for bodily
injury or property damage, (ii) Employer's Liability in an amount not less than
Five Hundred Thousand Dollars ($500,000) per occurrence, and (iii) Worker's
Compensation in an amount not less than that prescribed by statutory limits.
Upon reasonable request of Global Center, Inc., Client shall furnish Global
Center, Inc., with certificates of insurance, which evidence these minimum
levels of insurance.
5.6. REGULATIONS. Client shall use its best efforts to comply with and not
violate Global Center, Inc.'s Safety, Health and Operation Rules and regulations
relating to use of it's premises and facilities, so long as those regulations
are provided to client in writing. Client's failure to comply materially with
Global Center, Inc. 's rules and regulations shall constitute a material default
under this Agreement. Global Center, Inc., may, in its sole discretion, limit
Client's access to a reasonable number of authorized Client employees or
designees. Client shall not interfere with any other clients of Global Center,
Inc., or such other clients' use of the Space.
5.7. DISCLAIMER. Except as expressly stated herein, Global Center, Inc., does
not make any representation or warranty as to the fitness of the Space for
Client's use.
6. SERVICE INTERRUPTIONS
6.1. 99% NETWORK UPTIME GUARANTEE. In the event of Network Downtime (as defined
below), the monthly fee payable for the Bandwidth, defined in the Service Order,
shall be reduced as follows:
6.1.1. if the total Downtime in the calendar month is more than seven and two
tenths (7.2) hours, but does not exceed fourteen and four tenths (14.4) hours,
the monthly Bandwidth fee for that month shall be reduced by one-third (33.3%);
and
6.1.2. if the total Downtime in the calendar month is more than fourteen and
four tenth hours (14.4) hours, but does not exceed twenty-one and six tenths
(21.6) hours, the monthly Bandwidth fee for that month shall be reduced by
two-thirds (66.6%); and
6.1.3. If the total Downtime in the calendar month is more than twenty-one and
six-tenths (21.6) hours the monthly Bandwidth fee for that month shall be
reduced by three-quarters (75%).
6.2. DOWNTIME DEFINED. For the purposes of this Section, Downtime shall mean any
interruption of sixty (60) seconds or more in the availability of, (i) the
connection between the Client's equipment and the Global Center, Inc. switch
fabric, (ii) the internetwork that connects the Global Center, Inc. switch
fabric with the Internet. For purposes of this Section, the Internet is deemed
to consist of services that commence where Global Center, Inc. transmits a
Client's content to Global Center,
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GLOBAL CENTER, INC., A GLOBAL CROSSING COMPANY
Master Service Agreement No.
================================================================================
Inc.'s carrier(s) at the Global Center, Inc., border router port(s). Such
carriers provide Global Center, Inc., with private and dedicated bandwidth.
Global Center, Inc., undertakes no obligation for the circuit or link between
Global Center, Inc.'s facilities and such carrier's services. If router packet
loss is in excess of fifty percent (50%) and is sustained for sixty (60) seconds
or more, Global Center, Inc., will classify this as an "outage." If an "outage"
continues for a time period of more than two (2) minutes, then such outage will
be deemed Downtime. If the latency across the Global Center, Inc. national IP
backbone exceeds one hundred twenty (120) milliseconds, Global Center, Inc.,
will classify this as Downtime.
6.3. MAINTENANCE WINDOWS. Global Center, Inc., reserves three (3) regularly
scheduled maintenance windows per week, of three hour duration, in order to
maintain and upgrade the Global Center, Inc. IP Backbone infrastructure. Outages
or performance degradation during scheduled maintenance windows as a result of
router, switch or server maintenance, are not considered Downtime for purposes
of this section. Global Center, Inc. shall make all commercially reasonable
efforts to provide the client with prior notification of all scheduled and
emergency maintenance procedures.
6.4. 100% FACILITY UPTIME GUARANTEE. In the event of Facility Downtime (as
defined below), the Monthly Fee payable for the Co-location Services as set
forth in the applicable Service Order shall be reduced as follows:
6.4.1. If the total Facility Downtime in the calendar month is less than, or
equal to four minutes and thirty-two seconds (4.32) the monthly Co-location
service fee for that month shall be reduced by one-third (33.3%);
6.4.2. If the total Facility Downtime in the calendar month is more than four
minutes and thirty-two seconds (4.32) the monthly Co-location service fee for
that month shall be reduced by two-thirds (66.6%).
6.4.3. DOWNTIME DEFINED. For the purposes of this Section, Facility Downtime
shall mean any service interruption, only if such interruption is either due to
a facility power failure or environmental control failure.
6.5. INVESTIGATION OF SERVICE INTERRUPTIONS. At Client's request, Global Center,
Inc. will investigate any report of Downtime, and attempt to remedy any Downtime
expeditiously. If Global Center, Inc. reasonably determines that all facilities,
systems and equipment furnished by Global Center, Inc. are functioning properly,
and that Downtime arose from some other cause, Global Center, Inc. can continue
to investigate the Downtime cause at the client's request and expense for labor
and materials cost for services actually performed at the usual and customary
rates for similar services provided by Global Center, Inc. to clients in the
same locality.
6.6. TERMINATION. Client may terminate a Service Order in the event of Downtime
of either twenty-four (24) hours of cumulative time during any continuous twelve
(12) month period, or any continuous downtime of eight (8) or more hours.
6.7. SOLE REMEDY. The terms and conditions of this Section shall be Client's
sole remedy and Global Center, Inc.'s sole obligation for any Downtime.
7. USER CONTENT
7.1. Client is solely responsible for the content of any postings, data, or
transmissions using the Services ("Content"), or any other use of the Services
by Client or by any person or entity Client permits to access the Services (a
"User"). Client represents and warrants that it and any User will not use the
services for unlawful purposes (including without limitation infringement of
copyright or trademark, misappropriation of trade secrets, wire fraud, invasion
of privacy, pornography, obscenity and libel), or to interfere with or disrupt
other network users, network services or network equipment. Disruptions include
without limitation distribution of unsolicited advertising or chain letters,
repeated harassment of other network users, wrongly impersonating another such
user, falsifying one's network identity for improper or illegal purposes,
sending unsolicited mass e-mailings, propagation of computer worms and viruses,
and using the network to make unauthorized entry to any other machine accessible
via the network. If Global Center, Inc. has reasonable grounds to believe that
Client or a User is utilizing the Services for any such illegal or disruptive
purpose, Global Center, Inc. may suspend or terminate Services immediately upon
notice to Client. Client shall defend, indemnify, hold harmless Global Center,
Inc. from and against all liabilities and costs (including reasonable attorney's
fees) arising from any and all claims by any person arising out of Client's use
of the Services, including without limitation any content.
7.2. ACCEPTABLE USE POLICY. All Global Center, Inc. clients are responsible for
reviewing and complying with this Acceptable Use Policy. Global Center Inc.'s
clients who provide services to their own users must take steps to ensure
compliance by their users with this Acceptable Use Policy. This Policy is
subject to change without notice by publication at
http://www.globalcenter.net/aup. Clients are responsible for monitoring this web
site for changes.
Global Center, Inc. customers may not use Global Center, Inc.'s data
distribution network, machines, or services in any manner that violates any
applicable law, regulation, treaty, or tariffs. Also customers are prohibited
from activity that includes, but is not limited to unauthorized use (or
attempted unauthorized use) of any machines or networks, denial of service
attacks, falsifying header information or user identification information,
monitoring or scanning the networks of others without prior written permission
from Global Center, Inc.
7.2.1. EMAIL. Sending unsolicited bulk email is prohibited. Sending unsolicited
bulk email from another provider advertising or implicating the use of any
service hosted by Global Center Inc., including without limitation email, web,
FTP, and DNS services, is prohibited and is grounds for termination of those
services to users who engage in the practice. Users who send unsolicited bulk
email from Global Center Inc., accounts will be charged the cost of labor to
respond to complaints.
Continuing to send someone email after being asked to stop is considered
harassment and is prohibited. Using email to disrupt (e.g., mail bombing,
"flashing," etc.) is prohibited. Sending email with falsified header information
is prohibited. Chain letters, pyramid schemes, and hoaxes are prohibited.
7.2.2. USENET NEWSGROUPS. Global Center, Inc. places no content restrictions on
newsgroup postings by its users except that (a) no illegal content, including
pyramid/Ponzi schemes, is permitted and (b) all postings should conform to the
various conventions, guidelines and local culture found in each respective
newsgroup and Usenet as a whole.
7.2.3. Posting 20 or more copies of the same article in a 45-day period
("spamming") or continued posting of off-topic articles after being warned is
prohibited. Users who engage in spamming using Global Center, Inc. accounts will
be charged the cost of labor to issue cancellations and respond to complaints.
Users who engage in spamming from another provider advertising or implicating
the use of any service hosted by Global Center, Inc., including without
limitation email, web, FTP, and DNS services, is prohibited and is grounds for
termination of those services to those users.
7.2.4. Excessive crossposting (Breidbart Index of 20 or greater in a 45-day
period) is prohibited. The Breidbart Index (BI) is calculated by taking the sum
of the square roots of the number of newsgroups each copy of an article is
crossposted to. If two articles are posted, one crossposted to 9 newsgroups and
the other crossposted to 16 newsgroups, the BI = sqrt(9)+sqrt(16)=3+4=7.
Crossposting articles to newsgroups where they are off-topic is prohibited.
7.2.5. Posting articles with falsified header information is prohibited.
"Munging" header information to foil email address harvesting by "spammers" is
acceptable provided that a reasonable means of replying to the message
originator is given. Use of anonymous remailers is acceptable, so long as the
use is not otherwise a violation of this policy.
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<PAGE> 4
GLOBAL CENTER, INC., A GLOBAL CROSSING COMPANY
Master Service Agreement No.
================================================================================
7.2.6. Users may not issue cancellations for postings except those, which they
have posted themselves, those which have headers falsified so as to appear to
come from them or in newsgroups where they are the official moderators.
8. PRICING AND PAYMENT TERMS
8.1. PAYMENT TERMS. Client shall pay the fees set forth in the Services Order
Form according to the terms set forth therein. Client agrees to pay a late
charge of two percent (2%) above the prime rate as reported by the Wall Street
Journal at the time of assessment or the maximum lawful rate, whichever is less,
for all undisputed amounts not paid within thirty (30) days of receipt of
invoice.
8.2. LATE PAYMENTS. In the event of non-payment by Client of sums over-due
hereunder for more than forty-five (45) days, Global Center, Inc. may upon
written notice to Client either retain any equipment or other assets of Client
then in Global Center, Inc.'s possession and sell them in partial satisfaction
of such unpaid sums, or request Client to remove equipment from Global Center,
Inc.'s premises within ten (10) days. If Client fails to so remove, Global
Center, Inc. may deliver the equipment to Client at the latter's address for
notices at Client's expense for shipment and insurance, and Client shall be
obligated to accept such delivery.
8.3. PRICE INCREASES. Global Center, Inc. shall not increase the prices for
services during the initial term of any Service Order, but may thereafter change
prices upon sixty(60) days written notice.
9. MAINTENANCE AND SUPPORT
Global Center, Inc. shall provide Client with maintenance and support of the
Software and Hardware, if any ("Maintenance and Support") as specified in the
Service Specification.
9.1 EXCLUSIONS. Maintenance and Support shall not include services for problems
arising out of (a) modification, alteration or addition or attempted
modification, alteration or addition of the Hardware or Software undertaken by
persons other than Global Center, Inc. or Global Center, Inc.'s authorized
representatives; or (b) programs or hardware supplied by Client.
9.2. CLIENT DUTIES. Client shall document and promptly report all errors or
malfunctions of the Hardware or Software to Global Center, Inc. Client shall
take all steps necessary to carry out procedures for the rectification of errors
or malfunctions within a reasonable time after such procedures have been
received from Global Center, Inc. Client shall maintain a current backup copy of
all programs and data. Client shall properly train its personnel in the use and
application of the Hardware and Software.
10. TERM AND TERMINATION
10.1. TERM. The term of this Agreement shall commence on the Effective Date and
continue indefinitely unless terminated in accordance with this Section 10 or
the provisions contained in Section 6.6 The initial term of each Service Order
shall be as indicated therein.
10.2. TERMINATION UPON DEFAULT. Either party may terminate this Agreement in the
event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of
thirty (30) days following written notice of default. In the event this
Agreement is terminated due to Global Center, Inc.'s breach, Global Center,
Inc., shall refund to Client any Services fees on a straight-line prorated
basis.
