<PAGE>
As filed with the Securities and Exchange Commission on March 14, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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2BRIDGE
(Exact name of Registrant as specified in its charter)
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California 7389 93-1101376
(prior to (Primary Standard Industrial (I.R.S. Employer
reincorporation) Classification Code Number) Identification Number)
221 Main Street, Suite 800
Delaware San Francisco CA 94105
(after reincorporation) (415) 543-4600
(State or other
jurisdiction of
incorporation or
organization)
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
Mansoor Zakaria
Chairman and Chief Executive Officer
2Bridge, Inc.
221 Main Street, Suite 800
San Francisco CA 94105
(415) 543-4600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
John T. Sheridan, Esq. John A. Anzur, Esq.
Betty Ho, Esq. James Brennan, Esq.
Lynn Hashimoto, Esq. Mark Cawley, Esq.
Wilson Sonsini Goodrich & Rosati Gray Cary Ware & Friedenrich LLP
Professional Corporation 139 Townsend Street, Suite 400
650 Page Mill Road San Francisco, CA 94107
Palo Alto, CA 94304 (415) 836-2500
(650) 493-9300
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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.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Offering Price Amount of
Securities to be Registered Offering Share ($) Registration Fee
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<S> <C> <C>
Common Stock, $0.0001 par value............ $57,500,000 $15,180
</TABLE>
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated , 2000
[2BRIDGE, INC. Logo]
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Shares
Common Stock
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This is the initial public offering of 2Bridge, Inc. and we are offering
shares of our common stock. We anticipate the initial public offering price
will be between $ and $ per share. We have applied to list our common
stock on the Nasdaq National Market under the symbol "TOBE."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price to and Proceeds to
Public Commissions 2Bridge
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to additional
shares to cover any over-allotments.
Deutsche Banc Alex. Brown
SG Cowen
Thomas Weisel Partners LLC
The date of this prospectus is , 2000
<PAGE>
2Bridge Graphics
Front Cover:
Left hand side of the inside fold as follows:
. Corporate portals . eMarketplace . eHubs
. One Way . Many-to-one, . Many2Many
. Disparate one-to-many . Collaborative
content access . Transactions commerce
. Provider of . Provider of . Provider of
information liquidity Web-tone
[Screen Shot] [Screen Shot] [Screen Shot]
[2Bridge Screen Shots]
Right-hand side of inside fold as follows:
Written in bold at the top of the diagram/graphic:
[Title of Graphic]
The diagram is as follows:
<TABLE>
<CAPTION>
When Who What How How Much and How Fast
(Not like software or consulting
services)
<S> <C> <C> <C> <C> <C> <C> <C>
1999 Many to Many Bits Browser Subscription Days
Web Tone [Graphic] [Graphic] [Graphic] [Graphic of an [Graphic] [Graphic]
arrow pointing
down]
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1911 One to One Sounds Phone One-time Months
Dial Tone [Graphic] [Graphic] [Graphic] [Graphic of an [Graphic] [Graphic]
arrow pointing
up]
</TABLE>
[2Bridge Screen Shots]
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our historical financial statements and notes to those statements
included elsewhere in this prospectus. You should carefully read the entire
prospectus, including "Risk Factors" and the financial statements, before
making an investment decision.
Our Business
We provide comprehensive Internet-based solutions to create many-to-many
communication, commerce and collaboration eHubs for businesses. An eHub is an
Internet-based workspace where customers, partners, suppliers and employees can
simultaneously interact, access real-time business information, integrate
business processes and conduct eCommerce transactions. We believe our solutions
represent a new paradigm for eBusiness, and are designed to deliver secure,
real-time content and eCommerce capabilities from virtually any source to any
user, at any time.
Our solutions represent a new category of business-to-business platforms
designed to deliver dial-tone-like reliability and functionality, which we
refer to as Web-tone. We believe our Web-tone business model is better aligned
with our customers' needs because it is based on recurring fees for solutions,
services and transaction capabilities, instead of a large one-time capital
investment usually associated with software license purchases. Our business
model provides our customers the flexibility to adjust the type of services
they receive from us in response to their changing business needs, and provides
us with the incentive to innovate and serve them since we share in their long-
term success.
The impact of the Internet on traditional commerce models extends far beyond
the dollar value of commerce activity conducted over the Internet and has led
to the emergence of entirely new business models. To remain competitive,
companies are beginning to leverage the Internet as a primary business platform
to collaborate, interact, and conduct business. Gartner Group estimates that
business-to-business eCommerce using the Internet will grow from $145 billion
in 1999 to $7.3 trillion in 2004. Moreover, Forrester Research also estimates
that business-to-business eCommerce will account for more than 93% of U.S.
eCommerce transactions by 2004.
Our objective is to become the leading provider of comprehensive Internet-
based solutions to create many-to-many communication, commerce and
collaboration eHubs for businesses. Key elements of this strategy include
leveraging our Web-tone business model, establishing 2Bridge as a leading
global brand enabling eHub solutions, broadening adoption of 2Share throughout
our existing customer base, targeting strategic markets, and building strategic
alliances to strengthen our market position and offering.
2Share is designed to empower our customers, who are highly dependent on
real-time information exchange, to rapidly and seamlessly develop customized
eHubs. We believe our solutions create value by enabling firms to strengthen
business and employee relationships, improve time to market, increase revenue
and new market opportunities, and improve return on investment of existing
corporate assets. Since the introduction of 2Share in 1998, we have delivered
our solutions to customers in a number of strategic industries, including J.P.
Morgan & Co. Incorporated, The McGraw-Hill Companies, SAP AG, Schroders &
Company, and Visa USA.
3
<PAGE>
We were funded to develop our solution in January 1997 and will be
reincorporated in Delaware as 2Bridge, Inc. prior to the completion of this
offering. Our principal executive offices are located at 221 Main Street, Suite
800, San Francisco, CA 94105. Our telephone number at that location is
(415) 543-4600. Our Web site is located at www.2Bridge.com. The information
contained on our Web site does not constitute part of this prospectus.
----------------
Unless otherwise indicated, all information in this prospectus:
. assumes that the underwriters do not exercise their over-allotment option
to purchase additional shares in this offering;
. gives effect to the Delaware reincorporation that will occur prior to the
completion of this offering;
. gives effect to the conversion of all our preferred stock into common
stock which will occur prior to the completion of this offering; and
. gives effect to the two-for-three reverse stock split of our preferred
stock and common stock which will occur prior to the completion of this
offering.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by shares
2Bridge......................
Common stock to be outstanding
after
the offering................. shares
Use of proceeds............... For working capital and other general corporate
purposes, including expansion of services and
operations personnel, technology research and
development and sales and marketing.
Proposed Nasdaq National
Market symbol................ TOBE
</TABLE>
The number of shares of our common stock that will be outstanding after this
offering is based on the number outstanding on March 10, 2000. This number
assumes the conversion into common stock of all of our preferred stock
outstanding on that date and excludes:
. 620,925 shares of common stock issuable upon the exercise of outstanding
warrants as of December 31, 1999, at a weighted-average exercise price
per share of $2.96;
. 1,698,907 shares of common stock issuable upon the exercise of
outstanding stock options as of December 31, 1999, at a weighted-average
exercise price per share of $1.13;
. 1,106,284 shares of common stock available for future grant under our
1997 Stock Option Plan as of December 31, 1999; and
. 4,150,000 shares to be authorized for issuance under our 2000 Stock Plan,
2000 Employee Stock Purchase Plan and 2000 Director Option Plan.
Summary Financial Information
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1997 1998 1999
-------- --------- -----------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues...................................... $ -- $ 717 $ 3,637
Total costs and operating expenses............ 3,309 8,002 20,563
Net loss...................................... (2,989) (7,256) (17,302)
Basic and diluted net loss per share.......... $ (0.35) $ (0.84) $ (1.98)
Shares used in computing basic and diluted net
loss per share............................... 8,500 8,587 8,756
Pro forma basic and diluted net loss per
share........................................ $ -- $ -- $ (0.77)
Shares used in computing pro forma basic and
diluted net loss per share................... -- -- 22,379
<CAPTION>
December 31, 1999
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents..................... $ 8,817 $17,565 $
Working capital............................... 5,002 13,750
Total assets.................................. 15,108 23,856
Long-term debt................................ 515 515
Redeemable convertible preferred stock........ 34,170 --
Total stockholders' equity (deficit).......... (26,367) 16,551
</TABLE>
- --------
See Note 2 of notes to financial statements for an explanation of the
determination of the number of shares used in computing per share data.
The unaudited pro forma balance sheet data summarized above gives effect to
the conversion of all our outstanding preferred stock into common stock upon
the closing of this offering and our capital stock sales in March 2000. See
Note 13 to notes to financial statements. The unaudited pro forma as adjusted
balance sheet data above reflects our capital stock sales in March 2000 and the
receipt of the net proceeds from the sale of the shares of common stock
offered by 2Bridge at an assumed initial public offering price of $ per share
after deducting the underwriting discounts and commissions and estimated
offering expenses.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus, including our consolidated financial statements
and the related notes, before investing in our common stock. Our business,
operating results or financial condition could be seriously harmed by any of
the following risks. The trading price of our common stock could decline due to
any of these risks, and you may lose all or part of your investment.
Risks Related To Our Business
We are an early stage company, so we have only a limited operating history with
which you can evaluate our business and prospects.
We commenced our current operations in January 1997 and began selling our
2Share solution in the fourth quarter of 1998. Accordingly, we have only a
limited operating history with which you can evaluate our business and our
prospects. In addition, our prospects must be considered in light of the risks
encountered by companies in the early stages of development in new and rapidly
evolving markets, especially the business-to-business eCommerce markets. Some
of the risks we face include our ability to:
. attract and retain customers;
. hire aggressively to expand our services, sales and marketing efforts;
. predict the acceptance and adoption of our recurring fee-based business
model;
. expand our 2Share solution and develop new solutions and services;
. negotiate and maintain favorable strategic relationships; and
. plan and manage our growth effectively.
If we fail to manage these risks successfully, our business could be harmed.
We expect to incur losses in the future.
Our current operations have never been profitable. We have incurred net
losses in every fiscal period since we began our current operations. For the
year ended December 31, 1999, our net loss was $17.3 million. As of December
31, 1999 our accumulated deficit was $27.9 million. We expect to substantially
increase our sales personnel, marketing expenses, and services and operations
expenses. As a result, we will need to generate significant additional revenues
to achieve and maintain profitability in the future. We are not certain when we
will become profitable, if ever. Even if we do achieve profitability, we may
not sustain or increase profitability on a quarterly or annual basis. Failure
to achieve or maintain profitability will materially and adversely affect the
market price of our common stock.
We have not been able to fund our operations from cash generated by our
business, and we may not be able to do so in the future.
We have principally financed our operations to date through the private
placement of shares of our preferred stock and bank borrowings. If we do not
generate sufficient cash resources from our business to fund operations, our
growth could be limited unless we are able to obtain additional capital through
equity or debt financings. Our inability to grow as planned may reduce our
chances of achieving profitability, which, in turn, could have a material
adverse effect on the market price of our common stock.
6
<PAGE>
Our quarterly financial results fluctuate and are difficult to predict and, if
our future results are below the expectations of the public market analysts and
investors, the price of our common stock may decline.
Our quarterly revenues and results of operations are difficult to predict.
We have experienced, and expect to continue to experience, fluctuations in
revenues and operating results from quarter to quarter. As a result, we believe
that quarter-to-quarter comparisons of our revenues and operating results are
not necessarily meaningful, and that such comparisons may not be accurate
indicators of future performance. The reasons for these fluctuations include,
but are not limited to:
. the amount and timing of operating costs relating to the expansion of our
business, operations and infrastructure;
. the number and timing of new hires, particularly with respect to services
and operations personnel;
. the timing of our sales cycles;
. our ability to meet scheduled eHub implementations; and
. our utilization rate for our services and operations personnel.
We plan to significantly increase our technology, services and operating
expenses to expand our sales personnel, establish our brand and meet customer
needs. Our operating expenses, which include sales and marketing, research and
development and general and administrative expenses, are based on our
expectations of future revenues and are relatively fixed in the short term. If
revenues fall below our expectations during a quarter and we are not able to
quickly reduce our spending in response, our operating results for that quarter
could be harmed. It is likely that in some future quarter our operating results
may be below the expectations of public market analysts and investors and, as a
result, the price of our common stock may fall.
If our recurring fee-based business model is not accepted by our customers, our
revenues and business will be adversely affected.
We plan to receive substantially all of our future revenues from the sale of
our 2Share solution on a recurring fee basis from our customers. This model is
different from that of most enterprise software providers who generally offer
perpetual licenses and receive a single payment at the time of the license
grant. We began selling our products and services on a recurring fee basis in
the fourth quarter of 1999 and therefore do not have a lengthy operating
history to determine the acceptance of our model. If our recurring fee-based
business model were to ultimately prove unattractive to potential customers who
are accustomed to licensing software on a single payment basis, we would likely
have to adopt an alternate business model and accordingly we might lose
recurring revenue streams on which our business model is based. In addition,
our recurring fee-based contracts with our customers generally come up for
renewal annually and are terminable upon prior notice. If a significant portion
of our customers were to elect not to renew their contracts in the future, our
revenues may decline which would harm our business, operating results and
financial condition.
We expect to depend on 2Share for a significant portion of our revenues for the
foreseeable future and if it does not achieve broad market acceptance, our
revenues could decline.
We currently derive all of our revenues from selling our 2Share solution and
providing related services and support. We expect that we will continue to
derive a substantial amount of our revenues from sales of 2Share for the
foreseeable future. Consequently, a decline in the price of, or demand for,
2Share, or its failure to achieve broad market acceptance, could seriously harm
our business and results of operations.
7
<PAGE>
Our customer base is concentrated and loss of a major customer could cause our
revenues to decline.
During the year ended December 31, 1999, four customers accounted for
approximately 83% of our total revenues. We may continue to derive a
significant portion of our revenues from a relatively small number of customers
in the future. If a major customer decided not to renew its contract with us,
our revenues could decline and our operating results and financial condition
could be harmed.
Variations in our sales cycle could impact the timing of our revenues, causing
our quarterly operating results to fluctuate.
The period between our initial contact with a potential customer and the
purchase of our solution ranges from approximately 30 to 180 days and may vary
depending on the nature of the services requested by the customer and the size
of the customer. A lengthy sales cycle may have an impact on the timing of our
revenues, which in turn could cause our quarterly operating results to
fluctuate. A customer's decision to purchase our solution is discretionary, and
is influenced by many factors beyond our control, such as customer budgetary
cycles. To successfully sell our 2Share solution, we generally must educate our
potential customers regarding its use and benefits, which can require
significant time and resources.
We may not be able to increase market awareness and sales of our 2Share
solution if we do not expand our sales and distribution capabilities.
We need to substantially expand our sales and distribution efforts in order
to increase market awareness and sales of our 2Share solution and the related
services we offer. We have recently expanded our direct sales force and plan to
hire additional sales personnel. We must have a sales force with an industry-
and technology-focused background which can be targeted at multiple departments
within an organization. Competition for qualified sales and marketing personnel
is intense, and we might not be able to hire and retain adequate numbers of
these personnel to maintain our growth. New hires will require training and
take time to achieve full productivity. Our competitors have attempted to hire
our employees away from us and we expect that they will continue such attempts
in the future. We also plan to expand our relationships with existing customers
both inside the customer organization and with their customers, partners and
suppliers and to grow these relationships into additional sales opportunities
for our solution. If we are unable to successfully grow our sales capabilities,
we may be unable to expand our relationships in this way, or at all, and our
revenues may decline.
Our operating results may decline and our customers may become dissatisfied if
we do not expand our services and operations organization or if we are unable
to provide continuing service.
We cannot be certain that we can attract or retain a sufficient number of
highly qualified services and operations personnel. Customers that purchase our
solution typically engage our services and operations staff to assist with
support, design, consulting and implementation. We believe that growth in our
sales depends on our ability to provide our customers with these services,
either directly or through partners. As a result, we plan to increase the
number of our services and operations personnel to meet these needs. New
services and operations personnel will require training and education and take
time to reach full productivity. To meet our customers' implementation needs,
we may be required to use costly third-party consultants to supplement our
internal resource capabilities. Competition for qualified personnel is intense,
particularly because we are in a new market and only a limited number of
individuals have developed the skills required to provide the services our
customers require. Our business may be harmed if we are unable to hire and
retain new services and operations personnel.
8
<PAGE>
Delays in implementation of our solution could cause our operating results to
suffer.
The implementation of our solution requires internal quality assurance
testing and customer testing which may reveal performance issues that could
lead to delays in setting up our solution for customers. In addition, the
reallocation of resources associated with any postponement could cause delays
in the implementation of our solution at other customer sites and may adversely
affect or delay our ability to develop and release future enhancements to our
existing solution as well as new solutions. Any such delays could harm our
operating results.
Our industry is highly competitive and we may not be able to compete
effectively.
The market for business-to-business communication, commerce and
collaboration solutions is changing rapidly and intensely competitive. We
expect competition to intensify as the number of entrants and new technologies
increases. We may not be able to compete successfully against current or future
competitors. The competitive pressures facing us may harm our business,
operating results and financial condition.
Our current and potential competitors include, among others, both private
and public companies which are perceived as providing solutions similar to
ours, or which actually provide components of the solutions we provide, such as
companies which construct ePortals. In addition, our customers and companies
with whom we currently have strategic relationships may become competitors in
the future. Many of our competitors and potential competitors possess larger
technical staffs, larger customer bases, more established distribution
channels, greater brand recognition and greater financial, marketing and other
resources than we do. Our competitors may be able to develop products and
services that are superior to our solution, have significantly improved
functionality as compared to our existing and future solutions and achieve
greater customer acceptance. In addition, negotiating and maintaining favorable
customer and strategic relationships is critical to our business. Our
competitors may be able to negotiate strategic relationships on more favorable
terms than we are able to negotiate. Many of our competitors may also have
well-established relationships with our existing and prospective customers.
Increased competition may result in reduced margins, loss of sales or decreased
market share that in turn could harm our business, operating results and
financial condition.
We have experienced significant growth in our business in recent periods and we
may not be able to manage our future growth successfully.
Our ability to successfully deploy our solution and implement our business
plan in a rapidly evolving market requires an effective planning and management
process. We have increased, and plan to continue to increase, the scope of our
operations at a rapid rate. The number of people we employ has grown and we
expect it to continue to grow substantially. We expanded from 43 employees as
of December 31, 1998 to 124 employees as of March 10, 2000. Future expansion
efforts could be expensive and may strain our managerial and other resources.
To manage future growth effectively, we must maintain and enhance our financial
and accounting systems and controls, integrate new personnel and manage
expanded operations. If we do not manage growth properly, it could harm our
business, operating results and financial condition.
If the software components of our solution are unreliable, we could lose
customers and revenues.
Software included in solutions such as ours may contain known and undetected
errors or performance problems. Many serious defects are frequently found
during the period immediately following introduction of new software or to
enhancements to existing software. Although we attempt to resolve all errors we
believe our customers would consider serious, our technology is not
9
<PAGE>
error-free. Undetected errors or performance problems may be discovered in the
future and our customers may consider known errors to be more serious than we
do. This could result in lost revenues or delays in customer acceptance and
could be detrimental to our reputation, which could harm our business,
operating results and financial condition.
We rely on third-party technologies and a termination of any of our
relationships with third-party vendors could adversely affect our revenues and
business.
We use third-party technologies in our 2Share solution. If our third-party
technology vendors terminate their agreements to license their technologies to
us and we are not able to find replacement technologies, our ability to deploy
our 2Share solution may suffer, our revenues could decline and our operating
results and financial condition could be harmed.
Our executive officers and certain key personnel are critical to our business
and these officers and key personnel may not remain with us in the future.
Our future success depends upon the continued service of our executive
officers and other key personnel. We do not require any of our officers or key
employees to work for us for any specific amount of time nor are they under any
employment agreements. If we lose the services of one or more of our executive
officers or key employees, or if one or more of them decide to join a
competitor or otherwise compete directly or indirectly with us, our business,
operating results and financial condition could be harmed. In particular,
Mansoor Zakaria, our Chairman of the Board and Chief Executive Officer, would
be particularly difficult to replace.
If we cannot meet our future capital requirements, we may not be able to
develop or enhance our solution, take advantage of business opportunities and
respond to competitive pressures.
We currently anticipate that the net proceeds from this offering, together
with our existing working capital immediately prior to this offering, will be
sufficient to meet our anticipated working capital and capital expenditure
requirements for at least the next 12 months. The time period for which we
believe our capital is sufficient is an estimate. The actual time period may
differ materially as a result of a number of factors, risks and uncertainties.
We may need to raise additional funds in the future through public or private
debt or equity financings in order to:
. take advantage of opportunities, including more rapid international
expansion or acquisitions of complementary businesses or technologies;
. develop new solutions;
. build our brand; or
. respond to competitive pressures.
Any additional financing we may need in the future may not be available on
terms favorable to us, if at all. If adequate funds are not available or are
not available on acceptable terms, we may not be able to take advantage of
opportunities, develop new solutions or otherwise respond to unanticipated
competitive pressures. In such case, our business, operating results and
financial condition could be harmed.
We intend to expand our international sales efforts but do not have substantial
experience in international markets.
We intend to expand our international sales efforts in the future. We have
very limited experience in marketing, selling and supporting our solutions
abroad. Expansion of our international
10
<PAGE>
operations will require a significant amount of attention from our management
and substantial financial resources. If we are unable to grow our international
operations successfully and in a timely manner, our business and operating
results could be harmed. In addition, doing business internationally involves
additional risks, particularly:
. unexpected changes in regulatory requirements, taxes, trade laws and
tariffs;
. acceptance of the Internet and supporting technology standards;
. restrictions on repatriation of earnings;
. differing intellectual property rights;
. differing labor regulations;
. changes in a specific country's or region's political or economic
conditions;
. greater difficulty in staffing and managing foreign operations; and
. fluctuating currency exchange rates.
If we are unable to protect our intellectual property, we may lose a valuable
asset, experience reduced market share, or incur costly litigation to protect
our rights.
Our success depends, in part, upon our intellectual property rights. To
date, we have relied primarily on a combination of trade secret and trademark
laws, and nondisclosure and other contractual restrictions on copying and
distribution to protect our proprietary technology. Litigation to enforce our
intellectual property rights or protect our trade secrets could result in
substantial costs and may not be successful. Any inability to protect our
intellectual property rights could seriously harm our business, operating
results and financial condition. In addition, the laws of certain foreign
countries may not protect our intellectual property rights to the same extent
as do the laws of the United States. Our means of protecting our intellectual
property rights in the United States or abroad may not be adequate to fully
protect our intellectual property rights.
Third-party claims that we infringe upon their intellectual property rights
could be costly to defend or settle.
Litigation regarding intellectual property rights is common in Internet-
related industries. We expect that Internet technologies and services may be
increasingly subject to third-party infringement claims as the number of
competitors in our industry segment grows and the functionality of products and
services in different industry segments overlaps. We may from time to time
encounter disputes over rights and obligations concerning intellectual
property. Although we believe that our intellectual property rights are
sufficient to allow us to market our solution without incurring third-party
liability, third parties may bring claims of infringement against us. These
claims may or may not have merit. Any litigation to defend against claims of
infringement or invalidity could result in substantial costs and diversion of
resources. Furthermore, a party making a claim could secure a judgment that
requires us to pay substantial damages. A judgment could also include an
injunction or other court order that could prevent us from selling our
solutions. Our business, operating results and financial condition could be
harmed if any of these events occurred.
In addition, we have agreed, and may agree in the future, to indemnify
certain of our customers against claims that our solution infringes upon the
intellectual property rights of others. We could incur substantial costs in
defending ourselves and our customers against infringement claims. In the event
of a claim of infringement, we and our customers may be required to obtain one
or more licenses from third parties. We, or our customers, may be unable to
obtain necessary licenses from third parties at a reasonable cost, or at all.
Defense of any lawsuit or failure to obtain any potentially required licenses
could harm our business, operating results and financial condition.
11
<PAGE>
We are in current litigation defending claims of improper use of our name and,
if not settled, could be time-consuming, costly to defend and result in
substantial liability.
We are a defendant in a lawsuit pending in the U.S. District Court for the
Eastern District of Missouri brought by Bridge Information Systems, or Bridge.
Bridge alleges trademark infringement and related causes of action arising from
our use of 2Bridge. We have responded to the complaint with counterclaims
seeking a declaration of non-liability. Neither party has commenced discovery.
The court has scheduled a trial date for this matter during year 2001. Bridge
recently approached us to discuss an amicable resolution of the dispute. We
have indicated to Bridge that any settlement must allow us to use the name and
mark 2Bridge without any field of use restrictions. Although we are continuing
our discussions, it is too early to determine whether we will reach a
negotiated settlement. We intend to defend the case vigorously and believe that
it has a meritorious defense. However, there can be no assurance that we will
be free to continue using our name in its current form or will be free from
damages or liability arising from the use of our name.
If we become subject to service-related liability claims, they could be time-
consuming and costly to defend.
Since our customers use our solution for mission-critical applications such
as communication, Internet commerce and collaboration, errors, defects or other
performance problems could result in financial or other damages to our
customers. They could seek damages for losses from us, which, if successful,
could have a material adverse effect on our business, operating results or
financial condition. Although our agreements with our customers typically
contain provisions designed to limit our exposure to service-related liability
claims, existing or future laws or unfavorable judicial decisions could negate
these limitation of liability provisions. We have not experienced any product
liability claims to date. However, a service-related liability claim brought
against us, even if unsuccessful, could be time-consuming and costly to defend
and could harm our reputation.
Risks Relating To Our Industry
Our market is subject to rapid technological change and our future success will
depend on our ability to meet the changing needs of our industry.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product and service announcements. To be
successful, we must adapt to our rapidly changing market by continually
improving the performance, features and reliability of our solution. We could
incur substantial costs to modify our solution or infrastructure in order to
adapt to these changes. Our business could be harmed if we incur significant
costs without adequate results, or if we are unable to adapt rapidly to these
changes.
Continued adoption of the Internet as a method of conducting business is
necessary for our future growth.
The market for Internet-based, business-to-business communication, commerce
and collaboration is relatively new and is evolving rapidly. Our future
revenues and any future profits depend upon the widespread acceptance and use
of the Internet as an effective medium for business-to-business communication,
commerce and collaboration. The failure of the Internet to continue to develop
as a commercial or business medium could harm our business, operating results
and financial condition. The acceptance and use of the Internet for business-
to-business communication, commerce and collaboration could be limited by a
number of factors, such as the growth and use of the Internet in general, the
relative ease of communication, commerce and collaboration on the Internet, the
efficiencies and improvements that the Internet provides, concerns about
transaction security and taxation of transactions on the Internet.
12
<PAGE>
We depend on the speed and reliability of the Internet and our customers'
internal networks.
The recent growth in Internet traffic has caused frequent periods of
decreased performance. If Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently
or increase in frequency, business-to-business communication, commerce and
collaboration markets could grow more slowly or decline, which may reduce the
demand for our solution. The ability of 2Share to satisfy our customers' needs
is ultimately limited by and depends upon the speed and reliability of both the
Internet and our customers' internal networks. Consequently, the emergence and
growth of the market for our managed services depends upon improvements being
made to the entire Internet as well as to our individual customers' networking
infrastructures to alleviate overloading and congestion. If these improvements
are not made, the ability of our customers to utilize our solution will be
hindered, and our business, operating results and financial condition may
suffer.
Increased security risks of online commerce may deter future use of our
services.
A fundamental requirement to conduct Internet-based, business-to-business
communication, commerce and collaboration is the secure transmission of
confidential information over public networks. Advances in computer
capabilities, new discoveries in the field of cryptography, or other
developments may result in a compromise or breach of the security features
contained in our services or the algorithms used by our customers and their
business partners to protect content and transactions on Internet eCommerce
marketplaces or proprietary information in our customers' and their business
partners' databases. Anyone who is able to circumvent security measures could
misappropriate proprietary, confidential customer information or cause
interruptions in our customers' and their business partners' operations. Our
customers and their business partners may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches, reducing their demand for our solution. Further, a well-publicized
compromise of security could deter businesses from using the Internet to
conduct transactions that involve transmitting confidential information. The
failure of the security features of our services to prevent security breaches,
or well publicized security breaches affecting the Internet in general, could
significantly harm our business, operating results and financial condition.
Internet-related laws could limit the market for our services.
Regulation of the Internet is largely unsettled. The adoption of laws or
regulations that increase the costs or administrative burdens of doing business
using the Internet could cause companies to seek an alternative means of doing
business. If the adoption of new Internet laws or regulations causes companies
to seek alternative methods for conducting business, the demand for our
solution could decrease and our business could be adversely affected.
Risks Relating To This Offering
Because certain existing stockholders own a large percentage of our voting
stock, other stockholders' voting power may be limited.
Following the completion of this offering, it is anticipated that our
executive officers, directors and their affiliates will beneficially own or
control approximately % of our common stock. In combination with entities
owning 5% or more of our outstanding shares of common stock, this group
currently beneficially owns 19,297,251 shares of common stock, or approximately
80.0% of the outstanding shares of our stock. As a result, if those
stockholders act together, they will have the ability to control all matters
submitted to our stockholders for approval, including the election and removal
of directors and the approval of any merger, consolidation or sale of all or
substantially all of
13
<PAGE>
our assets. These stockholders may make decisions that are adverse to your
interests. See our discussion under the caption "Principal Stockholders" for
more information about ownership of our outstanding shares.
Future sales of our common stock may depress our stock price.
shares of our common stock can be sold in the public market 180 days
after the offering. If substantial amounts of our common stock were to be sold
in the public market following this offering, the market price of our common
stock could fall. In addition, these sales could create the perception to the
public of difficulties or problems with our solution. As a result, 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 consider appropriate. For
a more detailed discussion of shares eligible for sale after the offering, see
"Shares Eligible for Future Sale".
We have broad discretion to use the offering proceeds, and the investment of
these proceeds may not yield a favorable return.
The net proceeds of this offering are not allocated for specific purposes.
Thus, our management has broad discretion over how to use these proceeds, and
could spend most of them in ways with which our stockholders may not agree. The
proceeds may be invested in ways that do not yield favorable returns. See "Use
of Proceeds" for more information about how we plan to use our proceeds from
this offering.
Our securities have no prior market, and our stock price may decline after the
offering.
Before this offering, there has not been a public market for our common
stock. An active public market for our common stock may not develop or be
sustained after this offering. The initial public offering price has been
determined by negotiations between representatives of the underwriters and
ourselves. The trading prices of many technology companies' stocks are at or
near historical highs and reflect price to earnings ratios substantially above
historic levels. We cannot be certain that these trading prices or price to
earnings ratios will be sustained. The trading market price of our common stock
may decline below our initial public offering price.
Internet-related stock prices are especially volatile and this volatility may
depress our stock price.
The stock market, and specifically the stock prices of Internet-related
companies, has been very volatile. This volatility is often not related to the
operating performance of the companies. This broad market and industry
volatility may reduce the price of our common stock, regardless to our
operating performance. Due to this volatility, the market price of our common
stock could significantly decrease.
Fluctuations in our common stock's price may affect our visibility and
credibility in the business-to-business eCommerce solutions market. In the
event of broad fluctuations in the market price of our common stock, you may be
unable to resell your shares at or above the offering price.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
a lawsuit and management's attention could be diverted from our business.
14
<PAGE>
As a new investor, you will experience immediate and substantial dilution in
the value of the common stock.
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value. If the
holders of outstanding options and warrants exercise those options and
warrants, you will incur further dilution. See "Dilution" for a calculation of
the amount of dilution you will incur.
We have implemented certain anti-takeover provisions that could make it more
difficult for a third party to acquire us.
Provisions of our certificate of incorporation and our bylaws, as well as
Delaware law, could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock--Delaware Anti-Takeover Law and Certain Charter and Bylaws
Provisions" for a description of these provisions.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and elsewhere. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks
outlined under "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels or activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results.
This prospectus contains estimates of market growth related to the Internet
and eCommerce. These estimates have been included in studies published by the
market research and other firms including Forrester Research, International
Data Corporation and Gartner Group. These estimates have been produced by
industry analysts based on trends to date, their knowledge of technologies and
markets, and customer research, but these are forecasts only and are subject to
inherent uncertainty.
15
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share, after
deducting estimated underwriting discounts and commissions and estimated
offering expenses, will be $ . If the underwriters' over-allotment option is
exercised in full, we estimate that our net proceeds will be approximately
$ million.
Our principal reasons for engaging in this offering are to increase our
equity capital, create a public market for our common stock, facilitate future
access to the public equity markets and provide increased visibility in our
marketplace. We anticipate using the proceeds from this offering for working
capital and other general corporate purposes, including expansion of services
and operations personnel, technology research and development, and sales and
marketing personnel. The amounts that we actually expend on these matters will
vary significantly, depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a
result, we will retain broad discretion in the allocation of the net proceeds
of this offering. We may also consider acquisitions to enhance our solutions,
technologies or business. We currently have no commitments or agreements and
are not involved in any negotiations with respect to any acquisitions of
complementary products, technologies or businesses. Pending use of the net
proceeds of this offering, we intend to invest the net proceeds in interest
bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock or
other securities. We currently anticipate that we will retain all of our future
earnings for use in the expansion and operation of our business and do not
anticipate paying any cash dividends for the foreseeable future. In addition,
the terms of our line of credit arrangement restrict our ability to pay cash
dividends.
16
<PAGE>
CAPITALIZATION
The following table sets forth our total capitalization as of December 31,
1999:
. on an actual basis after giving effect to the two-for-three reverse stock
split of our preferred stock and common stock;
. on a pro forma basis to reflect the automatic conversion of all
outstanding shares of preferred stock into common stock upon the closing
of this offering, the sale of 743,200 shares of Series D preferred stock
for $7.2 million on March 10, 2000, the sale of 300,000 shares of common
stock for $1.6 million on March 8, 2000, and to give affect to changes in
our authorized shares as a result of our Delaware reincorporation; and
. on a pro forma as adjusted basis to reflect the sale of the shares
of common stock at an assumed initial public offering price of $ per
share in this offering, after deducting estimated underwriting discounts
and commissions and estimated offering expenses to be paid by us, the
conversion of all outstanding shares of preferred stock, including the
shares of Series D preferred stock, into common stock and the common
stock sold on March 8, 2000.
You should read this information together with the consolidated financial
statements and the notes to these statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Long-term debt................................. $ 515 $ 515 $
-------- -------- -----
Redeemable convertible preferred stock, no par
value, issuable in series; 14,245,674 shares
authorized actual; 13,622,932 shares issued
and outstanding actual; no shares authorized,
issued or outstanding pro forma and pro forma
as adjusted................................... 34,170 -- --
-------- -------- -----
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value: 5,000,000
shares authorized pro forma and pro forma as
adjusted, none issued and outstanding pro
forma and pro forma as adjusted ............. -- -- --
Common stock, $0.0001 par value: 30,000,000
shares authorized, 8,851,475 shares issued
and outstanding actual; 100,000,000 shares
authorized pro forma and pro forma as
adjusted; 23,517,607 shares issued and
outstanding pro forma; shares issued and
outstanding, pro forma as adjusted........... 8,792 51,710
Deferred stock compensation.................... (7,288) (7,288)
Accumulated deficit............................ (27,871) (27,871)
-------- -------- -----
Total stockholders' equity (deficit)........ (26,367) 16,554
-------- -------- -----
Total capitalization...................... $ 8,318 $ 17,066 $
======== ======== =====
</TABLE>
The outstanding share information shown in the table above excludes:
. 620,925 shares of common stock issuable upon the exercise of outstanding
warrants as of December 31, 1999, at a weighted-average exercise price
per share of $2.96;
. 1,698,907 shares of common stock issuable upon the exercise of
outstanding stock options as of December 31, 1999, at a weighted-average
exercise price per share of $1.13;
. 1,106,284 shares of common stock available for future grant under our
1997 Stock Option Plan as of December 31, 1999; and
. 4,150,000 shares to be authorized for issuance under our 2000 Stock Plan,
2000 Employee Stock Purchase Plan and 2000 Director Option Plan.
See "Management--Employee Benefit Plans" for information about our stock
plans.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999, after giving
effect to the conversion of our outstanding preferred stock into common stock
upon completion of this offering and the sale of 743,200 shares of Series D
preferred stock for $7.2 million on March 10, 2000 and the sale of 300,000
shares of common stock for $1.6 million on March 8, 2000, was $16.6 million or
$0.70 per share of common stock. Pro forma net tangible book value per share
represents total tangible assets less total liabilities, divided by the number
of outstanding shares of common stock.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the net tangible book value per share of our common stock
immediately afterwards. After giving effect to our sale of the shares of
common stock offered by this prospectus and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, our net tangible book value at December 31, 1999 would have been $
or $ per share. This represents an immediate increase in net tangible book
value to existing stockholders of $ per share and an immediate dilution to
new public investors of $ per share. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Pro forma net tangible book value per share as of December 31,
1999......................................................... $0.70
Increase per share attributable to new public investors.......
-----
Pro forma net tangible book value per share after offering......
----
Dilution per share to new public investors...................... $
====
</TABLE>
The following table sets forth on a pro forma basis as of December 31, 1999,
after giving effect to the conversion of our preferred stock, and assuming a
two-for-three reverse stock split of all the outstanding common stock, the
differences between the number of shares of common stock purchased from us, the
total price paid, and the average price per share paid by the existing
stockholders and new public investors, deducting estimated underwriting
discounts and commissions and offering expenses to be paid by us, using an
assumed initial public offering price of $ per share:
<TABLE>
<CAPTION>
Shares
Purchased Total Consideration
-------------- ---------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... % $ % $
New public investors.......
--- --- ---------- ---------
% $ %
=== === ========== =========
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors increase to , or %, of the total shares of
common stock outstanding after this offering.
The above discussion and tables assume no exercise of stock options or
warrants outstanding as of December 31, 1999. As of December 31, 1999, there
were options and warrants outstanding to purchase a total of 1,698,907 shares
and 620,925 shares of our common stock with a weighted-average exercise price
of $1.13 and $2.96 per share. If any of these options or warrants are
exercised, there will be further dilution to new public investors. Please see
Note 7 of notes to financial statements for more information about these
options and warrants.
18
<PAGE>
SELECTED FINANCIAL DATA
(in thousands, except per share data)
The statements of operations data for the years ended December 31, 1997,
1998 and 1999 and the balance sheet data at December 31, 1998 and 1999, are
derived from our financial statements and related notes which have been audited
by Ernst & Young LLP, independent auditors, and are included elsewhere in this
prospectus. The balance sheet data at December 31, 1997 are derived from
audited financial statements not included in this prospectus. Historical
results are not necessarily indicative of future results. When you read this
selected financial data, it is important that you also read the financial
statements and the related notes included in this prospectus, as well as the
section of this prospectus titled Management's Discussion and Analysis of
Financial Condition and Results of Operations.
In September 1992, Mr. Mansoor Zakaria, our Chief Executive Officer, founded
a California corporation which provided publishing and strategic consulting
services from its incorporation through December 31, 1996. These operations
were unrelated to 2Bridge's current operations. Revenues from these operations
were $693,000 for the year ended December 31, 1995 and $1.8 million for the
year ended December 31, 1996. The corporation had a net loss of $226,000 for
the year ended December 31, 1995 and had net income of $251,000 for the year
ended December 31, 1996. These financial results are derived from unaudited
financial statements not included in this prospectus. When we were funded in
January 1997 to develop our 2Bridge solution, this corporate entity was
retained. Accordingly, the results of operations for the corporation for the
years ended December 31, 1995 and 1996 are not meaningful for comparison
purposes with the results of operations for the three years ended December 31,
1999.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues.............................. $ -- $ 717 $ 3,637
Cost of revenues...................... -- 184 1,309
------- -------- --------
Gross profit.......................... -- 533 2,328
Operating expenses:
Sales and marketing.................. 858 3,260 9,411
Research and development............. 998 3,002 3,516
General and administrative........... 1,413 1,502 5,045
Amortization of deferred stock
compensation........................ 40 54 1,282
------- -------- --------
Total operating expenses............. 3,309 7,818 19,254
------- -------- --------
Operating income (loss)............... (3,309) (7,285) (16,926)
------- -------- --------
Interest and other income............. 353 211 298
Interest expense...................... (33) (182) (674)
======= ======== ========
Net loss.............................. $(2,989) $ (7,256) $(17,302)
======= ======== ========
Net loss per share:
Basic and diluted.................... $ (0.35) $ (0.84) $ (1.98)
======= ======== ========
Pro forma basic and diluted ......... $ (0.77)
========
Shares used in computing net loss per
share:
Basic and diluted.................... 8,500 8,587 8,756
======= ======== ========
Pro forma basic and diluted ......... 22,379
========
<CAPTION>
December 31,
------------------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............. $ 1,011 $ 4,860 $ 8,817
Working capital....................... 63 2,919 5,002
Total assets.......................... 1,371 6,504 15,108
Long-term debt........................ 242 1,135 515
Redeemable convertible preferred
stock................................ 3,340 13,414 34,170
Accumulated deficit................... (3,313) (10,569) (27,871)
Total stockholders' deficit........... (3,197) (10,380) (26,367)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon
current expectations that involve risks and uncertainties. The following
discussion should be read in conjunction with the financial statements and
notes included elsewhere in this prospectus. Our actual results and the timing
of certain events could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" and elsewhere in this prospectus.