10.3. TERMINATION UPON INSOLVENCY. This Agreement shall terminate, effective
upon delivery of written notice by a party, (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party; (ii) upon the making of an
assignment for the benefit of creditors by the other party; or (iii) upon the
dissolution of the other party.
10.4. EFFECT OF TERMINATION. The provisions of Sections 1, 2.3, 3.2, 3.4, 7,
10.4, 11, 12, 13 and 14 shall survive termination of this Agreement. All other
rights and obligations of the parties shall cease upon termination of this
Agreement. The term of any license granted hereunder shall expire upon
expiration or termination of this Agreement.
11. CONFIDENTIAL INFORMATION
All information identified disclosed by either party ("Disclosing Party") to the
other party ("Receiving Party"), if disclosed in writing, labeled as proprietary
or confidential, or if disclosed orally, reduced to writing within thirty (30)
days and labeled as proprietary or confidential ("Confidential Information")
shall remain the sole property of Disclosing Party. Except for the specific
rights granted by this Agreement, Receiving Party shall not use any Confidential
Information of Disclosing Party for its own account. Receiving Party shall use
the highest commercially reasonable degree of care to protect Disclosing Party's
Confidential Information. Receiving Party shall not disclose Confidential
Information to any third party without the express written consent of Disclosing
Party (except solely for Receiving Party's internal business needs, to employees
or consultants who are bound by a written Agreement with Receiving Party to
maintain the confidentiality of such Confidential Information in a manner
consistent with this Agreement). Confidential Information shall exclude
information (i) available to the public other than by a breach of this
Agreement; (ii) rightfully received from a third party not in breach of an
obligation of confidentiality; (iii) independently developed by Receiving Party
without access to Confidential Information; (iv) known to Receiving Party at the
time of disclosure; or (v) produced in compliance with applicable law or a court
order, provided Disclosing Party is given reasonable notice of such law or order
and an opportunity to attempt to preclude or limit such production. Subject to
the above, Receiving Party agrees to cease using any and all materials embodying
Confidential Information, and to promptly return such materials to Disclosing
Party upon request.
12. LIMITATION OF LIABILITY
GLOBAL CENTER, INC.'S LIABILITY FOR ALL CLAIMS ARISING OUT OF THIS AGREEMENT
SHALL BE LIMITED TO THE AMOUNT OF FEES PAID BY CLIENT TO GLOBAL CENTER, INC.
UNDER THIS AGREEMENT. IN NO EVENT SHALL GLOBAL CENTER, INC. BE LIABLE FOR ANY
LOSS OF DATA, LOSS OF PROFITS, COST OF COVER OR OTHER SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR INDIRECT DAMAGES ARISING FROM OR IN RELATION TO THIS AGREEMENT
OR THE USE OF THE SERVICES, HOWEVER CAUSED AND REGARDLESS OF THEORY OF
LIABILITY. THIS LIMITATION WILL APPLY EVEN IF GLOBAL CENTER, INC. HAS BEEN
ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
13. DISCLAIMER OF WARRANTIES
EXCEPT AS OTHERWISE STATED HEREIN, GLOBAL CENTER, INC. SPECIFICALLY DISCLAIMS
ALL WARRANTIES EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT OF THE SYSTEM OR SERVICES PROVIDED BY GLOBAL CENTER, INC.
HEREUNDER.
14. MISCELLANEOUS
14.1. INDEPENDENT CONTRACTOR. The relationship of Global Center, Inc. and Client
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party the
power to direct and control the day-to-day activities of the other; (ii)
constitute the parties as partners, joint ventures, co-owners or otherwise as
participants in a joint
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GLOBAL CENTER, INC., A GLOBAL CROSSING COMPANY
Master Service Agreement No.
================================================================================
undertaking; or (iii) allow either party to create or assume any obligation
on behalf of the other party for any purpose whatsoever.
14.2. NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be given by registered or certified mail addressed to the addresses
first written above. Such notice shall be deemed to be given upon the earlier of
actual receipt or three (3) days after it has been sent, properly addressed and
with postage prepaid. Either party may change its address for notice by means of
notice to the other party given in accordance with this Section.
14.3. ASSIGNMENT. Neither party may assign this Agreement, in whole or in part,
either voluntarily or by operation of law without express written consent of the
other party, and any attempt to do so shall be a material default of this
Agreement and shall be void.
14.4. GOVERNING LAW. This Agreement shall be interpreted according to the laws
of the State of California without regard to or application of choice-of-law
rules or principles.
14.5. ENTIRE AGREEMENT AND Waiver. This Agreement, including all appendices,
attachments and Service Orders, shall constitute the entire Agreement between
Global Center, Inc. and Client with respect to the subject matter hereof and all
prior Agreements, representations, and statement with respect to such subject
matter are superseded hereby. This Agreement may be changed only by written
Agreement signed by both Global Center, Inc. and Client. No failure of either
party to exercise or enforce any of its rights under this Agreement shall act as
a waiver of subsequent breaches; and the waiver of any breach shall not act as a
waiver of subsequent breaches.
14.6. SEVERABILITY. In the event any provision of this Agreement is held by a
court of other tribunal of competent jurisdiction to be unenforceable, that
provision will be enforced to the maximum extent permissible under applicable
law, and the other provisions of this Agreement will remain in full force and
effect.
14.7. NON-SOLICITATION. During the term of this Agreement and for a period of
one (1) year thereafter, client shall not directly solicit, nor directly attempt
to solicit the services, of any employee or subcontractor of Global Center, Inc.
without the prior written consent of the other party.
14.8. SUBSTITUTION. Global Center, Inc. may substitute, change or modify the
Software or Hardware at any time, but shall not thereby alter the technical
parameters of the Services.
141 Caspian Court
Sunnyvale, CA 94089
BY
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TITLE
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DATE
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CLIENT:
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BY
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TITLE
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DATE
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<PAGE> 6
SERVICE SPECIFICATION
CO-LOCATION SERVICE
Global Center, Inc. will provide a level of service, which includes the
following features and options:
GENERAL FEATURES
MAINTENANCE OF THE SPACE (INCLUDING JANITORIAL SERVICES):
In connection with the Space made available hereunder, Global Center, Inc. or
its landlord shall perform services that support the overall operation of each
Space at no additional charge to Client. Those services include the following:
- - Janitorial Services
- - 24 x 7 Access to the Space
- - Authorized Security System Access to Raised Floor Collocation Space
- - Primary A/C 110 volt Power to the Space
- - Backup Power-UPS Systems & Battery Plant (30 - 60 minute survivability
objective)
- - Generator Back-up (Sustained backup power)
- - HVAC Systems for facility air conditioning
- - Fire Control Systems
- - Network Monitoring Systems
- - Redundant Network Connectivity and Hardware
- - 19" Rack Spaces for installation of Hardware
- - Custom configurations of space to accommodate cabinets
- - Lockable private caged customer areas
- - 10-base-T or 100-base-T switched port with direct high speed Internet
backbone connection.
24x7 NOC SUPPORT: Will provide proactive site monitoring with ExpressLane(TM)
statistics on Client information base; including bandwidth usage, statistics and
network availability reporting, host monitoring and management interface, access
to Global Center, Inc. incident tracking system to expedite fault resolution and
remote server reboot.
ESCALATION PLAN AND PROCEDURES: To be provided by Global Center, Inc. in the
Welcome Package 5-10 days after the contract is signed.
RIGHT-OF-WAY AND ACCESS
Global Center, Inc. will allow 24 x 7 access and right-of-way to Client Hardware
located in Global Center, Inc. facility at no charge. Clients will be escorted
at all times while in the facility. Access to the facilities will not be
unreasonably withheld by Global Center, Inc. to Clients for performing
appropriate procedures and maintenance of Hardware, facilities, and systems.
Page 6 of 6
<PAGE> 1
EXHIBIT 10.36
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated May 19, 1999, between SILICON VALLEY BANK
("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and
ONELIST, INC. ("Borrower"), whose address is 951 Old Country Road, Belmont,
California 94002 provides the terms on which Bank will lend to Borrower and
Borrower will repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP. The term "financial
statements" includes the notes and schedules. The terms "including" and
"includes" always mean "including (or includes) without limitation," in this or
any Loan document This Agreement shall be construed to impart upon Bank a duty
to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower will pay Bank the unpaid principal amount of all Credit Extensions and
interest on the unpaid principal amount of the Credit Extensions
2.1.1 Equipment Advances.
(a) Subject to the terms and conditions of this Agreement Bank agrees to lend to
Borrower, from time to time prior to the Commitment Termination Date, equipment
advances (each an "Equipment Advance" and collectively the "Equipment Advances")
in an aggregate amount not to exceed the Committed Equipment Line. When repaid,
the Equipment Advances may not be re-borrowed. The proceeds of the Equipment
Advances will be used solely to reimburse Borrower for the purchase of Eligible
Equipment. Each Equipment Advance shall be considered a promissory note
evidencing the amounts due hereunder for all purposes. Bank's obligation to lend
hereunder shall terminate on the earlier of (i) the occurrence and continuance
of an Event of Default, or (ii) the Commitment Termination Date. For purposes of
this Section, the minimum amount of each Equipment Advance is $30,000 and the
maximum number of Equipment Advances that will be made is 3.
(a) (b) To obtain an Equipment Advance, Borrower will deliver to Bank a
completed supplement in substantially the form attached as Exhibit C ("Loan
Supplement"), and such additional information as Bank may request at least five
(5) Business Days before the proposed funding date (the "Funding Date"). On each
Funding Date, Bank will specify in the Loan Supplement for each Equipment
Advance, the Basic Rate, the Loan Factor, and the Payment Dates. If Borrower
satisfies the conditions of each Equipment Advance specified from time to time
by Bank, Bank will disburse such Equipment Advance by internal transfer to
Borrower's deposit account with Bank. Each Equipment Advance may not exceed 100%
of the Original Stated Cost.
-3-
<PAGE> 2
(c) Bank's obligation to lend the undisbursed portion of the Committed Equipment
Line will terminate if, in Bank's sole discretion, there has been a material
adverse change in the general affairs, management, results of operation,
condition (financial or otherwise) or the prospects of Borrower, whether or not
arising from transactions in the ordinary course of business, or there has been
any material adverse deviation by Borrower from the most recent business plan of
Borrower presented to and accepted by Bank prior to the execution of this
Agreement.
2.2 Interest Rate, Payments.
(a) Principal and Interest Payments On Payment Dates. Borrower will repay the
Equipment Advances on the terms provided in the Loan Supplement Borrower will
make payments monthly in advance of principal and accrued interest for each
Equipment Advance (collectively, "Scheduled Payments"), on the first Business
Day of the month following the Funding Date (or commencing on the Funding Date
if the Funding Date is the first Business Day of the month) with respect to such
Equipment Advance and continuing thereafter during the Repayment Period on the
first Business Day of each calendar month (each a "Payment Date"), in an amount
equal to the Loan Factor multiplied by the Loan Amount for such Equipment
Advance as of such Payment Date. All unpaid principal and accrued interest is
due and payable in full on the last Payment Date with respect to such Equipment
Advance. Payments received after 12:00 noon Pacific time are considered received
at the opening of business on the next Business Day. When a payment is due on a
day that is not a Business Day, the payment is due the next Business Day and
additional fees or interest accrue. An Equipment Advance may only be prepaid in
accordance with Sections 2.2 (e) and 2.2 (g).
(b) Interest Rate. Borrower will pay interest on the unpaid principal amount of
each Equipment Advance from the first Payment Date after the Funding Date of
such Equipment Advance until the Equipment Advance has been paid in full, at the
per annum rate of interest equal to the Basic Rate determined by Bank as of the
Funding Date for each Equipment Advance in accordance with the definition of the
Basic Rate. Any amounts outstanding during the continuance of an Event of
Default shall bear interest at a per annum rate equal to the Basic Rate plus
five percent (5%). If any change in the law increases Bank's expenses or
decreases its return from the Equipment Advances, Borrower will pay Bank upon
request the amount of such increase or decrease.
(c) Interim Payment In addition to the Scheduled Payments, on the Funding Date
for each Equipment Advance (unless the Funding Date is the first Business Day of
the month) Borrower shall pay to Bank, on behalf of Bank, an amount (the
"Interim Payment") equal to the initial Equipment Advance multiplied by the
product of (i) the quotient derived from dividing the initial Loan Factor with
respect to such Equipment Advance by 30, and (ii) the number of days from the
Funding Date of the Equipment Advance until the first Payment Date with respect
to such Equipment Advance.
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(d) Final Payment on the Maturity Date with respect to each Equipment Advance,
Borrower will pay, in addition to the unpaid principal and accrued interest and
all other amounts due on such date with respect to such Equipment Advance, an
amount equal to the Final Payment.
(e) Prepayment Upon an Event of Loss. If any Financed Equipment is subject to an
Event of Loss and Borrower is required to or elects to prepay the Equipment
Advance with respect to such Financed Equipment pursuant to Section 6.7, then
such Equipment Advance shall be prepaid to the extent and in the manner provided
in such section.
(f) Mandatory Prepayment Upon an Acceleration. If the Equipment Advances are
accelerated following the occurrence of an Event of Default or otherwise (other
than following an Event of Loss), then Borrower will immediately pay to Bank (i)
all unpaid Scheduled Payments with respect to each Equipment Advance due prior
to the date of prepayment (ii) all accrued unpaid interest, including the
default rate of interest, to the date of the prepayment, (iii) the Final Payment
and (iv) all other sums, if any, that shall have become due and payable with
respect to any Equipment Advance.
(g) Permitted Prepayment of Loans. With Bank's prior written consent, Borrower
shall have the option to prepay all, but not less than all, of the Equipment
Advances advanced by Bank under this Agreement, provided Borrower (i) provides
written notice to Bank of its election to exercise to prepay the Equipment
Advances at least thirty (30) days prior to such prepayment and (ii) pays, on
the date of the prepayment (A) all remaining Scheduled Payments (including
principal and interest); (B) all unpaid accrued interest to the date of the
prepayment (C) the Final Payment, and (D) all other sums, if any, that shall
have become due and payable hereunder with respect to this Agreement.
2.3 Fees.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $5,000 due on
the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees and
reasonable expenses) incurred through and after the date of this Agreement, are
payable when due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
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3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) timely receipt of any Payment Advance Form; and
(b) the representations and warranties in Section 5 must be materially true on
the date of the Payment/Advance Form and on the effective date of each Credit
Extension and no Event of Default may have occurred and be continuing, or result
from the Credit Extension. Each Credit Extension is Borrower's representation
and warranty on that date that the representations and warranties of Section 5
remain true.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest
Borrower grants Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
of Borrower's duties under the Loan Documents. Except for Permitted Liens, any
security interest will be a first priority security interest in the Collateral.
Bank may place a "hold" on any deposit account pledged as Collateral. If this
Agreement is terminated, Bank's lien and security interest in the Collateral
will continue until Borrower fully satisfies its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in its state
of formation and qualified and licensed to do business in, and in good standing
in, any state in which the conduct of its business or its ownership of property
requires that it be qualified, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could cause reasonably be expected to cause a
Material Adverse Change.
5.2 Collateral.
Borrower has good title to the Collateral, free of Liens except Permitted Liens.
All Inventory is in all material respects of good and marketable quality, free
from material defects.
5.3 Litigation.
Except as shown in the Schedule, there are no actions or proceedings pending or,
to the knowledge or Borrower's Responsible Officers and legal counsel,
threatened by or against
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Borrower or any Subsidiary in which an adverse decision could reasonably be
expected to cause a Material Adverse Change.
5.4 No Material Adverse Change In Financial Statements.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrowers consolidated
financial condition and Borrower's consolidated results of operations. There has
not been any material deterioration in Borrower's consolidated financial
condition since the date of the most recent financial statements submitted to
Bank.
5.5 Solvency.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act Borrower is not engaged as
one of its important activities in extending credit: for margin stock (under
Regulations G, T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.
5.8 Full Disclosure.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not
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misleading. It being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results during the period or periods covered by
such projections and forecasts may differ from the projected and forecasted
results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 Government Compliance. Borrower will maintain its and all Subsidiaries'
legal existence and good standing in its jurisdiction of formation and maintain
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to cause a material adverse effect on Borrower's business
or operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have material adverse effect on Borrower's business or operations or
would reasonably be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) as soon as available, but no later than
30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during the period, in a form and certified by a Responsible Officer acceptable
to Bank; (ii) as soon as available, but no later than 90 days after the last day
of Borrower's fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Bank; (iii) a prompt report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of $100,000 or more; and (iv)
budgets, sales projections, operating plans or other financial information Bank
requests.
(b) Bank has the right to audit Borrower's Collateral anytime an Event of
Default has occurred and is continuing.
6.3 Inventory; Returns.
Borrower will keep all Inventory in good and marketable condition, free from
material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $50,000.
6.4 Taxes.
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Borrower will make, and cause each Subsidiary to make, timely payment of all
material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
6.5 Insurance.
Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank requests. Insurance policies will be in a form, with companies,
and in amounts that are reasonably satisfactory to Bank. All property policies
will have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
all policies will provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Subject to
Section 6.7 (a) below, so long as no Event of Default has occurred and is
continuing, Borrower shall have the option of applying the proceeds of any
casualty policy to the replacement or repair of destroyed or damaged property;
provided that, after the occurrence and during the continuance of an Event of
Default, all proceeds payable under any such casualty policy shall, at the
option of Bank, be payable to Bank on account of the Obligations.
6.6 Primary Accounts.
Borrower will maintain its primary depository and operating accounts with Bank.
6.7 Loss; Destruction; or Damage. Borrower will bear the risk of the Financed
Equipment being lost stolen, destroyed, or damaged. If during the term of this
Agreement any item of Financed Equipment becomes obsolete or is lost, stolen,
destroyed, damaged beyond repair, rendered permanently unfit for use, or seized
by a governmental authority for any reason for a period equal to at least the
remainder of the term of this Agreement (an "Event of Loss"), then in each case,
Borrower (a) prior to the occurrence of an Event of Default, at Borrowers
option, will (i) pay to Bank on account of the Obligations all accrued interest
to the date of the prepayment plus all outstanding principal, plus the Final
Payment; or (ii) repair or replace any Financed Equipment subject to an Event of
Loss provided the repaired or replaced Financed Equipment is of equal or like
value to the Financed Equipment subject to an Event of Loss and provided further
that Bank has a first priority perfected security interest in such repaired or
replaced Financed Equipment (b) during the continuance of an Event of Default,
on or before the Payment Date after such Event of Loss for each such item of
Financed Equipment subject to such Event of Loss, Borrower will, at Bank's
option, pay to Bank an amount equal to the sum of. (i) all accrued and unpaid
Scheduled Payments (with respect to such Equipment Advance related to the Event
of Loss) due prior to the next such Payment Date, (ii) all Regularly Scheduled
Payments (including principal and interest), (iii) the Final Payment plus (iv)
all other sums, if any, that shall have become due and payable, including
interest at the Default Rate with respect to any past due amounts. (c) On the
date of receipt by Bank of the amount specified above with respect to each such
item of Financed Equipment subject to an Event of Loss, this Agreement shall
terminate as to such Financed Equipment.
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If any proceeds of insurance or awards received from governmental authorities
are in excess of the amount owed under this Section, Bank shall promptly remit
to Borrower the amount in excess of the amount owed to Bank.
6.8 Further Assurances.
Borrower will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written consent,
which will not be unreasonably withheld:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, other than Transfers (i) of Inventory in the ordinary course of
business; (ii) of non-exclusive licenses and similar arrangements for the use of
the property of Borrower or its Subsidiaries in the ordinary course of business;
or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto or
have a material change in its ownership (other than the sale of Borrower's
equity securities in a public offering or to venture capital investors approved
by Bank) of greater than 25%. Borrower will not without at least 30 days prior
written notice, relocate its chief executive office or add any new offices or
business locations.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person,
except where (i) no Event of Default has occurred and is continuing or would
result from such action during the term of this Agreement and result in a
decrease of more than 25% of Tangible Net Worth. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance.
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Create, incur, or allow any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries to do so, except for-Permitted Liens, or permit any Collateral
not to be subject to the first priority security interest granted here, subject
to Permitted Liens.
7.6 Distributions; Investments.
Directly or indirectly acquire or own any Person, or make any Investment in any
Person, other than Permitted Investments, or permit any of its Subsidiaries to
do so. Pay any dividends or make any distribution or payment or redeem, retire
or purchase any capital stock.
7.7 Transactions with Affiliates.
Directly or indirectly enter or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person.
7.8 Subordinated Debt.
Make or permit any payment on any Subordinated Debt except under the terms of
the Subordinated Debt, or amend any provision, in any document relating to the
Subordinated Debt without Bank's prior written consent.
7.9 Compliance.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonable be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default.
8.1 Payment Default.
If Borrower fails to pay any of the Obligations within 3 days after their due
date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period).
8.2 Covenant Default.
If Borrower violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any
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agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or cannot
be cured after Borrower's attempts within 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not
more than 30 days) to attempt to cure the default During the additional time,
the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period).
8.3 Material Adverse Change.
If there (i) occurs a material impairment in the perfection or priority of the
Bank's security interest in the Collateral or in the value of such Collateral
which is not covered by adequate insurance or (ii) is a material impairment of
the prospect of repayment of any portion of the Obligations.
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized, levied on, or
comes into possession of a trustee or receiver and the attachment, seizure or
levy is not removed in 10 days, or if Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business or if a
judgment or other claim becomes a Lien on a material portion of Borrower's
assets, or if a notice of lien, levy, or assessment is filed against any of
Borrower's assets by any government agency and not paid within 10 days after
Borrower receives notice. These are not Events of Default if stayed or if a bond
is posted pending contest by Borrower (but no Credit Extensions will be made
during the cure period).
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or
an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within 30 days (but no Credit Extensions will be made before any Insolvency
Proceeding is dismissed).
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third party that
gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change.
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $50,000 is rendered against
Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions
will be made before the judgment is stayed or satisfied).
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in
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any writing delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under this
Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or reasonable to
protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower,
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney. Effective only when an Event of Default occurs and
continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i)
endorse Borrowers name on any checks or other forms of payment or security; (ii)
sign Borrower's name on any invoice or bill of lading for any Account or drafts
against account debtors, (iii) make, settle, and adjust all claims under
Borrower's insurance policies; (iv) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank
determines reasonable; and (v) transfer the Collateral into the name of Bank or
a third party as the Code permits. Bank may exercise the power of attorney to
sign Borrower's name on
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any documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 Accounts Collection.
When an Event of Default occurs and continues, Bank may notify any Person owing
Borrower money of Bank's security interest in the funds and verify the amount of
the Account. Borrower must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amount or furnish any required proof of payment to
third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank
deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due
and payable, bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.
9.5 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and Section 9-207 of the
Code, it is not liable for (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other person.
Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement the Loan Documents, and all
other agreements are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank's exercise of one night or remedy is not an
election, and Bank's waiver of any Event of Default is not a continuing waiver.
Bank's delay is not a waiver, election, or acquiescence. No waiver is effective
unless signed by Bank and then is only effective for the specific instance and
purpose for which it was given.
9.7 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment notice of any default nonpayment at maturity, release, compromise,
settlement extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.
10 NOTICES
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All notices or demands by any party about this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to the addresses set forth at the beginning of this
Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights
under it without Bank's prior written consent which may be granted or withheld
in Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Agreement
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all obligations in this Agreement
12.4 Severability of Provision. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.
12.5 Amendments in Writing, Integration.
All amendments to this Agreement must be in writing and signed by Borrower and
Bank.
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This Agreement represents the entire agreement about this subject matter, and
supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
are an original, and all taken together, constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this Agreement continue in
full force while any Obligations remain outstanding. The obligations of Borrower
in Section 12.2 to indemnify Bank will survive until all statutes of limitations
for actions that may be brought against Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank's subsidiaries or affiliates in connection
with their business with Borrower, (ii) to prospective transferees or purchasers
of any interest in the loans, (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit and
(v) as Bank considers appropriate exercising remedies under this Agreement
Confidential information does not include information that either (a) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.
12.9 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of the Loan
Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
13.1 Definitions.
In this Agreement "Accounts" are all existing and later arising accounts,
contract rights, and other obligations owed Borrower in connection with its sale
or lease of goods (including licensing software and other technology) or
provision of services, all credit insurance, guaranties, other security and all
merchandise returned or reclaimed by Borrower and Borrowers Books relating to
any of the foregoing.
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"Affiliate" of a Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person's senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person's managers and members.
"Bank Expense" are all audit fees and expenses and reasonable costs and expenses
(including reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including appeals or
Insolvency Proceedings).
"Basic Rate" is, as of the Funding Date, the per annum rate of interest (based
on a year of 360 days) equal to the sum of (a) the U.S. Treasury note yield to
maturity for a term equal to the Treasury Note Maturity as quoted in The Wall
Street Journal on the day the Loan Supplement is prepared, plus (b) the Loan
Margin.