We provide comprehensive Internet-based solutions to create many-to-many
communication, commerce and collaboration eHubs for businesses. An eHub is an
Internet-based workspace where customers, partners, suppliers and employees can
simultaneously interact, access real-time business information, integrate
business processes and conduct eCommerce transactions. We believe our solutions
represent a new paradigm for eBusiness, and are designed to deliver secure,
real-time content and eCommerce capabilities from virtually any source to any
user, at any time.
We received funding in January 1997 to develop our 2Share solution and were
a development stage company from that date through September 30 ,1998. During
this period we did not have significant revenues and our operating activities
were related primarily to designing, developing and testing our solution,
expanding our sales, marketing and services organizations, building our
corporate infrastructure, testing our technology in client environments,
establishing relationships with partners, customers and suppliers, and raising
capital. Since January 1997, we have incurred substantial research and
development costs and invested heavily in the expansion of our sales, marketing
and services organizations to support our long-term growth strategy. Our
headcount increased from 43 persons as of December 31, 1998 to 124 as of March
10, 2000. As a result of these expenses, we have incurred net losses in each
quarter since the quarter ended March 31, 1997 and as of December 31, 1999 had
an accumulated deficit of $27.9 million. We intend to continue expanding our
sales and marketing organizations and implementing significant marketing
programs to solidify our market position, gain name recognition, establish an
international presence and introduce new products and services. We also intend
to increase our research and development, sales and marketing, and general and
administrative organizations so that we can continue to enhance our solution
and deliver services that are beneficial to our customers. As a result of these
anticipated expenditures, we expect to incur net losses for the foreseeable
future.
We focused our initial development efforts on an Internet software
application designed to allow our customers to construct customized eHubs. We
sold our solutions as stand-alone products and derived revenues from the
licenses, maintenance and support of the software application. We recognized
revenues from license agreements upon delivery and acceptance of our solution.
Services revenues were recognized as these services were performed. Maintenance
revenues were recognized ratably over the term of the support contract,
typically one year. In mid-1999 we recognized the opportunity to build upon our
initial software development efforts to deliver an eHub solution over an IP
network that we believe represents a new category of Internet-based solutions.
In August 1999, to better align our business model with our customers' needs,
we discontinued our license model and began selling our solution for recurring
fees. Our last license revenues were recognized for the three months ending
September 30, 1999.
Our revenues will primarily consist of recurring fees, which are based upon
the complexity of the eHub determined by the number of different application
services, information sources and other related add-on services. Customers
contract for periodic recurring fees which cover all services related to our
2Share-enabled eHubs.
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<PAGE>
Revenues during the implementation period are recognized ratably as services
are performed. Recurring fees are recognized over the term of the agreement and
add-on services are recognized as services are performed. Under our recurring
fee-based model, we do not expect to generate significant deferred revenues,
but payments made in advance of delivering our solution will be recorded as
deferred revenues.
We offer our 2Share solution and related services primarily through a direct
field force of business advisors based in the United States. We also have
business specialists who are internal sales personnel that assist our advisors
with lead generation and customer qualification. In addition, we have recently
entered into marketing arrangements to enhance our indirect sales channels.
We believe that period-to-period comparisons of our operating results should
not be relied upon as indicative of future performance. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in early stages of development, particularly companies
in new and rapidly evolving markets. There can be no assurance we will be
successful in addressing such risks and difficulties. Although we have
experienced revenue growth recently, this growth may not continue. In addition,
we may not achieve or maintain profitability in the future.
Results of Operations
We did not recognize any revenues in 1997 since our solution was not yet
commercially available. We incurred operating expenses in 1997 primarily
related to increases in headcount in research and development, sales and
marketing and general administrative organizations.
Revenues
Prior to September 30, 1999, our revenues were derived from the sale of
software licenses, maintenance and consulting services. After that date, we
began offering our solutions and services through a recurring fee-based model.
Our revenues were $717,000 for the year ended December 31, 1998 and $3.6
million for the year ended December 31, 1999. The increase resulted from the
increase in the number of customers as well as in the penetration of our
existing customers. J.P. Morgan & Co. Incorporated, The McGraw-Hill Companies
Inc. and SAP AG each accounted for over ten percent of our revenues in 1998.
J.P. Morgan & Co. Incorporated, The McGraw-Hill Companies Inc. and Schroders &
Company Inc. each accounted for over ten percent of our revenues in 1999.
Cost of Revenues
Our cost of revenues includes costs related to network hardware,
compensation and related overhead costs for personnel engaged in providing our
2Share solution, as well as costs for third parties contracted to provide
services to our customers. A portion of our indirect compensation and related
overhead costs is allocated to cost of revenues. We expect the allocation of
indirect costs to increase in absolute dollars based on increased revenues
derived from our 2Share solution. Cost of revenues increased from $184,000 for
the year ended December 31, 1998 to $1.3 million for the year ended December
31, 1999. This increase resulted from cost incurred to support our increasing
revenues received from our growing customer base.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses consist primarily of
salaries and related costs for sales and marketing personnel, sales commissions
and other marketing activities. Sales and marketing expenses increased from
$3.3 million for the year ended December 31, 1998 to $9.4 million for the year
ended December 31, 1999. This increase was due to an increase of $1.7 million
in compensation expenses and increased spending of $4.4 million on advertising
and marketing programs.
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<PAGE>
Research and Development. Our research and development expenses consist
primarily of personnel and related costs. Research and development expenses
increased from $3.0 million in the year ended December 31, 1998 to $3.5 million
for the year ended December 31, 1999. This increase was primarily due to an
increase in headcount and related personnel costs. Technological feasibility of
the software component of our solution is generally not established until
substantially all product development is complete. Historically, software
development costs eligible for capitalization have been insignificant, and all
costs related to research and development have been expensed as incurred.
General and Administrative. Our general and administrative expenses consist
primarily of compensation and related costs for our executive, finance and
administrative personnel and other related expenses. General and administrative
expenses increased from $1.5 million for the year ended December 31, 1998 to
$5.0 million for the year ended December 31, 1999. This increase was primarily
due to increased compensation and related benefits associated with additional
personnel costs of $841,000 and increased costs associated with expanded
facilities, depreciation and overhead expenses of $2.5 million.
Amortization of Deferred Stock-Based Compensation. Amortization of deferred
stock-based compensation represents the amount of amortization related to the
difference between the exercise price of options granted and the deemed fair
market value of the underlying common stock on the date of the grant. During
the years ended December 31, 1998 and 1999, we recorded deferred compensation
of $16,000 and $8.5 million, in connection with stock option grants to
employees. We are amortizing this amount over the vesting periods of the
applicable options, resulting in amortization expense of $54,000 for the year
ended December 31, 1998 and $1.3 million for the year ended December 31, 1999.
Interest and Other Income
Interest and other income was $211,000 for the year ended December 31, 1998
and $298,000 for the year ended December 31, 1999. Interest income during each
year primarily resulted from interest earned on the proceeds from private
placements of our preferred stock.
Interest Expense
Our interest expense was $182,000 for the year ended December 31, 1998 and
$674,000 for the year ended December 31, 1999. The increased interest expense
resulted from additional borrowings and higher capital lease obligations during
the year ended December 31, 1999.
Income Taxes
There was no provision for federal or state income taxes for any period
since inception due to our operating losses. At December 31, 1999, we had net
operating loss carryforwards for federal income tax purposes of approximately
$25.0 million, which will expire in years 2010 through 2019 if not utilized.
Utilization of our net operating loss carryforwards may be subject to
substantial annual limitation due to ownership change provisions provided by
the Internal Revenue Code and similar state provisions. Such an annual
limitation could result in the expiration of the net operating loss
carryforwards before utilization. A valuation allowance has been established
and, accordingly, no benefit has been recognized for our net operating losses
and other deferred tax assets. The net valuation allowance increased by
approximately $3.0 million and $5.8 million during the years ended December 31,
1998 and 1999.
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Quarterly Results of Operations
The following table sets forth unaudited statement of operations data for
the five quarters following the general availability of our solution in
September 1998. This data has been derived from our unaudited financial
statements that have been prepared on the same basis as the audited financial
statements and, in the opinion of our management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of the information when read in conjunction with our financial statements and
related notes. Our quarterly results have been in the past and may in the
future be susceptible to significant fluctuations. As a result, we believe that
results of operations for interim periods should not be relied upon as any
indication of the results to be expected in any future period.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------
Dec. Mar. June Dec.
31, 31, 30, Sept. 30, 31,
1998 1999 1999 1999 1999
------- ------- ------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues......................... $ 252 $ 502 $ 654 $ 920 $ 1,561
Cost of revenues................. 80 77 156 403 673
------- ------- ------- ------- -------
Gross profit..................... 172 425 498 517 888
Operating expenses:
Sales and marketing............ 846 1,156 1,964 3,681 2,610
Research and development....... 1,054 781 932 888 915
General and administrative..... 452 858 1,322 1,289 1,576
Amortization of deferred stock
compensation.................. 9 8 7 6 1,261
------- ------- ------- ------- -------
Total operating expenses..... 2,361 2,803 4,225 5,864 6,362
------- ------- ------- ------- -------
Operating loss................... (2,189) (2,378) (3,727) (5,347) (5,474)
Interest and other income........ -- 39 17 103 139
Interest expense................. (10) (82) (157) (173) (262)
------- ------- ------- ------- -------
Net loss......................... $(2,199) $(2,421) $(3,867) $(5,417) $(5,597)
======= ======= ======= ======= =======
</TABLE>
Our revenues have increased in every quarter since the introduction of our
2Share platform in September 1998. These increases are attributable to the
increased market awareness and acceptance of the 2Share solution and the
penetration of our existing customer base. In the fourth quarter of 1999, we
began offering our 2Share solution exclusively on a recurring fee-based
business model which resulted in the allocation of significantly higher
compensation and related overhead costs to cost of revenues.
Operating expenses have generally increased each quarter because of
increased staffing in our sales and marketing, research and development and
general and administrative organizations. Research and development costs
decreased during the three months ended March 31, 1999 relative to the three
months ended December 31, 1998 in which we expensed purchased development costs
of $250,000. In addition, sales and marketing expenses increased significantly
for the three months ended September 30, 1999 due to increases in marketing
expenses related to national brand awareness and lead generation.
Our quarterly operating results have fluctuated significantly in the past,
and will continue to fluctuate in the future, as a result of a number of
factors, many of which are outside our control. These factors include:
. the amount and timing of operating costs relating to the expansion of our
business, operations and infrastructure;
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. the number and timing of new hires, particularly with respect to services
and operations personnel;
. the timing of our sales cycles;
. our ability to meet scheduled eHub implementations; and
. our utilization rate for our services and operations personnel.
Liquidity and Capital Resources
Through December 31, 1999, we have funded our operations primarily through
sales of equity securities with net proceeds of $33.3 million, and, to a lesser
extent, the use of long-term debt and equipment leases. We have also raised
funds from short-term debt. Our short-term debt, including the current portion
of our capital lease obligations, was $5.4 million at December 31, 1999. Our
sources of liquidity, as of December 31, 1999 consisted principally of cash and
cash equivalents of $8.8 million.
Net cash used in operating activities was $7.0 million for 1998 and $16.9
million for 1999. For these periods, net cash used by operating activities was
primarily for the funding of ongoing operations.
Net cash used in investing activities was $936,000 for 1998 and $1.5 million
for 1999. Our investing activities have consisted of purchases of property and
equipment. We finance the acquisition of property and equipment, which consists
mainly of furniture and fixtures and computer hardware and software for our
increasing employee base as well as for our management information systems,
primarily through capital leases. We expect to experience an increase in our
capital expenditures and lease commitments consistent with our anticipated
growth in operations, infrastructure and personnel.
Net cash provided by financing activities was $11.8 million in 1998 and
$22.3 million for 1999. For 1998, proceeds from financing activities were
primarily received from the private sale of preferred stock of $10.1 million
and $2.5 million from the sale and lease back of property and equipment. In
1999, proceeds provided by financing activities were primarily from the sale of
preferred stock of $20.0 million and $5.1 million from short-term borrowings,
offset in part by principal payments on capital lease obligations and long-term
debt of $2.7 million.
We expect to experience significant growth in our operating expenses in the
future, particularly in sales and marketing and research and development in
order to execute our business plan. As a result, we anticipate that these
operating expenses, as well as planned capital expenditures, will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in complementary businesses, technologies
or product lines. We believe that the net proceeds from the sale of common
stock in this offering will be sufficient to meet our operational and capital
expenditure requirements for at least the next 12 months. Thereafter, we may
find it necessary to obtain additional equity or debt financing. In the event
additional financing is required, we may not be able to raise it on acceptable
terms or at all.
Year 2000 Issues
We did not experience any significant problems associated with Year 2000
issues, and we are not aware that any of our suppliers or vendors experienced
any such problems.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the
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increase or decrease in the amount of interest expense we must pay with respect
to our outstanding debt instruments.
The risk associated with fluctuating interest expense is limited to the
exposure related to those debt instruments which are tied to market rates. We
do not use derivative financial instruments in our investment portfolio. We
ensure the safety and preservation of our invested principal funds by limiting
default risks, market risk and reinvestment risk.
We mitigate default risk by investing in safe and high-credit quality
securities. A hypothetical increase or decrease in market interest rates by 10%
from the market rates in effect at December 31, 1999 would not cause the fair
value of our cash and cash equivalents or the expense paid with respect to our
outstanding debt instruments to change by a material amount. Declines in
interest rates over time will, however, reduce our interest income while
increases in interest rates over time will increase our interest expense.
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BUSINESS
Overview
We provide comprehensive Internet-based solutions to create many-to-many
communication, commerce and collaboration eHubs for businesses. An eHub is an
Internet-based workspace where customers, partners, suppliers and employees can
simultaneously interact, access real-time business information, integrate
business processes and conduct eCommerce transactions. We believe our solutions
represent a new paradigm for eBusiness, and are designed to deliver secure,
real-time content and eCommerce capabilities from virtually any source to any
user, at any time.
Our solutions represent a new category of business-to-business platforms
designed to deliver dial-tone-like reliability and functionality, which we
refer to as Web-tone. We believe our Web-tone business model is better aligned
with our customers' needs because it is based on recurring fees for solutions,
services and transaction capabilities instead of a large one-time capital
investment usually associated with software license purchases. Our business
model provides our customers with the flexibility to adjust the type of
services they receive from us in response to their changing business needs and
provides us with the incentive to innovate and serve them since we share in
their long-term success.
Our eHub platform, 2Share, can be rapidly adopted by our customers to
construct customized eHubs that require no client application other than a
browser to create a primary business network. 2Share is an open standard
platform based on Java and XML (eXtensible Markup Language), and is provided
with comprehensive managed services which are deployed by customers in a
service-like fashion. With 2Share, a company can bridge multiple constituents
inside and outside the organization and empower each user to share, manage,
target and personalize valuable information from disparate corporate databases,
email exchanges, isolated desktops, and internal and external Web sites and
networks. Our solutions enable not only the collaborative exchange and
management of information, but also eCommerce transactions that result from
this collaboration.
2Share empowers our customers, who are highly dependent on real-time
information exchange, to rapidly and seamlessly develop customized eHubs. We
believe our solutions create value by enabling firms to strengthen business and
employee relationships, improve time to market, increase revenue and new market
opportunities, and improve return on investment of existing corporate assets.
Since the introduction of 2Share in 1998, we have delivered our solutions to
customers in a number of strategic industries, including J.P. Morgan & Co.
Incorporated, The McGraw-Hill Companies, SAP AG, Schroders & Company, and Visa
USA.
Industry Background
Evolution of the Internet as a Communication, Commerce and Collaboration
Platform
The Internet has become the fastest growing universal communications and
commerce medium in history. It is changing the way businesses interact and
transact with customers, partners, suppliers and employees. The communications
and information exchange capabilities of the Internet make it a natural
platform for collaboration and commerce for both businesses and consumers. Over
the past few years, the Internet has been used as a platform to publish massive
amounts of content. International Data Corporation estimates that the number of
Web content pages or URLs will grow from 2.2 billion in 1999 to over 16.5
billion in 2003. Over the same period of time, the Internet has been
increasingly leveraged as a primary sales and distribution channel by
businesses. Gartner Group estimates that business-to-business eCommerce over
the Internet will grow from $145 billion in 1999 to $7.3 trillion in 2004.
Moreover, Forrester Research also estimates that business-to-business eCommerce
will account for more than 93% of U.S. eCommerce transactions by 2004.
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Emergence of the Internet as a Platform for a Primary Business Network
The impact of the Internet on traditional commerce models extends far beyond
the dollar value of commerce activity conducted over the Internet and has led
to the emergence of entirely new business models. The Internet has enabled
companies to create new revenue opportunities, provide more useful information,
streamline complex business processes, lower costs and increase productivity in
the form of business-to-business solutions. To remain competitive, companies
are beginning to leverage the Internet as a primary network platform for
interaction that can span organizational boundaries and represent new, more
open organizational structures. Business users worldwide are beginning to rely
on the Internet to collaborate, interact and conduct business. In particular,
businesses recognize the strategic importance of using the Internet to
strengthen relationships with customers, partners, suppliers and employees.
Traditional Methods of Business-to-Business Communication, Commerce and
Collaboration
Traditionally, business-to-business communication, commerce and
collaboration has been conducted by means of phone, paper, fax and face-to-face
meetings. Increasing challenges in addressing the need for real-time
communications and transactions have led companies to adopt information
technology products and services such as databases, client/server applications,
video conferencing and e-mail. More recently, some companies have tried to
address their need for real-time communications, commerce and collaboration by
using software tools and in-house developers or consultants. However, the
realizable benefits of these custom systems tend to be uncertain due to the
challenges of integration with existing technology infrastructure and
adaptability for use with future technologies.
In addition, traditional information technology products and services
generally limit communications to a one-to-one basis between two parties, and
cannot support a real-time network-based or many-to-many form of interaction
that can span organizational boundaries. Traditional products and services
generally cannot scale either in terms of users, transaction volumes or
geography and have typically been deployed under a software license model,
which involves significant one-time capital outlays and often limits ongoing
relationships.
The limited communication capabilities of traditional technology products
and services have inhibited the migration of complex, commerce processes to the
Internet. While businesses have adopted the Internet as an effective channel
for transaction execution, the information-centric communication and
collaboration processes that both precede and follow a transaction have been
difficult for businesses to move to the Internet.
Challenges Facing Business-to-Business Communication, Commerce and
Collaboration
Traditional solutions for addressing the communication, commerce and
collaboration needs of today's fast paced Internet economy offer only a partial
solution and have significant drawbacks. These drawbacks include:
. Management and Information Control. Traditional solutions do not allow
users to effectively access, organize, control, integrate, customize and
share information from disparate sources inside and outside an
organization such as corporate databases, e-mail exchanges, desktops,
networks and internal and external Web sites;
. Scope of Communication. Traditional technologies have been unable to
scale and extend beyond one-to-one interactions to many-to-many
communication, commerce and collaboration among customers, partners,
suppliers and employees through an easily accessible primary business
network;
. Time to Market. Current products and services typically involve long
development and implementation cycles, a dedicated technical staff and
integration risk;
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. License Business Model. Traditional software solutions require
significant one-time capital investments due to vendors' software license
models; and
. Proprietary Technology. Traditional software products and services have
generally been unable to adapt to next-generation Internet architecture,
are often incompatible with existing technology infrastructure and are
dependent on proprietary technologies which are difficult to customize,
and require skilled and hard-to-find technology resources.
Opportunities for Business-to-Business Communication, Commerce and
Collaboration
The ubiquity and extensive adoption of the Internet enables it to serve as a
foundation for widespread business-to-business interactions which can bridge
companies and their customers, partners, suppliers and employees. These
interactions, which include business-to-business communication, commerce and
collaboration, often require integrating massive amounts of disparate
information and joining together hundreds or thousands of business users,
inside and outside the enterprise. Companies require an Internet-based solution
that can access, integrate, customize and share any type of information for any
user at any time, while enabling collaboration and eCommerce transactions.
As the Internet has evolved, solutions have emerged which have accelerated
the use of the Internet as a primary business network. Early solutions have
included eBusiness portals, or Web sites for employees or customers that serve
as gateways for externally published content, services and basic eCommerce
transactions. More recent solutions include vertical eMarketplaces, or dynamic
trading hubs, that bring together multiple buyers and sellers and are operated
by neutral third parties with deep industry domain expertise. We believe that
the next stage of the Internet's evolution will be marked by the widespread
deployment of solutions to create many-to-many communication, commerce and
collaboration eHubs for businesses. An eHub is an Internet-based workspace
where customers, partners, suppliers and employees can interact, access real-
time business information, integrate business processes and conduct eCommerce
transactions.
eHubs facilitate collaboration across disparate parties by integrating
shared business information and processes into one common interface and
permitting eCommerce transactions. Any industry that requires real-time
information exchange and collaboration among many disparate parties may benefit
from eHubs, including financial services, media and publishing, high-technology
and information services. As eHubs are adopted by companies, we believe they
will proliferate organically as one company's eHub extends through its
customers, partners and suppliers to form other eHubs. These compounding
benefits are based upon the principle of network effects in which the value of
a network becomes greater to each individual user as another user joins the
network. This network effect will drive the formation of a new communication
paradigm as one-to-one interactions over traditional networks, such as
telephone or email systems, are transformed into many-to-many interactions
across networks of eHubs.
eHubs provide several potential benefits including enhanced operating
efficiency and employee productivity, opportunities for increased revenue and
improved profits and strengthened relationships with customers, partners,
suppliers and employees. A comprehensive communication, commerce and
collaboration eHub should, irrespective of existing technology infrastructure:
. enable many-to-many interactions;
. support real-time exchange of decentralized and personalized
information;
. allow reliable and secure transactions between all parties using the
eHub; and
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. integrate cross-organizational processes and workflow.
An eHub solution should be aligned with a company's operating and financial
needs by charging a recurring fee for solutions and services instead of a
significant one-time capital outlay usually associated with software license
purchases. To gain a competitive advantage in today's Internet economy,
companies and their customers, partners, suppliers and employees are in need of
eHub solutions.
The 2Bridge Solution
We provide a comprehensive Internet-based eHub solutions that create many-
to-many communication, commerce and collaboration eHubs for businesses. Our
solutions provide business users inside and outside the enterprise the ability
to access real-time, mission-critical business information, integrate shared
business processes and conduct transactions. Our 2Share solution can be adopted
rapidly and cost-effectively and we believe that it represents a new paradigm
for many-to-many interactions and business-to-business information exchange and
transactions. 2Share is designed to deliver secure, real-time content and
eCommerce capabilities from virtually any source to any user, at any time. Our
solution is also designed to organize, integrate and customize mission-critical
information for each individual user. Our customers use 2Share to construct
customized eHubs which enable many-to-many interactions, requiring no user
application other than a browser.
2Share Features
Our 2Share solution is designed to extend a company's existing information
and communication processes to an Internet-based primary business network and
facilitate eCommerce transactions by:
. providing information and transaction access, from any source and in any
format, while being easy enough for any Internet-based business user to
have control over production, management and distribution of mission-
critical information and transactions to any other Internet-based user,
at any time;
. permitting extensive customization and personalization by individual
users and allowing them to filter, create, capture, update, share and
view vital information;
. supporting permission-based management of information and transaction
flows to any selected subset of users, or allowing a group of business
partners to interact in an environment specifically designed to fit their
needs;
. allowing round-the-clock access and management of mission-critical
information and business processes from a variety of devices;
. maintaining open standards and architecture and supporting multiple
operating system platforms such as Microsoft NT and Sun Solaris, while
allowing easy integration and providing extended functionality with other
existing technologies and services, such as enterprise software
applications, news feeds, calendaring and real-time Web conferencing; and
. enabling rapid deployment and ease of use, usually with minimal training.
We believe our 2Share solution represents a new category of Internet
solutions designed to deliver dial-tone-like reliability and functionality,
which we refer to as Web-tone. We offer our Web-tone service for recurring fees
instead of significant one-time capital investments usually associated with
software license purchases. For additional fees, our customers can also receive
add-on services, such as specialized modules, including eCommerce capabilities,
management and premium service arrangements, and custom design and development
services. Unlike other solutions which involve a substantial one-time license
fee, our fee structure does not require a significant initial capital outlay
and provides our customers the flexibility to adjust the type of services they
subscribe
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to in response to their changing business needs. In addition, our solution is
designed to deliver dial-tone-like reliability and functionality. Our solution
is an open standard platform based on Java and XML, provided with comprehensive
managed services which are deployed by customers in a service-like fashion. Our
eHub platform enables real-time, interactive communication, commerce and
collaboration among customers, partners, suppliers and employees, regardless of
their existing technology infrastructure.
We believe our solution offers our customers the following benefits:
Strengthened Business Relationships. Our solution allows our customers
to more effectively bridge and strengthen their customer, partner, supplier
and employee relationships by improving the speed and efficiency of
communication, commerce and collaboration without changing existing work
processes.
Improved Time to Market. Our customers' eHubs typically can be
implemented in just days to weeks versus the months it may take for
internally developed or third-party solutions.
Increased Revenue and New Market Opportunities. By improving the overall
experience for customers through a dynamic business partnership, our
solution provides our customers with cross-selling opportunities to their
customers, partners and suppliers and enhances market competitiveness.
Customizable and Scalable eHubs. Our solution is a scalable platform
which can evolve with changing business or infrastructure needs over time,
permitting the rapid addition of users, new features and services. In
addition, our solution is designed to be easily adaptable regardless of the
existing technology infrastructure or business processes.
Improved Return on Investment (ROI) of Existing Systems. Our solution
leverages a company's existing systems, which may previously have been
isolated or difficult to access, and increases employee productivity. It is
also designed to allow users to gain real-time access to mission-critical
business information needed from any external source at any time.
Our Strategy
We believe our solution represents a new paradigm for many-to-many
interactions, business-to-business information exchange and eCommerce
transactions. Our objective is to be the leading provider of comprehensive
Internet-based solutions that create many-to-many communication, commerce and
collaboration eHubs. To implement our strategy, we intend to:
Leverage our Web-tone Delivery Model. Rather than charging large one-
time license fees that require costly third-party consulting services and
substantial IT department involvement, we deliver our solutions based on a
one-time implementation fee followed by recurring fees. For additional
fees, our customers can receive add-on services and specialized
applications. This cost structure allows our customers to purchase our eHub
services and scale them as needed. We believe our business model creates a
partnership with our customers and is better aligned with their long-term
business and financial objectives. Moreover, we believe our Web-tone
delivery model will support the organic growth of eHub networks as it
permits the rapid addition of new users and facilitates the proliferation
of eHubs beyond our existing customers.
Establish 2Bridge as a Leading Global Brand Enabling eHub Solutions. We
plan to establish 2Bridge as the industry-standard platform on which to
build eHubs. We intend to promote our brand to create strong penetration
among strategic vertical markets. We believe that strong brand awareness,
combined with our existing customer base, will give us a competitive
advantage in our market. We also anticipate that the growth of the Internet
internationally will present significant opportunities to extend the global
reach of our solutions.
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We intend to expand globally by pursuing strategic partnerships and sales
efforts in Asia and in Europe.
Broaden Adoption of 2Share Throughout Our Existing Customer Base. We
plan to expand the footprint of our solution throughout our existing
customer base. We have designed our solution to enable our customers to
deploy and scale their eHubs rapidly. Our solution is designed for
virtually all business users throughout an organization and requires little
or no training. Our customers are able to quickly realize its benefits and
are motivated to adopt our solution broadly throughout the entire
organization. As a result, we believe our current customers alone represent
a significant growth opportunity.
Target Strategic Markets. We plan to grow by targeting strategic markets
where information and collaboration are critical, including financial and
information services. We believe participants in these markets require the
integration of complex information and processes in order to make effective
business decisions. As our customers use our solutions across their network
of customers, suppliers, partners and employees, other participants become
aware of and may begin using our solutions. This experience can create a
powerful multiplier effect across our target markets.
Build Strategic Alliances to Strengthen Our Market Position and
Offering. We intend to continue to develop strategic alliances with leaders
in the content, technology and Internet business landscape. Through these
third-party relationships we plan to offer additional value-added features
such as enterprise software integration, news feeds, calendaring and real-
time Web conferencing. We will also continue to pursue specific
relationships with other Internet technology providers, Internet hosting
companies and Internet service providers. We believe these relationships
will accelerate the adoption of our solutions, increase our brand
recognition and improve penetration of our target markets.
Our Solutions and Services
Our 2Share solution enables our customers to deploy eHubs and bridge
customers, partners, suppliers and employees, irrespective of their existing
technology infrastructure and business processes. In addition, our 2Share
solution provides a flexible eHub platform which addresses our customer's
changing business needs and the ever-expanding potential of the Internet.
Our solutions and services include the following features:
Collaboration
WorkCenter. At the heart of 2Share is the WorkCenter. WorkCenter is a
browser-based module that allows business users to create a powerful
network of eHubs that deliver meaningful and compelling information and
transactions to selected audiences without the need for extensive technical
training.
InfoCenter. The InfoCenter is a browser-based module where content and
workflow created in the WorkCenter is viewed. 2Share separates the delivery
of content to an eHub from its construction to facilitate customized
information delivery. A single item of content or transaction can be
delivered to multiple audiences with a different look, feel and context
setting for each user group.
Customized Information Delivery
Targeted Home Sites. Home Sites are customized points of entry into an
eHub targeted at specific users' needs. Using 2Share, users can create
thousands of targeted Home Sites that meet the needs of specific user
groups, both inside and outside an organization. This feature is
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particularly valuable for the creation of business-to-business customer
service eHubs which enable our customers to better serve and retain their
customers.
Personalization. 2Share supports personalized pages with content
organized and presented according to user preferences. 2Share's
personalization component, called MyView, serves as a single access point
for data existing on the 2Share system and for external data including
legacy systems and Internet links.
Conversion to HTML. 2Share converts over 200 file formats to standard,
browser-accessible formats such as HTML thereby making Internet site
creation accessible to business users with no specialized training.
Security. 2Share provides a secure repository for user information.
Access to information is controlled through support for industry standard
authentication and encryption protocols. Additionally, each user's login
determines the specific information available to be viewed and modified.
Search. 2Share helps customers sort and find information. 2Share content
is tagged with user-defined metadata including, keyword, site name, site
description, and author name. 2Share's search component enables the easy
location and retrieval of all 2Share content.
Workflow. 2Share supports information supply chain workflow. Role
assignment can be used to guarantee that content is routed through
customer-designated approval processes before becoming a viewable 2Share
site.
Threaded Discussion Groups. 2Share supports dynamic interaction through
threaded discussion groups, which can be embedded in user-defined locations
within 2Share sites. Threaded discussion groups encourage impromptu
communication among site visitors.
Extensibility
Connection to External Systems. 2Share provides connectivity to
customers' existing applications and databases, including legacy systems,
to enable the display of information from those systems and the integration
of business processes within customers' eHubs.
Third-Party Product Integration. 2Share enables the integration of
third-party product offerings to provide customers with complete solutions
for their communication, commerce and collaboration needs.
Value-Added Services
We form relationships with our customers to ensure that they are using the
latest Internet technologies to meet their needs. As part of our complete eHub
solution, we offer several complementary business services to our customers
such as:
. Client Technology Services which deliver customized business solutions,
including site design and information architecture development, utilizing
the technical expertise and business knowledge of our professionals;
. Creative Services which provide creative strategy and direction based
upon client business goals and their business model; and
. Solutions and Development Services which may include individual teams
assigned to customer projects to manage the eHub from inception to
implementation.
We currently have services personnel located in San Francisco, New York and
New Jersey, and we plan to add personnel in London, England and Bombay, India
during the second quarter of 2000.
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Customer Care
We believe that offering a superior level of customer service is essential
for our long-term relationship with our customers and our success. Customer
service is a standard feature in our offerings and available to all of our
customers. We offer our customers a choice of several levels of support, which
is included in the recurring fee. Our support provides dependable and timely
resolution of customers' technical inquiries. Our customers can also access our
online customer care portal.
Customer Case Studies
J.P. Morgan & Co. Incorporated
J.P. Morgan & Co. Incorporated is a leading financial services firm. Certain
of its subsidiaries use 2Share to keep their professionals in multiple
locations in the U.S. and Europe abreast of real-time portfolio management
information and to provide superior and consistent advice to its clients.
To provide this level of advice, J.P. Morgan's professionals needed real-
time access to vast amounts of information that existed in a variety of
disparate data sources.
Our initial eHub solution was implemented in just 26 days, and with 2Share,
J.P. Morgan's professionals now have real-time access, via a standard Web-
browser, to consolidated, consistent and up-to-the-minute information. User
acceptance was high and the solution was rolled out quickly with on-going
training.
The McGraw-Hill Companies, Inc.
The McGraw-Hill Companies, a global publishing, financial, information and
media services company, wanted to create an industry-specific portal for the
aviation industry. McGraw-Hill needed to consolidate seven existing Web sites
serving the aerospace industry into a single eHub where content no longer had
to be manually updated using HTML programmers.
McGraw-Hill selected 2Share to create its eHub, AviationNow, to collaborate
and publish articles and news stories in a more timely manner via a real-time
editorial process without the need for technical programming support.
The AviationNow eHub provides twice-hourly updates on all late-breaking news
to the aerospace industry. Using 2Share, authors and editors log in and upload
and/or publish their stories from around the world. Some authors email their
copy directly to AviationNow where it is edited and published by business users
of the system. In addition to providing timely news stories, this eHub also
provides several reference and community functions such as the World Aviation
Directory, aircraft and spacecraft specifications, eCommerce capabilities, and
a forum to discuss aerospace-related topics. AviationNow currently enjoys over
12,000 visitors per day and over 1.4 million page views.
SAP AG
Based in Walldorf, Germany, SAP AG is the market leader of inter-enterprise
software solutions. As a means of communicating with its geographically
dispersed workforce, SAP frequently produces and distributes newsletters
worldwide containing critical marketing and customer information. Prior to
implementing 2Share, SAP used a manual process to deliver these newsletters.
Today, SAP is able to deliver timely marketing information with their 2Share
system. Implementing 2Share enabled a small group of SAP employees to quickly
and efficiently create and distribute their newsletters in real-time to an
audience of over 300 users worldwide.
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<PAGE>
Customers
The following is a representative list of our customers as of January 31,
2000 who have purchased our 2Share solution for use in eHub applications.
. Frontline Capital Group . SAP AG
. JP Morgan & Co. Incorporated . Schroders & Company Inc.
. The McGraw-Hill Companies Inc. . Strategic Investment Partners,
Inc.
. Northpoint Communications
. VISA U.S.A., Inc.
. Puerto Rico Department of Justice
. WebCT
. Rapid Referral
During the year ending December 31, 1999, The McGraw-Hill Companies, Inc.,
Schroders & Company Inc. and JP Morgan & Co. Incorporated each accounted for
more than 10% of our revenues.
Sales and Marketing
We sell 2Share and related services primarily through a direct field force
of business advisors based in the United States. We also have business
specialists who are inside sales personnel that assist our advisors with lead
generation and customer qualification. In addition, we have recently entered
into marketing arrangements to enhance our indirect sales channels. As of
February 29, 2000 our sales and marketing group consisted of 30 professionals
located in our headquarters in San Francisco, California and our regional
offices in New York, New York; Chicago, Illinois; Washington, D.C.; Princeton,
New Jersey; and Houston, Texas. We plan to expand our sales and marketing group
through aggressive recruiting efforts.
Our marketing programs have been set up to establish our 2Share solution as
the industry-standard platform that enables eHubs and to generate significant
sales leads for our sales force to pursue. We use a broad mix of programs to
accomplish these goals including television and print advertising, press and
analyst briefings, e-mail campaigns, Web banners, Web sponsorships, outbound
telemarketing, industry trade shows and educational seminars. Additionally, to
support sales, we intend to produce high quality materials for prospective
customers including product overview brochures, technical briefs, white papers,
presentations and 2Share demonstrations.
Technology
2Share incorporates a Java and XML-based open standard platform which
enables real-time interactions among customers, partners, suppliers and
employees regardless of existing technology infrastructure. Key aspects of our
architecture include the following:
. Java-based architecture, which provides a solid foundation upon which to
build our flexible component-based solution.
. platform independence, which permits 2Share to support different
operating systems like Windows NT or Sun Solaris, Web applications
servers and databases.
. browser-based access, which requires no user, or client-based software
and relies exclusively on HTML and Java Script to enable all user
interactions.
[2Share Architecture Graphic]
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<PAGE>
In addition, the 2Share platform provides a powerful pluglet architecture.
2Share pluglets are server-side Java applications that provide access to
information residing both inside and outside of the 2Share system. Some common
pluglets pull data from relational databases, email systems and file systems,
while other pluglets provide discussion group functionality and site navigation
capabilities. Pluglets provide three major capabilities:
. connections to data sources and metadata;
. content conversion to multipurpose information types (typically HTML);
. business user-focused interface that allows users to easily manage
information and business processes.
Pluglets deliver an extensible framework that allows new information sources
and workflow to be added to 2Share in a seamless manner. Below is a partial
list of 2Share pluglets:
<TABLE>
<CAPTION>
2Share Pluglet Function
-------------- --------
<S> <C>
Table of contents....... Displays a list of page links with optional content
titles
Recent sites............ Displays a list of recently published 2Share sites
within a designated time frame associated with
certain keywords.
Desktop content......... Uploads information from files such as Word, Excel
and over 200 other formats.
Auto publishing agents.. Automatically publishes current versions of desktop
information for selected users.
Database................ Runs a query against any JDBC or ODBC data source
and displays the formatted results.
Email................... Accesses email from any Internet message access
protocol (IMAP) compliant email system.
Discussion.............. Provides a configurable forum for interactive,
threaded discussions.
Status change........... Displays comments added to content during the
approval process.
Workflow change......... Displays the real-time workflow status of each
source of information.
</TABLE>
Research and Development
We have invested significantly in research and development to enhance our
current solution and develop new solutions. Our research and development
expenses were $3.0 million and $3.5 million for the year ended December 31,
1998 and 1999. As of March 10, 2000 our research and development organization
consisted of 24 employees who are also responsible for development, quality and
assurance testing, documentation, release and maintenance, and overall
execution of our development strategy. We intend to continue to expand and
enhance the capabilities of our 2Share platform, as well as develop and extend
our eHub solution offerings, in order to provide our customers with
comprehensive, secure and flexible eHubs.
Competition
The market for many-to-many communication, commerce and collaboration
solutions is a new market, rapidly changing, intensely competitive and is
likely to become more competitive as the number of entrants and new
technologies increases. While we are not aware that any of our
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<PAGE>
competitors or potential competitors currently produces a solution that is
substantially similar to ours, we are subject to current or potential
competition from the following:
. custom development efforts from in-house information technology
resources, and from third-party systems integration and technology
services companies.
. suppliers of groupware, knowledge management and document management
solutions such as IBM;
. software companies that address narrower areas of Web site creation, such
as the aggregation of data sources into a central location;
. content personalization software and traditional and eBusiness consulting
companies such as Broadvision and Vignette;
We believe that the principal competitive factors affecting our market
include breadth and depth of a solution, compatibility with existing
applications and operating systems, a substantial customer base and strategic
alliances, core technology, product quality and performance, customer service,
and speed and ease of deployment. We believe our solution currently competes
favorably with respect to these factors. However, our market is relatively new
and evolving rapidly. We may not be able to maintain our competitive position
against current and potential competitors, especially those with significantly
greater financial, marketing, service, support, technical and other resources.
Some large potential competitors have longer operating histories, larger
customer bases, greater brand recognition, and significantly greater financial,
marketing and other resources than we do and may enter strategic or commercial
relationships with larger, more established and well-financed companies. Some
of our competitors may be able to secure alliances with customers and
affiliates on more favorable terms, devote greater resources to marketing and
promotional campaigns and devote substantially more resources to systems
development than we do. In addition, new technologies and the expansion of
existing technologies may increase competitive pressures on us. We may not be
able to compete successfully against current and future competitors, and
competitive pressures faced by us could harm our business, operating results
and financial condition.
Intellectual Property
Our success depends in part upon our proprietary technology. We rely on a
combination of trademark and trade secret protection and confidentiality and
nondisclosure agreements to establish and protect our intellectual property
rights. In addition, we seek to avoid disclosure of our trade secrets through a
number of means, including requiring those persons with access to our
proprietary information to execute nondisclosure agreements with us and
restricting access to our source code. We seek to protect our software,
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. We currently have no patents.
Our means of protecting our proprietary rights may not be adequate. Our
competitors may independently develop similar technology, duplicate our
products or design around our proprietary intellectual property. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. Policing unauthorized use of our products is difficult, and while
we are unable to determine the extent to which piracy of our solution exists,
piracy can be expected to be a persistent problem. In addition, the laws of
some foreign countries do not protect our proprietary rights to as great an
extent as do the laws of the United States.
There has been a substantial amount of litigation in the software industry
and the Internet industry regarding intellectual property rights. It is
possible that in the future, third parties may claim that we or our current or
potential future products infringe upon their intellectual property. We
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<PAGE>
expect that software product developers and providers of Internet-based
software applications will increasingly be subject to infringement claims as
the number of products and competitors in our industry segment grows and the
functionality of products in different industry segments overlaps. Any claims,
with or without merit, could be time consuming, result in costly litigation,
cause product shipment delays or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements, if required, may not be available
on terms acceptable to us or at all, which could seriously harm our business.
We are a defendant in a lawsuit pending in the U.S. District Court for the
Eastern District of Missouri brought by Bridge Information Systems, or Bridge.
Bridge alleges trademark infringement and related causes of action arising from
our use of 2Bridge. We have responded to the complaint with counterclaims
seeking a declaration of non-liability. Neither party has commenced discovery.