"Borrower's Books" are all Borrowers books and records including ledgers,
records regarding Borrowers assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"Business Day" is any day that is not a Saturday, Sunday or a day on which the
Bank is closed.
"Closing Date" is the date of this Agreement
"Code" is the California Uniform Commercial Code. "Collateral" is the property
described on Exhibit .
"Committed Equipment Line" is a Credit Extension of up to $200,000.
"Commitment Termination Date" is January 19, 2000.
"Contingent Obligation" is, for any Person, any direct or indirect liability,
contingent or not , of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or so and with recourse
by that Person, or for which that Person is directly or indirectly liable; (ii)
any obligations for undrawn letters of credit for the account of that Person;
and (iii) all obligations from any interest rate, currency or commodity swap
agreement interest rate cap or collar agreement or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but "Contingent Obligation"
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but
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<PAGE> 16
the amount may not exceed the maximum of the obligations under the guarantee or
other support arrangement.
"Credit Extension" is each Equipment Advance or any other extension of credit by
Bank for Borrower's benefit.
"Eligible Equipment" is general purpose computer equipment, office equipment
test and laboratory equipment furnishings, and, subject to the limitations set
forth below, Other Equipment that complies with all of Borrower's
representations and warranties to Bank and which is acceptable to Bank in all
respects. All Equipment financed with the proceeds of Equipment Advances shall
be new, provided that Bank, in its sole discretion, may finance used equipment
Invoices for Eligible Equipment must be dated within 120 days of the Equipment
Advance.
"Equipment" is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower
has any interest.
"Equipment Advance" is defined in Section 2.1.1.
"Equipment Availability End Date" is defined in Section 2.1.1.
"Equipment Maturity Date" is defined in Section 2.1.1.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"Final Payment" is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the Maturity
Date for such Equipment Advance equal to the Loan Amount for such Equipment
Advance at such time multiplied by the Final Payment Percentage.
"Final Payment Percentage" is, for each Equipment Advance, 8%.
"Financed Equipment" is defined in the Loan Supplement
"Funding Date" is any date on which an Equipment Advance is made to or on
account of Borrower.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
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"Insolvency Proceeding" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Inventory" is present and future inventory in which Borrower has any interest,
including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease or
to be furnished under a contract of service, of every kind and description now
or later owned by or in the custody or possession, actual or constructive, of
Borrower, including inventory temporarily out of its custody or possession or in
transit and including returns on any accounts or other proceeds (including
insurance proceeds) from the sale or disposition of any of the foregoing and any
documents of title.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Lien" is a mortgage, lien, deed of trust charge, pledge, security interest or
other encumbrance.
"Loan Amount" is the aggregate amount of the Equipment Advance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement all as amended, extended or restated.
"Loan Factor" is the percentage which results from amortizing the Equipment
Advance over the Repayment Period, using the Basic Rate as the interest rate.
"Loan Margin" is 400 basis points.
"Loan Supplement" is attached as Exhibit C
"Material Adverse Change" is defined in Section 8.3.
"Maturity Date" is, with respect to each Equipment Advance, the last day of the
Repayment Period for such Equipment Advance, or if earlier, the date of
acceleration of such Equipment Advance by Bank following an Event of Default.
"Obligations" are debts, principal, interest, Bank Expenses and other amounts
Borrower owes Bank now or later, including cash management services, letters of
credit and foreign
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<PAGE> 18
exchange contracts, if any and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank.
"Original Stated Cost" is (i), the original cost to the Borrower of the item of
new Equipment net of any and all freight, installation, tax or (ii) the fair
market value assigned to such item of used Equipment by mutual agreement of
Borrower and Bank at the time of making of the Equipment Advance.
"Other Equipment" is leasehold improvements, intangible property such as
computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property, taxes, shipping and installation expenses. Unless
otherwise agreed to by Bank: not more than 25% of the Equipment financed with
the proceeds of each Equipment Advance shall consist of Other Equipment.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other Loan
Document (b) Indebtedness existing on the Closing Date and shown on the
Schedule; (c) Subordinated Debt; (d) Indebtedness to trade creditors incurred in
the ordinary course of business; and (e) Indebtedness secured by Permitted
Liens.
"Permitted Investments" are: (a) Investments shown on the Schedule and existing
on the Closing Date; and (b)(i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any State
maturing within 1 year from its acquisition, (ii) commercial paper maturing no
more than 1 year after its creation and having the highest rating from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii)
Bank's certificates of deposit issued maturing no more than 1 year after issue.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or arising
under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government changes or levies,
either not delinquent or being contested in good faith and for which Borrower
maintains adequate reserves on its Books, if they have no priority over any of
Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower or its
Subsidiaries incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;
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<PAGE> 19
(d) Leases or subleases and licenses or sublicenses granted in the ordinary
course of the Borrowers business and any interest or title of a lessor, licensor
or under any lease or license, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest.
(e) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase.
"Person" is any individuals sole proprietorship, partnership, limited liability
company, joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate", even if it is not
Bank's lowest rate.
"Repayment Period", as to the Equipment Advances, is 24 months.
"Responsible Officer" is each of the Chief Executive Officer, the President, the
Chief Financial Officer and the Controller of Borrower.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's debt
to Bank (and identified as subordinated by Borrower and Bank).
"Subsidiary" is for any Person, or any other business entity of which more that
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of Borrower
and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, Patents, trade
and service marks and names, Copyrights and research and development expenses,
and (c) reserves not already deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"Treasury Note Maturity" is 24 months.
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BORROWER:
ONEList, Inc.
By:
---------------------------------
Title:
------------------------------
BANK:
SILICON VALLEY BANK
By:
---------------------------------
Title:
------------------------------
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EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in and to
the following: All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without limitation,
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is temporarily
out of Borrower's custody or possession or in transit and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any documents of title
representing any of the above;
All contract rights and general intangibles now owned or hereafter acquired,
including, without limitation, goodwill, trademarks, servicemarks, trade styles,
trade names, patents, patent applications, leases, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights, royalties,
license rights and all other forms of obligations owing to Borrower arising out
of the sale or lease of goods, the licensing of technology or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower,
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for, damages by way of any past, present and future infringement of any of the
foregoing; and
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All Borrower's Books relating to the foregoing and any and all claims, rights
and interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.
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EXHIBIT 10.37
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated June 23, 1999 by and between
COMDISCO, INC. ("Lessor") and EGROUPS, INC. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's
rights, but will not be obligated to perform any of the obligations of Lessor.
The Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the
Secured Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense or
claim;
(c) Subject to and without impairment of Lessee's leasehold rights in
the Equipment, Lessee holds the Equipment for the Secured Party to the extent of
the Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided
re-certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and
each Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
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<PAGE> 2
(c) There are no actions, suits, proceedings or patent claims pending
or, to the knowledge of the Lessee, threatened against or affecting the Lessee
in any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses,
has access to, or can become licensed on reasonable terms under all patents,
patent applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the
Lessee is a party are in full force and effect in all material respects, and are
valid, binding and enforceable by the Lessee in accordance with their respective
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally, and rules of law concerning
equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when
due if that failure continues for five (5) business days after written notice;
or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or warranty made by
the Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10) business
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the
failure by Lessee to pay its debts when due, the insolvency of Lessee, the
filing by Lessee or the filing against Lessee of any petition under any
bankruptcy or insolvency law or for the appointment of a trustee or other
officer with similar powers, the adjudication of Lessee as insolvent, the
liquidation of Lessee, or the taking of any action for the purpose of the
foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all Rent due under
the defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the
U.S. Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of
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<PAGE> 3
Directors meeting within thirty (30) days following the date of such meeting
held during the term of this Master Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as
owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting
from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule and any
replacement for that property required or permitted by this Master Lease or a
Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the first
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
INTERIM RENT - means the pro-rata portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or the
maximum amount permitted by the law of the state where the Equipment is located.
LICENSED PRODUCTS - means any software or other licensed products attached to
the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same
model, type, configuration and manufacture as Equipment.
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<PAGE> 4
MERGER - means any consolidation or merger of the Lessee with or into any other
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12)
months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
RENT - means the rent Lessee will pay for each item of Equipment expressed in a
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule
which incorporates all of the terms and conditions of this Master Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security interest
for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
EGROUPS, INC. COMDISCO, INC.,
as Lessee as Lessor
By: By:
------------------------------- ------------------------------------
Title: Title:
---------------------------- ---------------------------------
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<PAGE> 1
EXHIBIT 10.38
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS SUBORDINATED LOAN AND SECURITY AGREEMENT (the "AGREEMENT"), dated as
of October 8, 1999, is entered into by and between eGROUPS, INC., a Delaware
corporation, with its chief executive office and principal place of business
located at 350 Brannan Street, San Francisco, California, 94107 (the "BORROWER")
and Comdisco, Inc., a Delaware corporation, with its principal place of business
located at 6111 North River Road, Rosemont, Illinois 60018 (the "LENDER" or
sometimes, "COMDISCO"). In consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a
loan or loans up to an aggregate principal amount of SEVEN MILLION DOLLARS
($7,000,000.00); FOUR MILLION DOLLARS ($4,000,000.00) available immediately
("LOAN A") and THREE MILLION DOLLARS ($3,000,000.00) available upon Borrower's
request as more fully set forth herein ("LOAN B") (as the same may from time to
time be amended, modified, supplemented or revised, individually or collectively
referred to as the "LOAN(S)"), which would be evidenced by Subordinated
Promissory Note(s) executed by Borrower substantially in the form of Exhibit A
hereto (as the same may from time to time be amended, modified, supplemented or
restated by the mutual written agreement of the parties, the "NOTE(S)");
WHEREAS, Lender is willing to make the Loan(s) on the terms and conditions
set forth in this Agreement;
WHEREAS, Lender and Borrower agree any Loan(s) hereunder shall be
subordinate to Senior Debt (as defined herein) to the extent set forth in the
Subordination Agreement (as defined herein); and
WHEREAS, Borrower has also given Lender certain rights to purchase the
Borrower's Preferred Stock under terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "ACCOUNT" means any "account" as such term is defined in Section 9106
of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
<PAGE> 2
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Borrower under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Borrower (whether or not yet earned by performance on the
part of Borrower or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
1.2 "ACCOUNT DEBTOR" means any "account debtor," as such term is defined
in Section 9105(1)(a) of the UCC.
1.3 "ADVANCE" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "ADVANCE DATE" means the funding date of any Advance of the Loan.
1.5. "ADVANCE REQUEST" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit B attached hereto, as
submitted by Borrower to Lender from time to time.
1.6 "CHATTEL PAPER" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.7 "CLOSING DATE" means the date hereof.
1.8 "COLLATERAL" shall have the meaning assigned to such term in Section 3
of this Agreement.
1.9 "CONTRACTS" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "COPYRIGHTS" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
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<PAGE> 3
1.11 "COPYRIGHT LICENSE" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.12 "DOCUMENTS" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
1.13 "EQUIPMENT" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
1.14 "EXCLUDED AGREEMENTS" means (i) the Master Lease Agreement dated as
of June 23, 1999 between Borrower, as lessee, and Lender, as lessor, including,
without limitation, any Equipment Schedules and Summary Equipment Schedules to
the Master Lease Agreement executed or delivered by Borrower pursuant thereto
and any other modifications or amendments thereof, whereby Borrower (as lessee)
leases equipment, software, or goods from Lender (as lessor) to Borrower (as
lessee).
1.15 "FACILITY FEE" means one percent (1%) of Loan A and Loan B and due to
Lender at the Closing Date. The Commitment Deposit of Ten Thousand Dollars
($10,000.00) previously paid by Borrower less reasonable due diligence expenses
of Five Thousand Dollars ($5,000.00) shall be applied towards the Facility Fee
due for Loan A.
1.16 "FIXTURES" means any "fixtures," as such term is defined in Section
9313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all purchases of the security constituted
thereby, immediately upon any acquisition or release thereof or any such
purchase, as the case may be.
1.17 "GENERAL INTANGIBLES" means any "general intangibles," as such term
is defined in Section 9-106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill, associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License), claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9105(e) of the UCC), rights to sue for
past, present and future
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<PAGE> 4
infringement of Copyrights, Trademarks and Patents, rights to receive tax
refunds and other payments and rights of indemnification.
1.18 "INITIAL PUBLIC OFFERING" means an initial public offering of
Borrower's securities.
1.19 "INSTRUMENTS" means any "instrument," as such term is defined in
Section 9105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.20 "INTELLECTUAL PROPERTY" means all Copyrights, Trademarks, Patents,
service marks, tradenames, trade secrets, source codes, customer lists,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, skill, expertise, experience, processes, models, drawings,
materials and records.
1.21 "INVENTORY " means any "inventory," as such term is defined in
Section 9109(4) of the UCC, wherever located, now or hereafter owned or acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest,
and, in any event, shall include, without limitation, all inventory, goods and
other personal property which are held by or on behalf of Borrower for sale or
lease or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in Borrower's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all furnished goods whether or
not such inventory is listed on any schedules, assignments or reports furnished
to Lender from time to time and whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Borrower or is held
by Borrower or by others for Borrower's account, including, without limitation,
all goods covered by purchase orders and contracts with suppliers and all goods
billed and held by suppliers and all inventory which may be located on premises
of Borrower or of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents or other persons.
1.22 "LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.23 "LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.24 "LOAN DOCUMENTS" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided, that the Loan Documents
shall not include any of the Excluded Agreements.
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<PAGE> 5
1.25 "MATERIAL ADVERSE EFFECT" means a material adverse effect upon the
business, operations, properties, prospects, assets or conditions (financial or
otherwise) of Borrower that materially hinders the ability of Borrower to
perform, or of Lender to enforce, the Secured Obligations.
1.26 "MATURITY DATE" means the date thirty-six (36) months from the
Advance Date of each installment of the Loan.
1.27 "MAXIMUM LOAN AMOUNT" means Four Million Dollars ($4,000,000.00) for
Loan A and Three Million Dollars ($3,000,000) for Loan B.
1.28 "MERGER EVENT" means a capital reorganization of the shares of the
Borrower's stock (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Borrower with or into another corporation whether or not
the Borrower is the surviving corporation, or the sale of all or substantially
all of the Borrower's properties and assets to any other person or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of Borrower is transferred to parties that were not
existing holders of the Borrower's capital stock immediately prior to such
transaction, provided that such other corporation or other person shall have
cash and cash equivalent assets equal to or greater than ten million dollars
($10,000,000) and provided that the foregoing shall not apply to a merger
effected exclusively for the purpose of changing the domicile of the Borrower or
an Initial Public Offering.
1.29 "NEXT ROUND" shall be defined as the earliest to occur of (i) a
preferred stock financing of at least Ten Million Dollars ($10,000,000), (ii) a
Merger Event, or (iii) an Initial Public Offering.
1.30 "PATENT LICENSE" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.31 "PATENTS" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
1.32 "PERMITTED LIENS" means:
(i) Liens in favor of Lender;
(ii) Liens related to, or arising in connection with, Senior Debt;
(iii) Liens for taxes, fees, assessments or other governmental charges
or levies either not delinquent or being contested in good faith
and for
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<PAGE> 6
which Borrower maintains adequate reserves on its books in
accordance with GAAP;
(iv) Purchase money Liens (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the
Equipment, or (ii) existing on Equipment when acquired, if the
Lien is confined to the property and improvements and the
proceeds of the Equipment;
(v) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business and any interest or title
of a licensor or under any lease or license;
(vi) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section
9.8;
(vii) Liens on assets (including the proceeds thereof and accessions
thereto) that existed at the time such assets were acquired by
Borrower; provided such liens are not granted in contemplation
of or in connection with the acquisition of such asset by
Borrower;
(viii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection
with the importation of goods;
(ix) Liens on insurance proceeds in favor of insurance companies
granted solely as security for financed premiums;
(x) deposits under worker's compensation, unemployment insurance,
social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance
or other similar bonds for the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under
ERISA or Environmental Liens) or surety or appeal bonds, or to
secure indemnity, performance or other similar bonds in the
ordinary course of business;
(xi) Liens arising by operation of law such as mechanics',
materialman's, carriers', warehousemen's and landlord's liens
incurred in the ordinary course of business;
(xii) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type
described in clauses (ii) and (iv) above, provided that any
extension, renewal or replacement Lien shall be limited to the
property encumbered by the existing Lien and the principal
amount of the indebtedness being extended, renewed or refinanced
does not increase;
(xiii) Liens relating to customary setoffs or bankers liens with
respect to amounts on deposit in connection with arrangements
with banks in the ordinary course of business.
1.33 "PREFERRED STOCK" means the Borrower's Series C Preferred Stock.
1.34 "PROCEEDS" means "proceeds," as such term is defined in Section
9306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect
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to any of the Collateral, (c) any and all payments (in any form whatsoever) made
or due and payable to Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any Person acting under
color of governmental authority), (d) any claim of Borrower against third
parties (i) for past, present or future infringement of any Copyright, Patent or
Patent License or (ii) for past, present or future infringement or dilution of
any Trademark or Trademark License or for injury to the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
1.35 "PURCHASE OPTION" shall have the meaning assigned to such term in
Section 8 of this Agreement.
1.36 "RECEIVABLES" shall mean and include all of the Borrower's accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically sold or assigned to Lender hereunder.
1.37 "SECURED OBLIGATIONS" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.38 "SENIOR CREDITOR" means a bank, insurance company, pension fund, or
other institutional lender to be determined and identified to Lender in
accordance with the Subordination Agreement, or a syndication of such
institutional lenders that provides Senior Debt financing to Borrower; provided,
that Senior Creditor shall not include any officer, director, shareholder,
venture capital investor, or insider of Borrower, or any affiliate of the
foregoing persons, except upon the express written consent of Lender which
consent shall not be unreasonably withheld.
1.39 "SENIOR DEBT" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor(s)
under the applicable Senior Loan Documents, including, but not limited to such
amounts as may accrue or be incurred before or after default or workout or the
commencement of any liquidation, dissolution, bankruptcy, receivership or
reorganization by or against Borrower provided, that (i) Borrower may incur
Senior Debt without limitation as to amount, without the consent of Lender, so
long as such Senior Debt is secured only by Borrower's property, plant and
equipment (as defined under GAAP), (ii) if such Senior Debt is unsecured and
would exceed three million dollars ($3,000,000) in principal outstanding at any
one time, then Lender shall have the right to consent to the incurrence of such
Senior Debt, which consent shall not be unreasonably withheld, and (iii) if such
Senior
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Debt is secured by (a) non-property plant and equipment (as defined under GAAP)
assets and (b) would exceed the greater of (i) three million dollars
($3,000,000) in outstanding principal at any one time or (ii) eighty-five
percent (85%) of qualified accounts receivable, then Lender shall have the right
to consent to the incurrence of such Senior Debt, which consent shall not be
unreasonably withheld. To the extent Lender's consent is required hereunder,
Senior Debt shall not include any indebtedness or obligation unless and until
such consent has been given.
1.40 "SENIOR LOAN DOCUMENTS" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.41 "SUBORDINATION AGREEMENT" means the Subordination Agreement to be
entered into between Lender and Senior Creditor in such form as to be mutually
agreeable to Lender, Borrower and Senior Lender.
1.42 "TRADEMARK LICENSE" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.43 "TRADEMARKS" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.44 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
SECTION 2. THE LOANS
2.1 Lender agrees to lend to Borrower an amount not to exceed Four Million
and 00/100 Dollars ($4,000,000.00) in the aggregate at any one time outstanding
("LOAN A") for the purposes and upon the terms and subject to the conditions
contained in this Agreement.
2.2 Lender agrees to lend to Borrower an amount not to exceed Three
Million and 00/100 Dollars ($3,000,000.00) in the aggregate at any one time
outstanding ("LOAN B") for the purposes and upon the terms and subject to the
conditions contained in this Agreement.
2.3 The Loan(s) shall be available in minimum Advances of Five Hundred
Thousand Dollars ($500,000.00). Each Advance made by Lender to Borrower shall be
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evidenced by a Note in the original principal amount of such Advance. The
principal balance of each Note shall bear interest thereon precomputed at the
rate of eight and one-quarter percent (8.25%) per annum, and each such Note
shall be due and payable in twenty-four (24) equal monthly installments of
interest only, payable on the first day of each month, followed by twelve (12)
equal monthly installments of principal and interest, payable on the first day
of each month, to and including the Maturity Date (each, a "PAYMENT DATE"). If
any payment under a Note shall be payable on a day other than a business day,
then such payment shall be due and payable on the next succeeding business day.
2.4 In order to obtain an Advance under the Loans, Borrower shall
complete, sign and deliver an Advance Request to Lender. Each Advance Request
shall identify an Advance Date which is no less than three (3) business days
from the date of such notice. Upon receipt of an Advance Request, Lender shall
verify the information contained in the Advance Request and so long as no Event
of Default exists as of the date of the Advance Request, it shall promptly
deliver a Note dated the Advance Date evidencing such Advance to Borrower for
signature. Lender will fund the Advance in the manner requested in the Advance
Request within three (3) business days of receipt of the Advance Request so long
as Lender has received the original signed Note from Borrower on or before such
date. Borrower agrees that Lender may rely on any notice given by any Person it
reasonably believes to be an authorized officer of Borrower.
2.5 Borrower shall have the option to prepay any Note, in whole or in
part, without premium or penalty by paying the principal amount thereon together
with all accrued and unpaid interest with respect to such principal amount, as
of the date of such prepayment. Notwithstanding the foregoing, any such
prepayment by the Borrower shall not affect Lender's right to purchase as
described in Section 8 herein.
2.6 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the "Maximum
Rate"). If the Borrower actually pays Lender an amount of interest, chargeable
on the total aggregate principal Secured Obligations of Borrower under this
Agreement and the Note(s) (as said rate is calculated over a period of time from
the date of this Agreement through the end of time that any principal is
outstanding on the Note(s)), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note(s); second, after all
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by Borrower to Lender under this Agreement
or the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower, and the effective rate of interest will be
automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder, delinquent
interest shall be added to principal and shall bear interest on interest,
compounded at the rate set forth in Section 2.3.
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(c) Upon and during the continuation of an Event of Default hereunder, all
Secured Obligations, including principal, interest, compounded interest, and
reasonable professional fees, shall bear interest at a rate per annum equal to
the rate set forth in Section 2.3 plus five percent (5%) per annum ("Default
Rate").
(d) If the Borrower has not repaid the outstanding principal amount under
the Loan in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid, Lender shall have the right to purchase
from the Borrower at the applicable Purchase Price (as defined in Section 8.1
hereof), an additional number of shares of Preferred Stock which number shall be
determined by (i) multiplying the outstanding principal amount which is due but
unpaid by three percent (3%) and (ii) dividing the product thereof by the
Purchase Price.
SECTION 3. SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan(s) upon the terms and subject to
the conditions of the Note(s), Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender for security purposes only, and
hereby grants to Lender a security interest in, all of Borrower's right, title
and interest in, to and under each of the following (all of which being
hereinafter collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether
tangible or intangible and whether now or hereafter owned or
existing, leased, consigned by or to, or acquired by, Borrower
and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
Notwithstanding the foregoing, in no event shall Collateral include any
Copyrights, Patents, Trademarks, Licenses, or any Intellectual Property.
Such security interest shall be subordinate to any Permitted Liens.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
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The obligations of the Lender to make Loans hereunder are subject to the
satisfaction by Borrower, or waiver by Lender, of the following conditions:
4.1 Borrower, on or prior to the Closing Date, shall have delivered to
Lender the following:
(a) executed originals of the Agreement, and any other documents
reasonably required by Lender to effectuate the liens of Lender with
respect to all Collateral;
(b) certified copy of resolutions of Borrower's Board of
Directors evidencing approval of the borrowing and other transactions
evidenced by the Loan Documents;
(c) certified copies of the Certificate of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have
a Material Adverse Effect; and
(e) payment of the Facility Fee.
4.2 On each Advance Date:
(a) The Lender shall have received (i) an Advance Request for such
Advance as required by Section 2.4, and (ii) an executed Note evidencing such
Advance.
(b) The representations and warranties set forth in Section 5 hereof
shall be true and correct in all material respects on and as of the Advance Date
with the same effect as though made on and as of such date, except to the extent
such representations and warranties expressly relate to an earlier date.
Each Advance Request shall be deemed to constitute a representation and warranty
by the Borrower on the Advance Date as to the matters specified in paragraph (b)
of this Section 4.2.
4.3 PERFECTION OF SECURITY INTERESTS. Borrower shall have taken or caused
to be taken such actions reasonably requested by Lender to grant Lender a
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be reasonably necessary or
desirable to perfect the security interest of Lender in such Collateral.