The Court has scheduled a trial date for this matter during 2001. Bridge
recently approached us to discuss an amicable resolution of the dispute. We
have indicated to Bridge that any settlement must allow us to use the name and
mark 2Bridge without any restrictions of field of use. Although we are
continuing our discussions, it is too early to determine whether we will reach
a negotiated settlement. Should we not reach a settlement and if litigation is
decided unfavorably against us, we might be required to pay substantial damages
to Bridge and could be enjoined from using the name and mark 2Bridge unless we
are able to negotiate a license from Bridge.
Employees
As of March 10, 2000, we employed 124 individuals in the United States. None
of our employees is represented by a labor union or is subject to a collective
bargaining agreement. We believe our relations with our employees are good.
Facilities
Our executive offices and principal operations are currently located in San
Francisco, California. We curently lease approximately 32,800 square feet of
office space in San Francisco, California under two leases that expire in 2002
and 2005, respectively. We also lease office space in Princeton, New Jersey
under a lease that expires in 2003 and office space in New York, New York under
a lease that expires in 2001. We believe that our existing facilities are
adequate for our current operations.
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<PAGE>
MANAGEMENT
The following table sets forth information regarding our executive officers,
directors and key employees as of March 10, 2000:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Mansoor Zakaria.... 44 Founder, Chairman, Chief Executive Officer and Director
Talat Sadiq........ 55 Executive Vice President, Global Sales Development and
Support
Ronald Parks....... 44 Senior Vice President and Chief Financial Officer
Janet Akin-James... 44 Vice President, Sales Development and Support
Akbar Ayaz......... 49 Vice President, Client Technology Solutions
Richard Berger..... 39 Vice President, Engineering
Frank Cummings..... 41 Vice President, Solutions, Development and Operations
Jeffrey Forsman.... 53 Vice President, Global Operations
David Bender....... 39 Director of Creative Services
Justin Hafen....... 30 Director of Marketing and Corporate Communications
Milton Berlinski... 43 Director
David Braunschvig.. 46 Director
David Brown........ 43 Director
Masood Jabbar...... 50 Director
Mark Perry......... 56 Director
Fareed Zakaria..... 36 Director
</TABLE>
Mansoor Zakaria is the founder of 2Bridge and has served as Chairman and
Chief Executive Officer since our company was funded in January 1997. From 1986
to 1996, Mr. Zakaria operated a new media and database publishing company and
provided strategic consulting services. From 1982 to 1985, he was a director of
Product Management at Charles Schwab responsible for developing and marketing
electronic information and online trading products. He is a member of the board
of governance of Internet Finance Partners.
Talat Sadiq has served as our Executive Vice President, Global Sales
Development and Support since December 1999. In 1999, Mr. Sadiq was Executive
Vice President of Portal Services and Operations for Signatures Network, a
former division of Sony, Inc. From 1998 to 1999, he was Vice President of
Global Customer Programs, Americas, for Dell Computer Corporation. From 1994 to
1998, Mr. Sadiq held various management positions at Sun Microsystems, where he
managed its global field technical resources and developed and managed global
executive sales relationships withj numerous software partners. Mr. Sadiq
received a degree in electrical engineering from Cornell University.
Ronald Parks has served as our Chief Financial Officer since June 1997 and
received the title of Senior Vice President in August 1999. From 1996 to 1997,
Mr. Parks was the Vice President of Finance and Operations at AnyRiver
Entertainment, Inc., and from 1994 to 1996, he was the Vice President of
Finance and Operations at UDI Software, Inc. From 1991 to 1994, he held various
management positions at Reference Software International. Prior to that, he was
a Senior Manager in the Management Consulting Division of Ernst & Young LLP.
Mr. Parks received a B.S. in accounting from the City University of New York.
Mr. Parks is a Certified Public Accountant.
Janet Akin-James has been with 2Bridge since June 1999 and has served as our
Vice President, Sales Development and Support since November 1999. From 1997 to
1999, she held district and division manager positions with SBC
Telecommunications, Inc. From 1985 to 1997, Ms. Akin-James held various
positions at Pacific Bell. Ms. Akin-James received a B.S. in telecommunications
management from Golden Gate University.
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<PAGE>
Akbar Ayaz has served as our Vice President, Client Technology Services
since December 1999. From 1994 to 1999, Mr. Ayaz was Senior Architect
Consultant to J.P. Morgan responsible for advisory, mentoring and training
services. Prior to that, Mr. Ayaz was Partner and Practice Leader for the
Client Server Division at Comtex Information Systems. Mr. Ayaz received a B.S.
in general physics from University of Sind in Pakistan.
Richard Berger has been our Vice President, Engineering since September
1999. From 1992 to 1998, Mr. Berger worked first as Product Marketing Manager
and later as Vice President of Engineering for Mosaix Inc. (formerly ViewStar
Corp.). Prior to his work at Mosaix, Mr. Berger was Software Engineering
Manager at Sun Microsystems. Mr. Berger received an A.B. in computer science
and mathematics from Cornell University, an M.S. in computer science from
University of California, Berkeley and an M.B.A. from Stanford University.
Frank Cummings has been our Vice President, Solutions Development and
Operations since January 2000. From 1997 to 1999, Mr. Cummings was Senior
Director, Applications Development for The McGraw-Hill Companies. In 1996, he
was a management consultant for Towers Perrin. From 1996 to 1997, he was Senior
Systems Architect and Program Manager for SEMCOR, Inc. From 1995 to 1996, Mr.
Cummings was Lead Consultant at SmithKline Beecham. Mr. Cummings received the
equivalent of a B.S. in computer science through his service for the U.S. Army.
Jeffrey Forsman has served as our Vice President, Global Operations since
February 2000. From 1999 to 2000, he was Vice President of Information Systems
and Technology at Signatures Network. From 1995 to 1999, Mr. Forsman held
senior management positions at Scan-Optics, Inc. Mr. Forsman received a B.S. in
electrical engineering from Cornell University and has completed graduate
studies at Stanford University.
David Bender has served as our Director of Creative Services since December
1999. From 1997 to 1999, he was a Creative Consultant to several corporations
and agencies, including Razorfish, SF Interactive and Organic Online. From 1995
to 1997, he was Creative Director/Principal at Breaking Point, LLC. From 1993
to 1995, he was Creative Supervisor for Rapp Collins Worldwide. Mr. Bender
received a B.F.A. in Graphic Design from Kendall School of Design.
Justin Hafen has served as our Director of Marketing and Corporate
Communications since March 1999. From 1998 to 1999, Mr. Hafen was Director of
Marketing Communications for PG&E Energy Services. From 1992 to 1998, he held
management positions at McCann-Erickson, SBC Advertising, Smith's Food & Drug
Centers, Inc. and Harris & Love, Inc. Mr. Hafen received a B.A. in psychology
from University of Utah.
Milton Berlinski has served as a director of our company since 1997 and is
Managing Director of Goldman, Sachs & Co. Mr. Berlinski is responsible for
principal investing and merchant banking for financial institutions. In
addition, Mr. Berlinski serves as a member of Goldman Sachs' strategy committee
and leads Goldman, Sachs' corporate development efforts. Mr. Berlinski joined
Goldman Sachs as a Vice President--Investment Banking Division in 1986 and
became Managing Director and Partner in 1996. Mr. Berlinski received an M.B.A.
in finance from The Wharton School of Finance at University of Pennsylvania.
David Braunschvig has served as a director of our company since December
1999 and is Managing Director at Lazard Freres & Co. LLC. Mr. Braunschvig has
been with Lazard for over ten years and is a co-founder of Lazard's Internet
Group. He is a director of several privately-held companies including Skila,
Inc. and LuxuryFinder.com. Mr. Braunschvig received a doctorate degree in
computer science from University of Paris and an M.A. in public administration
from Harvard University.
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<PAGE>
David Brown has served as a director of our company since August 1999 and
has been the Managing Partner of Oak Hill Venture Partners, L.P. since 1999, a
Principal of Arbor Investors LLC since 1995, and a Vice President of Keystone,
Inc. since 1993. Mr. Brown also serves on the board of directors of AER Energy
Resources and Bell & Howell Company. Mr. Brown received a B.A. in economics and
government from Bowdoin College and an M.B.A. from the Amos Tuck School at
Dartmouth College.
Masood Jabbar has served as a director of our company since February 2000
and is President of the Computer System Division of Sun Microsystems, Inc.
Since joining Sun in 1986, he has held a number of senior positions including
Vice President of Finance and Planning for Sun's field organization, Director
of Marketing for the U.S. organization, and general manager for the Interactive
Products Group. Most recently, Mr. Jabbar acted as Chief Financial Officer and
Vice President of Staff Operations, where in addition to his responsibilities
as Chief Financial Officer, he was responsible for business development,
strategic relationships, and the operating company's acquisitions of key
technologies and businesses. Mr. Jabbar also serves on the board of directors
of EMedSoft. Mr. Jabbar received a B.A. in economics and statistics from
University of Panjab in Pakistan and an M.B.A. and a masters degree in
international management from the American Graduate School of International
Management.
Mark Perry has served as a director of our company since January 1997 and is
a General Partner of New Enterprise Associates. Mr. Perry joined NEA in 1995
and became a General Partner in 1996. He focuses in the area of information
technology. From 1994 to 1995, he served as President and Chief Executive
Officer and then as Chairman of Viewstar Corporation. Mr. Perry also serves on
the board of BizFinity, Cogit.com, Convene.com, Growth Networks, iManage, Magma
Design Automation, Silicon Spice, Siros Technologies and Technical Communities.
From 1994 to 1995, Mr. Perry served as President and Chief Executive Officer
and then as Chairman of ViewStar Corporation. Mr. Perry is a Certified Public
Accountant.
Fareed Zakaria has served as a director of our company since February 2000
and has been Managing Editor of Foreign Affairs magazine for the Council on
Foreign Relations since 1993. He is also a Contributing Editor of Newsweek
where he writes a column on international affairs. Prior to 1993, Zakaria ran
the "Project on the Changing Security Environment" at Harvard University, where
he also taught international politics and economics. He has been an Adjunct
Professor at Columbia University and Case Western Reserve University. Mr.
Zakaria also serves on the Advisory Board of Omnia Asset Management. He
received a B.A. in history from Yale University and a Ph.D. in political
science/international relations from Harvard University. Mr. Zakaria is the
brother of Mansoor Zakaria.
Classified Board
Immediately following the offering, our board of directors will consist of
seven directors divided into three classes with each class serving for a term
of three years. At each annual meeting of stockholders, directors will be
elected by the holders of common stock to succeed those directors whose terms
are expiring. In addition, our bylaws provide that the authorized number of
directors may be changed only by resolution of the board of directors. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each class will consist of one-third of the total number of directors. This
classification of the board of directors may have the effect of delaying or
preventing changes in control of our company.
Board Committees
The board of directors has a compensation committee and an audit committee.
The compensation committee, currently comprised of Mr. Berlinski and Mr. Perry,
administers our 1997
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<PAGE>
Stock Option Plan, our 2000 Stock Plan, our 2000 Employee Stock Purchase Plan
and all matters concerning executive compensation and employee agreements. The
audit committee, currently comprised of Mr. Brown, Mr. Perry and Mr. Jabbar,
performs the following functions:
. monitors our system of internal controls;
. oversees corporate financial reporting and internal and external audits;
. outlines to the board of directors the improvements made or to be made in
internal accounting controls;
. Nominates our independent auditors; and
. Provides the board of directors with other information and materials
necessary to make the board of directors aware of significant financial
matters.
Each of the audit committee and compensation committee was established in
March 2000.
Director Compensation
We do not currently pay cash compensation to directors for serving in that
capacity, nor do we reimburse directors for expenses incurred in attending
board meetings, except for travel expenses of up to $2,000 per board meeting.
We have granted stock options to directors for their services as such under our
1997 Stock Option Plan. In addition, non-employee directors will be entitled to
receive automatic grants of stock options under our 2000 Director Option Plan.
See "Employee Benefits--2000 Director Option Plan."
Compensation Committee Interlocks and Insider Participation
The compensation committee is currently comprised of Mr. Berlinski and Mr.
Perry. Neither of these committee members has at any time been an officer or
employee of our company and none of our past or present officers or employees
has served as a member of our compensation committee. No interlocking
relationship exists 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.
Limitation on Liability and Indemnification Matters
Our amended and restated certificate of incorporation limits the personal
liability of directors for breach of fiduciary duty to the maximum extent
permitted by Delaware law. Delaware law provides that directors of a
corporation will not be personally liable to us or our stockholders for
monetary damages for breach of their fiduciary duties as directors, except for:
. any breach of the director's duty of loyalty to us or our stockholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases, redemptions
or other distributions; or
. any transaction from which the director derived an improper personal
benefit.
Our bylaws require that we indemnify our directors and officers to the
extent permitted by Delaware law. We may, in our discretion, indemnify other
employees and agents to the extent permitted by Delaware law. We believe that
indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
41
<PAGE>
secure insurance on behalf of any of our officers, directors, employees or
other agents for any liability incurred in that capacity or arising out of that
status. We have obtained directors' and officers' insurance providing
indemnification for some of our directors, officers and employees for certain
liabilities.
We have also entered into agreements to indemnify our directors and
officers. These agreements indemnify our directors and officers for some
expenses, including attorneys' fees, judgments, fines and settlement amounts
incurred by them in any action or proceeding, including any action by or in the
right of our company, arising out of their services as one of our directors or
officers, any of our subsidiaries or any other company or enterprise to which
the person provides services at our request. We believe that these provisions,
agreements and the insurance we have obtained are necessary to attract and
retain qualified directors and officers.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative action, if successful, might otherwise benefit us and our
stockholders. Moreover, a stockholder's investment in us may be adversely
affected to the extent we pay the costs of settlement or damage awards against
our directors and officers under these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
Executive Compensation
The following table sets forth information concerning the compensation that
we paid during the fiscal year ended December 31, 1999 to our Chief Executive
Officer and our Chief Financial Officer. The option grant indicated was under
our 1997 Stock Option Plan.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation
--------------------------- Securities
Other Annual Underlying
Name and Principal Position Salary Bonus Compensation Options
- --------------------------- -------- ----- ------------ ------------
<S> <C> <C> <C> <C>
Mansoor Zakaria....................... $248,669 $ -- $19,900 --
Chairman and Chief Executive Officer
Ronald Parks.......................... 150,001 -- -- 66,666
Senior Vice President and Chief
Financial Officer
</TABLE>
In addition to Mr. Zakaria and Mr. Parks, three other executive officers of
our company, who have subsequently left 2Bridge, also earned compensation in
excess of $100,000 during the year.
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Option Grants in Last Fiscal Year
The following table sets forth information with respect to stock options
granted to the officers set forth in the Summary Compensation Table during the
year ended December 31, 1999. We have never granted any stock appreciation
rights. All option grants were made under our 1997 Stock Option Plan. The
exercise price per share was equal to the fair market value of the common stock
on the date of grant as determined by the board of directors. The percentage of
total options as set forth in the table below is based on an aggregate of
2,144,902 shares of common stock granted under the 1997 Employee Stock Option
Plan in the year ended December 31, 1999. The potential realizable value is
calculated based on the term of the ten-year option and assumed rates of stock
appreciation of 5% and 10%, compounded annually as set forth in the table
below. These assumed rates comply with the rules of the Securities and Exchange
Commission and do not represent our estimate of future stock price. Actual
gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable Value
------------------------------------------ at Assumed
% of Total Annual Rate of
Number of Options Stock Price
Securities Granted to Appreciation
Underlying Employees Exercise for Option Term
Options in Fiscal Price Per Expiration ----------------
Name Granted Year Share Date 5% 10%
- ---- ---------- ---------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mansoor Zakaria.... -- -- % $ -- -- $ -- $ --
Ronald Parks....... 16,666 0.8 0.75 3/15/09 7,861 19,921
50,000 2.3 1.58 10/11/09 49,683 125,906
</TABLE>
1999 Year-End Option Values
The following table sets forth information concerning option values for
stock options held by the officers set forth in the Summary Compensation Table.
None of these officers exercised any options in the year ended December 31,
1999.
The value realized represents the difference between the deemed value of the
common stock on the date of exercise used by us for accounting purposes and the
exercise price of the option.
The value of unexercised in-the-money options was calculated by determining
the difference between $ , the assumed initial public offering price, and the
exercise price of the option.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End Fiscal Year End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mansoor Zakaria............. -- -- -- --
Ronald Parks................ 65,624 73,265
</TABLE>
Employment Agreements
We require each of our employees to enter into confidentiality agreements
prohibiting the employee from disclosing any of our confidential or proprietary
information. In addition, the agreements generally provide that upon
termination, the employee will not solicit our employees for a period of 12
months following the end of their employment with our company. At the time of
commencement of employment, our employees also generally sign offer letters
specifying certain basic terms and conditions of employment. Other than as
described above, in general, our employees are not subject to written
employment agreements.
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<PAGE>
Employee Benefit Plans
2000 Stock Plan
Our 2000 Stock Plan was adopted by our board of directors in March 2000, and
we expect our stockholders to approve the plan in April 2000. This stock plan
provides for the grant of incentive stock options to our employees, within the
meaning of Section 422 of the United States tax code, and nonstatutory stock
options and stock purchase rights to our employees, directors and consultants.
As of March 10, 2000, no shares of our common stock have been issued pursuant
to the exercise of options granted under our stock plan and we have no
outstanding options to purchase shares of common stock.
Our stock plan will automatically terminate in 2010, unless terminated
sooner. In addition, our board of directors has the authority to suspend,
terminate or amend, with shareholder approval to the extent necessary to comply
with applicable laws, the stock plan provided it does not adversely affect any
option previously granted under the plan.
As of March 10, 2000, a total of 3,000,000 shares of our common stock have
been reserved for issuance pursuant to our 2000 Stock Plan. The plan provides
for an annual increase in authorized shares beginning in 2001 equal to the
lesser of:
. 5% of the outstanding shares of our common stock on the first day of our
fiscal year;
. 2,500,000 shares; or
. such lesser amount as our board of directors may determine.
In addition, any shares which were reserved but unissued under our 1997 Stock
Option Plan, and any shares that are returned to the 1997 Stock Option Plan as
a result of termination or repurchase of shares, will be available for issuance
under our 2000 Stock Plan.
Our board of directors or a committee of our board administers the 2000
Stock Plan. The 2000 Stock Plan may be administered by different committees
with respect to different groups of service providers. The administrator has
the power to determine the terms of the options or stock purchase rights
granted, including the exercise price, the number of shares subject to each
option or stock purchase right, the exercisability of the options and the form
of consideration payable upon exercise.
The administrator determines the exercise price and term of options granted
under our stock plan. With respect to incentive stock options, however, the
exercise price must at least be equal to the fair market value of our common
stock on the date of grant and its term may not exceed ten years.
No employee, director or consultant may be granted an option to purchase
more than 1,500,000 shares in any fiscal year. In connection with his or her
initial service, an employee, director or consultant may be granted an
additional option to purchase up to 1,500,000 shares of our common stock.
After termination of one of our employees, directors or consultants, he or
she may exercise his or her option for the period of time stated in the option
agreement. If termination is due to death, the option will generally remain
exercisable for 12 months following such termination. If termination is due to
disability, the option will generally remain exercisable for 12 months
following such termination. In all other cases, the option will generally
remain exercisable for three months. However, an option may never be exercised
later than the expiration of its term. 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 will revert to the plan.
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<PAGE>
Unless the administrator determines otherwise, any restricted stock purchase
agreement providing for early exercise of unvested stock options will grant us
a repurchase option that we may exercise upon the voluntary or involuntary
termination of the purchaser's service with us for any reason. The purchase
price for shares we repurchase will generally be the original price paid by the
purchaser. The administrator determines the rate at which our repurchase option
will lapse.
Our stock plan generally does not allow for the transfer of options or stock
purchase rights and only the optionee may exercise an option or stock purchase
right during his or her lifetime.
Our stock plan provides that in the event of our merger with or into another
corporation or a sale of substantially all of our assets, the successor
corporation will assume or substitute an equivalent option or right for each
outstanding option or stock purchase right. If the outstanding options or stock
purchase rights are not assumed or substituted, all outstanding options and
stock purchase rights will vest and become exercisable.
1997 Stock Option Plan
Our 1997 Stock Option Plan provides for the granting to employees of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code and for the granting to employees and consultants of nonstatutory
stock options. The terms of the 1997 stock option plan are substantially
similar to those of our 2000 Stock Plan. As of March 10, 2000, 3,156,666 shares
were authorized under the plan, 2,073,876 shares were subject to outstanding
options and 497,476 shares remain available for future grant. Upon the
completion of this offering, the 1997 Stock Option Plan will terminate, no
further option grants will be made under the 1997 Stock Option Plan, and any
shares reserved but not yet issued under the 1997 Stock Option Plan will be
available for future grant under the 2000 Stock Plan.
2000 Employee Stock Purchase Plan
Our board of directors adopted the 2000 Employee Stock Purchase Plan in
March 2000 and our stockholders are expected to approve the plan in April 2000.
A total of 750,000 shares of common stock have been reserved for issuance under
our 2000 Employee Stock Purchase Plan. The plan provides for annual increases
on the first day of each fiscal year beginning 2001 equal to the lesser of:
. 750,000 shares;
. 2% of our outstanding shares as of such date; or
. another amount determined by the board of directors.
The 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, contains 24-month offering periods.
The offering periods generally start on the first trading day on or after May 1
and November 1 of each year, except for the first such offering period, which
will commence on the first trading day on or after the effective date of this
offering and ends on the last trading day on or before April 30, 2002. Each
offering period will have four purchase periods of approximately six-months
duration.
Employees are eligible to participate if they are employed by us or any
participating subsidiary for at least 20 hours per week and more than five
months in any calendar year. However, the following employees may not be
granted options to purchase stock under the purchase plan:
. any employee who immediately after the grant would own stock possessing
5% or more of the total combined voting power or value of all classes of
our capital stock; or
. any employee whose rights to purchase stock under all of our employee
stock purchase plans accrues at a rate which exceeds $25,000 worth of
stock for each calendar year.
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<PAGE>
Participants may purchase common stock through payroll deductions of up to
15% of the participant's compensation. The maximum number of shares a
participant may purchase during a six month offering period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the purchase plan is 85% of the lower of the fair market value
of the common stock at the beginning of the offering period and the fair market
value of the common stock at end of the purchase period.
Our purchase plan provides that in the event we merge with or into another
company, or we sell substantially all of our assets, each outstanding option
may be assumed or substituted by the successor company. If the successor
company refuses to assume or substitute the options, the offering period then
in progress will be shortened and a new exercise date will be set, which will
occur before the proposed merger or sale.
The 2000 Employee Stock Purchase Plan will become effective on the effective
date of this offering and will terminate ten years thereafter, unless sooner
terminated by the board of directors. The board has the authority to amend or
terminate the purchase plan, except that no such action may adversely affect
any outstanding rights to purchase stock.
2000 Director Option Plan
Our board of directors adopted the 2000 Director Option Plan in March 2000
and we expect our stockholders to approve it in April 2000. The director plan
provides for the periodic grant of nonstatutory stock options to our non-
employee directors.
As of March 10, 2000, a total of 400,000 shares were reserved for issuance
under our director option plan.
All grants of options to our non-employee directors under the director
option plan are automatic and non-discretionary. We will grant an option to
purchase 25,000 shares to each non-employee director who joins the board after
our initial public offering when such person first becomes a non-employee
director (except for those directors who became non-employee directors by
ceasing to be employee directors). All non-employee directors who have been
directors for at least 6 months receive an option to purchase 10,000 shares
each year on the date of our annual stockholders meeting.
All options granted under our director option plan have a term of ten years
and an exercise price equal to fair market value on the date of grant. The
option granted initially to non-employee directors becomes exercisable over two
years with 1/24th of the total shares exercisable per month. The option granted
to non-employee directors on the date of our annual stockholders meeting
becomes exercisable as to 100% of the shares subject to the option on the date
of grant.
After termination as a non-employee director, an optionee must exercise an
option at the time set forth in his or her option agreement. If termination is
due to disability, the option will generally remain exercisable for six months.
If termination is due to death, the estate will be able to exercise the option
for 12 months. In all other cases, the option will remain exercisable for a
period of three months.
A non-employee director may not transfer options granted under our 2000
Director Option Plan other than by will or the laws of descent and
distribution. Only the non-employee director may exercise the option during his
or her lifetime.
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<PAGE>
In the event of our merger with or into another corporation or a sale of
substantially all of our assets, the successor corporation will assume or
substitute an equivalent option for each outstanding option. If such assumption
or substitution occurs, the options will continue to be exercisable according
to the same terms as before the merger or sale of assets. Following such
assumption or substitution, if a non-employee director is terminated other than
by voluntary resignation, the option will become fully exercisable. If the
outstanding options are not assumed or substituted for, our board of directors
will notify each non-employee director that he or she has the right to exercise
the option as to all shares subject to the option for a period of 30 days
following the date of the notice. The option will terminate upon the expiration
of the 30-day period.
Unless terminated sooner, our director option plan will automatically
terminate in 2010. Our board of directors has the authority to amend, alter,
suspend, or discontinue the director option plan, but no such action may
adversely affect any grant made under the director option plan.
401(k) Savings Plan
We sponsor a 401(k) savings in which eligible employees may participate. The
401(k) savings plan is intended to qualify under Sections 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended. Contributions to the 401(k)
savings plan and income earned on such contributions are not taxable to
employees until withdrawn from the 401(k) savings plan. Subject to restrictions
imposed by the Internal Revenue Code on highly compensated employees, employees
may generally defer up to 15% of their pre-tax earnings up to the statutorily
prescribed annual limit, which is $10,500 for the 2000 calendar year, and to
have the amount of such reduction contributed to the 401(k) savings plan. The
401(k) savings plan permits, but does not require, additional matching
contributions to the 401(k) savings plan. To date, we have not made any
matching contributions to the 401(k) savings plan. The 401(k) savings plan may
be amended or terminated by us at anytime, and in our sole discretion.
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<PAGE>
RELATED PARTY TRANSACTIONS
Equity Investment Transactions
Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows:
. an aggregate of 2,580,866 shares of Series A preferred stock at a price
of $1.31 per share in January 1997;
. an aggregate of 4,796,751 shares of Series B preferred stock at a price
of $2.11 per share in May 1998;
. an aggregate of 6,245,315 shares of Series C preferred stock at a price
of $3.20 per share in July and August 1999; and
. an aggregate of 743,200 shares of Series D preferred stock at a price of
$9.65 per share in March 2000.
Listed below are the directors, executive officers and stockholders who
beneficially own 5% or more of our securities who participated in these
financings.
<TABLE>
<CAPTION>
Directors, Executive Series A Series B Series C Series D Aggregate
Officers Preferred Preferred Preferred Preferred Purchase
and 5% Stockholders Stock Stock Stock Stock Price
- -------------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Entities affiliated with
New Enterprise Associates
VII, L.P. (1)............. 2,580,866 933,854 625,156 $7,347,000
Entities affiliated with
Goldman Sachs (2)......... 2,509,291 625,156 7,300,000
FW Ventures IV, L.P. (3)... 1,562,891 5,000,000
Milton Berlinski........... 133,236 1,286,000
David Braunschvig.......... 25,006 10,101 177,000
Masood Jabbar.............. 50,507 487,000
Hasso Plattner............. 1,099,267 381,345 3,542,000
Fareed Zakaria............. 10,101 97,000
</TABLE>
- --------
(1) Shares of Series A are held as follows: New Enterprise Associates VII, L.P.
2,523,514 shares, NEA Presidents Fund, L.P. 53,529 shares, NEA Ventures
1997, L.P. 3,823 shares. Shares of Series B and Series C are held by New
Enterprise Associates VII, L.P. Mark Perry is a general partner of New
Enterprise Associates VII, L.P. and is a member of our board. Mr. Perry
disclaims beneficial ownership of the 2,580,866 shares of Series A, 933,854
shares of Series B and 625,156 shares of Series C held of record by the
entities affiliated with New Enterprise Associates VII, L.P.
(2) Shares of Series B are held as follows: Bridge Street Fund 1998, L.P.
58,172 shares, Goldman, Sachs & Co. Verwaltungs 58,071 shares, GS Capital
Partners II, L.P. 1,574,402 shares, GS Capital Partners II Offshore, L.P.
625,889 shares, and Stone Street Fund 1998, L.P. 192,756 shares. Shares of
Series C are held as follows: Bridge Street Fund 1998, L.P. 14,493 shares,
Goldman, Sachs & Co. Verwaltungs 14,468 shares, GS Capital Partners II,
L.P. 392,240 shares, GS Capital Partners II Offshore, L.P. 155,931 shares,
and Stone Street Fund 1998, L.P. 48,022 shares. Milton Berlinski is general
partner of Goldman Sachs and is a member of our board. Mr. Berlinski
disclaims beneficial ownership of the 2,509,291 shares of Series B and
625,156 shares of Series C held of record by the entities affiliated with
Goldman Sachs.
(3) David Brown is a limited partner of FW Ventures IV, L.P. and is a member of
our board. Mr. Brown disclaims beneficial ownership of the 1,562,891 shares
of Series C held of record by FW Ventures IV, L.P.
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<PAGE>
Founder Stock Purchase Agreement; Restricted Stock Purchase Agreement
Mr. Mansoor Zakaria, our Chief Executive Officer, was issued 8,000,000
shares pursuant to a Founder Stock Purchase Agreement. Under this agreement, we
have a right of first refusal with respect to his shares, which will expire
upon our initial public offering. In January 1997, we also issued to Ronald
Lachman, a former director of our company, 500,000 shares of our common stock.
Pursuant to a Restricted Stock Purchase Agreement, we have a right of first
refusal with respect to his shares, which will expire upon our initial public
offering.
Other Transactions
On June 1, 1998, we authorized a full recourse loan to Mansoor Zakaria for a
principal amount not to exceed $1.2 million. All principal and interest under
the loan is payable upon the earlier of July 1, 2003 or the termination of Mr.
Zakaria's full-time employment with us. As of December 31, 1999, approximately
$400,000 of principal and accrued interest was outstanding.
On March 8, 2000, we authorized the sale of 266,666 shares of common stock
to Milton Berlinski, a director of our company, at a purchase price of $5.25
per share and 33,333 shares of common stock to David Braunschvig, a director of
our company, at a purchase price of $5.25 per share. Mr. Berlinski and Mr.
Braunschvig were granted piggy-back registration rights with respect to such
common stock.
We have entered into indemnification agreements with each of our executive
officers and directors.
We have granted options to certain of our executive officers and directors.
Please see "Option Grants in Last Fiscal Year," and "Founder Stock Purchase
Agreement; Restricted Stock Purchase Agreement."
Holders of preferred stock are entitled to certain registration rights with
respect to the common stock issued or issuable upon conversion of the preferred
stock. Please see "Description of Capital Stock--Registration Rights."
We believe that all related-party transactions described above were on terms
no less favorable than could have been otherwise obtained from unrelated third
parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock, as of March 10, 2000, and as adjusted
to reflect the sale of common stock offered by us in this offering, for:
. each person who we know beneficially owns more than 5% of the common
stock;
. each of our directors;
. each executive officer named in the Summary Compensation Table; and
. all of our directors and officers as a group.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o 2Bridge, Inc., 221 Main St., Suite 800, San
Francisco, California 94105. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and includes voting or
investment power with respect to the securities. Except as indicated by
footnote, and subject to applicable community property laws, each person
identified in the table possesses sole voting and investment power with respect
to all shares of common stock shown held by them.
Shares underlying options that are deemed beneficially owned and exercisable
within 60 days of March 10, 2000 are listed in this table separately in the
column labeled "Shares Subject to Options." These shares are included in the
number of shares listed in the column labeled "Total Number." The numbers shown
in the table assume no exercise by the underwriters of their over-allotment
option.
The number of shares of common stock outstanding used in calculating the
percentage for each listed person includes shares of common stock underlying
options or warrants held by such person that are exercisable within 60 days of
March 10, 2000, but excludes shares of common stock underlying options or
warrants held by any other person. Percentage of beneficial ownership is based
on shares of common stock outstanding as of March 10, 2000, after giving effect
to the conversion of all outstanding shares of preferred stock upon the closing
of this offering.
50
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Percentage
Beneficially Beneficially
Owned Shares Owned
------------ Subject to -----------------
Options or Before After
Total Number Warrants Offering Offering
------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Mansoor Zakaria..................... 8,000,000 -- 33.7%
Entities affiliated with
New Enterprise Associates VII, L.P.
2490 Sand Hill Road
Menlo Park, CA 94025 (1)........... 4,473,210 333,333 18.6%
Mark Perry (1)...................... 4,473,210 333,333 18.6%
Entities affiliated with Goldman
Sachs
85 Broad Street, 19th Floor
New York, NY 10004 (2)............. 3,134,447 -- 13.2%
Milton Berlinski (2)................ 3,534,350 -- 14.9%
FW Ventures IV, L.P.
2775 Sand Hill Road, Suite 220
Menlo Park, CA 94025 (3)........... 1,562,891 -- 6.6%
David Brown (3)..................... 1,562,891 -- 6.6%
Hasso Plattner
c/o Loewenthal Capital Management
Attn: Ronn C. Lowenthal
235 Montgomery Street, Suite 920
San Francisco, CA 94104............ 1,480,613 -- 6.2%
Ronald Parks........................ 80,902 21,875 *
David Braunschvig................... 82,329 13,889 *
Fareed Zakaria...................... 21,212 11,111 *
Masood Jabbar....................... 58,841 8,334 *
Directors and Executive Officers as
a Group (14 persons) (1)(2)(3)..... 17,813,735 388,541 73.8%
</TABLE>
- --------
* Indicates less than 1%.
(1) Includes 4,139,877 shares held by New Enterprise Associates VII L.P. and
affiliates. Mr. Perry, General Partner of New Enterprise Associates VII
L.P., disclaims beneficial ownership of the shares held by New Enterprise
Associates VII L.P., except to the extent of his proportionate pecuniary
interest therein. Mr. Perry is a member of our board of directors.
(2) Includes 3,134,447 shares held by Goldman Sachs. Mr. Berlinski, disclaims
beneficial ownership of the shares held by Goldman Sachs, except to the
extent of his proportionate pecuniary interest therein. Mr. Berlinski is a
member of our board of directors.
(3) Includes 1,562,891 shares held by FW Ventures IV, L.P. Mr. Brown, a limited
partner of FW Ventures IV, L.P., disclaims beneficial ownership of the
shares held by FW Ventures IV, L.P., except to the extent of his
proportionate pecuniary interest therein. Mr. Brown is a member of our
board of directors.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of 100,000,000 shares of common stock, $0.0001 par value, and 5,000,000
shares of preferred stock, $0.0001 par value.
The following summary of the rights of the common stock and preferred stock
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of our amended and restated certificate of
incorporation and bylaws which are included as exhibits to the registration
statement of which this prospectus is a part and by the provisions of Delaware
law.
Common Stock
After giving effect to the two-for-three reverse stock split of all
outstanding common stock and preferred stock and the conversion of all
previously outstanding preferred stock into shares of common stock, as of March
10, 2000, there were 23,751,496 shares of common stock outstanding held of
record by approximately 126 stockholders. There will be shares of common
stock outstanding, assuming no exercise of the underwriters' over-allotment
option and no exercise of certain outstanding options or warrants, after giving
effect to the sale of common stock in the offering.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to the following rights:
. to receive dividends out of assets legally available therefor at such
times and in such amounts as the board of directors from time to time may
determine;
. one vote for each share held on all matters submitted to a vote of
stockholders; and
. upon our liquidation, dissolution or winding-up, to share ratably in all
assets remaining after payment of liabilities and the liquidation of any
preferred stock.
Cumulative voting for the election of directors is not authorized by our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. The
common stock is not entitled to preemptive rights, conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. Each outstanding share of common stock is, and
all shares of common stock to be outstanding upon completion of this offering
will be, upon payment therefor, duly and validly issued, fully paid and
nonassessible. 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 any shares of any series of preferred stock which we may designate
in the future.
Preferred Stock
Upon completion of this offering, our board of directors has the authority,
without further action by the stockholders, to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the designations, powers,
preferences, privileges, which may be greater than the rights of the common
stock. The board, without stockholder approval, can issue preferred stock with
voting, conversion or other rights that could adversely affect the voting power
and other rights of the holders of common stock. Preferred stock could thus be
issued quickly with terms calculated to delay or prevent a change in control of
our company or make removal of management more difficult. Additionally, the
issuance of preferred stock may have the effect of decreasing the market price
of the common stock. At present, there are no shares of preferred stock
outstanding, and we have no plans to issue any of the preferred stock.
52
<PAGE>
Registration Rights
Upon completion of the offering and assuming the exercise of all of our
currently outstanding warrants, the holders of an aggregate of approximately
24,372,421 shares of common stock will be entitled to certain rights with
respect to the registration of such shares under the Securities Act of 1933.
Under the terms of the amended and restated investors' rights agreement, if we
propose to register any of its securities under the Securities Act of 1933,
either for our own account or for the account of other security holders, these
holders are entitled to notice of such registration and are entitled to include
shares of common stock in the registration. The rights are subject to
conditions and limitations, among them the right of the underwriters of an
offering subject to the registration to limit the number of shares included in
such registration. A limited number of the holders of these rights may also
require us to file a registration statement under the Securities Act of 1933
with respect to their shares of common stock and we are required to use our
best efforts to effect such registration, subject to conditions and
limitations. Furthermore, stockholders with registration rights may require us
to file additional registration statements on Form S-3, subject to conditions
and limitations.
Delaware Anti-Takeover Law and Certain Charter and Bylaws Provisions
Delaware Anti-Takeover Statute. We are subject to Section 203 of the
Delaware General Corporation Law. In general, these provisions prohibit a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless the transaction in which
the person became an interested stockholder is approved in a manner presented
in Section 203 of the Delaware General Corporation Law.
Generally, a "business combination" is defined to include mergers, asset or
stock sales and other transactions resulting in financial benefit to a
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years, did own, 15% or
more of a corporation's outstanding voting stock.
Certificate of Incorporation and Bylaws. Our certificate of incorporation
and bylaws include provisions that:
. allow the board of directors to issue, without further action by the
stockholders, up to 5,000,000 shares of undesignated preferred stock;
. require that any action to be taken by our stockholders be effected at a
duly called annual or special meeting and not by written consent;
. divide the board of directors into three classes, with each class serving
for a term of three years;
. prohibit cumulative voting in the election of directors;
. require that special meetings of our stockholders be called only by the
board of directors, the chairman of the board, the chief executive
officer and the president;
. establish an advance notice procedure for stockholder proposals to be
brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to the board of directors; and
. require that certain amendments to the certificate of incorporation and
the bylaws require the approval of the holders of at least 66 2/3% of the
voting power of all outstanding stock.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board and in the policies formulated by the
board and to discourage certain types
53
<PAGE>
of transactions that may involve an actual or threatened change of control of
our company. These provisions are designed to reduce our vulnerability to an
unsolicited proposal for a takeover that does not contemplate the acquisition
of all of our outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of our company. These provisions,
however, could discourage potential acquisition proposals and could
complicate, delay or prevent a change in control of our company. They may also
have the effect of preventing changes in our management. We believe that the
benefits of increased protection of our potential ability to negotiate with
the proponent of an unfriendly or unsolicited proposal to acquire or
restructure us outweighs the disadvantages of discouraging these proposals,
including proposals that are priced above the then current market value of our
common stock, because, among other things, negotiation of these proposals
could result in an improvement of their terms.
Transfer Agent and Registrar
The transfer agent and registrar for common stock is ChaseMellon
Shareholder Services, L.L.C.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market
following the offering could cause the prevailing market price of our common
stock to fall and impede our ability to raise equity capital at a time and on
terms favorable to us.
Upon completion of the offering, we will have outstanding an aggregate of
shares of common stock, assuming no exercise of the underwriters' over-
allotment option and no exercise of outstanding options or outstanding
warrants. Of these outstanding shares, shares sold in the offering will be
freely tradable without restriction or further registration under the
Securities Act of 1933, unless purchased by our "affiliates" as that term is
defined in Rule 144 under the Securities Act of 1933. The remaining 23,751,496
shares of common stock outstanding upon completion of the offering and held by
existing stockholders will be "restricted securities" as that term is defined
in Rule 144 under the Securities Act of 1933. 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 of 1933, which rules are summarized below, or another exemption. Sales of
the restricted shares in the public market, or the availability of such shares
for sale, could adversely affect the market price of the common stock.
All officers, directors and certain other holders of common stock have
entered into contractual "lock-up" agreements providing that they will not
offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of shares of common stock owned by them or that could be purchased by
them through the exercise of options or warrants for a period of 180 days after
the date of this prospectus without the prior written consent of Deutsche Bank
Securities Inc. As a result of these contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701, additional shares will be available beginning 181 days after the
effective date of the offering, subject in some cases to certain volume
limitations.
Of the remaining restricted shares:
. no shares are subject to our repurchase option in the event of
termination of employment; and
. 1,029,200 shares will not be eligible for sale pursuant to Rule 144 until
at least March 10, 2001 with respect to 743,200 shares and until at least
March 8, 2001 with respect to the remaining 286,000 shares.
On November , 2000, approximately 431,090 shares subject to vested options
will be available for sale subject to compliance with Rule 701 and upon the
expiration of agreements not to sell such shares entered into between the
underwriters and such stockholders. Any shares subject to lock-up agreements
may be released at any time without notice by the underwriters.
In general, under Rule 144 as currently in effect, beginning 91 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
persons who may be deemed to be our "affiliates", would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after the offering; or
. the average weekly trading volume of the common stock as reported through
the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale.
55
<PAGE>
Sales under Rule 144 are also subject to certain 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 90 days preceding a sale, and who has
beneficially owned for at least two years the restricted shares proposed to be
sold, including the holding period of any prior owner except an affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 permits resales of shares issued
prior to the date the issuer becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, pursuant to certain compensatory benefit
plans and contracts commencing 90 days after the issuer becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, in reliance upon
Rule 144 but without compliance with certain restrictions, including the
holding period requirements. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options, including exercises after the date the issuer becomes
so subject. Securities issued in reliance on Rule 701 are restricted securities
and, subject to the contractual restrictions described above, beginning 91 days
after the date of this prospectus, may be sold by persons other than affiliates
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one-year minimum holding period
requirements.
We have agreed not to sell or otherwise dispose of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, or enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the common stock, for a
period of 180 days after the date of this prospectus, without the prior written
consent of Deutsche Bank Securities Inc., subject to limited exceptions.
We intend to file a registration statement under the Securities Act of 1933
covering the shares of common stock subject to outstanding options or reserved
for issuance under our 2000 Stock Plan, 1997 Stock Plan, 2000 Employee Stock
Purchase Plan and the 2000 Director Plan. This registration statement is
expected to be filed soon after the effectiveness of the registration statement
covering the shares of common stock offered in this offering and will
automatically become effective upon filing. Accordingly, shares registered
under such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates and the expiration of a 180-day lockup period, be
available for sale in the open market, except to the extent that such shares
are subject to our vesting restrictions or the contractual restrictions
described above.
56
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank
Securities Inc., SG Cowen Securities Corporation and Thomas Weisel Partners LLC
have severally agreed to purchase from the Company the following respective
number of shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Deutsche Bank Securities Inc.......................................
SG Cowen Securities Corporation....................................
Thomas Weisel Partners LLC.........................................
---
Total Underwriters...............................................
===
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and the other selling terms.
We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to additional shares
of common stock at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the table above bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is % of the initial public offering price. We
have agreed to pay the underwriters the following fees and expenses, assuming
either no exercise or full exercise by the underwriters of the underwriters'
over-allotment option:
<TABLE>
<CAPTION>
Total Fees
------------------------------------
Without Exercise With Full Exercise
of Over-Allotment of Over-Allotment
Fee Per Share Option Option
------------- ----------------- ------------------
<S> <C> <C> <C>
Fees paid by 2Bridge......... $ $ $
</TABLE>
57
<PAGE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $1,700,000.
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors and substantially all of our stockholders
and holders of options and warrants to purchase our stock, has agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of our common stock held by these persons prior to
this offering or common stock issuable upon exercise of options or warrants
held by these persons for a period of 180 days after the effective date of the
registration statement of which this prospectus is a part without the prior
written consent of Deutsche Bank Securities Inc. This consent may be given at
any time without public notice. We have entered into a similar agreement with
the representatives of the underwriters.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these over-
allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for friends and family members of our
executive officers and other persons that are affiliated with companies with
whom we have a business relationship, such as executives of companies that
market, sell or otherwise promote our products. None of these shares will be
subject to lock-up agreements.
The number of shares of our common stock available for sale to the general
public will be reduced to the extent these reserved shares are purchased. Any
reserved shares that are not purchased by these persons will be offered by the
underwriters to the general public on the same basis as the other shares in
this offering.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-manager on
138 filed public offerings of equity securities, of which 102 have been
completed, and has acted as a syndicate member in an additional 75 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with this
offering and the share ownership of individuals associated with Thomas Weisel
Partners stated below.
58
<PAGE>
In March 2000, we sold 743,200 shares of our Series D preferred stock in a
private placement at a price of $9.65 per share. Each of the shares of Series D
preferred stock is convertible at the option of the holder into one shares of
our common stock. In this private placement, individuals associated with
Deutsche Bank Securities Inc. purchased 40,402 shares of Series D preferred
stock for an aggregate purchase price of approximately $315,000 and individuals
associated with Thomas Weisel Partners LLC purchased 11,654 shares of Series D
preferred stock on the same terms as the other investors in the private
placement. The aggregate number of shares of Series D preferred Stock purchased
by Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC was 52,056
shares. Upon conversion of these shares into common stock, based on an assumed
initial public offering price of $ , the value of these shares is $ . The
difference between the amount that and originally paid for the Series D
preferred stock and the value of the Series D preferred stock based on the
assumed initial public offering price of $ equals $ .
Pricing of this Offering
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering were:
. prevailing market conditions;
. our results of operations in recent periods;
. the present stage of our development;
. the market capitalizations and stages of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
. estimates of our business potential.
59
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters in connection with
this offering will be passed upon for the underwriters by Gray Cary Ware &
Friedenrich LLP, San Francisco, California. WS Investment Company, an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as well as individual attorneys of this firm, beneficially own an
aggregate of 43,104 shares of our common stock.
EXPERTS
The financial statements of 2Bridge, Inc. at December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999, included in
this prospectus and registration statement, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon such report, given on the
authority of such firm as experts in accounting and auditing .
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, under the Securities Act of 1933, a registration statement on Form S-1
relating to the common stock offered hereby. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules thereto. For further information with respect to our company and
the shares we are offering by this prospectus you should refer to the
registration statement, including the exhibits and schedules thereto. You may
inspect a copy of the registration statement without charge at the Public
Reference Section of the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 or at the Securities and Exchange
Commission's regional offices at 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036. The public may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an
Internet site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. The Securities and Exchange Commission's World Wide
Web address is http://www.sec.gov.
We intend to furnish holders of the common stock with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing
unaudited condensed financial information for the first three quarters of each
fiscal year. We intend to furnish such other reports as we may determine or as
may be required by law.
60
<PAGE>
2BRIDGE, INC.
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Equity (Deficit)......................................................... F-5
Statements of Cash Flows.................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
2Bridge, Inc.
We have audited the accompanying balance sheets of 2Bridge, Inc. as of
December 31, 1998 and 1999, and the related statements of operations,
redeemable convertible preferred stock and stockholders' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with 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 financial position of 2Bridge, Inc. at December
31, 1998 and 1999, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
Walnut Creek, California
February 11, 2000, exceptfor Note 13, as to which the date is
, 2000
----------------
The foregoing report is in the form that will be signed upon the
effectiveness of the reverse stock split and approval of the certificate of
incorporation in the state of Delaware as described in Note 13 to the financial
statements.
/s/ Ernst & Young LLP
Walnut Creek, California
March 13, 2000
F-2
<PAGE>
2BRIDGE, INC.
BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
------------------ December 31,
1998 1999 1999
-------- -------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 4,860 $ 8,817
Accounts receivable, net of allowance for
doubtful accounts of $0 in 1998 and $136
in 1999................................... 321 2,580
Prepaid expenses and other current assets.. 73 395
-------- --------
Total current assets..................... 5,254 11,792
Property and equipment, net.................. 842 2,282
Note receivable from officer................. 325 376
Other assets................................. 83 658
-------- --------
Total assets............................. $ 6,504 $ 15,108
======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................... $ 262 $ 641
Accrued compensation and other............. 78 207
Deferred rent.............................. -- 247
Borrowings under line of credit
arrangement............................... -- 5,050
Current portion of notes payable........... 1,667 --
Current portion of capital lease
obligations............................... 134 337
Other current liabilities.................. 194 308
-------- --------
Total current liabilities................ 2,335 6,790
Notes payable, less current portion.......... 833 --
Capital lease obligations, less current
portion..................................... 302 515
Commitments and contingencies
Redeemable convertible preferred stock, no
par value, issuable in series; 14,245,674
shares authorized 7,377,617 and 13,622,932
shares issued and outstanding at December
31, 1998 and 1999, respectively (none pro
forma); aggregate liquidation preference of
$33,486 at December 31, 1999................ 13,414 34,170 $ --
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value;
5,000,000 shares authorized, none issued
and outstanding........................... -- -- --
Common stock, $0.0001 par value;
100,000,000 shares authorized; 8,640,359
and 8,851,475 shares issued and
outstanding at December 31, 1998 and 1999,
respectively (22,474,407 shares pro
forma).................................... 226 8,792 42,962
Deferred stock compensation................ (37) (7,288) (7,288)
Accumulated deficit........................ (10,569) (27,871) (27,871)
-------- -------- --------
Total stockholders' equity (deficit)..... (10,380) (26,367) $ 7,803
======== ======== ========
Total liabilities, redeemable convertible
preferred stock and stockholders' equity
(deficit)............................... $ 6,504 $ 15,108
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
2BRIDGE, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenues:
Licenses......................................... $ -- $ 414 $ 1,045
Services......................................... -- 303 2,174
Recurring fees................................... -- -- 418
------- ------- --------
Total revenues................................. -- 717 3,637
Cost of revenues:
Services (1)..................................... -- 184 1,309
------- ------- --------
Total cost of revenues......................... -- 184 1,309
------- ------- --------
Gross profit....................................... -- 533 2,328
Operating expenses:
Sales and marketing (2).......................... 858 3,260 9,411
Research and development (3)..................... 998 3,002 3,516
General and administrative (4)................... 1,413 1,502 5,045
Amortization of deferred stock compensation...... 40 54 1,282
------- ------- --------
Total operating expenses....................... 3,309 7,818 19,254
------- ------- --------
Operating loss..................................... (3,309) (7,285) (16,926)
Interest and other income.......................... 353 211 298
Interest expense................................... (33) (182) (674)
------- ------- --------
Net loss........................................... $(2,989) $(7,256) $(17,302)
======= ======= ========
Net loss per share:
Basic and diluted................................ $ (0.35) $ (0.84) $ (1.98)
======= ======= ========
Pro forma basic and diluted (unaudited).......... $ (0.77)
========
Shares used in computing net loss per share:
Basic and diluted................................ 8,500 8,587 8,756
======= ======= ========
Pro forma basic and diluted (unaudited).......... 22,379
========
</TABLE>
- --------
(1) Excluding $1, $2 and $524 in amortization of deferred stock compensation
for the years ended December 31, 1997, 1998 and 1999, respectively.
(2) Excluding $15, $11 and $220 in amortization of deferred stock compensation
for the years ended December 31, 1997, 1998 and 1999, respectively.
(3) Excluding $19, $29 and $333 in amortization of deferred stock compensation
for the years ended December 31, 1997, 1998 and 1999, respectively.
(4) Excluding $5, $12 and $205 in amortization of deferred stock compensation
for the years ended December 31, 1997, 1998 and 1999, respectively.
See accompanying notes.
F-4
<PAGE>
2BRIDGE, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Stockholders' Equity (Deficit)
-------------------------------------------------------
Redeemable
Convertible Total
Preferred Stock Common Stock Deferred Stockholders'
------------------ ---------------- Stock Accumulated Equity
Shares Amount Shares Amount Compensation Deficit (Deficit)
---------- ------- --------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................... -- $ -- 8,000,000 $ 10 $ -- $ (324) $ (314)
Issuance of Series A
redeemable convertible
preferred stock at
$1.31 per share (net of
issuance costs of
$34)................... 2,580,866 3,340 -- -- -- -- --
Issuance of common
stock.................. -- -- 500,000 66 -- -- 66
Deferred stock
compensation related to
stock option grants.... -- -- -- 115 (115) -- --
Amortization of
deferred stock
compensation........... -- -- -- -- 40 -- 40
Net loss and
comprehensive loss..... -- -- -- -- -- (2,989) (2,989)
---------- ------- --------- ------ ------- -------- --------
Balance at December 31,
1997.................... 2,580,866 3,340 8,500,000 191 (75) (3,313) (3,197)
Issuance of Series B
redeemable convertible
preferred stock at
$2.11 per share (net of
issuance costs of
$58)................... 4,796,751 10,074 -- -- -- -- --
Exercise of stock
options................ -- -- 140,359 19 -- -- 19
Deferred stock
compensation related to
stock option grants.... -- -- -- 16 (16) -- --
Amortization of
deferred stock
compensation........... -- -- -- -- 54 -- 54
Net loss and
comprehensive loss..... -- -- -- -- -- (7,256) (7,256)
---------- ------- --------- ------ ------- -------- --------
Balance at December 31,
1998.................... 7,377,617 13,414 8,640,359 226 (37) (10,569) (10,380)
Issuance of Series C
redeemable convertible
preferred stock at
$3.20 per share (net of
issuance costs of
$66)................... 6,245,315 19,914 -- -- -- -- --
Exercise of stock
options................ -- -- 211,116 33 -- -- 33
Issuance of warrants in
connection with debt
financings............. -- 842 -- -- -- -- --
Deferred stock
compensation related to
stock option grants.... -- -- -- 8,533 (8,533) -- --
Amortization of
deferred stock
compensation........... -- -- -- -- 1,282 -- 1,282
Net loss and
comprehensive loss..... -- -- -- -- -- (17,302) (17,302)
---------- ------- --------- ------ ------- -------- --------
Balance at December 31,
1999.................... 13,622,932 $34,170 8,851,475 $8,792 $(7,288) $(27,871) $(26,367)
========== ======= ========= ====== ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
2BRIDGE, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Operating activities
Net loss........................................... $(2,989) $(7,256) $(17,302)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 77 251 564
Amortization of deferred compensation............ 40 54 1,282
Interest expense on warrants..................... -- -- 345
Provision for bad debts.......................... 38 -- 98
Change in operating assets and liabilities:
Accounts receivable............................. 26 (310) (2,357)
Prepaid expenses and other current assets....... (24) (46) (322)
Other assets.................................... (55) (12) (78)
Accounts payable................................ (74) 151 380
Accrued compensation and other.................. (139) 45 129
Deferred rent................................... -- -- 247
Other current liabilities....................... -- 157 114
------- ------- --------
Net cash used in operating activities.............. (3,100) (6,966) (16,900)
Investing activities
Purchases of property and equipment................ (4) (611) (1,431)
Note receivable from officer....................... -- (325) (51)
------- ------- --------
Net cash used in investing activities.............. (4) (936) (1,482)
Financing activities
Proceeds from (repayments of) notes payable........ -- 2,500 (2,500)
Principal payments on capital lease obligations.... (4) (93) (158)
Payments on bank line of credit agreement.......... -- (749) --
Borrowings under bank line of credit agreement..... 749 -- 5,050
Net proceeds from issuance of redeemable
convertible preferred stock....................... 3,340 10,074 19,914
Proceeds from exercise of stock options............ -- 19 33
------- ------- --------
Net cash provided by financing activities.......... 4,085 11,751 22,339
------- ------- --------
Net increase in cash............................... 981 3,849 3,957
Cash and cash equivalents at beginning of year..... 30 1,011 4,860
------- ------- --------
Cash and cash equivalents at end of year........... $ 1,011 $ 4,860 $ 8,817
======= ======= ========
Supplemental disclosure of cash flows information
Interest paid...................................... $ 33 $ 182 $ 378
======= ======= ========
Supplemental disclosure of noncash investing and
financing activities
Property and equipment acquired under capital
leases............................................ $ 273 $ 232 $ 573
======= ======= ========
Deferred compensation related to stock option
grants............................................ $ 115 $ 16 $ 8,533
======= ======= ========
Issuance of warrants in connection with debt
financings........................................ $ -- $ -- $ 842
======= ======= ========
Common stock issued in satisfaction of accounts
payable........................................... $ 65 $ -- $ --
======= ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
2BRIDGE, INC
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1999
1. The Company and Summary of Significant Accounting Policies
The Company
2Bridge (the "Company") provides comprehensive Internet-based solutions to
create many-to-many communication, commerce and collaboration eHubs for
businesses. An eHub is an Internet-based workspace where customers, partners,
suppliers and employees can simultaneously interact, access real-time business
information, integrate business processes and conduct eCommerce transactions.
The Company's solutions were released during the fourth quarter of 1998. The
Company conducts business primarily in the United States and operates in one
business segment which is the development of Internet-based eHub solutions for
businesses. One customer accounted for 41% and 55% of total revenues during the
years ended December 31, 1998 and 1999, respectively. Another customer
accounted for 30% and 13% of total revenues during the years ended December 31,
1998 and 1999, respectively. One customer accounted for 22% of total revenues
during the year ended December 31, 1998 and one customer accounted for 10% of
total revenues during the year ended December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with minimal
interest rate risks that have maturities of three months or less at date of
purchase and are stated at cost, which approximates fair value. The Company
maintains its cash in depository accounts with two domestic financial
institutions.
Concentrations of Credit Risk and Credit Evaluations
Financial instruments, which subject the Company to concentrations of credit
risk, consist primarily of trade accounts receivable.
A limited number of customers historically have accounted for a substantial
portion of the Company's revenues. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. Sales
of the Company's products and services will vary as a result of fluctuations in
market demand for such products and technology. Further, the markets in which
the Company competes are characterized by rapid technological change and
increased competition.
F-7
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
One customer accounted for $144,000 of the total accounts receivable balance
as of December 31, 1998 and $1,700,000 of the total accounts receivable balance
as of December 31, 1999.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the related assets,
generally three to five years. Assets under capital leases are included in
depreciable assets and amortized using the straight-line method over the
shorter of the estimated useful life or lease term, which is generally three
years. Leasehold improvements are amortized using the straight-line method over
the shorter of the estimated useful life or the life of the lease.
Revenue Recognition
Effective January 1, 1998, the Company adopted Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"), as amended by Statement of
Position 98-4 ("SOP 98-4") which was issued by the American Institute of
Certified Public Accountants ("AICPA"). The Company believes its current
revenue recognition policies and practices are consistent with SOP 97-2 and SOP
98-4. Additionally, the AICPA issued SOP 98-9 in December 1998, which provides
certain amendments to SOP 97-2, and is effective for transactions, entered into
beginning January 1, 2000. Full implementation guidelines for this standard
have not yet been issued. Once available, such implementation guidelines could
lead to unanticipated changes in the Company's current revenue recognition
policies, which changes could affect the timing of the Company's future
revenues and results of operations.
Prior to the fourth quarter of 1999, the Company sold its software as stand-
alone products and derived revenues from the licenses, maintenance and support
from the software application. The Company recognized revenues from these
agreements upon delivery and acceptance of the software if there was persuasive
evidence of an arrangement, collection was probable, the fee was fixed or
determinable, and there was sufficient vendor-specific objective evidence to
support allocating the total fee to all elements of multiple-element
arrangements. Software maintenance revenues are recognized ratably over the
term of the support contract, which is generally one year. Other service
revenue is recognized as services are performed. Payments received prior to
delivering services are recorded as deferred revenue. Through December 31,
1999, deferred revenue has not been significant.
During the fourth quarter of 1999, the Company began offering its 2Share
solution, although software-based, as a managed solution, which may include
custom design and related services that are designed to deliver dial-tone-like
access, reliability and functionality. As a result, the Company discontinued
using a license sales model and began selling its solutions through recurring
fee agreements. Recurring fees are recognized over the term of the agreement.
Software Development Costs
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased, or Otherwise Marketed," under which
certain software development costs incurred subsequent to the establishment of
technological feasibility are capitalized and amortized over the estimated
useful lives of the related products. Technological feasibility is established
upon completion of a working model. As of December 31, 1999, such capitalizable
software development
F-8
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
costs have been insignificant and all software development costs have been
charged to product development expenses in the accompanying statements of
operations.
Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
the use of the liability method in accounting for income taxes. Under this
method, deferred tax assets and liabilities are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
Advertising Costs
The Company expenses the costs of advertising as incurred. Advertising
expense was $3,647,000 for the year ending December 31, 1999. No advertising
expenses were incurred during the years ended December 31, 1997 and 1998.
Accounting For Stock-Based Compensation
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and has adopted the "disclosure only" alternative
described in Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123").
Reclassifications
Certain prior years amounts have been reclassified to conform to the
current year presentation.
2. Net Loss Per Share
Basic and diluted net loss per share information for all periods is
presented under the requirement of SFAS No. 128, "Earnings per Share" ("SFAS
128"). Basic earnings per share has been computed using the weighted-average
number of common shares outstanding during the period and excludes any
dilutive effects of stock options, warrants, and convertible securities.
Potentially dilutive securities also have been excluded from the computation
of diluted net loss per share, as their inclusion would be antidilutive.
F-9
<PAGE>
2BRIDGE, INC
NOTES TO FINANCIAL STATEMENTS--(Continued)
The calculation of historical and pro forma basic and diluted net loss per
share is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Historical:
Net loss...................................... $(2,989) $(7,256) $(17,302)
======= ======= ========
Weighted average shares of common stock
outstanding.................................. 8,500 8,587 8,756
======= ======= ========
Basic and diluted net loss per share.......... $ (0.35) $ (0.84) $ (1.98)
======= ======= ========
Pro forma (unaudited):
Net loss...................................... $(17,302)
========
Weighted average shares of common stock
outstanding used in computing basic and
diluted net loss per share (from above)...... 8,756
Adjustment to reflect the effect of the
assumed conversion of preferred stock to
common stock from the date of issuance....... 13,622
--------
Weighted average shares used in computing pro
forma basic and diluted net loss per share... 22,379
========
Pro forma basic and diluted net loss per
share........................................ $ (0.77)
========
</TABLE>
If the Company had reported net income, the calculation of historical and
pro forma diluted net income per share would have included an additional
3,203,714, 6,696,699, and 11,115,509 common stock equivalent shares related to
the outstanding stock options, convertible preferred stock and warrants not
included above (determined using the treasury stock method) for the years ended
December 31, 1997, 1998, and 1999, respectively.
3. Property and Equipment
The components of property and equipment are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
------ ------
<S> <C> <C>
Computers and software....................................... $ 710 $1,509
Leased assets................................................ 149 722
Office equipment............................................. 236 411
Leasehold improvements....................................... 146 603
------ ------
1,241 3,245
Less accumulated depreciation and amortization............... (399) (963)
------ ------
$ 842 $2,282
====== ======
</TABLE>
Accumulated amortization related to leased assets was $25,000 and $99,000 at
December 31, 1998 and 1999, respectively. Amortization on capital leases has
been included in depreciation expense.
F-10
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Financings
Line of Credit
As of December 31, 1999, the Company has a $5,050,000 line of credit with a
financing company, which was used to finance equipment purchases and operating
activities during the year ending December 31, 1999. Borrowings under the line
of credit bear interest at prime rate plus 3% (11.5% at December 31, 1999) and
are secured by substantially all of the Company's assets. At December 31, 1999,
the Company had outstanding borrowings totaling $5,050,000 and $73,000 in
accrued interest, which are due on July 31, 2000. Warrants were issued in
connection with this financing. See Note 7.
Leases
As of December 31, 1999, the Company had obtained credit lines from a number
of lease finance companies for the purpose of acquiring computer and office
equipment and leasehold improvements. In aggregate, the Company has entered
into lease finance agreements which allow for borrowings of up to $1,100,000,
bear interest between 6% and 11.5% per annum, and have terms ranging from 24 to
36 months. As of December 31, 1998 and 1999, the Company had outstanding
borrowings of $436,000 and $852,000, respectively, under the equipment lease
arrangements. Amounts outstanding under the lease arrangements are classified
as capital lease obligations in the balance sheet and are secured by the
related equipment. Warrants were issued in connection with this financing. See
Note 7.
Notes Payable
In September 1998, the Company restructured certain loan and security
agreements. Under the restructured agreement, the Company borrowed $2,500,000,
which was repaid in full with accrued interest in November 1999.
5. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating losses..................................... $ 3,900 $ 9,490
Research and development credit carryforwards............ 150 356
Other.................................................... 189 205
------- -------
Total deferred tax assets.............................. 4,239 10,051
Valuation allowance........................................ (4,239) (10,051)
------- -------
Net deferred tax assets.................................... $ -- $ --
======= =======
</TABLE>
Realization of deferred tax assets is dependent upon future earnings, if
any, the timing and amount of which are uncertain. Accordingly, the net
deferred tax assets have been fully offset by a valuation allowance. The
valuation allowance increased by $2,970,000 and $5,812,000 during 1998 and
1999, respectively.
F-11
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $25,000,000, which expire in
the years 2010 through 2019. The Company also had net operating loss
carryforwards for state income tax purposes of approximately $15,000,000
expiring in the years 2003 through 2004.
Utilization of the Company's net operating loss carryforwards may be subject
to substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code and similar state provisions. Such an
annual limitation could result in the expiration of the net operating loss
carryforwards before utilization.
6. Redeemable Convertible Preferred Stock
Redeemable convertible preferred stock is as follows by series:
<TABLE>
<CAPTION>
Shares Issued and
Outstanding Per Share
----------------------- ------------------------------
December 31,
Authorized ----------------------- Non-Cumulative Liquidation
Series Shares 1998 1999 Dividend Preference
------ ---------- --------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
A 2,580,866 2,580,866 2,580,866 $0.06 per annum $1.31
B 5,198,142 4,796,751 4,796,751 $0.11 per annum $2.11
C 6,466,666 -- 6,245,315 $0.17 per annum $3.20
---------- --------- ----------
14,245,674 7,377,617 13,622,932
========== ========= ==========
</TABLE>
Dividends
The holders of shares of the Series A, Series B, and Series C preferred
stock (collectively, "preferred stock") are entitled to receive non-cumulative
dividends, when and as declared by the Board of Directors, but only out of
funds that are legally available, at the rate of 5% of the original purchase
price per annum on each outstanding share of Preferred Stock (as adjusted for
any stock dividends, combinations or splits with respect to such shares). While
preferred stock remains outstanding, no dividend will be paid or declared, nor
will any other distribution be made on any common stock until all dividends on
the preferred stock have been paid.
Conversion
Each share of preferred stock, at the option of the holder, is convertible
into the number of fully paid and nonassessable shares of common stock at the
conversion rate. The conversion rate per share of preferred stock is 1:1. The
conversion rate is subject to adjustment as defined in the Series A, Series B,
and Series C preferred stock agreements. The number of shares of common stock
into which a share of a series of preferred stock is convertible is referred to
as the conversion rate of such series.
Each share of preferred stock will automatically be converted into shares of
common stock, based on the then-effective conversion rate, at any time upon the
affirmative vote of a majority of the outstanding shares of the preferred
series, or immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of common stock for the
account of the Company in which (i) the per share price is at least $7.50 (as
adjusted for stock splits, recapitalizations and the like), and (ii) the gross
cash proceeds to the Company (before underwriting discounts, commissions and
fees) are at least $20,000,000.
F-12
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Redemption
Upon a request, the holders of not less than two-thirds of the outstanding
shares of Series A, Series B, or Series C preferred stock, as applicable, may
require the Company to redeem for cash up to all of the Series A, Series B, or
Series C preferred stock outstanding on or after May 18, 2006 (the "Redemption
Date"). Upon the event of this election, the Company will redeem 33.3% of the
number of shares of preferred stock outstanding 60 days after the Redemption
Date, 50% of the number of shares of preferred stock outstanding as of the
first anniversary of the Redemption Date, and the balance of preferred stock
outstanding as of the second anniversary of the Redemption Date. The Company
will effect such redemptions on the applicable Redemption Date by paying in
cash in exchange for the shares of preferred stock to be redeemed a sum equal
to the original purchase price for each share of preferred stock (as adjusted
for any stock dividends, combinations or splits), plus all declared but unpaid
dividends on such shares.
If the Company does not have sufficient funds legally available to redeem
all shares to be redeemed at the Redemption Date (including, if applicable,
those to be redeemed at the option of the Company), then the Company will
redeem such shares pro rata to the extent possible and will redeem the
remaining shares to be redeemed as soon as sufficient funds are legally
available.
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of preferred stock are entitled
to receive, prior and in preference to any distribution of any of the assets of
the Company to the holders of common stock by reason of their ownership, an
amount per share equal to the sum of the original purchase price for each share
of preferred stock plus any declared but unpaid dividends with respect to such
shares. After payment of the full liquidation preference of the preferred
shareholders, any remaining assets of the Company legally available are to be
distributed ratably to the holders of the common stock and preferred stock on
an as-if-converted to common stock basis until such time as the holders of
preferred stock have received a total liquidation amount of one and one-half
times the original purchase price. The remaining assets of the Company legally
available for distribution, if any, are to be distributed ratably to the
holders of common stock. The holders of Series C preferred stock are entitled
to receive any distribution of any of the assets or surplus funds in preference
to holders of Series A and B preferred stock and common stock.
If, upon the occurrence of a liquidation event, the assets and funds
distributed among the holders of the preferred stock are insufficient to permit
the payment to such holders of the full preferential amount, then the entire
assets and funds of the Company legally available for distribution are to be
distributed among the holders of the preferred stock, in proportion to the
preferential amount each such holder is otherwise entitled to receive.
Voting
The holder of each share of preferred stock is entitled to the number of
votes equal to the number of shares of common stock into which each share of
preferred stock could be converted, and has voting rights and powers equal to
the voting rights and powers of the common stock.
F-13
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Stockholders' Equity
Common Stock
In January 1997, the Company issued 500,000 shares of common stock to a
consultant in satisfaction of all obligations and liabilities owed to the
consultant by the Company. The obligation and liabilities related to services
provided by the consultant prior to January 1, 1997. The Company recognized
$65,000 of expense based on the estimated fair value of the shares.
Warrants
In January 1997, in connection with obtaining the issuance of Series A
redeemable preferred stock, the Company issued warrants to investors to
purchase up to 333,333 shares of common stock at an exercise price of $1.88 per
share. These warrants are outstanding as of December 31, 1999 and are
exercisable through January 17, 2002. In November 1997, in connection with an
equipment lease arrangement, the Company issued a warrant to the lessor to
purchase up to 19,117 shares of common stock at an exercise price of $1.31 per
share. The warrants are outstanding at December 31, 1999 and are exercisable
through November 2004. The Company deemed the fair value of the warrants to be
immaterial using the Black Scholes method.
In connection with obtaining financing in March 1998, the Company issued
warrants to a lease finance company to purchase up to 68,058 shares of the
Company's Series B preferred stock at an exercise price of $2.11 per share.
These warrants are outstanding as of December 31, 1999 and are exercisable
through March 11, 2008. The Company deemed the fair value of the warrants to be
$115,000 and has amortized $101,000 to interest expense as of December 31,
1999. These warrants were valued under the Black Scholes method with the
following assumptions: volatility - .7, dividend yield - 0%, expected life - 7
years, risk-free interest rate - 6.2%.
In July 1999, in connection with obtaining financing, the Company issued two
warrants to financing institutions to purchase up to 39,072 and 37,509 shares,
respectively, of the Company's Series C preferred stock at an exercise price of
$3.20 per share. These warrants are outstanding as of December 31, 1999 and are
exercisable through July 2009 and May 2006, respectively. The Company
determined the fair value of the warrants to be $101,000 and $86,000, and has
amortized $63,000 and $86,000, respectively, to interest expense as of December
31, 1999. These warrants were valued under the Black Scholes method with the
following assumptions: volatility - .7, dividend yield - 0%, expected life - 7
and 10 years, risk-free interest rate - 5.4%.
In July and October 1999, in connection with an equipment shares lease
arrangement, the Company issued warrants to the lessor to purchase up to 3,907
and 7,815, respectively, of the Company's Series C preferred stock at an
exercise price of $3.20 per share. These warrants are outstanding as of
December 31, 1999 and are exercisable through July 2002 and October 2009,
respectively. The Company deemed the fair value of the warrants to be
immaterial using the Black Scholes method.
In connection with the line of credit (Note 4), the Company issued warrants
to purchase shares in the Company's next round of preferred stock financing
(the "Next Round") at 70% of the estimated sales price per share. The number of
shares subject to the warrant will be derived by dividing $757,500 by the
exercise price. If the next round of financing does not occur by July 31, 2000,
the warrants will be exercisable into 236,718 shares of the Company's Series C
preferred stock at an exercise price of $3.20 per share. See Note 13. These
warrants are outstanding as of December 31,
F-14
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
1999 and are exercisable through March 11, 2008. The warrants will
automatically expire upon an initial public offering of the Company's common
stock if not exercised. The Company determined the fair value of the warrants
to be $540,000 which was recorded in stockholders' equity, of which $95,000 has
been amortized to interest expense as of December 31, 1999. These warrants were
valued under the Black Scholes method with the following assumptions:
volatility -.7, dividend yield -0%, expected life -5.4%.
Stock Options
Under the Company's 1997 Stock Option Plan (the "Plan"), 3,156,666 shares of
common stock are reserved for the issuance of incentive stock options (ISO's)
and non-qualified stock options (NSO's) to certain directors, employees and
consultants of the Company. The ISO's may be granted at a price per share not
less than the fair market value at the date of grant. The NSO's may be granted
at a price per share not less than 85% of the fair market value at the date of
grant. If at any time the Company grants an option and the optionee directly or
by attribution owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, the option price shall be at
least 110% of the fair value at that date. The options generally vest over four
years and expire ten years after the date of grant.
A summary of the stock option activity through December 31, 1999, is as
follows:
<TABLE>
<CAPTION>
Weighted-Average
Exercise Price
Options Per Share
---------- ----------------
<S> <C> <C>
Balance at December 31, 1996................... -- $ --
Granted...................................... 1,239,333 0.14
Canceled..................................... (198,333) 0.14
---------- -----
Balance at December 31, 1997................... 1,041,000 0.14
Granted...................................... 1,225,000 0.39
Exercised.................................... (140,359) 0.14
Canceled..................................... (763,751) 0.26
---------- -----
Balance at December 31, 1998................... 1,361,890 0.30
Granted...................................... 2,144,902 1.12
Exercised.................................... (211,116) 0.16
Canceled..................................... (1,596,769) 0.53
---------- -----
Balance at December 31, 1999................... 1,698,907 $1.13
========== =====
Vested and exercisable at December 31, 1999.... 222,284
==========
</TABLE>
At December 31, 1999, options to purchase 1,106,284 shares of common stock
were available for future grant. The weighted-average fair value at grant date
of options granted during the years ended December 31, 1997, 1998 and 1999 was
$0.05, $0.14 and $0.27 per share, respectively, and the weighted-average
remaining contractual life of options outstanding at December 31, 1999 was 9.3
years.
F-15
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- -------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Exercise Number of Life Exercise Number of Exercise
Price Shares (in years) Price Shares Price
---------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.14 320,829 7.9 $0.14 199,186 $0.14
$0.45-1.13 406,892 9.1 $0.66 23,098 $0.45
$1.58-2.25 971,186 9.8 $1.66 -- $ --
--------- ----- -------
1,698,907 $1.13 222,284
========= ===== =======
</TABLE>
Deferred Compensation
The Company recorded deferred stock compensation of $115,000, $16,000, and
$8,533,000 during the years ended December 31, 1997, 1998, and 1999,
respectively, representing the difference between the exercise price and the
deemed fair value of the Company's common stock on the grant date for certain
of the Company's stock options granted to employees. In the absence of a public
market for the Company's common stock, the deemed fair value was based on the
price per share of recent preferred stock financings, less a discount to give
effect to the superior rights of the preferred stock. These amounts are being
amortized by charges to operations over the vesting periods of the individual
stock options using a graded vesting method. Such amortization amounted to
approximately $40,000, $54,000, and $1,282,000 for the years ended December 31,
1997, 1998, and 1999, respectively.
Pro Forma Disclosures on the Effect of Stock-Based Compensation
Pro forma information regarding results of operations and net loss per share
is required by SFAS 123, which also requires that the information be determined
as if the Company had accounted for its employee stock options under the fair
value method of SFAS 123. The fair value for these options was estimated at the
date of grant using the minimum value method with the following weighted
average assumptions:
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Expected dividend yield.................................... 0.0% 0.0% 0.0%
Expected life of option.................................... 5 yrs 5 yrs 5 yrs
Risk-free interest rate.................................... 6.17% 5.05% 5.44%
</TABLE>
F-16
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Had compensation cost for the Company's stock-based compensation plans been
determined using the fair value at the grant dates for awards under those plans
calculated using the minimum value method of SFAS 123, the Company's basic and
diluted net loss and pro forma basic and diluted net loss per share would have
been impacted as follows (in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Reported net loss.............................. $ (2,989) $ (7,256) $ (17,302)
Pro forma net loss............................. (2,993) (7,272) (17,363)
Reported basic and diluted net loss per share.. (0.35) (0.84) (1.98)
Pro forma basic and diluted net loss per
share......................................... (0.35) (0.85) (1.98)
</TABLE>
The effect on pro forma basic and diluted net loss is not necessarily
indicative of the effects on pro forma basic and diluted net loss in future
years, as future years will include the effects of additional years of stock
option grants.
9. Commitments and Contingencies
The Company leases office space and certain equipment under non-cancelable
operating leases. Capital lease obligations represent the present value of
future rental payments under capital lease agreements for equipment. Future
minimum lease payments under capital and operating leases, having initial terms
in excess of one year, are as follows at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
Years ending December 31:
2000....................................................... $389 $ 986
2001....................................................... 366 1,205
2002....................................................... 180 1,100
2003....................................................... -- 828
2004....................................................... -- 828
Thereafter................................................. -- 553
---- ------
Total minimum lease payments............................... 935 $5,500
======
Less: amount representing interest......................... 83
----
Present value of minimum lease payments.................... 852
Less: current portion of capital lease obligations......... 337
----
$515
====
</TABLE>
For the years ended December 31, 1997, 1998 and 1999, rent expense totaled
$248,000, $474,000 and $960,000, respectively.
The Company also entered into a sublease agreement through September 1999
for a total amount of $440,000. The appropriate amount has been offset against
the operating lease commitment for 2000, as shown above.
The Company is a defendant in a lawsuit regarding an alleged trademark
infringement by the Company. Management believes the resolution of these
matters does not expect to have a material adverse effect on the financial
position of the Company. However, depending on the amount and
F-17
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
timing, an unfavorable resolution could have a material adverse affect the
Company's future results of operations or cash flows in a particular period.
However, there can be no assurance that we will be free to continue using our
name in current form or be free from damages or liability arising from the use
of our name.
10. Note Receivable from Officer
In June 1998, the Company entered into a loan agreement with an executive
officer of the Company. The loan agreement allows for borrowings by the officer
of up to $1,200,000 through June 2003. The note is full recourse and bears
interest at the minimum rate allowable by the Internal Revenue Service
(December 31, 1999: 5.69%). Principal and interest are due on the earlier of
five years from the date in which funds are borrowed or upon the officer's
receipt of proceeds from the sale of the Company's common stock owned by the
executive officer; 50% of such proceeds are due to the Company. As of December
31, 1999, principal and interest amounts due under this agreement were $376,000
and $23,000, respectively.
11. Related Party Transactions
In February 2000, the Company entered into a memorandum of understanding
with four unrelated parties, under which the parties agreed to form a new
business, the purpose of which is to bring to market eCommerce ideas and
provide technical, strategic and financial assistance to start-up companies in
the financial service sector. For a period of six months after the formation of
this entity, the Company is committed to providing solution services to the new
entity for monthly service fees and ownership units in the new entity. In
return for these services, the Company is receiving cash and units in the
entity. The Company has recognized revenues only to the extent it receives
cash. The monthly service fees are to be billed at rates that approximate the
Company's billing rates for unrelated entities. Subsequent to the six month
period, any party can terminate this arrangement without penalties. In December
1999, prior to the formation of the memorandum of understanding, one of the
parties to the agreement, a United Kingdom company, engaged the Company to
provide certain consulting services on behalf of the new business. During the
year ending December 31, 1999, the Company recognized $373,000 in revenues
associated with this arrangement.
12. Retirement Plan
The Company has a retirement plan under section 401(k) of the Internal
Revenue Code (the "Plan") covering substantially all of its full-time employees
who are age 21 or older. Employees may make voluntary contributions to the
Plan, which are subject to certain statutory limitations. Employees may
contribute up to an annual maximum of the lesser of 15% of eligible
compensation or $10,000 for the year ended December 31, 1999. The Company made
no contributions to the Plan during the years ended December 31, 1997, 1998 or
1999.
13. Subsequent Events
Proposed Public Offering of Common Stock
In March 2000, the Company's board of directors authorized the Company to
file a registration statement with the Securities and Exchange Commission for
the purpose of an initial public offering of its common stock. Upon completion
of the Company's initial public offering as currently
F-18
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
anticipated, all of the outstanding preferred stock will be converted into
shares of common stock. The unaudited pro forma stockholders' equity at
December 31, 1999 gives effect to the conversion of all outstanding shares of
redeemable convertible preferred stock at that date into 13,622,932 shares of
common stock upon the completion of the offering.
Reincorporation
In connection with the Company's reincorporation in the State of Delaware,
the Board of Directors authorized an increase in the number of authorized
shares of common stock to 100,000,000 shares and a decrease in the numbers of
authorized preferred stock to 5,000,000 shares.
Stock Split
On March 8, 2000, the Board of Directors approved a two-for-three reverse
stock split of issued and outstanding common and preferred stock to be
effective prior to the completion of the initial public offering of its common
stock. All shares and related amounts in the accompanying financial statements
have been retroactively adjusted to reflect the stock split.
2000 Stock Plan
In March 2000, the Board of Directors adopted, subject to stockholder
approval, the 2000 Stock Plan and reserved an aggregate 3,000,000 shares of
common stock for grants of stock options under such Plan. Upon the completion
of the Company's initial public offering as currently anticipated, the
Company's current Plan will terminate and no further options will be granted
under that Plan.
2000 Director Option Plan
In March 2000, the Board of Directors adopted, subject to stockholder
approval, the 2000 Director Option Plan and reserved an aggregate 400,000
shares of common stock for grants of stock options under such Plan.
2000 Employee Stock Purchase Plan
In March 2000, the Board of Directors adopted, subject to stockholder
approval, the 2000 Employee Stock Purchase Plan, to be effective upon the
completion of the Company's initial public offering of its common stock. The
Company has reserved a total of 750,000 shares of common stock for issuance
under the plan. Eligible employees may purchase common stock at 85% of the
lesser of the fair market value of the Company's common stock on the first or
last day of the applicable six-month purchase period.