4.4 ABSENCE OF EVENTS OF DEFAULTS. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement.
4.5 FUNDING LIMITATION. Notwithstanding anything in this Agreement to the
contrary, Lender shall not be obligated to fund any additional Advance to
Borrower (i) at any time after six (6) months from the date of this Agreement,
or (ii) at any time an Event of Default exists pursuant to Section 9.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
5.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
5.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest in the Collateral as
security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims, other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection herewith as the
Lender may reasonably request. Except for Permitted Liens, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.
5.3 Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of Delaware, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or
location of its properties require such qualifications and where the failure to
be qualified would have a Material Adverse Effect.
5.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents, required to be
delivered or executed in connection herewith, have been duly authorized by all
necessary corporate action of Borrower, the individual or individuals executing
the Loan Documents were duly authorized to do so; and the Loan Documents
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization or other similar laws generally affecting the
enforcement of the rights of creditors.
5.5 This Agreement and the other Loan Documents do not and will not
violate any provisions of Borrower's Certificate of Incorporation, Bylaws or any
material contract, agreement, law, regulation, order, injunction, judgment,
decree or writ to which the Borrower is subject, or result in the creation or
imposition of any lien, security interest or other encumbrance upon the
Collateral, other than those (i) created by this Agreement or (ii) relating to
Permitted Liens.
5.6 The execution, delivery and performance of this Agreement and the
other Loan Documents do not require the consent or approval of any other person
or entity including, without limitation, after reasonable inquiry any regulatory
authority or governmental body of the United States or any state thereof or any
political subdivision of the United States or any state thereof.
5.7 No fact or condition exists that would constitute a payment default in
excess of $100,000 which remains uncured for thirty (30) days after receipt by
Borrower of written notice under the Senior Loan Documents.
5.9 (a) There are no actions, suits or proceedings at law or in equity or
by or before any governmental authority now pending or, to the knowledge of the
Borrower,
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threatened against or affecting the Borrower or any business, property or rights
of the Borrower (i) which involve any Loan Document or (ii) as to which there is
a reasonable possibility of an adverse determination and which, if adversely
determined, could, individually or in the aggregate, result in a Material
Adverse Effect.
(b) The Borrower is not in violation of any law, rule or regulation, or in
default with respect to any judgment, writ, injunction or decree of any
governmental authority, where such violation or default could result in a
Material Adverse Effect.
5.10 No information, report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrower to the Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact or
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.
5.11. All issued and outstanding shares of Common Stock, Preferred Stock
or any other securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. All outstanding shares of Common
Stock, Preferred Stock and any other securities were issued in full compliance
with all federal and California state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 20,000,000
shares of Common Stock, of which 5,812,399 shares are issued and outstanding;
(B) 1,620,000 shares of Series A Preferred Stock, of which 1,620,000 shares are
issued and outstanding and are convertible into 1,620,000 shares of Common Stock
at $0.50 per share; and (C) 3,600,000 shares of Series B Preferred Stock, of
which 3,556,772 shares are issued and outstanding and convertible into 3,556,772
shares of Common Stock at $1.43955 per share. All of the issued and outstanding
shares of Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. All of the issued and outstanding shares of
Preferred Stock have been duly authorized and validly issued and are fully paid
and nonassessable. As of the Closing Date the authorized capital of the Company
consists of (A) 20,000,000 shares of Common Stock, of which 6,226,399 shares are
issued and outstanding; (B) 1,620,000 shares of Series A Preferred Stock, of
which 1,620,000 shares are issued and outstanding and are convertible into
1,620,000 shares of Common Stock at $0.50 per share; and (C) 3,600,000 shares of
Series B Preferred Stock, of which 3,556,772 shares are issued and outstanding
and convertible into 3,556,772 shares of Common Stock at $1.43955 per share. As
of the Closing Date, except for (i) conversion privileges of the Preferred
Stock, (ii) outstanding Warrants to purchase Preferred Stock, (iii) outstanding
options under the Company's 1998 Stock Option Plan and except as set forth in
the Company's Restated Certificate, there are (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company , (ii) no
obligations (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such rights or to issue or distribute to
holders of a share of its capital stock any evidences of indebtedness or assets
of the Company, and (iii) no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend to make any other distribution in respect
thereof. All of the issued and outstanding securities or the Company have been
offered, issued and sold by the Company is compliance with applicable federal
and state securities laws.
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(ii) Except as set forth in the First Amended and Restated Investors
Rights Agreement dated December 17, 1998 (the "Rights Agreement"), no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
5.12 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and for which no filing extension has been
granted and has duly paid or fully reserved for all taxes or installments
thereof (including any interest or penalties) as and when due, which have or may
become due pursuant to such returns or pursuant to any assessment received by
Borrower since its inception through the Closing Date, if any (including any
taxes being contested in good faith and by appropriate proceedings).
SECTION 6. INSURANCE
6.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained commercial general liability insurance
against risks customarily insured against in Borrower's line of business. Such
risks shall include, without limitation, the risks of death, bodily injury and
property damage. So long as there are any Secured Obligations outstanding,
Borrower shall also cause to be carried and maintained insurance upon the
Collateral and Borrower's business, covering casualty, hazard and such other
property risks in amounts equal to the full replacement cost of the Collateral.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee and additional insured. Borrower
shall use commercially reasonable efforts to cause all policies evidencing such
insurance to provide for at least thirty (30) days prior written notice by the
underwriter or insurance company to Lender in the event of cancellation or
expiration. Such policies shall be issued by such insurers and in such amounts
as are reasonably acceptable to Lender.
6.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's gross negligence or willful misconduct.
SECTION 7. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
7.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable and in any event within thirty (30) days
after the end of each month: an internally prepared income statement,
balance sheet, and cash flow statement, (including the commencement of any
material litigation by or against Borrower), each certified by Borrower's
Chief Executive or Financial Officer to be true and correct in all
material respects;
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(b) As soon as practicable (and in any event within ninety (90)
days) after the end of each fiscal year, audited Financial Statements,
setting forth in comparative form the corresponding figures for the
preceding fiscal year, and accompanied by any audit report and opinion of
the independent certified public accountants selected by Borrower;
(c) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower
files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor; and
7.2 Borrower shall permit any authorized representative of Lender and its
attorneys and accountants on reasonable notice to inspect, examine and make
copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, upon reasonable
notice such representative of Lender and its attorneys and accountants shall
have the right to meet with management and officers of the Borrower to discuss
such books of account and records.
7.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be reasonably requested by Lender;
and take all further action that may be reasonably necessary, or that Lender may
reasonably request, to confirm, perfect, preserve and protect the security
interests intended to be granted hereby, and in addition, and for such purposes
only, Borrower hereby authorizes Lender to execute and deliver on behalf of
Borrower and to file such financing statements, security agreement and other
documents (reasonably necessary to confirm, continue, perfect, preserve and
protect the security interests granted hereby) without the signature of Borrower
either in Lender's name or in the name of Borrower as agent and attorney-in-fact
for Borrower. The parties agree that a carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof.
7.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender (other than in relation to Senior Debt and Permitted Liens)
and shall at all times keep the Collateral free and clear from any legal
process, liens or encumbrances whatsoever (except any placed thereon by Lender,
or any liens arising by operation of law with respect to any obligations not yet
overdue or any other liens consented to in writing by Lender, or relating to
Senior Debt and Permitted Liens) and shall give Lender prompt written notice
thereof.
7.5 Without Lender's prior written consent, Borrower shall not except in
the ordinary course of its business, and except as permitted in relation to
Senior Debt and Permitted Liens, (a) grant any material and unnecessary
extension of the time of payment of any of the Receivables, (b) to any material
extent, compromise, compound or settle the same for less than the full amount
thereof, (c) release, wholly or partly, any Person liable for the payment
thereof, or allow any credit or discount whatsoever thereon other than trade
discounts granted in the ordinary course of business of Borrower.
7.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition
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(taking into consideration ordinary wear and tear) and from time to time make or
cause to be made all necessary repairs, renewals and replacements thereto and
shall competently manage and care for its property in accordance with prudent
industry practices.
7.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of fifteen (15) days prior to the
closing date and requesting Lender's consent which consent shall not be
unreasonably withheld to the assignment of all of Borrower's Secured Obligations
hereunder to the successor entity in form and substance reasonably satisfactory
to Lender. In the event Lender does not consent to such assignment the parties
agree Borrower shall prepay the Loan in accordance with Section 2.2 hereof.
7.8 Borrower shall not, without the prior written consent of Lender, such
consent not to be unreasonably withheld, declare or pay any cash dividend or
make a distribution on any class of stock, other than pursuant to employee
repurchase plans upon an employee's death or termination of employment or
transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
other than (i) inventory sold in the normal course of business, (ii) in relation
to Senior Debt and Permitted Liens as permitted herein, or (iii) licenses of its
Intellectual Property.
7.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection. Borrower shall take all action reasonably necessary to maintain such
logs and maintenance records in a materially correct and complete fashion.
7.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
7.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) unless: (i) such
relocation shall be within the continental United States and (ii) Borrower shall
first cause to be filed and/or delivered to the Lender all Uniform Commercial
Code financing statements, certificates or other documents or instruments
necessary to continue in effect the perfected security interest of the Lender in
the Collateral, and (ii) have given the Lender no less than fifteen (15) days
prior written notice of such relocation.
7.12 Borrower shall not grant a security interest in, hypothecate or
otherwise encumber its Intellectual Property other than (i) Permitted Liens, and
(ii) licenses in the ordinary course of business including exclusive licenses
with geographical or time limitations, without Lender's prior written consent,
which consent will not be unreasonably withheld.
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7.13 Borrower shall consider a request by Lender to purchase shares of
Borrower's Preferred Stock in the next preferred round of equity financing
(anticipated to be a Series C Preferred) in an amount equal to a minimum of Five
Hundred Thousand Dollars ($500,000) and a maximum of Seven Hundred Fifty
Thousand Dollars ($750,000).
7.14 Subsequent to the date of this Agreement, Borrower may incur Senior
Debt, without limitation as to amount, provided, (i) Borrower may incur Senior
Debt without limitation as to amount, without the consent of Lender, so long as
such Senior Debt is secured only by Borrower's property, plant and equipment (as
defined under GAAP), (ii) if such Senior Debt is unsecured and would exceed
three million dollars ($3,000,000) in principal outstanding at any one time,
then Lender shall have the right to consent to the incurrence of such Senior
Debt, which consent shall not be unreasonably withheld, and (iii) if such Senior
Debt is secured by (a) non-property, plant and equipment (as defined under GAAP)
assets and (b) would exceed the greater of (i) three million dollars
($3,000,000) in outstanding principal at any one time or (ii) eighty-five
percent (85%) of qualified accounts receivable, then Lender shall have the right
to consent to the incurrence of such Senior Debt, which consent shall not be
unreasonably withheld. To the extent Lender's consent is required hereunder,
Senior Debt shall not include any indebtedness or obligation unless and until
such consent has been given.
SECTION 8. PURCHASE OPTION
8.1 In addition to any opportunity granted pursuant to Section 7.13
hereof, Lender shall have the right at any time, at Lender's sole and absolute
discretion (the "Purchase Option"), to purchase shares of Borrower's Preferred
Stock with an aggregate purchase value (subject to increase as provided in
Section 8.2) determined as follows:
(i) If amounts have been advanced against both Loan A or Loan B:
(a) forty-five percent (45%) of the Maximum Loan Amount for
Loan A; plus
(b) forty-five percent (45%) of the Maximum Loan Amount for
Loan B.
(ii) If amounts have been advanced against Loan A and not Loan B:
(a) forty-five percent (45%) of the Maximum Loan Amount for
Loan A; plus
(b) seventeen and one-half percent (17.5%) of the Maximum
Loan Amount for Loan B.
(iii) no amounts have been advanced against either Loan A or Loan B:
(a) thirty-five percent (35%) of the Maximum Loan Amount for
Loan A; plus
(b) seventeen and one-half percent (17.5%) of the Maximum
Loan Amount for Loan B.
The purchase price per share under the Purchase Option (the "PURCHASE PRICE")
shall be determined upon the earliest to occur of (i) the closing date of the
preferred equity financing with net proceeds to the Borrower in excess of Ten
Million Dollars ($10,000,000.00); (ii) the
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date that the initial price per share to the public is determined for purposes
of printing of the final prospectus for an Initial Public Offering; or (iii) the
closing date of a Merger Event.