Series D Preferred Stock
In March 2000, the Company issued 743,200 shares of Series D preferred stock
to new and current investors for $9.65 per share. The rights of the Series D
preferred stockholders are similar to those of the Series A, B and C preferred
stockholders. In the event of liquidation, the holders of Series D preferred
stock, along with the holders of Series C preferred stock, in preference to the
holders of common stock and Series A and B preferred stock, will receive their
original purchase price plus any declared but unpaid dividends. The holders of
not less than two-thirds of the shares of Series A, B, C and D preferred stock
may elect to have the company redeem the preferred stock at the original issue
price beginning March 2008.
F-19
<PAGE>
2BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The $9.65 per share price of Series D preferred stock does not necessarily
represent the fair value of the preferred stock issued. In March 2000, the
Company will record an increase to the net loss available to common
stockholders of approximately $260,120, which represents the difference between
the $9.65 per share purchase price and deemed fair value of $10.00 per share.
As a result of this transaction, the warrants issued in connection with the
line of credit (Note 7), became exercisable into 112,114 shares of Series D
preferred stock at $6.76 per share.
Sale of Common Stock
In March 2000, the Company sold 300,000 shares of its common stock for $5.25
per share to two directors for proceeds of $1,575,000.
F-20
<PAGE>
2BRIDGE, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Balance at
Beginning End of
of Period Additions Deletions Period
---------- --------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Deducted from asset accounts
Allowance for doubtful accounts..... $-- $ 38 $-- $ 38
---- ----- ---- ----
Totals............................ $-- $ 38 $-- $ 38
==== ===== ==== ====
Year ended December 31, 1998
Deducted from asset accounts
Allowance for doubtful accounts..... $ 38 $ -- $ 38 $--
---- ----- ---- ----
Totals............................ $ 38 $ -- $ 38 $--
==== ===== ==== ====
Year ended December 31, 1999
Deducted from asset accounts
Allowance for doubtful accounts..... $-- $ 136 $-- $136
---- ----- ---- ----
Totals............................ $-- $ 136 $-- $136
==== ===== ==== ====
</TABLE>
S-2
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide 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 on
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of our common stock.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 26
Management............................................................... 38
Related Party Transactions............................................... 48
Principal Stockholders................................................... 50
Description of Capital Stock............................................. 52
Shares Eligible for Future Sale.......................................... 55
Underwriting............................................................. 57
Legal Matters............................................................ 60
Experts.................................................................. 60
Where You Can Find More Information...................................... 60
Index to Financial Statements............................................ F-1
</TABLE>
Until , 2000 (25 days after the date of this prospectus), all dealers
that buy, sell or trade in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. The Dealers are also
obligated to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
[LOGO] 2BRIDGE, INC.
Shares
Common Stock
Deutsche Banc Alex. Brown
SG Cowen
Thomas Weisel Partners LLC
Prospectus
, 2000
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates,
except the registration fee, the NASD filing fee and the Nasdaq listing fee.
<TABLE>
<CAPTION>
Amount
To Be Paid
----------
<S> <C>
Registration Fee.................................................. $ *
NASD Fee.......................................................... *
Nasdaq Listing Fee................................................ *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Printing and Engraving Expenses................................... *
Blue Sky Fees and Expenses........................................ *
Transfer Agent Fees............................................... *
Miscellaneous..................................................... *
----
Total........................................................... *
====
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers
As permitted by Section 145 of the Delaware General Corporation Law, the
registrant's amended and restated certificate of incorporation includes a
provision that eliminates the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, the bylaws of
the registrant provide that: (1) the registrant is required to indemnify its
directors and executive officers and persons serving in such capacities in
other business enterprises at the registrant's request, to the fullest extent
permitted by Delaware law, including in those circumstances in which
indemnification would otherwise be discretionary; (2) the registrant may, in
its discretion, indemnify employees and agents in those circumstances where
indemnification is not required by law; (3) the registrant is required to
advance expenses, as incurred, to its directors and executive officers in
connection with defending a proceeding, except that it is not required to
advance expenses to a person against whom the registrant brings a claim for
breach of the duty of loyalty, failure to act in good faith, intentional
misconduct, knowing violation of law or deriving an improper personal benefit;
(4) the rights conferred in the bylaws are not exclusive, and the registrant is
authorized to enter into indemnification agreements with its directors,
executive officers and employees; and (5) the registrant may not retroactively
amend the bylaw provisions in a way that is adverse to such directors,
executive officers and employees in these matters. The registrant's policy is
to enter into indemnification agreements with each of its directors and
executive officers that provide the maximum indemnity allowed to directors and
executive officers by Section 145 of the Delaware General Corporation Law and
the bylaws, as well as certain additional procedural protections. In addition,
such indemnification agreements provide that the registrant's directors and
executive officers will be indemnified to the fullest possible extent not
prohibited by law against all expenses, including attorney's fees, and
settlement amounts paid or incurred by them in any action or proceeding,
including any derivative action by or in the right of the registrant, on
account of their services as directors or executive officers of the registrant
or as directors or officers of any other
II-1
<PAGE>
company or enterprise when they are serving in such capacities at the request
of the registrant. The registrant will not be obligated pursuant to the
indemnification agreements to indemnify or advance expenses to an indemnified
party with respect to proceedings or claims initiated by the indemnified party
and not by way of defense, except with respect to proceedings specifically
authorized by the registrant's board of directors or brought to enforce a right
to indemnification under the indemnification agreement, the registrant's bylaws
or any statute or law. Under the agreements, the registrant is not obligated to
indemnify the indemnified party (1) for any expenses incurred by the
indemnified party with respect to any proceeding instituted by the indemnified
party to enforce or interpret the agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
indemnified party in such proceeding was not made in good faith or was
frivolous; (2) for any amounts paid in settlement of a proceeding unless the
registrant consents to such settlement; (3) with respect to any proceeding
brought by the registrant against the indemnified party for willful misconduct,
unless a court determines that each of such claims was not made in good faith
or was frivolous; (4) on account of any suit in which judgment is rendered
against the indemnified party for an accounting of profits made from the
purchase or sale by the indemnified party of securities of the registrant
pursuant to the provisions of (S)16(b) of the Securities Exchange Act of 1934,
and related laws; (5) on account of the indemnified party's conduct which is
finally adjudged to have been knowingly fraudulent or deliberately dishonest,
or to constitute willful misconduct or a knowing violation of the law; (6) an
account of any conduct from which the indemnified party derived an improper
personal benefit; (7) on account of conduct the indemnified party believed to
be contrary to the best interests of the registrant or its stockholders; (8) on
account of conduct that constituted a breach of the indemnified party's duty of
loyalty to the registrant or its stockholders; or (9) if a final decision by a
court having jurisdiction in the matter shall determine that such
indemnification is not lawful.
The indemnification provision in the bylaws and the indemnification
agreements entered into between the registrant and its directors and executive
officers may be sufficiently broad to permit indemnification of the
registrant's officers and directors for liabilities arising under the
Securities Act of 1933.
Reference is made to the following documents filed as exhibits to this
registration statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit
Document Number
-------- -------
<S> <C>
Form of Underwriting Agreement...................................... 1.1
Certificate of Incorporation of the registrant...................... 3.1
Form of Amended and Restated Certificate of Incorporation of the
registrant to be filed upon closing of the offering................ 3.2
Bylaws of registrant................................................ 3.3
Form of Indemnification Agreement entered into by the registrant
with each of its directors and executive officers.................. 10.1
</TABLE>
Item 15. Recent Sales of Unregistered Securities
Since February 11, 1998, the registrant has issued and sold the securities
described below.
(a) From February 11, 1998 to March 10, 2000, the registrant issued and
sold an aggregate of 585,363 shares of unregistered common stock to 45
directors, officers, employees, former employees and consultants at prices
ranging from $0.14 to $3.20 per share, for aggregate cash consideration of
approximately $106,184. These shares were sold pursuant to the exercise of
options granted by the board. As to each director, officer, employee,
former employee and consultant of the registrant who was issued such
securities, the registrant relied upon Rule 701
II-2
<PAGE>
of the Securities Act of 1933. Each such person purchased securities of the
registrant pursuant to a written contract between such person and the
registrant. In addition, the registrant met the conditions imposed under
Rule 701(b).
(b) On May 18, 1998, the registrant issued and sold in the aggregate
4,796,751 shares of unregistered Series B preferred stock at a price per
share of $2.11 to certain investors for an aggregate cash consideration of
approximately $10.1 million. These shares were sold pursuant to a Series B
preferred stock purchase agreement between the registrant and such
investors. The registrant relied upon Section 4(2) of the Securities Act of
1933 and Regulation D, Rule 506, in connection with the sale of these
securities. The sale of Series B preferred stock was made in compliance
with all of the terms of Rules 501 and 502 of Regulation D, there was no
investor who was not an accredited investor as defined in Rule 501 of
Regulation D.
(c) Between July 23, 1999 and August 9, 1999, the registrant issued and
sold in the aggregate 6,245,315 shares of unregistered Series C preferred
stock at a price per share of $3.20 to certain investors for aggregate cash
consideration of approximately $20.0 million. The shares were sold pursuant
to a Series C preferred stock purchase agreement between the registrant and
such investors. The registrant relied upon Section 4(2) of the Securities
Act of 1933 and Regulation D, Rule 506, in connection with the sale of
these securities. The sale of Series C preferred stock was made in
compliance with all of the terms of Rules 501 and 502 of Regulation D,
there was no investor who was not an accredited investor as defined in Rule
501 of Registration D.
(d) On March 10, 2000, the registrant sold in the aggregate 743,200
shares of unregistered Series D preferred stock at a price per share of
$9.65 to certain investors for aggregate cash consideration of
approximately $7.2 million. The shares were sold pursuant to a Series D
preferred stock purchase agreement between the registrant and such
investors. The registrant relied upon Section 4(2) of the Securities Act of
1933 and Regulation D, Rule 506, in connection with the sale of these
shares. The sale of Series D preferred stock was made in compliance with
all of the terms of Rules 501 and 502 of Regulation D, there were no more
than 35 investors, as calculated pursuant to Rule 501(e) of Regulation D,
and each investor who was not an accredited investor represented to the
registrant that it had such knowledge and experience in financial and
business matters that it was capable of evaluating the merits and risks of
the investment.
(e) On March 11, 1998, in conjunction with obtaining equipment leases
and loans, the registrant issued unregistered warrants to purchase an
aggregate of 68,058 shares of Series B Preferred Stock, with an exercise
price per share of $2.11, to Comdisco, Inc. The registrant relied upon
Section 4(2) of the Securities Act of 1933 in connection with the issuance
of the warrants.
(f) On May 1, 1999, in conjunction with a loan transaction, the
registrant issued unregistered warrants to purchase an aggregate of 37,509
shares of Series C Preferred Stock, with an exercise price per share of
$3.20, to Imperial Bancorp. The registrant relied upon Section 4(2) of the
Securities Act of 1933 in connection with the issuance of the warrants.
(g) Between July 23, 1999 and October 21, 1999, in conjunction with
obtaining equipment leases and loans, the registrant issued unregistered
warrants to purchase an aggregate of 50,794 shares of Series C Preferred
Stock, with an exercise price per share of $3.20, to Comdisco, Inc. The
registrant relied upon Section 4(2) of the Securities Act of 1933 in
connection with the issuance of the warrants.
(h) On November 15, 1999, the registrant entered into a Loan Agreement
with Sand Hill Capital II, LP under which the registrant issued
unregistered warrants, with an exercise price per share of $6.76, to
purchase an aggregate of 112,114 shares of Series D Preferred Stock,
II-3
<PAGE>
48,881 of which were issued to Sand Hill Capital II, LP., 14,800 of which
were issued to Silicon Valley Bank and 48,433 of which were issued to TBCC
Funding Trust II. Under the terms of this Loan Agreement, for each 45-day
period (or portion thereof) after July 21, 2000 that any principal amount
of the loan remains outstanding, the registrant is obligated to issue
warrants to purchase an aggregate of 37,371 additional shares of Series D
Preferred Stock, 16,059 of which will be issued to Sand Hill Capital II,
LP, 5,772 of which will be issued to Silicon Valley Bank and 15,540 of
which will be issued to TBCC Funding Trust II. The registrant intends to
rely upon Section 4(2) of the Securities Act of 1933 in connection with the
issuance of such warrants.
(i) On March 10, 2000, the registrant issued and sold 266,666 shares of
unregistered common stock to Milton Berlinski, a director of our company,
at $5.25 per share for aggregate cash consideration of $1.4 million and
33,333 shares of unregistered common stock to David Braunschvig, a director
of our company, at $5.25 per share for aggregate cash consideration of
$175,000.
Appropriate legends were affixed to the share certificates issued in the
transactions described above. All recipients had adequate access, through their
relationships with the registrant, to information about the registrant
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Merger between the registrant and 2Bridge, Inc., a
Delaware corporation.*
3.1 Form of Certificate of Incorporation of registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of registrant
to be filed upon the closing of the offering made under the registration
statement.*
3.3 Form of Bylaws of registrant.
4.1 Form of registrant's common stock certificate.*
4.2 Amended and Restated Investors' Rights Agreement, dated as of March 10,
2000, among the registrant and the parties named therein.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.*
10.1 Form of Indemnification Agreement entered into by registrant with each
of its directors and executive officers.
10.2 Form of 2000 Stock Plan and related agreements.
10.3 Form of 1997 Stock Option Plan and related agreements.
10.4 Form of 2000 Employee Stock Purchase Plan and related agreements.
10.5 Form of 2000 Director Option Agreement and related agreements.
10.6 Lease Agreement, dated April 21, 1999, by and between the registrant and
C & C Investments.
10.7 Lease Agreement, dated October 29, 1992, by and between registrant (fka
MZ Group) and C & C Investments.
10.8 Lease Agreement, dated December 7, 1999, by and between registrant and
First Industrial, L.P.
10.9 Lease Agreement, dated December 4, 1997, by and between registrant (fka
Agora Digital Corporation) and First Pac Limited.
10.10 Loan Agreement, dated as of November 15, 1999, by and between registrant
and Sand Hill Capital II, LP.
10.11 Form of Subscription Agreement.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.12 Form of Non-Hosted Subscription Agreement.
10.13 Form of Professional Services Agreement.
10.14 Series B Preferred Stock Purchase Agreement, dated May 18, 1998, among
the Registrant and the parties listed thereto.
10.15 Series C Preferred Stock Purchase Agreement, dated July 23, 1999, among
the Registrant and the parties listed thereto.
10.16 Series D Preferred Stock Purchase Agreement, dated March 10, 2000, among
the Registrant and the parties listed thereto.
10.17 Warrant to Purchase Shares of Common Stock, dated November 1997, issued
to Comdisco, Inc.
10.18 Warrant to Purchase Shares of Series B Preferred Stock, dated March 11,
1998, issued to Comdisco, Inc.
10.19 Warrant to Purchase Shares of Series B Preferred Stock, dated March 11,
1998, issued to Comdisco, Inc.
10.20 Warrant to Purchase Series C Preferred Stock, dated May 1, 1999, issued
to Imperial Bancorp.
10.21 Warrant to Purchase Shares of Series C Preferred Stock, dated July 23,
1999, issued to Comdisco, Inc.
10.22 Warrant to Purchase Shares of Series C Preferred Stock, dated July 23,
1999, issued to Comdisco, Inc.
10.23 Warrant to Purchase Shares of Series C Preferred Stock, dated October
21, 1999, issued to Comdisco, Inc.
10.24 Warrant to Purchase Stock, dated November 15, 1999, issued to Silicon
Valley Bank.
10.25 Warrant to Purchase Stock, dated November 15, 1999, issued to Sand Hill
Capital II, LP.
10.26 Warrant to Purchase Stock, dated November 15, 1999, issued to TBCC
Funding Trust II.
10.27 Restricted Stock Purchase Agreement, dated March 8, 2000, between the
Registrant and Milton Berlinski.
10.28 Restricted Stock Purchase Agreement, dated March 8, 2000, between the
Registrant and David Braunschvig.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See page II-7).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
The undersigned 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.
II-5
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referenced in Item 14 of this
registration statement or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities, other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on this 14th day of March, 2000.
2BRIDGE, INC.
/s/ Mansoor Zakaria
By: _________________________________
Mansoor Zakaria
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints, jointly and severally, Mansoor Zakaria and each
one of them, his true and lawful attorney-in-fact and agents, each with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective
amendments, to this registration statement, and any registration statement
related to the offering contemplated by this registration statement that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933 and to file the same, with all exhibits thereto and all other 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 he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done or by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mansoor Zakaria Chairman and Chief March 14, 2000
______________________________________ Executive Officer and
Mansoor Zakaria Director (Principal
Executive Officer)
/s/ Ron Parks Senior Vice President and March 14, 2000
______________________________________ Chief Financial Officer
Ron Parks (Principal Financial and
Accounting Officer)
/s/ Milton Berlinski Director March 14, 2000
______________________________________
Milton Berlinski
/s/ David Braunschvig Director March 14, 2000
______________________________________
David Braunschvig
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David Brown Director March 14, 2000
______________________________________
David Brown
/s/ Mark Perry Director March 14, 2000
______________________________________
Mark Perry
/s/ Fareed Zakaria Director March 14, 2000
______________________________________
Fareed Zakaria
/s/ Masood Jabbar Director March 14, 2000
______________________________________
</TABLE> Masood Jabbar
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Merger between the registrant and 2Bridge, Inc., a
Delaware corporation.*
3.1 Form of Certificate of Incorporation of registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of registrant
to be filed upon the closing of the offering made under the registration
statement.*
3.3 Form Bylaws of registrant.
4.1 Form of registrant's common stock certificate.*
4.2 Amended and Restated Investors' Rights Agreement, dated as of March 10,
2000, among the registrant and the parties named therein.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.*
10.1 Form of Indemnification Agreement entered into by registrant with each
of its directors and executive officers.
10.2 Form of 2000 Stock Plan and related agreements.
10.3 Form of 1997 Stock Option Plan and related agreements.
10.4 Form of 2000 Employee Stock Purchase Plan and related agreements.
10.5 Form of 2000 Director Option Plan and related agreements.
10.6 Lease Agreement, dated April 21, 1999, by and between the registrant and
C & C Investments.
10.7 Lease Agreement, dated October 29, 1992, by and between registrant (fka
MZ Group) and C & C Investments.
10.8 Lease Agreement, dated December 7, 1999, by and between registrant and
First Industrial, L.P.
10.9 Lease Agreement, dated December 4, 1997, by and between registrant (fka
Agora Digital Corporation) and First Pac Limited.
10.10 Loan Agreement, dated as of November 15, 1999, by and between registrant
and Sand Hill Capital II, LP.
10.11 Form of Subscription Agreement.
10.12 Form of Non-Hosted Subscription Agreement.
10.13 Form of Professional Services Agreement.
10.14 Series B Preferred Stock Purchase Agreement, dated May 18, 1998, among
the Registrant and the parties listed thereto.
10.15 Series C Preferred Stock Purchase Agreement, dated July 23, 1999, among
the Registrant and the parties listed thereto.
10.16 Series D Preferred Stock Purchase Agreement, dated March 10, 2000, among
the Registrant and hte parties listed thereto.
10.17 Warrant to Purchase Shares of Common Stock, dated November 1997, issued
to Comdisco, Inc.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.18 Warrant to Purchase Shares of Series B Preferred Stock, dated March 11,
1998, issued to Comdisco, Inc.
10.19 Warrant to Purchase Shares of Series B Preferred Stock, dated March 11,
1998, issued to Comdisco, Inc.
10.20 Warrant to Purchase Series C Preferred Stock, dated May 1, 1999, issued
to Imperial Bancorp.
10.21 Warrant to Purchase Shares of Series C Preferred Stock, dated July 23,
1999, issued to Comdisco, Inc.
10.22 Warrant to Purchase Shares of Series C Preferred Stock, dated July 23,
1999, issued to Comdisco, Inc.
10.23 Warrant to Purchase Shares of Series C Preferred Stock, dated October
21, 1999, issued to Comdisco, Inc.
10.24 Warrant to Purchase Stock, dated November 15, 1999, issued to Silicon
Valley Bank.
10.25 Warrant to Purchase Stock, dated November 15, 1999, issued to Sand Hill
Capital II, LP.
10.26 Warrant to Purchase Stock, dated November 15, 1999, issued to TBCC
Funding Trust II.
10.27 Restricted Stock Purchase Agreement, dated March 8, 2000, between the
Registrant and Milton Berlinski.
10.28 Restricted Stock Purchase Agreement, dated March 8, 2000, between the
Registrant and David Braunschvig.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See page II-7).
27.1 Financial Data Schedule.
</TABLE>
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* To be supplied by amendment.
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
2BRIDGE, INC.
I.
The name of this corporation is 2Bridge, Inc. (the "Corporation").
II.
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
III.
The purpose of this Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
IV.
The Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock, par value $0.0001 per share (the "Common
Stock"), and Preferred Stock, par value $0.0001 per share (the "Preferred
Stock"). The total number of shares of Common Stock the Corporation shall have
authority to issue is 47,000,000. The total number of shares of Preferred Stock
the Corporation shall have authority to issue is 23,868,514: 3,871,300 of which
shares shall be designated Series A Preferred Stock ("Series A Preferred"),
7,797,214 of which shares shall be designated Series B Preferred Stock ("Series
B Preferred"), 9,700,000 of which shares shall be designated Series C Preferred
Stock ("Series C Preferred") and 2,500,000 of which shares shall be designated
Series D Preferred Stock ("Series D Preferred").
Upon the automatic conversion of all outstanding shares of Preferred Stock
in accordance with the provisions of Article IV, Section 4(a)(2) of this
Certificate of Incorporation (the "Automatic Conversion Event"), the Company
shall immediately thereafter be authorized to issue two classes of stock to be
designated, respectively, Common Stock, par value $0.0001 per share, and
Preferred Stock, par value $0.0001 per share. After the Automatic Conversion
Event, the total number of shares of Common Stock the Corporation shall have
authority to issue shall be 100,000,000, and the total number of shares of
Preferred Stock the Company shall have the authority to issue shall be
5,000,000. After the Automatic Conversion Event, 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 Board of Directors
(authority to do so being hereby expressly vested
<PAGE>
in the Board of Directors). With respect to such series, the Board of Directors
is authorized (i) to determine the number of shares of any such series and the
designation thereof, (ii) to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock and (iii) 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, to increase (but not above the total
number of authorized shares of the class) or decrease (but not below the number
of shares of such series then outstanding) the number of shares of any such
series subsequent to the issue of shares of that series.
Immediately following any Automatic Conversion Event, the Board of
Directors is authorized, without the further consent or approval of the
stockholders of the Company, to amend and restate this Certificate of
Incorporation to show the authorized classes of capital stock as set forth in
the preceding paragraph and to eliminate all references in this Certificate of
Incorporation to the rights, preferences, privileges and restrictions of the
series of Preferred Stock converted to Common Stock (and, in connection with any
such amendment and restatement, to renumber the remaining provisions of the
Certificate of Incorporation).
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to or
imposed on the respective classes of the shares of capital stock or the holders
thereof are as follows:
1. Voting Rights.
-------------
(a) Except as otherwise provided in this Certificate of
Incorporation or as required by law, the holders of the Preferred Stock will be
entitled to notice of any meeting of stockholders of the Corporation and to vote
upon any matter submitted to stockholders or a class of stockholders that
includes the Preferred Stock on the following basis: each share of Preferred
Stock will be treated as the number of shares of Common Stock into which such
share could be converted on the record date fixed for the vote or consent of
stockholders.
(b) So long as at least 2,000,000 shares of Series C Preferred
are outstanding, the holders of outstanding shares of Series C Preferred will be
entitled, voting as a separate class, to elect one (1) director. So long as at
least 2,000,000 shares of Series B Preferred are outstanding, the holders of
outstanding shares of Series B Preferred will be entitled, voting as a separate
class, to elect one (1) director. So long as at least 1,250,000 shares of Series
A Preferred are outstanding, the holders of outstanding shares of Series A
Preferred will be entitled, voting as a separate class, to elect two (2)
directors. So long as either the holders of Series A Preferred, Series B
Preferred, or Series C Preferred have the right to elect a director, the holders
of outstanding shares of Common Stock, voting as a separate class, will be
entitled to elect one (1) director, and the holders of Common Stock and Series D
Preferred, voting together as a class, will be entitled to elect one (1)
director. Any remaining members of the Board of Directors of the Corporation
shall be elected by
-2-
<PAGE>
holders of outstanding shares of Common Stock and Preferred Stock, voting
together as a single class. Any director elected solely by the holders of a
particular class or series of stock, may be removed, either with or without
cause, by, and only by, the affirmative vote of the holders of a majority of the
shares of that class or series of stock, either at a special meeting of such
stockholders duly called for that purpose or pursuant to a written consent of
stockholders, and any vacancy thereby created or otherwise resulting may be
filled by, and only by, the holders of the class or series of stock whose right
to such Board of Directors position are affected by such vacancy.
(c) Except as otherwise required by law or provided by in the
Corporation's Articles of Incorporation, a majority of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum at a meeting
of stockholders; provided that for action upon any matter as to which holders of
shares are entitled to vote as a class, a majority of the shares of such class,
represented in person or by proxy, will constitute a quorum.
2. Dividends. The holders of the Preferred Stock will be entitled to
---------
receive, when, as and if declared by the Board of Directors out of any assets at
the time legally available therefor, noncumulative cash dividends at the rate of
five percent (5%) of the Original Purchase Price (as defined in Section 3(a)
below) per annum per share of Preferred Stock (as appropriately adjusted for
stock splits or combinations of the Preferred Stock). No dividend shall be
declared or paid or other distributions made (other than those payable solely in
shares of Common Stock) with respect to the Common Stock during any fiscal year
of the Corporation until any declared dividends in the aforesaid amounts on the
outstanding shares of Preferred Stock shall have been paid in such fiscal year.
The holders of the Preferred Stock will also be entitled to participate pro rata
in any dividends paid on the Common Stock on an as-if-converted into Common
Stock basis.
3. Liquidation Preference.
----------------------
(a) For purposes hereof, the "Original Purchase Price" of the
Series A Preferred is $0.8718 per share, and the "Original Issue Date" is the
effective date of the initial sale of Series A Preferred. The "Original Purchase
Price" of the Series B Preferred is $1.4081 per share, and the "Original Issue
Date" is the effective date of the initial sale of Series B Preferred. The
"Original Purchase Price" of the Series C Preferred is $2.1328 and the "Original
Issue Date" is the effective date of the initial sale of Series C Preferred. The
"Original Purchase Price" of the Series D Preferred is $6.4347 per share, and
the "Original Issue Date" is the effective date of the initial sale of the
Series D Preferred.
(b) In the event of the liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the following shall apply:
(1) For each share of the Series C Preferred or Series D
Preferred then held, the holders of the Series C Preferred and Series D
Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to any
other holders of the Preferred Stock or Common Stock by reason of their
ownership thereof, an amount equal to the Original Purchase Price of the Series
C Preferred or Series D Preferred, as the case may be (as appropriately adjusted
for stock splits, stock dividends, recapitalizations,
-3-
<PAGE>
combinations and the like (collectively "Recapitalizations")) plus all declared
and unpaid dividends with respect thereto (the "Series C and Series D
Liquidation Preference"). If, upon occurrence of such event the assets and funds
thus distributed among the holders of the Series C Preferred and the Series D
Preferred shall be insufficient to permit the payment to the holders of the
Series C Preferred and the Series D Preferred of the full Series C and D
Liquidation Preference, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably, on an equal
priority, pari passu basis among the holders of Series C Preferred and Series D
Preferred based on their relative preferential amounts;
(2) After the payment of the Series C and D Liquidation
Preference for each share of the Series A Preferred or Series B Preferred then
held, the holders of the Series A Preferred and Series B Preferred shall be
entitled to receive, prior and in preference to any distribution of any assets
or surplus funds of the Corporation to any holders of the Common Stock by reason
of their ownership thereof, an amount equal to the Original Purchase Price of
the Series A Preferred or Series B Preferred (as appropriately adjusted for any
Recapitalizations) plus all declared and unpaid dividends with respect thereto
(the "Series A and B Liquidation Preference"). If, upon occurrence of such event
the assets and funds thus distributed among the holders of the Series A
Preferred and the Series B Preferred shall be insufficient to permit payment to
the holders of the Series A Preferred and the Series B Preferred of the full
Series A and B Liquidation Preference, then, after the payments required by
Section 3(b)(1) above shall have been made, the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably, on
an equal priority, pari passu basis among the holders of Series A Preferred and
Series B Preferred based on their relative preferential amounts;
(3) After the payment of the Series C and D Liquidation
Preference and Series A and B Liquidation Preference to the holders of the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred, the holders of the Preferred Stock and the holders of the Common
Stock will then be entitled to receive their pro rata share (on an as-converted
basis) of the remaining assets and funds of the Corporation until the holders of
the Series A Preferred have received, in the aggregate, $1.3077 per share, the
Series B Preferred holders have received, in the aggregate, $2.1122 per share,
the Series C Preferred holders have received, in the aggregate, $2.666 per
share, and the Series D Preferred holders have received, in the aggregate,
$8.0375 per share (including the Series A and B Liquidation Preference and the
Series C and D Liquidation Preference, as applicable).
(4) then, after payment has been made to the holders of the
Preferred Stock of the full amounts to which they are entitled as set forth in
clauses (1), (2), and (3) of this Section 3(b), all remaining assets and funds
of the Corporation will be distributed ratably among the holders of the
Corporation's Common Stock.
(c) A liquidation, dissolution or winding up for the purposes of
this Section 3 includes (i) a sale, lease or disposition of all or substantially
all of the assets of the Corporation, (ii) a merger or consolidation of the
Corporation with or into any other corporation or corporations or other entity,
or any other corporate reorganization, where the stockholders of the
-4-
<PAGE>
Corporation immediately prior to such event do not obtain or retain in excess of
fifty percent (50%) interest in the outstanding equity of the successor entity,
and (iii) the sale by the stockholders to any other corporation or corporations
or other entity or entities, or person or persons,of in excess of fifty percent
(50%) of the then outstanding shares (on an as-converted into Common Stock
basis) of the Corporation's stock.
4. Conversion Rights.
-----------------
(a) Right to Convert.
----------------
(1) Optional Conversion. Each share of Preferred Stock will
-------------------
be convertible, at the option of the holder thereof, at the office of the
Corporation or any transfer agent for the Preferred Stock, into Common Stock.
The number of shares of Common Stock into which each share of Preferred Stock
will be converted will be equal to the Original Purchase Price of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred as
applicable, divided by the Conversion Price (as hereafter defined) for such
Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred, such conversion ratio being referred to as the "Conversion Rate." The
initial Conversion Price for Series A Preferred will be the Original Purchase
Price of Series A Preferred, the initial Conversion Price for the Series B
Preferred will be the Original Purchase Price of Series B Preferred, the initial
Conversion Price for Series C Preferred will be the Original Purchase Price of
Series C Preferred and the initial Conversion Price for the Series D Preferred
will be the Original Purchase Price of Series D Preferred. Upon any decrease or
increase of the Conversion Price or the Conversion Rate for Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred, as described in
this Section 4, the Conversion Rate or Conversion Price, as the case may be, for
Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred, will be increased or decreased appropriately.
(2) Automatic Conversion of Preferred Stock. Each share of
---------------------------------------
Preferred Stock automatically will be converted into shares of Common Stock at
the then effective Conversion Rate at the earlier of:
(i) in the case of the Series A Preferred, the
voluntary conversion or consent to conversion of at least a majority of the
outstanding shares of Series A Preferred; in the case of the Series B Preferred,
the voluntary conversion or consent to conversion of at least a majority of the
outstanding shares of Series B Preferred; in the case of the Series C Preferred,
the voluntary conversion or consent to conversion of at least a majority of the
outstanding shares of Series C Preferred; and in the case of the Series D
Preferred, the voluntary conversion or consent to conversion of at least a
majority of the outstanding shares of Series D Preferred; or
(ii) immediately upon the closing of the sale of stock
pursuant to a registration statement under the Securities Act of 1933, as
amended, for a firm commitment underwritten public offering (other than a
registration on Form S-8, Form S-4 or comparable forms) covering the
Corporation's Common Stock which results in aggregate cash proceeds (prior to
underwriters' commissions and expenses) to the Corporation of at least twenty
million dollars ($20,000,000), after deduction of underwriting discounts and
commission and
-5-
<PAGE>
offering expenses and which has a public offering price of not less than five
dollars ($5.00) per share (as appropriately adjusted for any Recapitalizations).
Upon such automatic conversion, any declared and unpaid dividends shall be paid
in accordance with the provisions of Section 4(b)of this Article IV.
(3) Fractional Shares Upon Conversion. No fractional shares
---------------------------------
of Common Stock will be issued upon conversion of Preferred Stock and any
fractional share which otherwise would result from conversion by a holder of all
of the holder's shares of Preferred Stock (taken together as a group) will be
redeemed by payment in an amount equal to such fraction of the then effective
Conversion Price as promptly as funds legally are available therefor.
(b) Mechanics of Conversion. Upon conversion, the holder of
-----------------------
Preferred Stock will surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Preferred Stock, and will give written notice to the Corporation stating the
name or names in which the holder wishes the certificate or certificates for
shares of Common Stock to be issued; provided, however, that in the event of an
automatic conversion pursuant to this paragraph (b), the outstanding shares of
Preferred Stock shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
further, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless either the certificates evidencing such shares of Preferred Stock are
delivered to the Corporation or its transfer agent as provided above, or the
Preferred Stockholder notifies the Corporation or its transfer agent 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, as soon as
practicable thereafter, will issue and deliver at such office to such holder of
Preferred Stock or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which the holder will
be entitled as aforesaid, and the Corporation shall promptly pay in cash, or to
the extent sufficient funds are not legally available therefor, in Common Stock
(at the Common Stock's fair market value determined by the Board of Directors as
of the date of such conversion), any declared and unpaid dividends on the shares
of Preferred Stock being converted. Any conversion will be deemed to have been
made immediately prior to the close of business on the date of the event of
conversion, in the event of automatic conversion hereunder, or, in the event of
voluntary conversion, immediately prior to the close of business on the date
when the Corporation receives a holder's certificate or certificates for the
Preferred Stock and any other documents or instruments required hereunder or by
applicable law, and the person or persons entitled to receive the shares of
Common Stock issuable upon conversion will be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act the conversion may, at the option of
any holder tendering such Preferred Stock for conversion, be conditioned upon
the closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive Common Stock
-6-
<PAGE>
upon conversion of such Preferred Stock shall not be deemed to have converted
such Preferred Stock until immediately prior to the closing of such sale of
securities.
(c) Adjustment for Subdivisions or Combinations of Common Stock.
-----------------------------------------------------------
In the event the Corporation at any time or from time to time after the Original
Issue Date effects a subdivision or combination of its outstanding Common Stock
into a greater or lesser number of shares without a proportionate and
corresponding subdivision or combination of its outstanding Preferred Stock,
then the existing Conversion Price for the Series A Preferred, the Series B
Preferred, the Series C Preferred and Series D Preferred, respectively, will be
decreased or increased proportionately.
(d) Adjustment for Dividends, Distributions and Common Stock
--------------------------------------------------------
Equivalents. In the event the Corporation at any time or from time to time
- -----------
after the Original Issue Date makes or issues, or fixes a record date for the
determination of holders of Common Stock (but not holders of the Preferred
Stock) entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights (hereinafter
referred to as "Common Stock Equivalents") convertible into or entitling the
holder thereof to receive additional shares of Common Stock without payment of
any consideration by such holder for such Common Stock Equivalents or the
additional shares of Common Stock, then and in each such event the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for a subsequent adjustment of such number)
of Common Stock issuable in payment of such dividend or distribution or upon
conversion or exercise of such Common Stock Equivalents will be deemed to be
issued and outstanding as of the time of such issuance or, in the event such a
record date has been fixed, as of the close of business on such record date. In
each such event, the then existing Conversion Rate for each series of Preferred
Stock will be increased as of the time of such issuance or, in the event such a
record date has been fixed, as of the close of business on such record date, by
multiplying the Conversion Rate for the Series A Preferred, Series B Preferred,
Series C Preferred or Series D Preferred as applicable, by a fraction:
(i) the numerator of which will be the total number of
shares of Common Stock issued and outstanding (or so deemed) immediately prior
to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend; and
(ii) the denominator of which will be the total number
of shares of Common Stock issued and outstanding (or so deemed) immediately
prior to the time of such issuance or the close of business on such record date;
provided that if such record date has been fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the
Conversion Rate for the Preferred Stock will be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Rate for
each series of Preferred Stock will be adjusted pursuant to this Section 4(d) as
of the time of actual payment of such dividends or distribution.
(e) Adjustment for Sale of Shares. If at any time after the
-----------------------------
Original Issue Date, the Corporation issues or sells any shares of its Common
Stock (other than shares of Common
-7-
<PAGE>
Stock (i) issued on conversion of Preferred Stock; (ii) issued either directly
or upon exercise of options or warrants or issuance of shares of Common Stock to
employees, officers, directors and independent contractors of the Corporation
and its subsidiaries pursuant to stock purchase or stock option plans,
agreements or other similar arrangements that are approved unanimously by the
Board of Directors (the "Compensatory Shares"); or (iii) issued either directly
or upon exercise of options or warrants issued in connection with equipment
lease financing or other similar financing arrangements approved unanimously by
the Board of Directors (the "Lease Financing Shares")) for a consideration per
share less than the then effective Conversion Price, then and in each such case,
the Conversion Price for the Series A Preferred, the Series B Preferred, the
Series C Preferred and the Series D Preferred, respectively, will be reduced to
a price (calculated to the nearest cent) determined by multiplying such
applicable Conversion Price by a fraction (a) the numerator of which will be the
number of shares of Common Stock outstanding (or issuable upon conversion of the
Preferred Stock) immediately prior to such issuance or sale plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for such issuance or sale would purchase at such applicable
Conversion Price, and (b) the denominator of which will be the number of shares
of Common Stock outstanding (or issuable upon conversion of the Preferred Stock)
immediately after the Common Stock proposed to be issued or sold is issued or
sold; provided that such fraction will in no event be greater than one (1). For
purposes of this Section 4(e), the shares of Common Stock issuable upon
conversion of the Preferred Stock (without regard to adjustments in this Section
4(e)), the Compensatory Shares (to the extent issued or subject to outstanding
options), and the Lease Financing Shares (to the extent issued or subject to
outstanding options) will be deemed to be outstanding on the Original Issue
Date.
For the purpose of making any adjustment in the Conversion Price as
provided above, the consideration received by the Corporation for any issuance
or sale of Common Stock will be computed:
(1) to the extent it consists of cash, as the amount of
cash received by the Corporation before deduction of any offering expenses
payable by the Corporation and any underwriting or similar commissions,
compensation, or concessions paid or allowed by the Corporation in connection
with such issuance or sale;
(2) to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Corporation's Board of Directors; and
(3) if Common Stock is issued or sold together with other
stock or securities or other assets of the Corporation for a consideration which
covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Common Stock.
If the Corporation (a) grants any rights or options (other than rights or
options issued in connection with the Compensatory Shares and Lease Financing
Shares as described above) to subscribe for, purchase, or otherwise acquire
shares of Common Stock, or (b) issues or sells any security convertible into
shares of Common Stock, then, in each case, the price per share of
-8-
<PAGE>
Common Stock issuable on the exercise of the rights or options or the conversion
of the securities will be determined by dividing the total amount, if any,
received or receivable by the Corporation as consideration for the granting of
the rights or options or the issuance or sale of the convertible securities,
plus the minimum aggregate amount of additional consideration payable to the
Corporation on exercise or conversion of the securities, by the maximum number
of shares of Common Stock issuable on such exercise or conversion. Such granting
or issuance or sale will be considered to be an issuance or sale for cash of the
maximum number of shares of Common Stock issuable on exercise or conversion at
the price per share determined under this subsection, and the Conversion Price
for the Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred, as applicable, will be adjusted as above provided to reflect (on the
basis of that determination) the issuance or sale. No further adjustment of the
Conversion Price for the Series A Preferred, Series B Preferred, Series C
Preferred or Series D Preferred will be made as a result of the actual issuance
of shares of Common Stock on the exercise of any such rights or options or the
conversion of any such convertible securities, except as set forth below.
Upon the redemption or repurchase of any such securities or the expiration
or termination of the right to convert into, exchange for, or exercise with
respect to, Common Stock, the Conversion Price for the Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred will be readjusted
to such price as would have been obtained had the adjustment made upon their
issuance been made upon the basis of the issuance of only the number of such
securities as were actually converted into, exchanged for, or exercised with
respect to, Common Stock. If the purchase price or conversion or exchange rate
provided for in any such security changes at any time, then, upon such change
becoming effective, the Conversion Price for the Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred then in effect will be
readjusted forthwith to such price as would have been obtained had the
adjustment made upon the issuance of such securities been made upon the basis of
(a) the issuance of only the number of shares of Common Stock theretofore
actually delivered upon the conversion, exchange or exercise of such securities,
and the total consideration received therefor, and (b) the granting or issuance,
at the time of such change, of any such securities then still outstanding for
the consideration, if any, received by the Corporation therefor and to be
received on the basis of such changed price or rate.
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a Recapitalization of the Common Stock, Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4), provision shall be made so that the holders of the Preferred
Stock will thereafter be entitled to receive upon conversion of the 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 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 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
issuable upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred) shall be applicable after that event in as
nearly an equivalent manner as may be practicable.