The "Purchase Price" shall be the lesser of:
(i) the price per share equivalent of a Three Hundred Million 00/100
Dollar ($300,000,000.00) fully diluted pre-money valuation of
Borrower if the participants in the Next Round include at least
one financial investor/venture capital/mezzanine investor;
(ii) the price per share equivalent of a Two Hundred Fifty Million
00/100 Dollar ($250,000,000.00) fully-diluted pre-money
valuation of Borrower if the participants in the Next Round
include only strategic corporate investor(s); or
(iii) the price per share determined as follows:
(a) If Borrower closes the Next Round on or before November
9, 1999, ninety percent (90%) of the purchase price per
share of the securities issued or exchanged in the Next
Round.
(b) If Borrower closes the Next Round after November 9, 1999
but on or before December 9, 1999, eighty-five percent
(85%) of the price per share of the securities issued or
exchanged in the Next Round.
(c) If Borrower closes the Next Round after December 9,
1999, but on or before February 9, 2000, seventy percent
(70%) of the price per share of the securities issued or
exchanged in the Next Round.
(d) If Borrower closes the Next Round after February 9,
1999, but prior to March 1, 2000, sixty-five percent
(65%) of the price per share of the securities issued or
exchanged in the Next Round.
(e) If Borrower closes the Next Round on or after March 1,
2000 the price per share equivalent of a One Hundred
Million and 00/100 Dollar ($100,000,000.00) pre-money
fully diluted valuation;
Provided, that in the case of a Merger Event the price per share shall be
determined under this subsection (iii) as follows:
(i) if the Borrower is acquired in the Merger Event for cash or
other consideration other than equity securities, the price per
share shall be determined by dividing the aggregate value of
such consideration by the number of shares of capital stock of
Borrower eligible to receive such consideration at the time of
the Merger Event;
(ii) if the consideration in the Merger Event is equity securities,
then the price per share shall be the per-share value assigned
in the Merger Event to the Borrower's most senior class of stock
that is eligible to be exchanged in the Merger Event.
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The Purchase Option will terminate upon the date fifteen (15) days after
receipt by Lender of notice from Borrower of its Board of Directors' approval of
definitive plans to initiate an Initial Public Offering or Merger Event, subject
to the terms set forth in Section 8.9 hereof.
The number and purchase price of such shares are subject to adjustment as
provided in this Section 8.
8.2 If the Borrower has not repaid the outstanding principal amount under
a Note in its entirety by the Maturity Date (as defined in the applicable
Note(s)), then for each additional month, or portion thereof, thereafter that
the outstanding principal is not paid, Lender shall have the right to purchase
from the Borrower, at the Purchase Price (adjusted, as set forth and defined in
Section 8.3 herein), an additional amount of Preferred Stock with a value equal
to the product of (x) the outstanding principal amount which is due but unpaid
and (y) three percent (3%).
8.3 The Purchase Price per share and the number of shares of Preferred
Stock purchasable hereunder are subject to adjustment, as follows:
(a) If the Borrower at any time shall, by combination, reclassification,
exchange or subdivision of the securities as to which purchase rights under this
Purchase Option exist into the same or a different number of securities of any
other class or classes, this Purchase Option shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Purchase Option immediately prior to such
classification, exchange, subdivision or other change.
(b) If the Borrower at any time shall combine or subdivide its Preferred
Stock, the Purchase Price shall be proportionately decreased in the case of a
subdivision, or proportionately increased in the case of a combination.
(c) If the Borrower at any time shall pay a dividend payable in, or make
any other distribution (except any distribution specifically provided for in the
foregoing subsections (a) or (b)) of the Borrower's stock, then the Purchase
Price shall be adjusted, from and after the record date of such dividend or
distribution, to that price determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction (i) the numerator of
which shall be the total number of all shares of the Borrower's stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of all shares of the Borrower's
stock outstanding immediately after such dividend or distribution. The Lender
shall thereafter be entitled to purchase, at the Purchase Price resulting from
such adjustment, the number of shares of Preferred Stock (calculated to the
nearest whole share) obtained by multiplying the Purchase Price in effect
immediately prior to such adjustment by the number of shares of Preferred Stock
issuable upon the exercise hereof immediately prior to such adjustment and
dividing the product thereof by the Purchase Price resulting from such
adjustment.
(d) Additional antidilution rights applicable to the authorized and
outstanding Series A and Series B Preferred Stock are as set forth in the
Borrower's Certificate of Incorporation, as amended through the Closing Date, a
true and complete copy of which is
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attached hereto as Exhibit C (the "CHARTER"). The Borrower shall promptly
provide the Lender with any restatement, amendment, modification or waiver of
the Charter. The Preferred Stock purchasable hereunder shall have the benefit of
the same antidilution rights applicable to such Preferred Stock when authorized
and issued pursuant to Borrower's Charter, as amended, and Borrower shall
provide Lender with all notices and information at the time and to the extent it
is required to do so to the holders of Preferred Stock.
(e) If: (i) the Borrower shall declare any dividend or distribution upon
its stock, whether in cash, property, stock or other securities; (ii) there
shall be any Merger Event; (iii) there shall be an Initial Public Offering; or
(iv) there shall be any voluntary dissolution, liquidation or winding up of the
Borrower; then, in connection with each such event, the Borrower shall send to
the Lender: (A) at least fifteen (15) days' prior written notice of the date on
which the books of the Borrower shall close or a record shall be taken for such
dividend, distribution, subscription rights (specifying the date on which the
holders of Preferred Stock shall be entitled thereto) or for determining rights
to vote in respect of such Merger Event, dissolution, liquidation or winding up;
(B) in the case of any such dissolution, liquidation or winding up, at least
fifteen (15) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon dissolution, liquidation or winding up); and (C) in the case of
a Initial Public Offering or Merger Event, the Borrower shall give the Lender at
least fifteen (15) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Purchase Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Lender, at the address as shown herein, or at such other address as
Lender may subsequently designate by written notice to Borrower.
(f) Failure to timely provide such notice required by subsection (e) above
shall entitle Lender to retain the benefit of the applicable notice period
notwithstanding anything to the contrary contained in any insufficient notice
received by Lender. The notice period shall begin on the date Lender actually
receives a written notice containing all the information specified above.
8.5 The Purchase Option is exercisable by the Lender, in whole or in part,
at any time, or from time to time, prior to the earlier of fifteen (15) days
after receipt of notice from Borrower of the Board of Directors' approval of
definitive plans to initiate (i) an Initial Public Offering, or (ii) a Merger
Event. Lender may exercise its Purchase Option by tendering to the Borrower at
its principal office a notice of exercise in the form attached hereto as Exhibit
D (the "NOTICE OF PURCHASE"), duly completed and executed together with payment
in an amount equal to the Purchase Price for that portion of the Purchase Option
so exercised, in cash or by bank cashier's or certified check; provided that
Lender may satisfy all or a portion of the Purchase Price by tender of one or
more Note(s), the outstanding principal and interest of which shall be credited
against the Purchase Price, with the balance, if any, of the Purchase Price
payable in cash or by check as provided above. In such event, the Note(s) so
tendered will be deemed satisfied in full and will be cancelled by the Lender
and the Borrower will have no further obligation to the Lender under such
Note(s).
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Promptly upon receipt of the Notice of Purchase and the payment of the
Purchase Price in accordance with the terms set forth below, Borrower shall
execute the acknowledgment of exercise in the form attached hereto as Exhibit E
(the "ACKNOWLEDGMENT OF PURCHASE") indicating the number of shares which remain
subject to future purchases, if any. Subject to Lender's right of withdrawal, no
later than twenty-one (21) days thereafter, the Borrower shall issue to the
Lender a certificate for the number of shares of Preferred Stock purchased.
8.6 (a) During the term of this Purchase Option, the Borrower will at all
times have authorized and reserved a sufficient number of shares of its
Preferred Stock to provide for the exercise of the rights to purchase Preferred
Stock as provided for herein.
(b) If any shares of Preferred Stock required to be reserved hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal statute
then enforced, or any state securities law, required by reason of any transfer
involved in such purchase), or listing on any domestic securities exchange,
before such shares may be issued upon purchase, the Borrower will, at its
expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
8.7 No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Purchase Option, but in lieu of such fractional
shares the Borrower shall make a cash payment therefor upon the basis of the
Purchase Price then in effect.
8.8 This Purchase Option does not entitle the Lender to any voting rights
or other rights as a shareholder of the Borrower prior to the exercise of the
Purchase Option.
8.9 Borrower shall give Lender at least fifteen (15) days notice of a
Board of Directors' approval of definitive plans to initiate a Merger Event or
an Initial Public Offering of its capital stock pursuant to a registration
statement filed with the Securities and Exchange Commission. In either such
event, Lender shall have the right to exercise its Purchase Option subject to
the successful completion of such Merger Event or Initial Public Offering. If
such closing does not take place, the Borrower shall promptly notify the Lender
that such proposed transaction has been terminated, and the Lender may rescind
any exercise of its Purchase Option promptly after such notice of termination of
the proposed transaction if the exercise of this Purchase Option has occurred
after the Borrower notified the Lender that the Merger Event was proposed.
SECTION 9. DEFAULT
The occurrence of any one or more of the following events (herein called
"EVENTS OF DEFAULT") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
9.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the
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other Loan Documents, and such default continues for more than five (5) days
after Lender has given written notification thereof; or
9.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) days after
Lender has given written notice to Borrower of such default.
9.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect on the date it was made;
or
9.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
9.5 Sixty (60) days shall have expired after the commencement of an action
by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
9.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
9.7 The occurrence of any payment default in excess of $100,000 under any
Senior Loan Documents, Excluded Agreements, lease or other promissory note,
agreement for borrowed money or obligation of Borrower which remains uncured for
more than thirty (30) days after Borrower receives written notification thereof.
SECTION 10. REMEDIES
Upon the occurrence and continuance of any one or more Events of Default,
Lender, at its option, may declare the Note and all of the other Secured
Obligations to be accelerated and immediately due and payable (provided, that
upon the occurrence of an Event of Default of the type described in Sections 9.4
or 9.5, the Note(s) and all of the other Secured Obligations shall automatically
be accelerated and made due and payable without any further act), whereupon the
unpaid principal of and accrued interest on such Note(s) and all other
outstanding Secured Obligations shall become immediately due and payable, and
shall thereafter bear interest at
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the Default Rate set forth in, and calculated according to, Section 2.3 (c) of
this Agreement. Lender may exercise all rights and remedies with respect to the
Collateral under the Loan Documents or otherwise available to it under
applicable law, including the right to release, hold or otherwise dispose of all
or any part of the Collateral and the right to occupy, utilize, process and
commingle the Collateral.
After any one or more Events of Default has remained uncured for more than
fifteen (15) days after Lender has given written notice to Borrower of failure
to cure any Event of Default Lender may then, or at any time thereafter and from
time to time, apply, collect, sell in one or more sales, lease or otherwise
dispose of, any or all of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, in such order as Lender may
elect, and any such sale may be made either at public or private sale at its
place of business or elsewhere. Borrower agrees that any such public or private
sale may occur upon five (5) calendar days' prior written notice to Borrower.
Lender may require Borrower to assemble the Collateral and make it available to
Lender at a place designated by Lender which is reasonably convenient to Lender
and Borrower. The proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by Lender in the
following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's
reasonable costs and professionals' and advisors' reasonable fees and
expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its
sole discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction
may direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 11. MISCELLANEOUS
11.1 CONTINUATION OF SECURITY INTEREST. This is a continuing Agreement and
the grant of a security interest hereunder shall remain in full force and effect
and all the rights, powers and remedies of Lender hereunder shall continue to
exist until the Secured Obligations are paid in full as the same become due and
payable and until Lender has executed a written termination statement (which
Lender shall promptly execute after full payment of the Secured Obligations
hereunder), reassigning to Borrower, without recourse, the Collateral and all
rights conveyed hereby and returning possession of the Collateral to Borrower.
The rights, powers and remedies of Lender hereunder shall be in addition to all
rights, powers and remedies given by statute or rule of law and are cumulative.
The Purchase of any one or more of the rights, powers and remedies provided
herein shall not be construed as a waiver of or election of remedies with
respect to any other rights, powers and remedies of Lender.
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11.2 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.3 NOTICE. Except as otherwise provided herein, all notices and service
of process required, contemplated, or permitted hereunder or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given or delivered upon the earlier of: (i) the first business
day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) IF TO LENDER:
COMDISCO, INC./COMDISCO VENTURES
Attention: Jill Hanses
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
WITH A COPY TO:
COMDISCO, INC./COMDISCO VENTURES
Attention: Documentation Group
100 Hamilton Avenue, Suite 104A
Palo Alto, CA 94301
Facsimile: (650) 473-0204
(b) IF TO BORROWER:
EGROUPS, INC.
Attention: Chief Executive Officer
520 Third Street, Suite 225
San Francisco, CA 94107
Facsimile: (415) 284-6900
Phone: (415) 449-3482
or to such other address as each party may designate for itself by like notice.
11.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Note(s), and the
other Loan Documents constitute the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof, and
supersede and replace in their entirety any prior proposals, term sheets,
letters, negotiations or other documents or agreements, whether written or oral,
with respect to the subject matter hereof or thereof (including, without
limitation, Lender's proposal letter dated August 26, 1999, all of which are
merged herein and therein. None of the terms of this Agreement, the Note(s) or
any of the other Loan Documents may be amended except by an instrument executed
by each of the parties hereto.
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11.5 HEADINGS. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
11.6 NO WAIVER. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No omission, or delay, by Lender at any
time to enforce any right or remedy reserved to it, or to require performance of
any of the terms, covenants or provisions hereof by Borrower at any time
designated, shall be a waiver of any such right or remedy to which Lender is
entitled, nor shall it in any way affect the right of Lender to enforce such
provisions thereafter.
11.7 SURVIVAL. All agreements, representations and warranties contained in
this Agreement, the Note(s) and the other Loan Documents or in any document
delivered pursuant hereto or thereto shall be for the benefit of Lender and
shall survive the execution and delivery of this Agreement and the expiration or
other termination of this Agreement.
11.8 SUCCESSOR AND ASSIGNS. The provisions of this Agreement and the other
Loan Documents shall inure to the benefit of and be binding on Borrower and its
permitted assigns (if any). Borrower shall not assign its obligations under this
Agreement, the Note(s) or any of the other Loan Documents without Lender's
express written consent which consent shall not be unreasonably withheld, and
any such attempted assignment without consent shall be void and of no effect.
Lender may assign, transfer, or endorse its rights hereunder and under the other
Loan Documents without prior notice to Borrower, and all of such rights shall
inure to the benefit of Lender's successors and assigns.
11.9 FURTHER INDEMNIFICATION. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
11.10 GOVERNING LAW. This Agreement, the Note(s) and the other Loan
Documents have been negotiated and delivered to Lender in the State of Illinois,
and shall not become effective until accepted by Lender in the State of
Illinois. Payment to Lender by Borrower of the Secured Obligations is due in the
State of Illinois. This Agreement, the Note(s) and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11.11 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings arising
in or under or related to this Agreement, the Note(s) or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
located in the State of Illinois. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal
jurisdiction in Cook County, State of Illinois; (b) waives any objection as to
jurisdiction or venue in Cook County, State of Illinois; (c) agrees not to
assert any defense based on lack of jurisdiction or venue in the aforesaid
courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, the Note(s) or the
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other Loan Documents. Service of process on any party hereto in any action
arising out of or relating to this agreement shall be effective if given in
accordance with the requirements for notice set forth in Section 11.3, above and
shall be deemed effective and received as set forth in Section 11.3, above.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of either party to bring proceedings
in the courts of any other jurisdiction.
11.12 MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR
ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR
ITS ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver
extends to all such Claims, including, without limitation, Claims which involve
persons or entities other than Borrower and Lender; Claims which arise out of or
are in any way connected to the relationship between Borrower and Lender; and
any Claims for damages, breach of contract arising out of this Agreement, any
other Loan Document or any of the Excluded Agreements, specific performance, or
any equitable or legal relief of any kind.
11.13 CONFIDENTIALITY. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property, and any Financial
Statements provided pursuant to Section 7 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring, perfecting or foreclosing on the Collateral or
otherwise provided under this Agreement, provided such Confidential Information
is marked as confidential by Borrower at the time of disclosure, shall be
received in the strictest confidence and will not be disclosed to any other
person or entity in any manner whatsoever, in whole or in part, without the
prior written consent of the Borrower, unless and until Lender has acquired
indefeasible title thereto.
11.14 COUNTERPARTS. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
26
<PAGE> 27
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and delivered
this Agreement as of the day and year first above written.
BORROWER: EGROUPS, INC.
Signature:
--------------------------
Print Name:
-------------------------
Title:
------------------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
LENDER: COMDISCO, INC.
Signature:
--------------------------
Print Name:
-------------------------
Title:
------------------------------
27
<PAGE> 1
EXHIBIT 10.39
NOTICE OF EXERCISE OF PURCHASE OPTION
TO: eGroups, Inc. ("Borrower")
(1) Subject to the successful completion of an Initial Public Offering, as set
forth in the Loan Agreement, the undersigned Lender hereby elects to exercise
its Purchase Option with respect to 437,500 shares of the Series D Preferred
Stock of Borrower, pursuant to the terms of the Subordinated Loan and Security
Agreement dated the 8th day of October, 1999, as amended pursuant to the letter
dated November 17, 1999 between Borrower and the Lender (the "Loan Agreement"),
and tenders herewith payment of the purchase price for such shares, together
with all applicable transfer taxes, if any, by converting and cancelling debt
outstanding in the amount of $3,150,000.00 which represents a portion of the
outstanding debt under that certain Subordinated Promissory Note dated October
13, 1999.
(2) In exercising its rights with respect to the Purchase Option, the
undersigned hereby represents and warrants to Borrower as follows:
(a) The right to acquire Preferred Stock or the Preferred Stock issuable upon
exercise of the Lender's rights contained herein will be acquired for investment
and not with a view to the sale or distribution of any part thereof, and the
Lender has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) The Lender understands (i) that the Preferred Stock issuable upon exercise
of its Purchase Option is not registered under the 1933 Act nor qualified under
applicable state securities laws on the ground that the issuance contemplated by
its Purchase Option will be exempt from the registration and qualifications
requirements thereof, and (ii) that the Borrower's reliance on such exemption is
predicated on the representations set forth in this notice.
(c) The Lender has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment,
and has the ability to bear the economic risks of its investment.
(d) The Lender understands that if the Borrower does not register with the
Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the
"1934 Act"), or file reports pursuant to Section 15(d), of the 1934 Act, or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this its Purchase Option, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Lender also understands that any sale of its
rights of the Lender to purchase Preferred Stock or Preferred Stock which might
be made by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(e) Lender is an "accredited investor" within the meaning of the Securities and
Exchange Rule 501 of Regulation D, as presently in effect.
<PAGE> 2
(3) Subject to our review and acceptance of your Acknowledgement Certificate
with respect to this Notice, please issue a certificate or certificates
representing said shares of Series D Preferred Stock in the name of the
undersigned or in such other name as is specified below.
COMDISCO, INC.
(Name)
Attn: Ms. Jill Hanses
6111 N. River Rd.
Rosemont, IL 60018
(Address)
Lender: COMDISCO, INC.
By:
Title: JILL R HANSES
SENIOR VICE PRESIDENT
Date:
ACKNOWLEDGMENT OF RECEIPT OF NOTICE OF EXERCISE OF PURCHASE OPTION
The undersigned eGroups, Inc. ("Borrower") hereby acknowledges receipt of the
"Notice of Purchase" from Comdisco, Inc. ("Lender") to exercise its Purchase
Option with respect to 437,500 shares of the Series D Preferred Stock of
eGroups, Inc., pursuant to the terms of the Subordinated Loan and Security
Agreement dated October 8, 1999, as amended pursuant to the letter dated
November 17, 1999 (the "Agreement"). Borrower further acknowledges that such
shares remain subject to purchase under the terms of the Agreement.
In connection with such Purchase Option the undersigned hereby represents,
warrants and agrees as follows:
(a) All representations and warranties of the Borrower made pursuant to the
Agreement are true and correct in all material respects on and as of the date of
this Acknowledgment with the same effect as though made on and as of this date
(except as set forth in Schedule 1 to this Acknowledgment)
(b) The Preferred Stock issuable upon exercise of the Lender's rights has been
duly and validly reserved and, when issued in accordance with the provisions of
the Purchase Option, will be validly issued, fully paid and non-assessable, and
will be free of any taxes, liens, charges or encumbrances of any nature
whatsoever; provided, however, that the Preferred Stock issuable pursuant to the
Purchase Option may be subject to restrictions on transfer under state and/or
federal securities laws. The Borrower has made available to the Lender true,
correct and complete copies of its Charter and Bylaws, as amended. The issuance
of certificates for shares of Preferred Stock following exercise of the Purchase
Option shall be made without charge to the Lender for any issuance tax in
respect thereof, or other cost incurred by the Borrower in connection with such
purchase and the related issuance of shares of Preferred Stock. The Borrower
shall not be required to pay any tax which may
<PAGE> 3
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Lender.
(c) The issuance to Lender of the right to acquire the shares of Preferred
Stock, has been duly authorized by all necessary corporate action on the part of
the Borrower, and the Purchase Option is not inconsistent with the Borrower's
Charter or Bylaws, does not contravene any law or governmental rule, regulation
or order applicable to it, does not and will not contravene any provision of, or
constitute a default under, any material indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Purchase
Option constitutes a legal, valid and binding agreement of the Borrower,
enforceable in accordance with its terms.
(d) No consent or approval of, giving of notice to, registration with, or taking
of any other action in respect of any state, federal or other governmental
authority or agency is required with respect to the execution, delivery and
performance by the Borrower of its obligations under the Purchase Option, except
for the filing of notices pursuant to Regulation D under the 1933 Act and any
filing required by applicable state securities law, which filings will be
effective by the time required thereby.
(e) The Borrower is not, pursuant to the terms of any other agreement currently
in existence, under any obligation to register under the 1933 Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(f) Subject to the accuracy of the Lender's representations in its Notice, the
issuance of the Preferred Stock upon exercise of the Purchase Option will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) If Lender proposes to sell Preferred Stock issuable upon the exercise of the
Purchase Option in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Borrower shall furnish to the Lender, within five (5)
days after receipt of a written request, a written statement confirming the
Borrower's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule, as such Rule may be amended from
time to time.
Borrower acknowledges that Lender has the right to review Schedule 1 to this
Certificate and that Lender may in its sole discretion withdraw its notice of
exercise of Purchase Option within the ten (10) business days after Lender's
receipt of this Acknowledgment.
Borrower: EGROUPS, INC.
By:
Title:
Date:
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 25, 2000, in the Registration Statement
(Form S-1) and related Prospectus of eGroups, Inc., for the registration of
shares of its common stock.
/s/ ERNST & YOUNG LLP
Palo Alto, California
March 23, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> JUN-05-1998
<PERIOD-END> JUL-31-1999
<CASH> 4,957,231
<SECURITIES> 0
<RECEIVABLES> 339,127
<ALLOWANCES> 10,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,587,762
<PP&E> 1,038,828
<DEPRECIATION> 88,234
<TOTAL-ASSETS> 6,755,951
<CURRENT-LIABILITIES> 1,534,662
<BONDS> 304,500
4,236,723
5,177
<COMMON> 12,454
<OTHER-SE> 743,227
<TOTAL-LIABILITY-AND-EQUITY> 6,755,951
<SALES> 488,700
<TOTAL-REVENUES> 488,700
<CGS> 221,832
<TOTAL-COSTS> 221,832
<OTHER-EXPENSES> 7,070,621
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 22,730
<INCOME-PRETAX> (6,644,612)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,644,612)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,857,237)
<EPS-BASIC> (1.25)
<EPS-DILUTED> (0.49)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 44,586,059
<SECURITIES> 0
<RECEIVABLES> 2,307,805
<ALLOWANCES> 150,000
<INVENTORY> 0
<CURRENT-ASSETS> 47,084,661
<PP&E> 3,136,935
<DEPRECIATION> 439,512
<TOTAL-ASSETS> 52,211,255
<CURRENT-LIABILITIES> 2,506,822
<BONDS> 7,347,487
0
16,539
<COMMON> 16,244
<OTHER-SE> 41,522,345
<TOTAL-LIABILITY-AND-EQUITY> 52,211,255
<SALES> 3,463,636
<TOTAL-REVENUES> 3,463,636
<CGS> 324,471
<TOTAL-COSTS> 324,471
<OTHER-EXPENSES> 15,743,858
<LOSS-PROVISION> 140,000
<INTEREST-EXPENSE> 373,840
<INCOME-PRETAX> (12,774,049)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,774,049)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (12,902,983)
<EPS-BASIC> (1.61)
<EPS-DILUTED> (0.56)
</TABLE>