-9-
<PAGE>
(g) No Impairment. Without the consent of the holders of the
-------------
Preferred Stock, as set forth in Section 6 below, the Corporation, whether by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, merger, dissolution, issue or sale of securities or any
other voluntary action, will not avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but at all times in good faith will assist in the carrying out of
all of such action as may be necessary or appropriate in order to protect the
conversion rights pursuant to this Section 4 of the holders of the Preferred
Stock against dilution or other impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Rate pursuant to this Section 4,
the Corporation at its expense promptly will compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of 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, upon the written request at any time of
any holder of Preferred Stock, will furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate for the Series A Preferred, Series B Preferred, Series
C Preferred or Series D Preferred, as applicable, at the time in effect, and
(iii) 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 the
Preferred Stock held by such holder.
(i) Notices of Record Date. In the event that the Corporation
----------------------
shall propose at any time:
(1) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(2) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or any other similar rights;
(3) to effect any reclassification or recapitalization of
its Common Stock outstanding which results in a change in the Common Stock; or
(4) a liquidation, dissolution or winding up as described
in Section 3(c) of this Article IV;
Then, in connection with each such event, the Corporation shall send a
written notice, pursuant to Section 4(k) below, to the holders of the Preferred
Stock as follows:
(1) at least 20 days prior to the date on which a record
shall be taken for such dividend, distribution or subscription offer (and
specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote on the matters referred to in clauses
(3) and (4) above; and
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<PAGE>
(2) in the case of the matters referred to in clauses (3)
and (4) above, at least 20 days prior to the date when the same shall take place
and specifying the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event or the record date for the determination of such
holders if such record date is earlier.
(j) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation at all times will 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 Preferred Stock such number of its shares of Common
Stock as from time to time will be sufficient to effect the conversion of all
then outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock is not sufficient to effect the
conversion of all then outstanding shares of Preferred Stock, in addition to
such other remedies as may be available to the holders of the Preferred Stock
for such failure, the Corporation will take such corporate action as, in the
opinion of its counsel, may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as will be sufficient for such
purpose.
(k) Notices. Any notices required by the provisions of this
-------
Section 4 to be given to the holders of the Preferred Stock must be in writing
and will be deemed given upon personal delivery, one day after deposit with a
reputable overnight courier service for overnight delivery or after transmission
by facsimile telecopier with confirmation of successful transmission, or five
days after deposit in the United States mail, by registered or certified mail
postage prepaid, or upon actual receipt if given by any other method, addressed
to each holder of such record at the holder's address appearing on the books of
the Corporation.
5. Redemption.
----------
(a) Redemption Election. The holders of not less than two-thirds
-------------------
of the outstanding shares of the Series A Preferred, Series B Preferred, Series
C Preferred or Series D Preferred, as applicable, may elect, on or after the
date eight years from the Original Issue Date of the Series B Preferred, by
written notice to the Corporation (the date of such written notice referred to
herein as the "Redemption Notice Date") to have the outstanding shares of the
Series A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
redeemed by the Corporation pursuant to this Section 5.
(b) Redemption Schedule. In the event of the election referred
-------------------
to in Section 5(a) of this Article IV, the Corporation will redeem the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred,
according to the following schedule: (a) one-third of each holder's shares of
Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred, as applicable, outstanding sixty days after the Redemption Notice
Date (the "Redemption Date") will be redeemed by the Corporation on the
Redemption Date (or if such date is not a business day, then the next business
day); (b) one-third of each holder's shares of Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred, as applicable, outstanding
as of the first anniversary of the Redemption Date will be redeemed by the
Corporation on such first anniversary (or if such date is not a business day,
then the next business day); and (c) the balance of each holder's
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<PAGE>
shares of Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred outstanding as of the second anniversary of the Redemption Date will
be redeemed by the Corporation on such second anniversary (or if such date is
not a business day, then the next business day). The Corporation shall effect
such redemptions on a pro rata basis on the applicable dates by paying in cash
in exchange for each share of Series A Preferred, Series B Preferred, Series C
Preferred or Series D Preferred to be redeemed a sum equal to the Redemption
Price (as defined below).
(c) Redemption Price. The amount per share payable upon such
----------------
redemption of Preferred Stock will be the Original Purchase Price of the Series
A Preferred, Series B Preferred, Series C Preferred or Series D Preferred, as
applicable (as appropriately adjusted for any Recapitalizations), plus any
declared but unpaid dividends on such shares (the "Redemption Price").
(d) Redemption Notice. At least fourteen (14) days prior to the
-----------------
initial Redemption Date, written notice (the "Redemption Notice") will be
mailed, postage prepaid, to each holder of record of the Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred at the holder's
address last shown on the records of the Corporation, specifying the Redemption
Price of the shares to be redeemed and the Redemption Date, and calling upon
such holder to surrender to the Corporation for redemption, in the manner and at
the place designated in the Redemption Notice, the holder's certificate or
certificates representing the shares of Preferred Stock being redeemed, and
thereupon the Redemption Price of such shares will be payable without interest
to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate will be
canceled to the extent redeemed.
(e) Insufficient Funds. If no funds or insufficient funds are
------------------
legally available to redeem all of the shares of Preferred Stock then due to be
redeemed on a Redemption Date, then (i) the maximum possible number of shares of
Series A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
permitted to be redeemed shall be so redeemed pro rata (based on aggregate
Redemption Price to be redeemed) among the holders of the Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred, as applicable, and
(ii) any of such shares which are not redeemed shall be carried forward and
shall be redeemed (together with other shares of Preferred Stock which are then
due to be redeemed) at the next such redemption date scheduled under Section
5(b) of this Article IV to the full extent of legally available funds of the
Corporation at such time. Shares of Preferred Stock which are subject to
redemption, but which have not been redeemed due to insufficient legally
available funds, shall continue to be outstanding and entitled to all dividend,
liquidation, conversion and other rights, preferences, privileges and
restrictions of the Preferred Stock, until such shares have been converted or
redeemed and the Redemption Price has been paid or set aside with respect to
such shares. Any failure by the Corporation to comply with the redemption
procedures set forth in Section 5(b) of this Article IV shall not relieve the
Corporation of its obligations to redeem the shares of Preferred Stock under
this Section 5. Notwithstanding any election to be redeemed, any holder of any
Preferred Stock may convert such shares in accordance with Section 4 of this
Article IV at any time prior to the close of business on the business day next
preceding the applicable redemption date for such shares.
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<PAGE>
6. Covenants.
---------
(a) In addition to any other rights provided by law, so long as
any shares of Preferred Stock shall be outstanding, the Corporation, without
first obtaining the affirmative vote or written consent of the holders of not
less than a majority of such outstanding shares of Preferred Stock (with the
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred voting together as a single class), will not:
(1) increase or decrease the authorized number of shares of
the Preferred Stock or the Common Stock;
(2) apply any of its assets to the redemption, repurchase,
acquisition, payment of dividends or other distributions directly or indirectly,
through subsidiaries or otherwise, of any shares of any class or series of
equity securities (except for (i) redemption of any series of Preferred Stock
pursuant to Section 5 of this Article IV, or (ii) acquisitions of Common Stock
by the Corporation pursuant to agreements which permit the Corporation to
repurchase such shares upon termination of services to the Corporation or in
exercise of the Corporation's right of first refusal on a proposed transfer);
(3) sell, lease or dispose of all or substantially all of
the assets of the Corporation, or effect a merger or consolidation of the
Corporation with or into any other corporation or corporations or other entity,
or any other corporate reorganization where the stockholders of the Corporation
immediately prior to such event do not obtain or retain a majority of the
outstanding equity in the successor entity; or
(4) amend the Certificate of Incorporation or bylaws to
change the authorized number of directors of the Corporation's board of
directors.
(b) In addition to any other rights provided by law, so long as
any shares of Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred, as applicable, shall be outstanding, the Corporation,
without first obtaining the affirmative vote or written consent of the holders
of not less than a majority of such outstanding shares of Series A Preferred,
Series B Preferred, Series C Preferred or Series D Preferred, (each voting as a
separate class), as applicable, will not:
(1) amend or repeal any provision of, or add any provision
to, the Corporation's Certificate of Incorporation or bylaws if such action
would alter, change or waive any of the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred; or
(2) create, whether by reclassification or otherwise, any
shares of any class or series of stock ranking senior to or on parity with the
Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred, as to dividends, voting, liquidation preference, conversion or
redemption rights.
-13-
<PAGE>
V.
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
Neither any amendment, modification nor repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article, shall eliminate, reduce or adversely affect, any right or
protection of a director of the Corporation existing hereunder with respect to
any act or omission occurring prior to such amendment, modification, repeal or
adoption of an inconsistent provision.
VI.
Effective upon the closing of a firm commitment underwritten public
offering of Common Stock of the Corporation, no action that is required or
permitted to be taken by the stockholders of the Corporation at any annual or
special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders.
VII.
Effective upon the closing of a firm commitment underwritten public
offering of Common Stock of the Corporation, no stockholder will be permitted to
cumulate votes at any election of directors.
VIII.
Notwithstanding the foregoing, effective upon the closing of a firm
commitment underwritten public offering of Common Stock of the Corporation, the
Board of Directors shall be divided into three classes, the members of each
class to serve for a term of three years; provided that the directors shall be
elected as follows: at the first annual meeting of the stockholders held
following the closing of a firm commitment underwritten public offering of
Common Stock of the Corporation, the directors in the first class shall be
elected for a term of three years, at the second annual meeting following such
date, the directors in the second class shall be elected for a term of three
years, and at the third annual meeting following such date, the directors in the
third class shall be elected for a term of three years. The Board of Directors
by resolution shall nominate the directors to be elected for each class. At
subsequent annual meetings of stockholders, a number of directors shall be
elected equal to the number of directors with terms expiring at that annual
meeting. Directors elected at each such subsequent annual meeting shall be
elected for a term expiring with the annual meeting of stockholders three years
thereafter.
-14-
<PAGE>
IX.
The Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal the Bylaws of the Corporation, but the stockholders may make
additional by-laws and may alter or repeal any by-law whether adopted by them or
otherwise.
Notwithstanding any other provision of this Certificate of Incorporation,
the Bylaws of the Corporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of stock of the Corporation required
by law, this Certificate of Incorporation or any Preferred Stock designation,
the affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the voting
power of the then outstanding shares of the voting stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required for the modification, amendment or repeal of
Section 2.2 (Annual Meeting), Section 2.3 (Special Meeting), Section 2.5
(Advance Notice of Stockholder Nominees and Stockholder Business), Section 3.3
(Election and Term of Office of Directors) and Section 3.4 (Resignation and
Vacancies) of the Bylaws of the Corporation or of Article VIII or this Article
IX of this Certificate of Incorporation.
X.
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the Corporation.
XI.
The Corporation is to have perpetual existence.
XII.
The number of directors which constitute the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.
XIII.
Advance notice of new business at stockholders' meetings and stockholder
proposals and stockholder nominations for the election of directors shall be
given in the manner and to the extent provided in the Bylaws of the Corporation.
XIV.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
-15-
<PAGE>
XV.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
XVI.
The name and mailing address of the incorporator are as follows:
Lynn Hashimoto
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
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<PAGE>
The undersigned incorporator hereby acknowledges that the above Certificate
of Incorporation of 2Bridge, Inc., is her act and deed and that the facts stated
therein are true.
Dated: ____________, 2000
_______________________________________
Lynn Hashimoto
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<PAGE>
Exhibit 3.3
BYLAWS
OF
2BRIDGE, INC.
(a Delaware corporation)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES............................................................... 1
1.1 REGISTERED OFFICE............................................................... 1
1.2 OTHER OFFICES................................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS....................................................... 1
2.1 PLACE OF MEETINGS............................................................... 1
2.2 ANNUAL MEETING.................................................................. 1
2.3 SPECIAL MEETING................................................................. 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................................ 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS................. 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.................................... 4
2.7 QUORUM.......................................................................... 4
2.8 ADJOURNED MEETING; NOTICE....................................................... 5
2.9 VOTING.......................................................................... 5
2.10 WAIVER OF NOTICE................................................................ 5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING......................... 6
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING...................................... 6
2.13 PROXIES......................................................................... 7
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE........................................... 7
ARTICLE III DIRECTORS..................................................................... 8
3.1 POWERS.......................................................................... 8
3.2 NUMBER OF DIRECTORS............................................................. 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS........................................ 8
3.4 RESIGNATION AND VACANCIES....................................................... 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE........................................ 9
3.6 REGULAR MEETINGS................................................................ 9
3.7 SPECIAL MEETINGS; NOTICE........................................................ 9
3.8 QUORUM.......................................................................... 10
3.9 WAIVER OF NOTICE................................................................ 10
3.10 ADJOURNMENT..................................................................... 10
3.11 NOTICE OF ADJOURNMENT........................................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............................... 11
3.13 FEES AND COMPENSATION OF DIRECTORS.............................................. 11
3.14 APPROVAL OF LOANS TO OFFICERS................................................... 11
ARTICLE IV COMMITTEES..................................................................... 11
4.1 COMMITTEES OF DIRECTORS......................................................... 11
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.2 MEETINGS AND ACTION OF COMMITTEES............................................... 12
4.3 COMMITTEE MINUTES............................................................... 12
ARTICLE V OFFICERS........................................................................ 13
5.1 OFFICERS........................................................................ 13
5.2 ELECTION OF OFFICERS............................................................ 13
5.3 SUBORDINATE OFFICERS............................................................ 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................................. 13
5.5 VACANCIES IN OFFICES............................................................ 13
5.6 CHAIRMAN OF THE BOARD........................................................... 14
5.7 PRESIDENT....................................................................... 14
5.8 VICE PRESIDENTS................................................................. 14
5.9 SECRETARY....................................................................... 14
5.10 CHIEF FINANCIAL OFFICER......................................................... 15
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS............. 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS....................................... 15
6.2 INDEMNIFICATION OF OTHERS....................................................... 16
6.3 INSURANCE....................................................................... 16
ARTICLE VII RECORDS AND REPORTS........................................................... 16
7.1 MAINTENANCE AND INSPECTION OF RECORDS........................................... 16
7.2 INSPECTION BY DIRECTORS......................................................... 17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS................................................ 17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................................. 17
7.5 CERTIFICATION AND INSPECTION OF BYLAWS.......................................... 17
ARTICLE VIII GENERAL MATTERS.............................................................. 17
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING........................... 17
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS....................................... 18
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED............................... 18
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES................................ 18
8.5 SPECIAL DESIGNATION ON CERTIFICATES............................................. 19
8.6 LOST CERTIFICATES............................................................... 19
8.7 CONSTRUCTION; DEFINITIONS....................................................... 20
ARTICLE IX AMENDMENTS..................................................................... 20
9.1 AMENDMENTS BY STOCKHOLDERS AND DIRECTORS........................................ 20
</TABLE>
-ii-
<PAGE>
BYLAWS
------
OF
--
2BRIDGE, INC.
-------------
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The Board of Directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the Board of Directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
Board of Directors, the chairman of the board, the chief executive officer or
the president of the Company or the holders of shares entitled to cast not less
than ten percent (10%) of the votes at the meeting.
<PAGE>
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting. The notice shall specify the
place, date and hour of the meeting and (i) in the case of a special meeting,
the purpose or purposes for which the meeting is called (no business other than
that specified in the notice may be transacted) or (ii) in the case of the
annual meeting, those matters which the Board of Directors, at the time of
giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
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, by any nominating committee or person appointed by 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 Section and who was a stockholder of record at the time of the
giving of such notice. Such nominations, other than those made by or at the
direction of the Board of Directors or by any nominating committee or person
appointed by the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than sixty (60) days nor more than one
hundred twenty (120) days prior to the scheduled meeting regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that in the event less than seventy (70) days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. For purposes
of this Section 2.5 "public disclosure" shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or a comparable
national news service or in a document publicly filed by the corporation with
the Securities and Exchange Commission. Such stockholder's notice shall set
forth (a) as to each person, if any, whom the stockholder proposes to nominate
for election or re-election as a director: (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
corporation which are beneficially owned by such person, (iv) any other
information relating to such person that is required by law to be disclosed in
solicitations of proxies for election of directors pursuant to applicable rules
and regulations of the Securities and Exchange Commission promulgated under the
Securities Exchange Act of 1934, as amended, and (v) such person's written
consent to being named as a nominee and to serving as a director if elected; and
(b) as to the stockholder giving the notice: (i) the name and address, as they
appear on the corporation's books, of such stockholder, (ii) the class and
number of shares of the corporation
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<PAGE>
which are beneficially owned by such stockholder on the date of such stockholder
notice, and (iii) a description of all arrangements or understandings between
such stockholder and each nominee and any other person or persons (naming such
person or persons) relating to the nomination. At the request of the Board of
Directors any person nominated by the Board of Directors 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 or required by the corporation to determine the
eligibility of such proposed nominee to serve as director of the corporation. No
person shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this Section. 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 the chairman should so determine, the
chairman shall so declare at the meeting and the defective nomination shall be
disregarded.
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) as 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 that was a stockholder of record at the time
of the giving of the relevant notice as provided below. Business to be brought
before an annual meeting by a stockholder shall not be considered properly
brought if the stockholder has not given timely notice thereof in writing to the
Secretary of the corporation or if such business is not a proper matter for
stockholder action under the General Corporation Law of the State of Delaware.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than sixty (60)
nor more than one hundred twenty (120) days prior to the scheduled meeting
regardless of any postponements, deferrals or adjournments of that meeting to a
later date; provided, however, that in the event that less than seventy (70)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual 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 and any other stockholders known by such
stockholder to be supporting such proposal, (iii) the class and number of shares
of the corporation which are beneficially owned by the stockholder and by any
other stockholders known by such stockholder to be supporting such proposal on
the date of such stockholder notice, (iv) any material interest of the
stockholder in such business, and (v) any other information that is required by
law to be provided by the stockholder in his capacity as a proponent of 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 stockholders' meeting, stockholders must provide notice as
required by the regulations promulgated under the
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<PAGE>
Securities Exchange Act of 1934, as amended. 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 Section. 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
accordance with the provisions of this Section, and, if the chairman should so
determine, the chairman shall so declare at the meeting that any such business
not properly brought before the meeting shall not be transacted.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
------
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
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2.8 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of the State of Delaware (relating to voting rights of fiduciaries, pledgors and
joint owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
At a stockholders' meeting at which directors are to be elected, a
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the stockholder has given notice prior
to commencement of the voting of the stockholders' intention to cumulate votes.
If any stockholder has given such a notice, then every stockholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that stockholder's shares are
normally entitled or (ii) by distributing the stockholder's votes on the same
principle among any or all of the candidates, as the stockholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect.
Notwithstanding the foregoing, effective upon the closing of a firm
commitment underwritten public offering of Common Stock of the corporation, no
stockholder will be permitted to cumulate votes at any election of directors.
2.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of the State of Delaware or of the certificate of incorporation
or these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of
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notice of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such 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, is 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.
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 and, who, if the action had been taken at a
meeting, would have been entitled to notice of the meeting if the record date
for such meeting had been the date that written consents signed by a sufficient
number of holders to take the action were delivered to the corporation as
provided in Section 228(c) of the General Corporation Law of the State of
Delaware. 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 the State of Delaware.
Notwithstanding the foregoing, effective upon the closing of a firm
commitment underwritten public offering of Common Stock of the corporation, no
action that is required or permitted to be taken by the stockholders at any
annual or special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
------------------------------------------
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the Board of Directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
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If the Board of Directors does not so fix a record date, 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 business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business 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
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1
of these bylaws.
2.13 PROXIES
-------
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date unless the proxy provides for a longer period. A proxy shall
be deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
the State of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
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ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of the State of
Delaware and any limitations in the certificate of incorporation and these
bylaws relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of Directors.
3.2 NUMBER OF DIRECTORS
-------------------
The corporation shall have one director as long as the corporation has no
more than one shareholder; if the corporation has two stockholders, the number
of directors shall be two (2); and if the corporation has more than two
stockholders, the number of directors shall be not less than five (5) nor more
than seven (7). The exact number of directors shall be fixed from time to time
within the limits specified herein, by the Board of Directors or the
stockholders.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
----------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy or a newly created directorship, shall hold office until the
expiration of the term of the class of directors for which elected and until a
successor has been elected and qualified.
Notwithstanding the foregoing, effective upon the closing of a firm
commitment underwritten public offering of Common Stock of the corporation, the
Board of Directors shall be divided into three classes, the members of each
class to serve for a term of three years; provided that the directors shall be
elected as follows: at the first annual meeting of the stockholders held
following the closing of a firm commitment underwritten public offering of
Common Stock of the corporation, the directors in the first class shall be
elected for a term of three years, at the second annual meeting following such
date, the directors in the second class shall be elected for a term of three
years, and at the third annual meeting following such date, the directors in the
third class shall be elected for a term of three years. The Board of Directors
by resolution shall nominate the directors to be elected for each class. At
subsequent annual meetings of stockholders, a number of directors shall be
elected equal to the number of directors with terms expiring at that annual
meeting. Directors elected at each such subsequent annual meeting shall be
elected for a term expiring with the annual meeting of stockholders three years
thereafter.
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<PAGE>
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the Board of Directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes effective.
All vacancies and newly created directorships in the Board of Directors may
be filled by a majority of the remaining directors, even if less than a quorum,
or by a sole remaining director; provided that whenever the holders of any class
or classes of stock or series thereof are entitled to elect one or more
directors by the provisions of the certificate of incorporation, vacancies and
newly created directorships of such class or classes or series may be filled by
a majority of the directors elected by such class or classes or series thereof
then in office, or by a sole remaining director so elected.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
Regular meetings of the Board of Directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the Board of Directors. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the
corporation. Special meetings of the Board of Directors may be held at any place
within or outside the State of Delaware that has been designated in the notice
of the meeting or, if not stated in the notice or if there is no notice, at the
principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
----------------
Regular meetings of the Board of Directors may be held without notice if
the times of such meetings are fixed by the Board of Directors.
3.7 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the Board of Directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation, or by facsimile or electronic
mail. If the notice is mailed, it shall be deposited in the United States mail
at least four (4) days before the time of the holding of the meeting. If the
notice is delivered personally or by telephone or
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telegram or by facsimile or electronic mail, it shall be delivered personally or
by telephone or to the telegraph company or by facsimile or electronic mail at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.8 QUORUM
------
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
----------------
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
3.10 ADJOURNMENT
-----------
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
---------------------
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
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3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Any action required or permitted to be taken by the Board of Directors may
be taken without a meeting, provided that all members of the Board of Directors
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the Board of Directors.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section 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 IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of one (1) or more directors of the corporation. The Board of
Directors may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. In the
absence or disqualification of a member of the committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of any such
absent or disqualified
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member. Any committee, to the extent provided in the resolution of the Board of
Directors, or in these bylaws, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it, but no such committee shall have the
power or authority to:
(a) approve or adopt, or recommend to the stockholders, any action or
matter expressly required by the General Corporation Law of the State of
Delaware to be submitted to stockholders for approval; or
(b) adopt, amend or repeal any bylaw of the corporation.
4.2 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
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ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, a secretary and a
chief financial officer. The corporation may also have, at the discretion of the
Board of Directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The Board of Directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in these bylaws or as the Board of Directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
Board of Directors at any regular or special meeting of the Board of Directors
or, except in case of an officer chosen by the Board of Directors, by any
officer upon whom such power of removal may be conferred by the Board of
Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
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5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
chairman of the board by the Board of Directors or as may be prescribed by these
bylaws. If there is no president, then the chairman of the board shall also be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and 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. The
president shall preside at all meetings of the stockholders and, in the absence
or nonexistence of a chairman of the board, at all meetings of the Board of
Directors. The president shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or these
bylaws.
5.8 VICE PRESIDENTS
---------------
In the absence or disability of the 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 from time to time may be
prescribed for them respectively by the Board of Directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at 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, whether regular or special (and, if special, how authorized and the
notice given), 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 stockholders
and their addresses, the number and classes of shares held by each, the number
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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. The secretary 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.
5.10 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 money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the Board of Directors, shall
render to the president and directors, whenever they request it, an account of
all of such person's transactions as chief financial officer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or
these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
-------------------------------------------------
AND OTHER AGENTS
----------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of the State of Delaware as the same now exists or
may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of the State of Delaware as the
same now exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit or proceeding,
in which such person was or is a party or is threatened to be made a party by
reason of the fact that such person is or was an employee or agent of the
corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
corporation (other than a director or officer) shall mean any person (i) who is
or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under the provisions of the General Corporation
Law of the State of Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the Board of Directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent
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to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in the State of Delaware or at its
principal place of business.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The Board of Directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, if any, the president, any vice president, the
chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the Board of Directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
--------------------------------------
The original or a copy of these bylaws, as amended or otherwise altered to
date, certified by the secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the stockholders of the
corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------
For purposes of determining 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 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 shall not be more than sixty (60) days before any such
action. In that case, only stockholders of record at the close of business on
the date so fixed are entitled to receive the dividend, distribution or
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of
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<PAGE>
any shares on the books of the corporation after the record date so fixed,
except as otherwise provided in the General Corporation Law of the State of
Delaware. 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.
If the Board of Directors does not so fix a record date, then 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 applicable
resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
-----------------------------------------
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
--------------------------------------------------
The Board of Directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
------------------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairperson or vice-
chairperson of the Board of Directors, or the president or vice-president, and
by the treasurer or an assistant treasurer, or the secretary or an assistant
secretary of the corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
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<PAGE>
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
the State of Delaware, in lieu of the foregoing requirements there may be set
forth on the face or back of the certificate that the corporation shall issue to
represent such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests the powers, the
designations, the preferences and the relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The Board of
Directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates or uncertificated shares on such terms and conditions as the board
may require; the board may require indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate or uncertificated shares.
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<PAGE>
8.7 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of the State of
Delaware shall govern the construction of these bylaws. Without limiting the
generality of this provision, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both a
corporation and a natural person.
ARTICLE IX
AMENDMENTS
----------
9.1 AMENDMENTS BY STOCKHOLDERS AND DIRECTORS
----------------------------------------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote or by the Board of Directors of
the corporation. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit their power
to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
2BRIDGE, INC.
A DELAWARE CORPORATION
Adoption by Incorporator
------------------------
The undersigned person appointed in the Certificate of Incorporation to act
as the Incorporator of 2Bridge, Inc. hereby adopts the foregoing bylaws,
comprising twenty (20) pages, as the Bylaws of the corporation.
Executed this [________] day of March, 2000.
______________________________________
Lynn Hashimoto, Incorporator
Certificate by Secretary of Adoption by Incorporator
----------------------------------------------------
The undersigned hereby certifies that he is the duly elected, qualified and
acting Secretary of 2Bridge, Inc. and that the foregoing Bylaws, comprising
twenty (20) pages, were adopted as the Bylaws of the corporation on March [___],
2000 by the person appointed in the Certificate of Incorporation to act as the
Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this [___] day of March, 2000.
______________________________________
Ronald Parks, Secretary
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
2BRIDGE
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
March 10, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights.................................. 1
1.1 Definitions.................................... 1
1.2 Requested Registration......................... 3
1.3 Piggy-back Registration Rights................. 5
1.4 Form S-3 Registration.......................... 6
1.5 Obligations of the Company..................... 7
1.6 Furnish Information............................ 8
1.7 Expenses of Registration....................... 8
1.8 Delay of Registration.......................... 9
1.9 Indemnification................................ 9
1.10 Reports Under Securities Exchange Act of 1934.. 11
1.11 Assignment of Registration Rights.............. 11
1.12 Limitations on Subsequent Registration Rights.. 12
1.13 Market Stand-off Agreement..................... 12
1.14 Termination of Registration Rights............. 12
2. Rights of First Refusal.............................. 12
2.4 Exercise of Right............................... 14
2.5 Lapse and Reinstatement of Right................ 14
2.6 Termination..................................... 14
3. Information and Board Visitation Rights.............. 15
4. Restrictions on Transfer............................. 16
4.2 Legends......................................... 17
5. General Provisions................................... 18
5.1 Further Assurances............................. 18
5.2 Rights Cumulative.............................. 18
5.3 Notices........................................ 18
5.4 Term........................................... 18
5.5 Severability................................... 19
5.6 Attorneys' Fees................................ 19
5.7 Entire Agreement............................... 19
5.8 Choice of Law.................................. 19
5.9 Binding on Heirs, Successors and Assigns....... 19
5.10 Amendment; Waiver.............................. 19
5.11 Counterparts................................... 20
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<PAGE>
2BRIDGE
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT ("Agreement") is
entered into as of March 10, 2000, by and among 2Bridge, a California
corporation (the "Company"), and the persons identified as "Investors" on
Exhibits A-1, A-2, A-3 and A-4 hereof.
RECITALS
WHEREAS, the Series A Preferred Stock ("Series A Preferred") Investors
listed on Exhibit A-1, the Series B Preferred Stock ( "Series B Preferred")
Investors listed on Exhibit A-2 hereto and the Series C Preferred Stock ("Series
C Preferred") Investors listed on Exhibit A-3 hereto are parties to the Second
Amended and Restated Investors' Rights Agreement dated as of July 23, 1999 (the
"Prior Agreement"), pursuant to which the Company granted to the Series A
Preferred, Series B Preferred and Series C Preferred Investors certain
registration and purchase rights; and
WHEREAS, in connection with the Company's issuance of Series D Preferred
Stock ("Series D Preferred") to certain Investors listed on Exhibit A-4 hereto
pursuant to the Series D Preferred Stock Purchase Agreement of even date
herewith (the "Purchase Agreement"), the Series A Preferred, Series B Preferred
and Series C Preferred Investors have agreed to amend and restate the Prior
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
1. Registration Rights. The Company hereby covenants and agrees as follows:
-------------------
1.1 Definitions. As used in this Agreement, the following terms shall have
-----------
the following respective meanings:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Common Stock" means the Company's Common Stock.
(d) "Form S-3" means such form under the 1933 Act as in effect on the
date hereof or any registration form under the 1933 Act subsequently adopted by
the Securities and Exchange Commission ("SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
<PAGE>
(e) "Holder" means any person owning of record Registrable Securities
or any permitted assignee thereof in accordance with Section 1.11 below.
(f) "Initiating Holders" means any Holders who in the aggregate
possess more than 25% of the Registrable Securities then outstanding.
(g) "Initial Public Offering" means the Company's first Public
Offering.
(h) "Public Offering" means any registered offering of the Company's
securities solely for cash, other than a registration (i) on Form S-8 or any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or (ii) with respect to an employee benefit plan, or
(iii) solely in connection with a Rule 145 transaction under the 1933 Act.
(i) 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 1933 Act, and the declaration or
ordering of the effectiveness of such registration statement or document by the
SEC.
(j) The term "Registrable Securities" means: (i) the Common Stock
issued or issuable upon conversion of the Series A Preferred, Series B
Preferred, Series C Preferred or Series D Preferred (collectively, "Preferred
Stock") held by the Investors, (ii) the Common Stock issued or issuable upon
exercise of the Warrants (x) to purchase Common Stock held by the Series A
Preferred Investors (the "Series A Warrant"), (y) to purchase Series C Preferred
Stock held by Imperial Bancorp (collectively, the "Series C Warrant"), and (z)
to purchase Series D Preferred Stock held by each of Sand Hill Capital II, LP,
TBCC Funding Trust II, and Silicon Valley Bank (collectively with the Series A
Warrant and the Series C Warrant, the "Warrants"); (iii) with respect to Section
1.3, 1.5 through 1.14 only, the Common Stock issued to each of Mr. Milton
Berlinski and David Braunschwig, each pursuant to a Restricted Stock Purchase
Agreement, dated March 8, 2000, and (iv) any Common Stock of the Company issued
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued) by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of, such Preferred Stock or Common Stock, excluding in
all cases, however, any Registrable Securities (A) sold by a person in a
transaction in which its rights under this Section 1 are not assigned; (B) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction; or (C) sold in a transaction exempt from the
registration and prospectus delivery requirements of the 1933 Act under Section
4(1) thereof so that all transfer restrictions and restrictive legends with
respect thereto are removed upon the consummation of such sale.
(k) 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.
(l) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 1.2, 1.3 and 1.4 below, including, without
limitation, all registration, filing and qualification fees, underwriters'
expense allowance, printing expenses, fees and
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<PAGE>
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company) and reasonable fees and disbursements not
to exceed $15,000 of one special counsel for all of the Holders who elect to
include their Registrable Securities in any such registration.
(m) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of the Registrable Securities in the
registration.
1.2 Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall receive from
------------------------
Initiating Holders a written request that the Company file a registration
statement under the 1933 Act with respect to shares of Registrable Securities
whose expected aggregate offering price is not less than: (i) $10,000,000 if
such request is made prior to the Company's Initial Public Offering, or (ii)
$7,500,000 of such request is made after the Company's Initial Public Offering,
the Company will:
(i) promptly, and in no event later than 30 days from receipt of
such written request, give written notice of such request to all other Holders;
and
(ii) subject to the limitations of Section 1.2(b) below, as soon as
practicable, use its best efforts to effect such registration under the 1933 Act
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the 1933 Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company; provided that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 1.2:
(A) Prior to the third anniversary of the closing date of the
initial purchase and sale of the Series D Preferred;
(B) During the period starting with the date of filing of any
registration statement in connection with the Initial Public Offering, provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective, and ending on the date
which is 180 days after the date on which such registration statement is
declared effective;
(C) If the Company has previously effected two (2)
registrations under this Section 1.2;
-3-
<PAGE>
(D) If the Company delivers notices to the Holders not more
than 30 days after receipt of any registration request of the Initiating Holders
that it intends to file a registration statement for its Initial Public Offering
within 90 days of the receipt of such registration request; or
(E) If the Company shall furnish to the Holders requesting a
registration statement pursuant to this Section 1.2 a certificate, signed by the
Chairman of the Board of the Company, stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be filed or
effected at such time, in which event the Company shall have the right to defer
such filing for a period of not more than 90 days after receipt of the
registration request of the Initiating Holders; provided that such right to
delay a request shall be exercised by the Company not more than once in any 12
month period.
Subject to the foregoing clauses (A) through (E) inclusive, the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders and in any event within 120 days
after receipt of such request.
(b) Underwriting. In the event that a registration pursuant to this
------------
Section 1.2 is for a registered Public Offering by means of an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.2(a)(i) above. In such event, the right of any Holder to registration
pursuant to this Section 1.2 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 1.2(b),
and the inclusion of such Holder's Registrable Securities in the underwriting to
the extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with a managing underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 1.2, if the managing
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company 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 registration and underwriting
shall be allocated among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement, provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all other securities
of the Company are first entirely excluded from the underwriting and
registration. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.
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<PAGE>
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities held by such Holder affected
shall be withdrawn from registration. If the registration does not become
effective due to the withdrawal of Registrable Securities, then either: (a) the
Holders requesting registration shall reimburse the Company for expenses
incurred in complying with the request, or (b) the aborted registration shall be
treated as effected for purposes of Section 1.2(a)(ii)(C); provided, however,
that if at the time of such withdrawal, the Holder or 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 following disclosure by the Company of
such material adverse change, then the Holders shall not be required to pay any
of such expenses, and the aborted registration shall not be treated as effected
for purposes of Section 1.2(a)(ii)(C).
1.3 Piggy-back Registration Rights.
------------------------------
(a) Piggy-back Rights. Except with respect to the Company's Initial
-----------------
Public Offering, if (but without any obligation to do so) the Company proposes
to register (including for this purpose a registration effected by the Company
for shareholders other than the Holders) any of its securities in connection
with a Public Offering, other than (i) a registration relating solely to
employee benefit plans, or (ii) a registration relating solely to a Commission
Rule 145 transaction, the Company shall promptly give each Holder written notice
of such registration, together with a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of each Holder given within 15 days
after delivery of such written notice by the Company in accordance with Section
5.3 below, the Company shall, subject to the provisions of Section 1.3(b) below,
use its best efforts to cause to be registered under the 1933 Act all of the
Registrable Securities that each such Holder has requested to be registered. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any of its Registrable
Securities in any subsequent registration statement or statements as may be
filed by the Company with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
(b) Underwriting Requirements in Piggy-back Registration. If the
registration statement under which the Company gives notice under this Section
1.3 is for an underwritten offering, the Company shall so advise the Holders of
Registrable Securities. The right of any Holder to registration pursuant to
Section 1.3(a) above shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting (each, a "Participating
Holder") shall (together with the Company and any other holders of Company
securities distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be
-5-
<PAGE>
underwritten, the underwriter may (subject to the allocation priority set forth
below) exclude some or all Registrable Securities from such registration and
underwriting. Further, notwithstanding anything to the contrary herein, no
reduction shall be made with respect to securities offered by the Company for
its own account under this Section 1.3. The Company shall so advise all persons
requesting registration, and the number of shares of securities that may be
included in the registration and underwriting shall be allocated in the
following manner. The number of shares that may be included in the registration
and underwriting shall be allocated (i) first to the Company; (ii) second to the
Participating Holders, in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders; and (iii)
third, to any other shareholders of the Company (other than Participating
Holders) on a pro rata basis. In no event shall the amount of securities of the
selling Holders included in the registration be reduced below twenty-five
percent (25%) of the total amount of securities included in such registration,
unless such offering is the Initial Public Offering and such registration does
not include shares of any other selling shareholders, in which event any or all
of the Registrable Securities of the Holders may be excluded in accordance with
the immediately preceding sentence. In no event will shares of any other
participating shareholder be included in such registration which would reduce
the number of shares which may be included by Participating Holders without the
written consent of Participating Holders of not less than a majority of the
Registrable Securities proposed to be sold in the offering. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration. In no event will the Company have any
obligation under this Section 1.3 with respect to its Initial Public Offering.
1.4 Form S-3 Registration. In case the Company shall receive from any
---------------------
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided that the
Company shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.4: (i) if the Company is not qualified as
a registrant entitled to use Form S-3; (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 of less than $500,000; (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
-6-
<PAGE>
seriously detrimental to the Company and its shareholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 120 days after receipt of the request of the Holder or
Holders under this Section 1.4; provided that the Company shall not utilize this
right more than once in the prior twelve (12) month period; or (iv) if the
Company has already effected one (1) registration on Form S-3 for the Holders
pursuant to this Section 1.4 in the prior twelve (12) month period.
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 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 120 days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 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
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under the securities laws of such
jurisdictions as shall be reasonably appropriate for the distribution of the
securities covered by the registration statement, 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 jurisdiction, and provided further that (anything in this Agreement to the
contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities in that
jurisdiction be borne by selling shareholders, then such expenses shall be
payable by the selling Holders pro rata, to the extent required by such
jurisdiction if such Holders do not elect to withdraw from the registration
after notice of such requirement.
(e) In the event of any underwritten Public Offering, enter into and
perform its obligations under an underwriting agreement with terms generally
satisfactory to the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
-7-
<PAGE>
(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 1933 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) Furnish, at the request of a majority of the Holders participating
in the registration, on the date that such Registrable Securities are delivered
to the underwriters for sale, 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 as of 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 and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and if permitted by applicable accounting
standards, to the Holders requesting registration of Registrable Securities.
1.6 Furnish Information. In connection with any action pursuant to this
-------------------
Section 1, the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities. In that connection, each selling
Holder shall be required to represent to the Company that all such information
which is given is both complete and accurate in all material respects when made.
1.7 Expenses of Registration. All Registration Expenses shall be borne by
------------------------
the Company. All Selling Expenses shall be borne by the Holders of the
securities so registered, (i) in an underwritten transaction, pro rata, on the
basis of the number of shares so registered or (ii) otherwise, by the Holder or
Holders who incurred such expenses.
1.8 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
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, the officers, directors, partners, and members (if
Holder is an LLC) of each Holder, any underwriter (as defined in the 1933 Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the 1933 Act or the 1934 Act, against any
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<PAGE>
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the 1933 Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto; (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or (iii) any violation
or alleged violation by the Company of the 1933 Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the 1933 Act, the
1934 Act or any state securities law; and the Company will reimburse each such
Holder, officer, director or partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action.
The Company's indemnity contained in this Section 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 to any
Holder 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 in writing
and expressly stated for use in connection with such registration by any such
Holder. The Company shall not be required to indemnify any person against any
liability arising from any untrue or misleading statement or omission contained
in any preliminary prospectus if such deficiency is corrected in the final
prospectus or any amendments or supplements thereto (collectively, the "Final
Prospectus"), and after the Company has furnished such Holder with a copy of the
Final Prospectus, such Holder fails to deliver a copy of such Final Prospectus.
The indemnity provided for in this Section 1.9(a) shall remain in full force and
effect regardless of any investigation made by or on behalf of such seller,
underwriter, participating person or controlling person and shall survive
transfer of such securities by such seller.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, any underwriter (within the meaning
of the 1933 Act) for the Company, any person who controls such underwriter, and
any other Holder selling securities in such registration statement or any of its
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the 1933 Act, the 1934 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 and expressly stated in a writing for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses, as reasonably incurred, by any person intended to be indemnified
pursuant to this Section 1.9(b), in connection with investigating or defending
any such loss, claim, damage, liability, or action. The indemnity agreement
contained in this Section 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
-9-
<PAGE>
without the consent of the Holder, which consent shall not be unreasonably
withheld, provided, that in no event shall any indemnity under this Section
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, notify the
indemnifying party in writing 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 that an indemnified party shall have the
-------------
right to retain its own counsel, with the reasonable fees and expenses to be
paid by the indemnifying party if the indemnified party reasonably determines
that 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 notify an indemnifying party within a
reasonable time of the commencement of any such action, to the extent
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to notify 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) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control, provided, however, that the failure of the underwriting agreement
to address an issue shall not be deemed to be a conflict between the
underwriting agreement and this Agreement.
(e) The obligations of the Company and Holders under this Section 1.9
shall survive the completion of any offering of the Registrable Securities in a
registration statement under this Section 1.
1.10 Reports Under Securities Exchange Act of 1934. With a view of making
---------------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the 1933 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, the
Company agrees to:
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in SEC Rule 144, at all
times after 90 days after the effective date of the registration statement filed
by the Company in connection with its Initial Public Offering;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the registration of the Company's Initial Public Offering is declared
effective;
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<PAGE>
(c) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, upon reasonable request: (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after 90 days after the effective date of the registration statement filed by
the Company in connection with its Initial Public Offering), the 1933 Act and
the 1934 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 or any state securities authorities which permits the selling of any such
securities without registration or pursuant to such form S-3.
1.11 Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registrable Securities pursuant to this Section 1 may be assigned by a
Holder to (A) a transferee or assignee of Registrable Securities who acquires
not less than 50,000 shares of the Registrable Securities (as adjusted for
recapitalizations, stock splits and combinations and the like), (B) a
subsidiary, parent, general partner, limited partner, retired partner,
affiliate, member (if Holder is an LLC) of a Holder, or investment fund or
entity controlled by a Holder, or (C) a Holder's family member or trust for the
benefit of an individual Holder or any family member; provided that (i) 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 (ii) such
assignment shall be effective only if immediately following such transfer the
transferee is bound by the terms and conditions of this Agreement and such
transfer of any Registrable Securities is lawful under all applicable securities
laws.
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 at least a majority of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company which would: (i) permit such holder or prospective
holder to include such securities in any registration filed pursuant to Section
1.2, 1.3, or 1.4 above if such inclusion would adversely affect the rights of
any Holder of Registrable Securities hereunder (provided that the pro rata
participation of those additional shares in a registration or cutback shall not
be deemed an adverse affect if such pro rata participation is approved
unanimously by the Board of Directors); (ii) permit such holder or prospective
holder to require the Company to initiate any registration of any securities of
the Company; or (iii) grant such holder registration rights senior to those
granted to the Holders hereunder.
1.13 Market Stand-off Agreement. Each Holder agrees, in connection with the
--------------------------
Company's Initial Public Offering, 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, grant any option for the purchase of, or
otherwise dispose of any securities of the Company (other than those included in
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<PAGE>
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
underwriters.
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.
1.14 Termination of Registration Rights. The registration rights granted
----------------------------------
pursuant to this Agreement shall terminate (i) as to all Holders on the date
which is the fifth year anniversary following the consummation of the Initial
Public Offering of the Company, or (ii) as to any Holder, at such time as such
Holder is able to sell all Registrable Securities held by it pursuant to Rule
144 promulgated under the 1933 Act in a three (3) month period.
2. Rights of First Refusal. The Company hereby grants to each Investor, as
-----------------------
long as the Investor holds at least 1,500,000 shares of Registrable Securities
(as adjusted for recapitalizations, stock splits and combinations and the like),
the right of first refusal to purchase, pro rata, a portion of any New
Securities (as defined in Section 2.1 below) that the Company, from time to
time, may propose to sell and issue. Each Investor's pro rata share of the New
Securities will be the ratio of (i) the number of shares of Common Stock issued
and held, and issuable upon the conversion of the shares of Preferred Stock and
upon the exercise of the Warrants then held, by such Investor as of the date of
the Rights Notice (as defined below) to (ii) the total number of shares of
Common Stock issued and held, and issuable upon the conversion of the shares of
Preferred Stock and upon the exercise of the Warrants or any other options,
warrants or convertible securities then held, by all persons, or reserved for
issuance under stock option and stock purchase plans of the Company as of such
date. This right of first refusal will be subject to the following provisions:
2.1 "New Securities" will mean any shares of Common Stock or Preferred
Stock of any kind of the Company, whether now or hereafter authorized, and
rights, options, or warrants to purchase said Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
said Common Stock or Preferred Stock; provided that "New Securities" will not
include: (i) securities issuable upon the conversion of or with respect to the
Series A Preferred, Series B Preferred, Series C Preferred or Series D
Preferred; (ii) securities issuable, upon the exercise of or with respect to the
Warrants to purchase shares of Series B Preferred issued and outstanding on
March 11, 1998; (iii) securities issuable, upon the exercise of or with respect
to the Warrants to purchase shares of Series C Preferred issued and outstanding
as of the date of the close of the Company's Series C Preferred issuance; (iv)
securities issuable, upon the exercise of or with respect to the Warrants to
purchase shares of Series D Preferred issued and outstanding as of the date of
the close of the Company's Series D Preferred issuance; (v) securities issued in
connection with the acquisition of another corporation by the Company by merger,
consolidation, purchase of substantially all of the assets, or other
reorganization as a result of which the Company owns more than fifty percent
(50%) of the voting power of such corporation; (vi) up to 4,735,000 shares of
the Company's Common Stock or related options (or such greater number of shares
as may be approved by a unanimous vote of the Board of Directors) issued
pursuant to any
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<PAGE>
stock option, incentive or any similar plan or agreement approved by the
Company's Board of Directors; (vii) shares of the Company's Common Stock or
Preferred Stock issued in connection with any stock split, stock dividend,
recapitalization, reclassification or similar event; (viii) securities as to
which the holders of a majority in interest of the Registrable Securities then
outstanding waive their rights of first refusal under this Section 2; (ix)
securities issued in connection with any grant by the Company or to the Company
of any substantial licensing, distribution, technology, product or intellectual
property rights that is approved by the Company's Board of Directors; or (x)
securities issued in connection with any equipment lease financing or other
similar purchase financing arrangement approved by a unanimous vote of the
Company's Board of Directors.
2.2 If the Company proposes to issue New Securities, it will give each
Investor that holds at least 1,500,000 shares of Registrable Securities (as
adjusted for recapitalizations, stock splits and combinations and the like)
written notice (the "Rights Notice") of the Company's intention to do so,
describing the New Securities, the price, and the general terms upon which the
Company proposes to issue them. Each such Investor will have 15 days from the
date of delivery of the Rights Notice to agree to purchase up to its pro rata
share of such New Securities (as determined above) for the price and upon the
general terms specified in the Rights Notice by giving written notice to the
Company setting forth the quantity of New Securities to be purchased.
2.3 If not all of the Investors elect to purchase their pro rata share of
New Securities, then the Company shall promptly notify in writing the Investors
who do so elect and shall offer such Investors the right to acquire such
unsubscribed shares. Such Investors shall have 5 days after receipt of such
notice to notify the Company of its election to purchase all or a portion
thereof of the unsubscribed shares.
2.4 Exercise of Right. If any Investor exercises its right of first
-----------------
refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after each Investor gives notice of such exercise, which
period of time shall be extended if necessary to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and such
Investor shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
2.5 Lapse and Reinstatement of Right. In the event an Investor fails to
--------------------------------
exercise the right of first refusal provided in this Section 2.1 within said
fifteen (15) day period, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by
such Investor at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the notice. In the event the
Company has not sold the New Securities described in the notice or entered into
an agreement to sell the New Securities within said ninety (90) day period (or
sold the New Securities in accordance with the foregoing within sixty (60) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities without first offering such securities to each Investor in
the manner provided above.
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<PAGE>
2.6 Termination. The rights of first refusal granted in this Section 2
-----------
shall not apply to, and shall terminate upon the closing of, a sale of shares of
the Company's capital stock pursuant to the Company's Initial Public Offering.
3. Information and Board Visitation Rights.
---------------------------------------
3.1 As long as an Investor holds not less than 1,500,000 shares of
Registrable Securities, the Company will deliver the following information and
reports to that Investor:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, an audited balance sheet of
the Company as of the end of such year and audited statements of income,
shareholders equity, and cash flow for such year, which year end financial
reports will be in reasonable detail and will be accompanied by a report and
opinion thereon of independent public accountants of nationally recognized
standing selected by the Company.
(b) As soon as practicable after the end of each fiscal quarter, and
in any event within 45 days thereafter, balance sheets of the Company and its
subsidiaries, if any, as of the end of such quarter, and statements of income
and cash flow for each quarter and for the current fiscal year to date,
including comparisons to that fiscal year's Annual Plan (as defined below) of
results for the quarter, as well as to year-to-date and the prior year
comparable period, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments need not be made.
(c) With reasonable promptness after being approved by the Company's
Board of Directors, monthly financial statements compared against a copy of the
Company's annual financial plan (the "Annual Plan").
(d) With reasonable promptness after being approved by the Company's
Board of Directors, and in all events within thirty (30) days prior to the
commencement of the relevant fiscal year, a copy of the Company's Annual Plan,
respecting such fiscal year, which will include reasonable detail and monthly
budgets.
3.2 The Company shall permit each Holder of at least 1,500,000 shares of
Registrable Securities, at such Holder'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 Investor; provided, however, that
-------- -------
the Company shall not be obligated pursuant to this Section 3. 2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
3.3 The Company's obligations to deliver reports and other information
under this Section 3 will terminate upon the closing of a sale of shares of the
Company's capital stock pursuant to the Company's Initial Public Offering.
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<PAGE>
3.4 Dr. Hasso Plattner (collectively with his affiliates) shall have the
right to designate one (1) person to attend all meetings of the Company's Board
of Directors in a nonvoting observor capacity. Arbor Investors shall have the
right to designate one (1) person to attend all meetings of the Company's Board
of Directors in a nonvoting observor capacity. Each such attendee may
participate in discussions of matters brought to the Board, but shall not have
any vote as to such matters. Each such attendee shall sign the Company's
customary form of Observer Rights Agreement. The Company shall provide such
persons with the same notice of all meetings of the Board of Directors and all
information and materials that it provides to the members of the Board of
Directors. The rights granted in this Section 3.4 shall terminate upon the
closing of a sale of shares of the Company's capital stock pursuant to the
Company's Initial Public Offering.
3.5 Each Investor agrees to, and to use its best efforts to insure that its
authorized representatives, keep confidential the information provided to it
pursuant to this Section 3 and any other information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may disclose
such proprietary or confidential information to any partner, subsidiary, parent,
or member of such Investor for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary, parent or member is advised of the
confidentiality provisions of this Section 3.
4. Restrictions on Transfer
------------------------
4.1 Each Holder agrees not to make any disposition of all or any portion of
the Preferred Stock, Warrants or Registrable Securities unless and until:
(a) There is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The transferee has agreed in writing to be bound by this
Section 4, (ii) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (iii) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the 1933 Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of Sections 4.1(a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is (i) a partnership to its partners or former
partners in accordance with partnership interests or to a member of such Holder
or an entity controlling, controlled by, or under common control with such
Holder or to an affiliate, (ii) a corporation to its shareholders in accordance
with their interest in the corporation, (iii) a limited liability company to its
members or former members in accordance with their interest in the limited
liability company, or (iv) to the Holder's family member or trust for the
benefit of an individual Holder, provided the transferee will be subject to the
terms of this Section 4 to the same extent as if he were an original Holder
hereunder.
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<PAGE>
4.2 Legends.
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(a) All certificates evidencing the Preferred Stock, and evidencing
the shares of Common Stock issuable upon the conversion of any of the Preferred
Stock and upon exercise of any of the Warrants, will bear the following legends:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN TAKEN BY
THE ISSUEE FOR INVESTMENT PURPOSES. THE SHARES MAY NOT BE SOLD OR
TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SAID ACT, (B)
THE TRANSFER AGENT (OR THE COMPANY IF THEN ACTING AS ITS OWN TRANSFER
AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION SATISFACTORY TO
COUNSEL FOR THE COMPANY OR A "NO-ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER, (C) THEY ARE SOLD IN COMPLIANCE WITH RULE 144 OR RULE 144A
UNDER THE ACT, OR (D) OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY IS PRESENTED TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED."
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS AS SET FORTH IN THAT CERTAIN AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT DATED MARCH _____, 2000, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
(b) The certificates evidencing the Preferred Stock or such shares of
Common Stock will also bear any legend required by the Commissioner of
Corporations of the State of California or required pursuant to any state, local
or foreign law governing such securities.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
4.3 Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
5. General Provisions.
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5.1 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby, and to carry into effect the intents and purposes of
this Agreement.
5.2 Rights Cumulative. Each and all, of the various rights, powers and
-----------------
remedies of the parties hereto shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
5.3 Notices. All notices, consents or demands of any kind which any party
-------
to this Agreement may be required or may desire to serve on any other party
hereto in connection with this Agreement shall be in writing and may be
delivered by personal service or overnight courier, by facsimile transmission,
or by certified mail, return receipt requested, deposited in the United States
mail with first-class postage thereon fully prepaid, addressed: (i) if to the
Company, attention: Secretary at its then current principal executive office
address; or (ii) if to an Investor, at its address as such Investor shall have
notified the Company is the Investor's latest address in accordance with this
Section 5.3. Service of any such notice or demand so made by mail shall be
deemed complete on the date of actual delivery as shown by the addressee's
certification receipt or at the expiration of 5 business days after the date of
mailing, whichever is earlier in time. Any party hereto may from time to time by
notice in writing served upon the others as aforesaid, designate a different
mailing address or a different person to which such notices or demands are
thereafter to be addressed or delivered.
5.4 Term. This Agreement shall commence as of the date set forth above and
----
shall terminate on the first date upon which each of the conditions for
termination of the respective Investors' rights, set forth in Sections 1.14,
2.6, 3.3 and 3.4 herein, have been satisfied.
5.5 Severability. The provisions of this Agreement are severable. The
------------
invalidity, in whole or in part, of any provision of this Agreement shall not
affect the validity or enforceability of any other of its provisions. If one or
more provisions hereof shall be so declared invalid or unenforceable, the
remaining provisions shall remain in full force and effect and shall be
construed in the broadest possible manner to effectuate the purposes hereof. The
parties further agree to replace such void or unenforceable provisions of this
Agreement with valid and enforceable provisions which will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provisions.
5.6 Attorneys' Fees. In any action at law or in equity to enforce any of
---------------
the provisions or rights under this Agreement, the unsuccessful party to such
litigation, as determined by the court in a final judgment or decree, shall pay
the successful party all reasonable costs, expenses and attorneys' fees incurred
by the successful party (including, without limitation, costs, expenses and fees
on any appeal).
-17-
<PAGE>
5.7 Entire Agreement. This Agreement (together with the Purchase Agreement
----------------
and the other documents referred to herein and therein) is intended by the
parties hereto to be the final expression of their agreement and constitutes and
embodies the entire agreement and understanding between the parties hereto with
regard to the subject matter hereof, is a complete and exclusive statement of
the terms and conditions thereof, and shall supersede any and all prior
correspondence, conversations, negotiations, agreements or understandings,
whether written or oral, relating to the same subject matter.
5.8 Choice of Law. It is the intention of the parties that the internal
-------------
laws of the State of California (irrespective of its choice of law principles)
should govern the validity of this Agreement and the interpretation of the
rights and duties of the parties.
5.9 Binding on Heirs, Successors and Assigns. This Agreement and all of
----------------------------------------
its terms, conditions and covenants are intended to be fully effective and
binding, to the extent permitted by law, on the heirs, executors,
administrators, successors and permitted assigns of the parties hereto.
5.10 Amendment; Waiver. Any provision of this Agreement may be amended
-----------------
and/or the observance thereof may be waived upon the written consent of the
Company and the Holders of a majority of the Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with this Section
5.10 shall be binding upon each Holder of any Registrable Securities then
outstanding (including securities into which such securities are convertible),
each future Holder of all such Registrable Securities, and the Company. No
waiver of any term, provision or condition of this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or be
construed as, a further or continuing waiver of any such term, provision or
condition or as a waiver of any other term, provision or condition of this
Agreement.
5.11 Counterparts. This Agreement may be executed in separate counterparts,
------------
each of which shall be deemed an original, and when executed, separately or
together, shall constitute a single original instrument, effective in the same
manner as if the parties hereto had executed one and the same instrument. In the
event of an additional closing or closings of the purchase of additional shares
of Series D Preferred Stock pursuant to the Purchase Agreement of even date
herewith, upon execution of a signature page counterpart and without need for an
amendment hereto, any such purchaser shall become a party to this Agreement, and
shall be deemed an "Investor" for purposes of this Agreement, and shall have the
rights and obligations hereunder.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
2BRIDGE
By:
-----------------------------
Mansoor Zakaria, Chairman and
Chief Executive Officer
[SIGNATURE PAGE TO THE AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
-19-
<PAGE>
2BRIDGE
INVESTOR SIGNATURE PAGE
TO
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
The undersigned hereby executes and delivers the Amended and Restated
Investors' Rights Agreement (the "Agreement") to which this Signature Page is
attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of said Agreement and Signature
Pages of the other parties named in said Agreement, shall constitute one and the
same document in accordance with the terms of said Agreement.
-------------------------------------
[Type or Print Name of Investor]
By:
----------------------------------
Print Name:
--------------------------
Title:
--------------------------------
(if applicable)
Address:
-----------------------------
-----------------------------
-----------------------------
<PAGE>
EXHIBIT 10.1
2BRIDGE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of ______________
by and between 2Bridge, Inc., a Delaware corporation (which, together with the
California corporation which was its predecessor, is known herein as the
"Company"), and _______________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the coverage of liability
insurance has been limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers and
directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement (if
such settlement is approved in advance by the Company, which approval shall not
be unreasonably withheld) actually and reasonably incurred by Indemnitee in
connection with such action or proceeding if Indemnitee acted in good faith and
in a manner Indemnitee reasonably believed to be in or not opposed to the
<PAGE>
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that (i) Indemnitee did not act in
good faith, (ii) Indemnitee did not act in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company, or (iii)
with respect to any criminal action or proceeding, Indemnitee had no reasonable
cause to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) and, to the fullest extent permitted by law, amounts
paid in settlement, in each case to the extent actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such action or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
and its stockholders, except that no indemnification shall be made in respect of
any claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company in the performance of Indemnitee's duty to the Company and
its stockholders unless and only to the extent that the court in which such
action or suit is or was pending shall determine upon application that, in view
of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses and then only to the extent that the
court shall determine.
2. Agreement to Serve. In consideration of the protection afforded by
------------------
this Agreement, if Indemnitee is a director of the Company, he agrees to serve
at least for the balance of the current term as a director and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. If Indemnitee is an officer of the Company not serving
under an employment contract, he agrees to serve in such capacity at least for
the balance of the current fiscal year of the Company and not to resign
voluntarily during such period without the written consent of a majority of the
Board of Directors. Following the applicable period set forth above, Indemnitee
agrees to continue to serve in such capacity at the will of the Company (or
under separate agreement, if such agreement exists) so long as he is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Bylaws of the Company or any subsidiary of the Company or until such time
as he tenders his resignation in writing. Nothing contained in this Agreement
is intended to or shall create in Indemnitee any right to continued employment.
-2-
<PAGE>
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action or proceeding referenced in Section
1(a) or (b) hereof (but not amounts actually paid in settlement of any such
action or proceeding). Indemnitee hereby undertakes to repay such expenses
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request
therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly addressed;
otherwise notice shall be deemed received when such notice shall actually be
received by the Company. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) Procedure. Any indemnification provided for in Section 1 shall be
---------
made no later than forty-five (45) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under any
provision of the Company's Certificate of Incorporation or Bylaws providing for
indemnification, is not paid in full by the Company within forty-five (45) days
after a written request for payment thereof has first been received by the
Company, Indemnitee may, but need not, at any time thereafter submit his claim
to arbitration as described in Section 14 to recover the unpaid amount of the
claim and, subject to Section 15 of this Agreement, Indemnitee shall also be
entitled to be paid for the expenses (including attorneys' fees) of bringing
such claim. It shall be a defense to any such action (other than a claim
brought for expenses incurred in connection with any action or proceeding in
advance of its final disposition) that Indemnitee has not met the standards of
conduct which make it permissible under applicable law for the Company to
indemnify Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company, and Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Subsection 3(a) unless and until such
defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists or an arbitration panel as described in Section
14. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court or arbitration panel to decide, and neither the failure
of the Company (including its Board of Directors, any committee or subgroup of
the Board of Directors, independent legal counsel, or its stockholders) to have
made a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met
-3-
<PAGE>
the applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, which approval shall
not be unreasonably withheld, upon the delivery to Indemnitee of written notice
of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his own counsel in
any such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute or rule
which expands the right of a Delaware corporation to indemnify a member of its
Board of Directors or an officer, such changes shall be, ipso facto, within the
---- -----
purview of Indemnitee's rights and Company's obligations under this Agreement.
In the event of any change in any applicable law, statute or rule which narrows
the right of a Delaware corporation to indemnify a member of its Board of
Directors or an officer, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement shall have no effect
on this Agreement or the parties' rights and obligations hereunder.
-4-
<PAGE>
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action or
other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines, penalties or amounts paid in settlement actually or
reasonably incurred by him in the investigation, defense, appeal or settlement
of any civil or criminal action or proceeding, but not, however, for the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
----------------------
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Directors' and Officers' Liability Insurance. The Company shall, from
--------------------------------------------
time to time, make a good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among
other considerations, the Company will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage. In all
policies of directors' and officers' liability insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company's
directors, if Indemnitee is a director; or of the Company's officers, if
Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, if Indemnitee is not an officer or director but is a
key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in
good faith that such insurance is not reasonably available, if the premium costs
for such insurance are disproportionate to the amount of coverage provided, if
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
-5-
<PAGE>
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
-----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions
-------------
or transactions from which a director may not be indemnified under the Delaware
General Corporation Law; or
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such claim; or
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction or the arbitration panel determines that each of the material
assertions made by the Indemnitee in such proceeding was not made in good faith
or was frivolous; or
(d) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
-6-
<PAGE>
10. Effectiveness of Agreement. To the extent that the indemnification
--------------------------
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the Delaware General Corporation
Law, such provisions shall not be effective unless and until the Company's
Certificate of Incorporation authorizes such additional rights of
indemnification. In all other respects, the balance of this Agreement shall be
effective as of the date set forth on the first page and may apply to acts or
omissions of Indemnitee which occurred prior to such date if Indemnitee was an
officer, director, employee or other agent of the Company, or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the time
such act or omission occurred.
11. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that if
Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries.
12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
13. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
14. Arbitration. It is understood and agreed that the Company and
-----------
Indemnitee shall carry out this Agreement in the spirit of mutual cooperation
and good faith and that any differences, disputes or controversies shall be
resolved and settled amicably among the parties hereto. In the event that the
dispute, controversy or difference is not so settled in the above manner within
forty-five (45) days, then the matter shall be exclusively submitted to
arbitration in Santa Clara
-7-
<PAGE>
County, California before three independent technically qualified arbitrators in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and under the laws of Delaware, without reference to conflict of
laws principles. Subject to Sections 1(b) and 6, arbitration shall be the
exclusive forum and the decision and award by the arbitrator(s) shall be final
and binding upon the parties concerned and may be entered in any state court of
California having jurisdiction.
15. Attorneys' Fees. In the event that any action is instituted or claim
---------------
is submitted to arbitration by Indemnitee under this Agreement to enforce or
interpret any of the terms hereof, Indemnitee shall be entitled to be paid all
court costs and expenses, including reasonable attorneys' fees, incurred by
Indemnitee with respect to such action or arbitration, unless as a part of such
action, a court of competent jurisdiction or the arbitrator(s) determines that
each of the material assertions made by Indemnitee as a basis for such claim
were not made in good faith or were frivolous. In the event of an action
instituted or a claim submitted to arbitration by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action or
claim (including with respect to Indemnitee's counterclaims and cross-claims
made in such action or arbitration), unless as a part of such action the court
or the arbitrator(s) determines that each of Indemnitee's material defenses to
such action or claim were made in bad faith or were frivolous.
16. Notice. All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
17. Consent to Jurisdiction. The Company and Indemnitee each hereby
------------------------
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California
in Santa Clara County and that any arbitration proceeding which arises out of or
relates to this Agreement shall be held in Santa Clara County, California.
18. Choice of Law. This Agreement shall be governed by and its provisions
-------------
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and performed entirely within
Delaware.
19. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall
-8-
<PAGE>
execute all documents required and shall do all acts that may be necessary to
secure such rights and to enable the corporation effectively to bring suit to
enforce such rights.
20. Continuation of Indemnification. All agreements and obligations of
-------------------------------
the Company contained herein shall continue during the period that Indemnitee is
a director, officer or agent of the Company and shall continue thereafter so
long as Indemnitee shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative, by reason of the fact that
Indemnitee was serving in the capacity referred to herein.
21. Amendment and Termination. Subject to Section 20, no amendment,
-------------------------
modification, termination or cancellation of this Agreement shall be effective
unless in writing signed by both parties hereto.
22. Integration and Entire Agreement. This Agreement (a) sets forth the
--------------------------------
entire understanding between the parties, (b) supersedes all previous written or
oral negotiations, commitments, understandings and agreements relating to the
subject matter hereof and (c) merges all prior and contemporaneous discussions
between the parties.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
2BRIDGE, INC.
By:______________________________
Title:___________________________
Address: 221 Main Street, Suite 800
San Francisco, CA 94105
AGREED TO AND ACCEPTED:
INDEMNITEE:
______________________________
Signature
______________________________
Print Name
______________________________
______________________________
Address
-10-
<PAGE>
EXHIBIT 10.2
2BRIDGE, INC.
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means 2Bridge, Inc., a Delaware corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by the
----------
Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
--------
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
<PAGE>
(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, then three (3) months following the 91st 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 on the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
-------------------------
as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "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.
(r) "Option" means a stock option granted pursuant to the Plan.
------
-2-
<PAGE>
(s) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Optioned Stock" means the Common Stock subject to an Option or
--------------
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 2000 Stock Plan.
----
(x) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(y) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(z) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
----------
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(aa) "Section 16(b) " means Section 16(b) of the Exchange Act.
-------------
(bb) "Service Provider" means an Employee, Director or Consultant.
----------------
(cc) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(dd) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ee) "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 13 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 3,000,000 Shares plus an annual increase to be added on
the first day of the Company's fiscal year beginning in 2001, equal to the
lesser of (i) 2,500,000 shares, (ii) 5% of the outstanding shares on such date
or (iii) a lesser amount determined by the Board. 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 the unpurchased Shares which were subject
thereto shall become
-3-
<PAGE>
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. Different Committees with
------------------------------
respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
--------------------
shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
-4-
<PAGE>
(vi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(vii) 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 satisfying applicable foreign laws;
(viii) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(ix) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
-----------
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
-5-
<PAGE>
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 1,500,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 1,500,000
Shares, which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
-6-
<PAGE>
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares, provided Shares acquired from the Company, (A)
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the
-7-
<PAGE>
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 Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the
-8-
<PAGE>
Optionee's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance, but only to the extent that the Option is vested on
the date of death. In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for twelve (12) months following the
Optionee's termination. If, at the time of death, the Optionee is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the 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
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the
-9-
<PAGE>
Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, 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 and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the number of shares that may be added annually to the shares
reserved under the Plan (pursuant to Section 3(a)(i)), as well as the price per
share of Common Stock covered by each such outstanding Option or Stock Purchase
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
--------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right shall be assumed
or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and have the right to exercise
the Option or Stock Purchase Right as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
or Stock Purchase Right becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully
-10-
<PAGE>
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. 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 Company 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.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being
-11-
<PAGE>
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.
17. 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.
18. Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. 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 manner and to the
degree required under Applicable Laws.
-12-
<PAGE>
2BRIDGE, INC.
2000 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________________
Date of Grant _________________________________
Vesting Commencement Date _________________________________
Exercise Price per Share $_________________________________
Total Number of Shares Granted _________________________________
Total Exercise Price $_________________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: __________________________________
Vesting Schedule:
----------------
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates].
<PAGE>
Termination Period:
------------------
This Option may be exercised for [three months] after Optionee ceases to be
a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for [twelve months] after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
---------
A. Grant of Option.
----------------
The Plan Administrator of the Company hereby grants to the Optionee named
in the Notice of Grant attached as Part I of this Agreement (the "Optionee") an
option (the "Option") to purchase the number of Shares, as set forth in the
Notice of Grant, at the exercise price per share set forth in the Notice of
Grant (the "Exercise Price"), subject to the terms and conditions of the Plan,
which is incorporated herein by reference. Subject to Section 15(c) of the
Plan, in the event of a conflict between the terms and conditions of the Plan
and the terms and conditions of this Option Agreement, the terms and conditions
of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d)
it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
-------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
C. Method of Payment.
------------------
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash;
2. check;
3. consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
4. surrender of other Shares, provided Shares acquired from the
Company, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (ii) have a Fair Market Value on the date of surrender
equal to the aggregate Exercise Price of the Exercised Shares.
D. 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 the Optionee. The terms of the Plan and this Option
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
E. Term of Option.
---------------
This Option may be exercised only within the term set out in the Notice
of Grant, and may be exercised during such term only in accordance with the Plan
and the terms of this Option Agreement.
F. Tax Obligations.
----------------
1. Withholding Taxes. Optionee agrees to make appropriate
-----------------
arrangements with the Company (or the Parent or Subsidiary employing or
retaining Optionee) for the satisfaction of all Federal, state, and local income
and employment tax withholding requirements applicable to the Option exercise.
Optionee acknowledges and agrees that the Company may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
2. Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
-3-
<PAGE>
G. Entire Agreement; Governing Law.
--------------------------------
The Plan is incorporated herein by reference. The Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
H. NO GUARANTEE OF CONTINUED SERVICE.
----------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES
AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.
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 Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: 2BRIDGE, INC.
- ----------------------------------- -----------------------------------
Signature By
- ----------------------------------- -----------------------------------
Print Name Title
- -----------------------------------
Residence Address
- -----------------------------------
-4-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
------------------------------------
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
2BRIDGE, INC.
2000 STOCK PLAN
EXERCISE NOTICE
2Bridge, Inc.
221 Main Street, Suite 800
San Francisco, CA 94105
Attention: [Title]
1. Exercise of Option. Effective as of today,________________, _____, the
------------------
undersigned ("Purchaser") hereby elects to purchase ______________ shares (the
"Shares") of the Common Stock of 2Bridge, Inc. (the "Company") under and
pursuant to the 2000 Stock Plan (the "Plan") and the Stock Option Agreement
dated, _____ (the "Option Agreement"). The purchase price for the Shares shall
be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
----------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. 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 with 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.
<PAGE>
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: 2BRIDGE, INC.
- ----------------------------------- --------------------------------------
Signature By
- ----------------------------------- --------------------------------------
Print Name Its
Address: Address:
- ------- -------
- ----------------------------------- 2Bridge, Inc.
221 Main Street, Suite 800
- ----------------------------------- San Francisco, CA 94105
--------------------------------------
Date Received
-2-
<PAGE>
EXHIBIT 10.3
2BRIDGE SOFTWARE
1997 STOCK OPTION PLAN
1. Adoption and Purpose of the Plan. This stock option plan, to be known as
--------------------------------
the "2Bridge Software 1997 Stock Option Plan" (but referred to herein as the
"Plan") has been adopted by the board of directors (the "Board") of 2Bridge
Software, a California corporation (the "Company"), and is subject to the
approval of its shareholders pursuant to section 8 below. The purpose of this
Plan is to advance the interests of the Company and its shareholders by enabling
the Company to attract and retain qualified directors, officers, employees,
independent contractors, consultants and advisers by providing them with an
opportunity for investment in the Company. The options that may be granted
hereunder ("Options") represent the right by the grantee thereof (each,
including any permitted transferee pursuant to section 7.3 below, an "Optionee")
to acquire shares of the Company's common stock ("Shares" which if acquired
pursuant to the exercise of an Option will be referred to as "Option Stock")
subject to the terms and conditions of this Plan and a written agreement between
the Company and the Optionee to evidence each such Option (an "Option
Agreement").
2. Certain Definitions. The defined terms set forth in Exhibit A attached
------------------- ---------
hereto and incorporated herein (together with other capitalized terms defined
elsewhere in this Plan) will govern the interpretation of this Plan.
3. Eligibility. The Company may grant Options under this Plan only to (i)
-----------
persons who, at the time of such grant, are directors, officers and/or employees
of the Company and/or any of its Subsidiaries, and (ii) persons who, and
entities which, at the time of such grant, are independent contractors,
consultants or advisers of the Company and/or any of its Subsidiaries ("Eligible
Participants"); provided that no Option may be granted to any person after he or
she ceases, or to any entity after it ceases, for any reason, to be an Eligible
Participant (a "Loss of Eligibility Status"). Subject to the provisions of
section 4 of this Plan, there is no limitation on the number of Options that may
be granted to an Eligible Participant.
4. Option Pool: Shares Reserved for Option. In no event will the Company
---------------------------------------
issue, in the aggregate, more than three million four hundred eighty-five
thousand (3,485,000) Shares (the "Option Pool") pursuant to the exercise of all
Options granted under this Plan, exclusive of those Shares of Option Stock that
may be reacquired by the Company by repurchase or otherwise; provided that in
order to comply with the requirements of Section 260.140.45 of Title 10 of the
California Code of Regulations (the "30% Rule"), at no time will the total
number of Shares that either (x) may be acquired pursuant to the exercise of all
outstanding Options granted hereunder or under any other outstanding options or
warrants issued by the Company (exclusive of certain excluded rights and
warrants described in the 30% Rule), or (y) are provided for under any stock
bonus or similar plan of the Company, in the aggregate exceed 30% of the total
number of then issued and outstanding Shares of the Company (including shares of
convertible preferred stock or convertible senior common stock on an as
converted basis). At all times while Options granted under this Plan are
outstanding, the Company will reserve for issuance for the purposes hereof a
<PAGE>
sufficient number of authorized and unissued Shares to fully satisfy the
Company's obligations under all such outstanding Options.
5. Administration. This Plan will be administered and interpreted by the Board,
--------------
or by a committee consisting of two or more members of the Board, appointed by
the Board for such purpose (the Board, or such committee, referred to herein as
the "Administrator"). Subject to the express terms and conditions hereof, the
Administrator is authorized to prescribe, amend and rescind rules and
regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. Specifically,
the Administrator will have full and final authority in its discretion, subject
to the specific limitations on that discretion as are set forth herein and in
the Articles of Incorporation and Bylaws of the Company, at any time:
(a) to select and approve the Eligible Participants to whom Options will be
granted from time to time hereunder;
(b) to determine the Fair Market Value of the Shares as of the Grant Date
for any Option that is granted hereunder;
(c) with respect to each Option it decides to grant, to determine the terms
and conditions of that Option, to be set forth in the Option Agreement
evidencing that Option (the form of which also being subject to approval
by the Administrator), including at a minimum the following:
(i) the total number of Shares of Option Stock that may be acquired by
the Optionee pursuant to that Option;
(ii) whether that Option will be designated an "incentive stock option"
as defined in Section 422 of the Code (an "ISO"), in which case the Option will
be subject to all of the special provisions set forth in section 6 below;
(iii) the per share purchase price to be paid to the Company by the
Optionee to acquire the Option Stock issuable upon exercise of the Option (the
"Option Price"); provided that the Option Price will not be less than eighty-
five percent (85%) of the Fair Market Value of the Shares as of the Grant Date,
unless the Optionee is a 10% shareholder, in which case the Option Price will
not be less than one hundred ten percent (110%) of such Fair Market Value;
(iv) the maximum period or term during which that Option will be
exercisable (the "Option Term") and/or the last date on which that Option may be
exercised (the "Expiration Date"), provided that in no event may the Expiration
Date be later than, or the Option Term be longer than, ten (10) years from the
Grant Date.
(v) the maximum period following any Loss of Eligibility Status with
respect to the Original Holder, whether resulting from his or her death,
disability or any other reason, during which period (the "Grace Period") the
Option will be exercisable, subject to the earlier end of the Option Term or the
Expiration Date, provided that if the Administrator fails to
-2-
<PAGE>
specify such Grace Periods, but subject to the provisions of section 6(e) below
with respect to ISOs, the following Grace Periods will apply (and in no event
may the Administrator select Grace Periods that are shorter than the following):
(A) sixty (60) days after such Loss of Eligibility Status, other than by reason
of a Just Cause Termination or the Original Holder's death or disability, (B)
one hundred eighty (180) days after such Loss of Eligibility Status by reason of
the Original Holder's death or disability, and (C) thirty (30) days after such
Loss of Eligibility Status by reason of a Just Cause Termination of the Original
Holder;
(vi) the form or forms of legal consideration in addition to cash
(including without limitation Shares and unexercised Vested Options, and, for an
Optionee who is an employee and/or director only, unsecured promissory notes)
that the Company will accept as payment of all or a portion of the Option Price
and/or Tax Withholding Liability to be paid by the Optionee upon the exercise of
an Option granted hereunder, and the fair market value of such non-cash
consideration;
(vii) the conditions (e.g., the passage of time or the occurrence of
events), if any, that must be satisfied prior to the vesting of the right to
exercise all, or specified portions of an Option (such portions being described
as a percentage of the total number of Shares of Option Stock that may be
acquired by the Optionee pursuant to that Option; the vested portion being
referred to as a "Vested Option" and the unvested portion being referred to as
an "Unvested Option"); provided that no such conditions (except the Loss of
Eligibility Status of the Original Holder, after which no Unvested Option will
become a Vested Option) may be imposed which prevents an Optionee from
purchasing at least twenty percent (20%) of the Shares of Option Stock initially
subject to the Option as of the first anniversary of the Grant Date, and as of
each anniversary thereafter, such that by the fifth anniversary of the Grant
Date (assuming no such Loss of Eligibility Status) the entire Option would be
deemed a Vested Option; provided further that if the Option Agreement does not
otherwise specify, the Option will initially be deemed an entirely Unvested
Option but portions of the Option will become a Vested Option on the following
schedule: (A) twenty-five percent (25.0%) will become a Vested Option as of the
first anniversary of the Grant Date; and (B) two and one-twelfth percent
(2.083%) will become a Vested Option as of the first day of each month
thereafter, such that the Option will be a fully Vested Option as of the fourth
anniversary of the Grant Date, subject to the condition that the Original Holder
does not suffer a Loss of Eligibility Status prior to each such vesting date;
and
(viii) in addition, or as an alternative, to imposing vesting conditions
on the right to exercise an Option as provided in section 5(c)(vii) above,
whether any portion of the Shares of Option Stock acquired by an Optionee upon
exercise of an Option will be subject to repurchase by the Company or its
assigns pursuant to section 7.4(c) below at the Option Price paid for such
Shares or at some other price that may be less than the Fair Market Value of
such Shares (such Shares, if subject to repurchase at less than Fair Market
Value, being referred to as "Unvested Shares") following a Loss of Eligibility
Status or other designated event, and the conditions (e.g., the passage of time
or the occurrence of events), if any, that must be satisfied for such Shares to
be no longer subject to such rights of repurchase at less than Fair Market Value
(such Shares being referred to as "Vested Shares"); provided that no such
conditions (except the Loss of Eligibility Status of the Original Holder, after
which no Unvested Shares will become
-3-
<PAGE>
Vested Shares) may be imposed which prevent Unvested Shares from becoming Vested
Shares at the rate of at least twenty percent (20%) per year following the Grant
Date, such that by the fifth anniversary of the Grant Date (assuming no such
Loss of Eligibility Status) all of the Shares would be deemed Vested Shares;
provided further that no Shares acquired upon the exercise of an Option will be
deemed Unvested Shares unless specified in the Option Agreement; and
(d) to delegate all or a portion of the Administrator's authority under
sections 5(a), (b) and (c) above to one or more members of the Board who also
are executive officers of the Company, and subject to such restrictions and
limitations as the Administrator may decide to impose on such delegation.
6. Special Provisions Relating to ISOs. Notwithstanding anything else in this
-----------------------------------
Plan to the contrary, the following provisions will apply to each Option granted
hereunder that is designated as an ISO pursuant to section 5(c)(ii) above and
that is intended to qualify for the treatment available pursuant to Section 422
of the Code:
(a) such ISO may be granted only to Eligible Participants who, as of
the Grant Date, are employees of the Company and/or its Subsidiaries (as
determined by Section 3401(c) of the Code);
(b) to the extent that the Fair Market Value of Option Stock
(determined as of the Grant Date) with respect to which all ISOs are exercisable
for the first time by any individual during any calendar year (pursuant to this
Plan and all other plans of the Company and/or its Subsidiaries) exceeds
$100,000, the Option will not be treated as an ISO;
(c) the Option Price of an ISO will not be less than one hundred
percent (100%) of the Fair Market Value of the Shares as of the Grant Date,
except as set forth in section 6(d) below;
(d) in the case of an ISO granted to an Optionee who is a 10%
shareholder: (i) the Option Price will not be less than one hundred ten percent
(110%) of the Fair Market Value of the Shares as of the Grant Date; and (ii) the
Option Term and/or the Expiration Date may not be more than five (5) years from
the Grant Date; and
(e) notwithstanding any Grace Period selected by the Administrator
pursuant to section 5(c)(v) above, the tax treatment available pursuant to
Section 422 of the Code upon the exercise of an ISO will not be available to an
Optionee who exercises any ISO more than (i) three (3) months following the
Original Holder's Loss of Eligibility Status other than by reason of his or her
death or permanent and total disability within the meaning of Section 22(e)(3)
of the Code, or (ii) twelve (12) months following such Original Holder's Loss of
Eligibility Status by reason or his or her permanent and total disability,
whichever case may be applicable.
7. Additional Terms and Conditions of Stock Option Agreements. No Option will
----------------------------------------------------------
be deemed granted hereunder merely upon the authorization thereof by the
Administrator, but will be deemed granted hereunder only upon the execution of
an Option Agreement evidencing the same by both the Optionee and a duly
authorized officer of the Company. In addition to the terms and
-4-
<PAGE>
conditions thereof to be determined by the Administrator pursuant to section
5(c) above, unless otherwise stated therein, each Option Agreement will be
deemed to include the following terms and conditions unless expressly waived by
the Company in the Option Agreement:
7.1 Exercise of the Option; Issuance of Share Certificate. That portion of
-----------------------------------------------------
the Option that is a Vested Option may be exercised by giving written notice
thereof to the Company, on such form as may be specified by the Administrator,
but in any event stating: the Optionee's intention to exercise the Option; the
date of exercise; the number of full Shares of Option Stock to be purchased
(which number will be no less than one hundred (100) Shares, without regard to
adjustments to the number of Shares subject to the Option pursuant to section 9
below, or, if less, all of the remaining Shares subject to the Option); the
amount and form of payment of the Option Price; and will contain such assurances
of the Optionee's investment intent as the Company may require to ensure that
the transaction complies in all respects with the requirements of the 1933 Act
and other applicable securities laws. The notice of exercise will be signed by
the person or persons exercising the Option. In the event that the Option is
being exercised by the representative of Optionee, the notice will be
accompanied by proof satisfactory to the Company of the representative's right
to exercise the Option. The notice of exercise will be accompanied by full
payment of the Option Price for the number of Shares of Option Stock to be
purchased, in United States dollars, in cash, by check made payable to the
Company, or in the form of such other legal consideration for the purchase of
Shares as may be approved by the Administrator, in its discretion pursuant to
section 5(c)(vi) above. In addition, to the extent required by applicable
federal, state, local or foreign law, and as a condition to the Company's
obligation to issue any Shares upon the exercise of the Option in full or in
part, Optionee will make arrangements satisfactory to the Company for the
payment of any applicable Tax Withholding Liability that may arise by reason of
or in connection with such exercise. Such arrangements may include, in the
Company's sole discretion, that the Optionee tender to the Company the amount of
such Tax Withholding Liability, in cash, by check made payable to the Company,
or in the form of such other payment as may be approved by the Administrator, in
its discretion pursuant to section 5(c)(vi) above. After receiving a proper
notice of exercise and payment of the applicable Option Price and withholding
taxes, the Company will cause to be issued a certificate or certificates for the
Shares of Option Stock as to which the Option has been exercised, registered in
the name of the person rightfully exercising the Option and, subject to sections
7.4(e) and 7.7 below, the Company will cause such certificate or certificates to
be delivered to such person.
7.2 Compliance with Law. Notwithstanding any other provision of this Plan,
-------------------
Options may be granted pursuant to this Plan, and Option Stock may be issued
pursuant to the exercise thereof by an Optionee, only after and on the condition
that there has been compliance with all applicable federal and state securities
laws. The Company will not be required to list, register or qualify any Shares
of Option Stock upon any securities exchange, under any state or federal law, or
with the Securities and Exchange Commission or any State agency, or secure the
consent or approval of any governmental regulatory authority, except that if at
any time the Board determines, in its discretion, that such listing,
registration or qualification of the Shares of Option Stock, or any such consent
or approval, is necessary or desirable as a condition of or in connection with
the exercise of an Option and the purchase of Shares of Option Stock thereunder,
that Option may not be exercised, in whole or in part, unless and until such
listing, registration, qualification,
-5-
<PAGE>
consent or approval is effected or obtained free of any conditions that are not
acceptable to the Board, in its discretion. However, the Company will seek to
register or qualify with, or as may be provided by applicable local law, file
for and secure an exemption from such registration or qualification requirements
from, the applicable securities administrator and other officials of each
jurisdiction in which an Eligible Participant would be granted an Option
hereunder prior to such grant.
7.3 Restrictions on Transfer.
------------------------
(a) Options Nontransferable. No Option will be transferable by the
-----------------------
Original Holder otherwise than by will or the laws of descent and distribution.
During the lifetime of the Original Holder, the Option will be exercisable only
by the Original Holder.
(b) Prohibited Transfers. In addition to any other limitation on
--------------------
Transfer created by applicable securities laws, prior to the Initial Public
Offering, no Holder of any Shares of Option Stock, may Transfer such Shares, or
any interest therein, except pursuant to a Permitted Transfer or as otherwise
expressly provided in this section 7, and in any event only after compliance
with the specific limitations and conditions set forth in this section 7 and
with all applicable securities laws. All transfers of Option Stock not complying
with the specific limitations and conditions set forth in this section 7 are
expressly prohibited. Any prohibited Transfer is void and of no effect, and no
purported transferee in connection therewith will be recognized as a Holder of
Option Stock for any purpose whatsoever. Should such a Transfer purport to
occur, the Company may refuse to carry out the Transfer on its books, attempt to
set aside the Transfer, enforce any undertakings or rights under this section 7,
or exercise any other legal or equitable remedy. For purposes of this section 7,
the term "Option Stock" includes all Shares issued by the Company to a Holder
(or his, her or its predecessor) by reason of such holdings, including any
securities which may be acquired as a result of a stock split, stock dividend,
and other distributions of Shares in the Company made upon, or in exchange for,
other securities of the Company.
(c) Permitted Transfers. The Company's rights of first refusal and
-------------------
repurchase set forth in section 7.4(a) and section 7.4(b) below will not apply
in the case of a Permitted Transfer. For such purposes, a "Permitted Transfer"
means any of the following: (i) a Transfer by will or under the laws of descent
and distribution; or (ii) a Transfer by a Holder of Option Stock to his or her
ancestors, descendants or spouse (other than pursuant to a decree of divorce,
dissolution or separate maintenance, a property settlement, or a separation
agreement or any similar agreement or arrangement with a spouse, except for bona
fide estate planning purposes), or to a trust, partnership, limited liability
company, custodianship or other fiduciary account for the benefit of the Holder
and/or such ancestors, descendants or spouse, including any Transfer in the form
of a distribution from any such trust, partnership, limited liability company,
custodianship or other fiduciary account to any of the foregoing permitted
beneficial owners or beneficiaries thereof.
-6-
<PAGE>
(d) Conditions to Transfer. It will be a condition to any Transfer of
----------------------
any Shares of Option Stock, in the case of either a Permitted Transfer or the
Company's failure or refusal to exercise its rights of first refusal under
section 7.4 below, that:
(i) the transferee of the Shares will execute such documents as the
Company may reasonably require to ensure that the Company's rights under this
Plan, and any applicable Option Agreement, are adequately protected with respect
to such Shares, including, without limitation, the transferee's agreement to be
bound by all of the terms and conditions of this Plan and such Agreement, as if
he or she were the original Holder of such Shares; and
(ii) the Company is satisfied that such Transfer complies in all
respects with the requirements imposed by applicable state and federal
securities laws and regulations.
(e) Market Standoff. If in connection with any public offering of
---------------
securities of the Company (or any Successor Entity), the underwriter or
underwriters managing such offering so requests, then each Optionee and each
Holder of Shares of Option Stock will agree to not sell or otherwise Transfer
any such Shares (other than Shares included in such underwriting) without the
prior written consent of such underwriter, for such period of time as may be
requested by the underwriter (not to exceed 210 days) commencing on the
effective date of the registration statement filed with the Securities and
Exchange Commission in connection with such offering.
7.4 Company Rights of Repurchase and First Refusal. The Company win have
----------------------------------------------
the following rights of repurchase and first refusal with respect to Shares of
Option Stock:
(a) Company's Right of First Refusal. If any Holder proposes to
--------------------------------
Transfer any Shares of Option Stock to any transferee, other than in the case of
an Involuntary Transfer subject to section 7.4(b) below, the Company will have
an assignable right (but not an obligation), prior to an Initial Public
Offering, to purchase such Shares on the terms and conditions set out in this
section 7.4(a). Such right of first refusal will be exercisable only on an all-
or-nothing basis as to any particular Transfer of Shares, in the following
manner:
(i) The Holder proposing to Transfer such Shares will provide to
the Company a notice, of proposed Transfer (a "Proposed Transfer Notice")
stating: the number of Shares that the Holder proposes to Transfer and the
Holder's bona fide intention to Transfer such Shares; the names and addresses of
the Holder, the proposed transferee; the manner and date of such proposed
Transfer; and the bona fide cash price and/or other consideration (and the fair
market value thereof) per share, if any, that such Transferee has offered to pay
Holder for such Shares (the "Offered Price") as well as such other terms,
including payment terms, and conditions, if any, as were included in such offer
(the "Offered Terms"). If the Company subsequently requests additional
information concerning the proposed transferee, or the Offered Terms, the Holder
will attempt promptly to provide the requested information to the Company.
(ii) The Company (or its assignee) may exercise its right of first
refusal under this section 7.4(a) by delivering to the Holder of such Shares a
notice of such
-7-
<PAGE>
election, within thirty (30) days after the Company has received the Proposed
Transfer Notice, specifying a closing date that is no more than sixty (60) days
after receipt of the Proposed Transfer Notice (or such later date as the
transferee may have offered or on which the Transfer is otherwise scheduled to
occur).
(iii) At such closing, to be held at the Company's principal
executive offices, the Company (or its assignee) will pay the Holder of the
Shares, in cash, the purchase price equal to the Offered Price (or, in the case
of a Donative Transfer of Shares of Option Stock, the Fair Market Value
thereof), subject to an appropriate adjustment to take into account any deferred
payment terms that were included in the Offered Terms; provided that if the
Offered Price includes any non-cash consideration, the value thereof for
purposes of this section 7.4(a) will be determined in good faith by the Board,
subject to section 7.4(d) below.
(iv) If the Company (including its assignees) fails or refuses to
exercise its rights under this section 7.4(a) with respect to any Shares that
are the subject of any Proposed Transfer Notice, then the Holder will have the
right to Transfer such Shares to the transferee named in such Notice at the
Offered Price and upon such Offered Terms as were set forth in such Notice;
provided that such Transfer must be completed within ninety (90) days after the
Company has received the Proposed Transfer Notice with respect to such Shares.
(b) Following an Involuntary Transfer. Following any Involuntary
Transfer of Shares of Option Stock (the "Transferred Shares"), the Company will
have the assignable right (but not the obligation), prior to an Initial Public
Offering, to purchase from the transferee of the Transferred Shares
("Transferee") all or a portion of such Shares for a purchase price that is
equal to the Fair Market Value of those Shares as of the date of such
Involuntary Transfer. Such right will be exercisable in the following manner:
(i) The Transferee promptly after such Involuntary Transfer will
provide to the Company a notice of Transfer (an "Involuntary Transfer Notice")
stating: the number of Transferred Shares; the names and addresses of the
transferor and the Transferee; and the manner, circumstances and date of such
Involuntary Transfer. If the Company subsequently requests additional
information concerning the proposed transferee, or the Involuntary Transfer, the
Transferee will attempt promptly to provide the requested information to the
Company.
(ii) The Company (or its assignee) may exercise its purchase
rights under this section 7.4(b) at any time not more than ninety (90) days
after the Company has received the Involuntary Transfer Notice with respect to
the Transferred Shares. If the Company (or its assignee) elects to exercise such
purchase rights it will do so by delivering to the Transferee a notice of such
election, specifying the number of Transferred Shares to be purchased and a
closing date that is no more than sixty (60) days after the giving of such
notice.
(iii) At such closing, to be held at the Company's principal
executive offices, the Company (or its assignee) will pay the Transferee the
purchase price specified in this section 7.4(b). Following a Loss of Eligibility
Status.
-8-
<PAGE>
(c) Following a Loss of Eligibility Status. Following any Loss of
--------------------------------------
Eligibility Status by the Original Holder of an Option, the Company will have
the assignable right (but not the obligation) to purchase from the Holder of
Shares acquired pursuant to the exercise of the Option, all or a portion of such
Shares for a purchase price that (1) in the case of Unvested Shares pursuant to
section 5(c)(viii) above, is equal to the Option Price paid for such Shares, and
(2) in the case of Vested Shares, or Shares of Option Stock that were never
subject to Vesting pursuant to section 5(c)(viii) above, is equal to the greater
of (A) the Option Price per share paid upon the exercise of the Option pursuant
to which those Shares were issued, or (B) the Fair Market Value of those Shares
as of the date of such Loss of Eligibility Status. Such right will be
exercisable in the following manner:
(i) The Company (or its assignee) may exercise its right of
repurchase under this section 7.4(c) at any time not more than ninety (90) days
after the effective date of the Loss of Eligibility Status of the Original
Holder of the Option (or if such Loss of Eligibility Status results from the
Original Holder's death or disability, a period of ninety (90) days after the
expiration of the Grace Period determined by the Administrator pursuant to
section 5(c)(v) above during which the Optionee would be able to exercise any
Vested Option), but in any event in the case of Vested Shares, prior to an
Initial Public Offering. If the Company (or its assignee) elects to exercise
such purchase rights it will do so by delivering to the Holder of such Shares a
notice of such election, specifying the number of Shares to be purchased and a
closing date that is within such ninety (90) day period.
(ii) At such closing, to be held at the Company's principal
executive offices, the Company (or its assignee) will pay the Holder of the
Shares, the purchase price, as specified in this section 7.4(c), in cash, or by
cancellation of indebtedness to the Company, if any, incurred by the original
purchaser of the Option Stock to purchase the same, or both, at a closing to be
held at the Company's principal executive offices on the date specified in such
notice.
(iii) Any assignment by the Company of its rights to purchase
Unvested Shares under this section 7.4(c) will be subject to the requirements of
Section 260.140.41(k) of Title 10 of the California Code of Regulations.
(d) Resolution of Disputes. If there is a dispute concerning the fair
----------------------
market value of the consideration offered or accepted for the Shares of Option
Stock or the Fair Market Value of the Option Stock, in connection with the
exercise by the Company of its rights under this section 7.4, the dispute will
be resolved by the independent certified public accounting firm that audited or
prepared without audit the Company's last regular annual financial statement and
the determination of that firm will be binding on the parties in the absence of
fraud.
(e) Escrow. For purposes of facilitating the enforcement of the
------
restrictions on Transfer set forth in this Plan or in any Option Agreement, the
Administrator may, at its discretion, require the Holder of Shares of Option
Stock to deliver the certificate(s) for such Shares with a stock power executed
by him or her and by his or her spouse (if required for Transfer), in blank, to
the Secretary of the Company or his or her designee, to hold said
-9-
<PAGE>
certificate(s) and stock power(s) 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 Plan. The certificates may be held in escrow so long as the Shares
of Option Stock whose ownership they evidence are subject to any right of
repurchase or of first refusal under this Plan or under an Option Agreement.
Each Optionee, by exercising an Option, thereby acknowledges that the Secretary
of the Company (or his or her designee) is so appointed as the escrow holder
with the foregoing authorities as a material inducement to the grant of an
Option under this Plan, that the appointment is coupled with an interest, and
that it accordingly will be irrevocable. The escrow holder will not be liable to
any party to an Option Agreement (or to any other party) for any actions or
omissions unless the escrow holder is grossly negligent relative thereto. The
escrow holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine.
7.5 Change of Control Transactions. Notwithstanding any other provision of
------------------------------
this Plan, in the event of a Change of Control Transaction (as defined herein):
(a) with respect to all Options that have been granted hereunder and
that are outstanding as of the consummation of such Change of Control
Transaction, the Board, in its sole discretion, may determine that it is in the
best interests of the Company, and if so may take all appropriate action either
to:
(i) cancel all such Options effective as of the consummation of the
Change of Control Transaction and, in connection with each Option, any portion
of which is a Vested Option, notify the Optionee of the proposed Change of
Control Transaction reasonably prior to its consummation so that the Optionee
will have an opportunity to exercise the Vested Option immediately prior to such
consummation; or
(ii) require the Successor Entity in such Change of Control
Transaction to assume the outstanding Options or substitute therefor comparable
options of such Successor Entity (or of its parent or its Subsidiary); and
(b) with respect to all Shares of Option Stock that have been issued
and that are outstanding as of the consummation of such Change of Control
Transaction, the Company will have the right (but not the obligation) to
repurchase all (but not less than all) of the Shares by paying the Holder
thereof cash, or cancelling any indebtedness of such Holder to the Company, or
both, at a closing to be held contemporaneously with the consummation of the
Change of Control Transaction, provided that the repurchase price for such
Shares (other than Unvested Shares pursuant to section 5(c)(viii) above)] will
be an amount per share that is equal to the Fair Market Value of the Shares
based on the Board's good faith estimate of the valuation of the Company implied
by the estimated fair market value of the total consideration to be paid in
connection with the Change of Control Transaction.
(i) For purposes of this section 7.5: the term "Change of Control
Transaction" means a Business Combination in which less than sixty-six and two-
thirds percent (66.67%) of the outstanding voting securities of the Successor
Entity immediately following the consummation of the Business Combination
transaction are beneficially held by those persons and entities in the same
proportion as such persons and entities beneficially held the voting securities
-10-
<PAGE>
of the Company immediately prior to such transaction; the term "Business
Combination" means a transaction or series of transactions consummated within
any period of ninety (90) days resulting in (A) the sale of all or substantially
all of the assets of the Company, (B) a merger or consolidation or other
reorganization in which the Company is not the surviving entity or becomes owned
entirely by another entity, or (C) the sale or other change of beneficial
ownership of at least thirty-three and one-third percent (33.33%) of the
outstanding voting securities of the Company.
7.6 Additional Restrictions on Transfer; Investment Intent. By accepting an
------------------------------------------------------
Option and/or Shares of Option Stock under this Plan, the Optionee will be
deemed to represent, warrant and agree that, unless a registration statement is
in effect with respect to the offer and sale of Shares of Option Stock: (i)
neither the Option nor any such Shares will be freely tradeable and must be held
indefinitely unless such Option and such Shares are either registered under the
1933 Act or an exemption from such registration is available; (ii) the Company
is under no obligation to register the Option or any such Shares; (iii) upon
exercise of the Option, the Optionee win purchase the Shares of Option Stock for
his or her own account and not with a view to distribution within the meaning of
the 1933 Act, other than as may be effected in compliance with the 1933 Act and
the rules and regulations promulgated thereunder; (iv) no one else will have any
beneficial interest in the Option Stock; (v) the Optionee has no present
intention of disposing of the Option Stock at any particular time; and (vi)
neither the Option nor the Shares have been qualified under the securities laws
of any state and may only be offered and sold pursuant to an exception from
qualification under applicable state securities laws.
7.7 Stock Certificates; Legends. Certificates representing Shares of Option
---------------------------
Stock will bear all legends required by law and necessary or appropriate in the
Administrator's discretion to effectuate the provisions of this Plan and of the
applicable Option Agreement. The Company may place a "stop transfer" order
against Shares of Option Stock until full compliance with all restrictions and
conditions set forth in this Plan, in any applicable Option Agreement and in the
legends referred to in this section 7.7.
7.8 Notices. Any notice to be given to the Company under the terms of an
-------
Option Agreement will be addressed to the Company at its principal executive
office, Attention: Corporate Secretary, or at such other address as the Company
may designate in writing. Any notice to be given to an Optionee will be
addressed to him or her at the address provided to the Company by the Optionee.
Any such notice win be deemed to have been duly given if and when enclosed in a
properly sealed envelope, addressed as aforesaid, deposited, postage prepaid, in
a post office or branch post office regularly maintained by the United States
Postal Service.
7.9 Other Provisions. Each Option Agreement may contain such other terms,
----------------
provisions and conditions, including restrictions on the Transfer of Shares of
Option Stock, and rights of the Company to repurchase such Shares, not
inconsistent with this Plan, as may be determined by the Administrator in its
sole discretion.
7.10 Specific Performance. Under those circumstances in which the Company
--------------------
chooses to timely exercise its rights to repurchase Shares of Option Stock as
provided herein, the Company will be entitled to receive such Shares in specie
in order to have the same available for
-11-
<PAGE>
future issuance without dilution of the holdings of other shareholders of the
Company. By accepting Shares of Option Stock, the Holder thereof therefore
acknowledges and agrees that money damages will be inadequate to compensate the
Company and its shareholders if such a repurchase is not completed as
contemplated hereunder and that the Company will, in such case, be entitled to a
decree of specific performance of the terms hereof or to an injunction
restraining such holder (or such Holder's personal representative) from
violating this Plan or Option Agreement, in addition to any other remedies that
may be available to the Company at law or in equity.
7.11 No Shareholder Rights. No rights or privileges of a shareholder in the
---------------------
Company are conferred by reason of the granting of the Option. No Optionee will
become a shareholder in the Company with respect to any Shares of Option Stock
unless and until the Option has been properly exercised and the Option Price
fully paid as to the portion of the Option exercised.
8. Term of the Plan. This Plan will become effective on the date of its
----------------
adoption by the Board, provided this Plan is approved by the shareholders of the
Company (excluding Shares of Option Stock issued by the Company pursuant to the
exercise of Options granted under this Plan) within twelve (12) months before or
after that date. If this Plan is not so approved by the shareholders of the
Company within that twelve (12) month period of time, any Options granted under
this Plan will be rescinded and will be void. This Plan will remain in effect
until the tenth (10th) anniversary of the date of its adoption by the Board or
its approval by the shareholders of the Company, whichever is earlier, unless it
is terminated earlier pursuant to section 11 of this Plan.
9. Adjustments Upon Changes in Stock. In the event of any change in the
---------------------------------
outstanding Shares of the Company as a result of a stock split, reverse stock
split, stock dividend or distribution, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made in: (i) the
aggregate number of Shares that are reserved for issuance in the Option Pool
pursuant to section 4 above, under outstanding Options or future Options granted
hereunder; (ii) the Option Price and the number of Shares of Option Stock that
may be acquired under each outstanding Option granted hereunder; and (iii) other
rights and matters determined on a per share basis under this Plan or any Option
Agreement evidencing an outstanding Option granted hereunder. Any such
adjustments will be made only by the Board, and when so made will be effective,
conclusive and binding for all purposes with respect to this Plan and all
Options then outstanding. No such adjustments will be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
Shares or securities convertible into or exchangeable for Shares.
10. Modification, Extension and Renewal of Options; Governing Law. Subject to
-------------------------------------------------------------
the terms and conditions and within the limitations of this Plan, the
Administrator may modify, extend or renew outstanding Options granted under this
Plan, or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised). Notwithstanding the
foregoing, however, no modification of any Option will, without the consent of
the Optionee, alter or impair
-12-
<PAGE>
any rights or obligations under any outstanding Option. This Plan will be
governed by, and construed in accordance with, the laws of the State of
California.
11. Amendment and Discontinuance. The Board May amend, suspend or discontinue
----------------------------
this Plan at any time or from time to time; provided that no action of the Board
will cause ISOs granted under this Plan not to comply with Section 422 of the
Code unless the Board specifically declares such action to be made for that
purpose and provided further that no such action may, without the approval of
the shareholders of the Company, materially increase (other than by reason of an
adjustment pursuant to section 9 hereof) the maximum aggregate number of Shares
of Option Stock in the Option Pool, materially increase the benefits accruing to
Eligible Participants, or materially modify the category of, or eligibility
requirements for persons who are Eligible Participants. However, no such action
may alter or impair any Option previously granted under this Plan without the
consent of the Optionee, nor may the number of Shares of Option Stock in the
Option Pool be reduced to a number that is less than the aggregate number of
Shares of Option Stock (i) that may be issued pursuant to the exercise of all
outstanding and unexpired Options granted hereunder, and (ii) that have been
issued and are outstanding pursuant to the exercise of Options granted hereunder
(net of any such Shares that have been reacquired by the Company by repurchase
or otherwise).
12. Information Provided by Company. Prior to an Initial Public Offering, the
-------------------------------
Company annually will make available to each Optionee the Company's financial
statements (which statements need not be audited), and each Optionee will, by
virtue of entering into an Option Agreement, be deemed to have agreed (and to
cause any investment advisers to whom the Optionee proposes to make such
information available to agree) to keep such information confidential and not to
use such information for any purpose whatsoever other than determining whether
to exercise an Option.
13. Copies of Plan. A copy of this Plan will be delivered to each Optionee at
--------------
or before the time he or she executes an Option Agreement.
Date Plan Adopted by Board of Directors: March 17, 1997
Date Plan Approved by the Shareholders: March 17, 1997
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<PAGE>
2BRIDGE SOFTWARE
1997 STOCK OPTION PLAN
Exhibit A
DEFINITIONS
1. "10% shareholder" means a person who owns, either directly or indirectly by
virtue of the ownership attribution provisions set forth in Section 424(d) of
the Code at the time he or she is granted an Option, stock possessing more than
ten percent (10%) of the total combined voting power or value of all classes of
stock of the Company and/or of its Subsidiaries.
2. "1933 Act" means the Securities Act of 1933, as amended.
3. "Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of the Code as
enacted at the time of the Plan's adoption by the Board and as subsequently
amended, or to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise).
4. "Donative Transfer" with respect to Shares of Option Stock means any
Transfer, other than a Permitted Transfer or an Involuntary Transfer, without
the receipt of cash or other legal consideration in payment therefor.
5. "Fair Market Value" means, with respect to the Shares and as of the date
that is relevant to such a determination (e.g., on the Grant Date), the market
price per share of such Shares determined by the Administrator, consistent with
the requirements of Section 422 of the Code and to the extent consistent
therewith, as follows: (a) if the Shares are traded on a stock exchange on the
date in question, then the Fair Market Value will be equal to the closing price
reported by the applicable composite transactions report for such date; (b) if
the Shares are traded over-the-counter on the date in question and are
classified as a national market issue, then the Fair Market Value will be equal
to the last-transaction price quoted by the NASDAQ system for such date; (c) if
the Shares are traded over-the-counter on the date in question but are not
classified as a national market issue, then the Fair Market Value will be equal
to the mean between the last reported representative bid and asked prices quoted
by the NASDAQ system for such date; and (d) if none of the foregoing provisions
is applicable, then the Fair Market Value will be determined by the
Administrator in good faith on such basis as it deems appropriate, taking into
consideration the provisions of Section 260.141.50 of Title 10 of the California
Code of Regulations.
6. "Grant Date" means, with respect to an Option, the date on which the Option
Agreement evidencing that Option is entered into between the Company and the
Optionee, or such other date as may be set forth in that Option Agreement as the
"Grant Date" which will be the effective date of that Option Agreement.
<PAGE>
7. "Holder" means the holder of any Shares of Option Stock.
8. "Initial Public Offering" means the closing of the first sale of securities
of the Company, or of any Successor Entity, to the public, through a firm
commitment underwriting, for an aggregate price (exclusive of underwriters'
commissions and expenses of the offering) of at least ten million dollars
($10,000,000), pursuant to an effective registration statement filed with the
Securities and Exchange Commission under the 1933 Act.
9. "Involuntary Transfer" with respect to Shares of Option Stock includes,
without limitation, any of the following: (A) an assignment of the Shares for
the benefit of creditors of the transferor; (B) a Transfer by operation of law;
(C) an execution of judgment against the Shares or the acquisition of record or
beneficial ownership of Shares by a lender or creditor; (D) a Transfer by will
or under the laws of descent and distribution; (E) a Transfer pursuant to any
decree of divorce, dissolution or separate maintenance, any property settlement,
any separation agreement or any other agreement with a spouse (except for bona
fide estate planning purposes) under which any Shares are Transferred or awarded
to the spouse of the transferor or are required to be sold; or (F) a Transfer
resulting from the filing by the transferor of a petition for relief, or the
filing of an involuntary petition against the transferor, under the bankruptcy
laws of the United States or of any other nation.
10. "Just Cause Termination" means a termination by the Company and/or any of
its Subsidiaries of the Original Holder's employment or services (or if the
Original Holder is a director, removal of him or her from the Board by action of
the shareholders or, if permitted by applicable law and the Bylaws of the
Company, the other directors), in connection with the good faith determination
of the Board (or of the Company's shareholders if the Original Holder is a
director and the removal of him or her from the Board is by action of the
shareholders, but in either case excluding the vote of the subject individual if
he or she is a director or a shareholder) that the Original Holder has engaged
in any acts involving dishonesty or moral turpitude or in any acts that
materially and adversely affect the business, affairs or reputation of the
Company or any of its Subsidiaries.
11. "Original Holder" means the original Eligible Participant to whom an Option
is granted under the Plan, even if such Option is transferred pursuant to
section 7.3 of the Plan.
12. "Subsidiary" has the same meaning as "subsidiary corporation" as defined in
Section 424(f) of the Code.
13. "Successor Entity" means a corporation or other entity that acquires an or
substantially all of the assets of the Company, or which is the surviving or
parent entity resulting from a Business Combination, as that term is defined in
section 7.5 of the Plan.
14. "Tax Withholding Liability" in connection with the exercise of any Option
means all federal and state income taxes, social security tax, and any other
taxes applicable to the compensation income arising from the transaction
required by applicable law to be withheld by the Company.
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<PAGE>
15. "Transfer" with respect to Shares of Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer, conveyance,
pledge, hypothecation, encumbrance, disposal, loan, gift, attachment or levy of
those Shares, including without limitation any Involuntary Transfer.
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<PAGE>
EXHIBIT 10.4
2BRIDGE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of 2Bridge, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company or any
-----
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean 2Bridge, Inc. and any Designated Subsidiary
-------
of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the first Trading Day on or after
-------------
May 1st and November 1st of each year.
<PAGE>
(j) "Fair Market Value" shall mean, 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 on the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately twenty-
----------------
four (24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1st and
November 1st of each year and terminating on the first Trading Day on or after
the May 1st and November 1st Offering Period commencement date approximately
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the first Trading Day on or before
April 30, 2002. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing on one Exercise Date and ending with the next Exercise Date, except
that the first Purchase Period of any Offering Period shall commence on the
Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a share
--------------
of Common Stock on the Enrollment Date or on the Exercise Date, whichever is
lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock covered
--------
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
-2-
<PAGE>
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1st and November 1st each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the first Trading Day on or
before April 30, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
---------
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
-3-
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding 15% of the Compensation which he or
she receives on each pay day during the Offering Period; provided, however, that
should a pay day occur on an Exercise Date, a participant shall have the payroll
deductions made on such day applied to his or her account under the new Offering
Period or Purchase Period, as the case may be.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the nature and/or number
of participation rate changes during any Offering Period. The change in rate
shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 5,000
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be
-4-
<PAGE>
subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board
may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of the Company's Common Stock an
Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any
-5-
<PAGE>
time by giving written notice to the Company in the form of Exhibit B to this
Plan. All of the participant's payroll deductions credited to his or her account
shall be paid to such participant promptly after receipt of notice of withdrawal
and such participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares shall
be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 750,000 shares plus an annual increase to be added on the first day
of the Company's fiscal year beginning in 2001, equal to the lesser of (i)
750,000 shares, (ii) 2% of the outstanding shares on such date or (iii) a lesser
amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
-6-
<PAGE>
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), the
number of shares that may be added annually to the shares reserved under the
Plan (pursuant to Section 13(a)(i)), as well as the price per share and the
number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued
-7-
<PAGE>
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
-8-
<PAGE>
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period including
an Offering Period underway at the time of the change in Purchase Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval or the
consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
-9-
<PAGE>
23. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board of Directors or its approval by the shareholders of
the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period.
-10-
<PAGE>
EXHIBIT A
---------
2BRIDGE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the 2Bridge, Inc.
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing within 30 days after the date
---------------------------------------------------------------------------
of any disposition of my shares and I will make adequate provision for
----------------------------------------------------------------------
Federal, state or other tax withholding obligations, if any, which arise
------------------------------------------------------------------------
upon the
--------
<PAGE>
disposition of the Common Stock. The Company may, but will not be
--------------------------------
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ __________________________________________
Relationship
__________________________________________
(Address)
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary other
than spouse)
<PAGE>
EXHIBIT B
---------
2BRIDGE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the 2Bridge, Inc.
Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:____________________________
<PAGE>
EXHIBIT 10.5
2BRIDGE, INC.
2000 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 2000 Director Option Plan are
--------------------
to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All Options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the common stock of the Company.
------------
(d) "Company" means 2Bridge, Inc., a Delaware corporation.
-------
(e) "Director" means a member of the Board.
--------
(f) "Disability" means total and permanent disability as defined in
----------
section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(i) "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 on the day of
determination as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the day of
<PAGE>
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
---------------
(k) "Option" means a stock option granted pursuant to the Plan.
------
(l) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(m) "Optionee" means a Director who holds an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 2000 Director Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 400,000 Shares (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside Directors
--------------------
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options.
-2-
<PAGE>
(ii) Each Outside Director shall be automatically granted an Option
to purchase 25,000 Shares (the "First Option") on the date on which such person
first becomes an Outside Director, whether through election by the shareholders
of the Company or appointment by the Board to fill a vacancy; provided, however,
that an Inside Director who ceases to be an Inside Director but who remains a
Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 10,000 Shares (a "Subsequent Option") on the date of the
Company's annual stockholder's meeting of each year, provided he or she is then
an Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall become
exercisable as to .04% of the Shares subject to the First Option on each monthly
anniversary of its date of grant, provided that the Optionee continues to serve
as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be as
follows:
(A) the term of the Subsequent Option shall be ten (10) years.
(B) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option shall
become exercisable as to 100% of the Shares subject to the Subsequent Option on
the date of grant, provided that the Optionee continues to serve as a Director
on such date.
-3-
<PAGE>
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 16 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to be
---------------------
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other Shares, provided Shares acquired
directly from the Company, (x) have been owned by the Optionee for more than six
(6) 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 said Option shall be exercised, (iv) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (v) any combination of the foregoing methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the
-4-
<PAGE>
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment shall be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to Section
----------------------------------------------
10 hereof, in the event an Optionee's status as a Director terminates (other
than upon the Optionee's death or Disability), the Optionee may exercise his or
her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within six (6) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option 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.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well
-5-
<PAGE>
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares 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 effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." 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
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall 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, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(b) through (d)
above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
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).
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, for each Share of Optioned Stock
subject to the Option, to be solely common stock of
-6-
<PAGE>
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.
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable law, regulation
or stock exchange rule, the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for all
------------------------
purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. 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 pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
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.
14. Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
-7-
<PAGE>
16. 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 state and federal law and any stock exchange rules.
-8-
<PAGE>
FIRST OPTION
2BRIDGE, INC.
DIRECTOR OPTION AGREEMENT
2Bridge, Inc., (the "Company"), has granted to ___________________ (the
"Optionee"), an option to purchase a total of [_______] shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the
Company's 2000 Director Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
--------------------
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common
--------------
Stock.
3. Exercise of Option. This Option shall be exercisable during its term in
------------------
accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option shall become exercisable in installments
cumulatively with respect to [____] of the Optioned Stock on each anniversary of
its date of grant, so that one hundred percent (100%) of the Optioned Stock
shall be exercisable [_______] years after the date of grant; provided, however,
that in no event shall any Option be exercisable prior to the date the
stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by written
------------------
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the 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.
4. Method of Payment. Payment of the exercise price shall be by any of the
-----------------
following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
<PAGE>
(iii) surrender of other Shares, provided Shares acquired from the Company,
(x) have been owned by the Optionee for more than six (6) 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 said Option shall be
exercised; or
(iv) delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. 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.
6. 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 the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee .
7. Term of Option. This Option may not be exercised more than ten (10)
--------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this 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 purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the
-2-
<PAGE>
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
DATE OF GRANT: ______________
2BRIDGE, INC.,
A Delaware corporation
By:
---------------------------
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, 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 hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
______________________________
Optionee
-3-
<PAGE>
EXHIBIT A
---------
DIRECTOR OPTION EXERCISE NOTICE
2Bridge, Inc.
221 Main Street, Suite 800
San Francisco, CA 94105
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of 2Bridge, Inc. (the "Company") under and pursuant to the Company's
2000 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the Shares
--------------------------------
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act"), or unless an exemption from such registration
is available, and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer adverse
----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: 2BRIDGE, INC.
By: By:
---------------------------- -----------------------------
Its:
----------------------------
Address:
Dated: Dated:
------------------------- --------------------------
-2-
<PAGE>
SUBSEQUENT OPTION
2BRIDGE, INC.
DIRECTOR OPTION AGREEMENT
2Bridge, Inc., (the "Company"), has granted to ___________________ (the
"Optionee"), an option to purchase a total of [_______] shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the
Company's 2000 Director Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
--------------------
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common
--------------
Stock.
3. Exercise of Option. This Option shall be exercisable during its term in
------------------
accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option shall become exercisable with respect to [____] of
the Optioned Stock on the anniversary of its date of grant; provided, however,
that in no event shall any Option be exercisable prior to the date the
stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by written
------------------
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the 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.
4. Method of Payment. Payment of the exercise price shall be by any of the
-----------------
following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
(iii) surrender of other Shares, provided Shares acquired from the
Company, (x) have been owned by the Optionee for more than six (6) months on the
date of surrender, and (y)
<PAGE>
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. 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.
6. 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 the Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
--------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this 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 purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the
-2-
<PAGE>
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
DATE OF GRANT:
________________
2BRIDGE, INC.,
A Delaware corporation
By:
___________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, 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 hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated:
_________________
_____________________________
Optionee
-3-
<PAGE>
EXHIBIT A
---------
DIRECTOR OPTION EXERCISE NOTICE
2Bridge, Inc.
221 Main Street, Suite 800
San Francisco, CA 94105
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of 2Bridge, Inc. (the "Company") under and pursuant to the Company's
2000 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the Shares
--------------------------------
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act"), or unless an exemption from such registration
is available, and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer adverse
----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: 2BRIDGE, INC.
By: By:
--------------------- -----------------------
Its:
-----------------------
Address:
Dated: Dated:
------------------ ---------------------
-2-
<PAGE>
EXHIBIT 10.6
COMMERCIAL OFFICE
LEASE
BETWEEN
C & C INVESTMENTS, LANDLORD
and
2BRIDGE SOFTWARE, TENANT
Premises: 221 Main Street
San Francisco, CA 94105
<PAGE>
COMMERCIAL OFFICE LEASE
-----------------------
BASIC LEASE INFORMATION
-----------------------
Lease Section
- -------------
Introductory Date: April 21, 1999
Paragraph
Landlord: C & C INVESTMENTS
Tenant: 2BRIDGE SOFTWARE
a California corporation
Section 1 Premises: the entire 8th Floor
Building: 221 Main Street
San Francisco, CA 94105
Section 2 Term
Commencement: April 22, 1999
Section 2 Term
Expiration: August 31, 2005
Section 3 Base Rent: 4/22/1999 to
8/19/1999 no rent
8/20/1999 to
8/31/2005 $69,025.62 per month
i.
<PAGE>
Section 3(b) Base Year
(for Operating
Expenses
Increases): Calendar year 1999
Section 3(c) Base Year
(for Property
Taxes
Increases): Calendar year 1999
Section 3(b) Tenant's
and 3(c) Percentage
Share (of
increases in
Operating
Expenses and
Property
Taxes): 5.96%
Section 33 Tenant's
Address for
Notices: Suite 700
221 Main Street
San Francisco, CA 94105
Section 33 Landlord's
Address for
Notices: Suite 404
101 Howard Street
San Francisco, CA 94105
Section 38 Deposit: $69,025.62
ii.
<PAGE>
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information.
LANDLORD: TENANT:
C & C INVESTMENTS 2BRIDGE SOFTWARE
a trust a California corporation
By _______________________________ By ___________________________________
Corwin Booth Mansoor Zakaria
Trustee Chief Executive Officer
By ___________________________________
Ron Parks
Secretary
iii.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Premises.............................................................. 1
-------- -
2. Term; Completion of Improvements...................................... 1
-------------------------------- -
3. Rental................................................................ 2
------ -
4. Use................................................................... 8
--- -
5. Services.............................................................. 9
-------- -
6. Taxes Payable by Tenant............................................... 13
----------------------- --
7. Alterations, Additions or Improvements................................ 13
-------------------------------------- --
8. Liens................................................................. 14
----- --
9. Repairs............................................................... 15
------- --
10. Destruction or Damage................................................. 15
--------------------- --
11. Insurance; Waiver of Subrogation...................................... 17
-------------------------------- --
12. Waiver; Indemnity..................................................... 18
----------------- --
13. Compliance with Legal Requirements.................................... 20
---------------------------------- --
14. Assignment and Subletting............................................. 23
------------------------- --
15. Rules................................................................. 30
----- --
16. Entry by Landlord..................................................... 30
----------------- --
17. Events of Default..................................................... 31
----------------- --
18. Landlord's Right to Terminate......................................... 33
----------------------------- --
19. Continuation Notwithstanding Default.................................. 34
------------------------------------ --
20. Additional Remedies................................................... 34
------------------- --
21. Landlord's Right to Cure Defaults..................................... 35
--------------------------------- --
22. Attorneys' Fees....................................................... 35
--------------- --
23. Eminent Domain........................................................ 35
-------------- --
24. Subordination......................................................... 37
------------- --
25. No Merger............................................................. 38
--------- --
26. Sale.................................................................. 38
---- --
</TABLE>
iv.
<PAGE>
<TABLE>
<S> <C>
27. Estoppel Certificate................................................. 38
-------------------- --
28. No Light, Air, or View Easement...................................... 39
------------------------------- --
29. Holding Over......................................................... 39
------------ --
30. Abandonment.......................................................... 39
----------- --
31. Surrender............................................................ 39
--------- --
32. Waiver............................................................... 40
------ --
33. Notice............................................................... 40
------ --
34. Complete Agreement................................................... 41
------------------ --
35. Corporate Authority.................................................. 41
------------------- --
36. Miscellaneous Provisions............................................. 41
------------------------ --
37. Exhibits............................................................. 43
-------- --
38. Security Deposit..................................................... 43
---------------- --
39. Brokerage............................................................ 43
--------- --
40. Limitation of Liability.............................................. 44
----------------------- --
41. Parking Spaces....................................................... 44
-------------- --
</TABLE>
Exhibit A -- Floor Plan
Exhibit B -- Workletter
Landlord's Rules
v.
<PAGE>
COMMERCIAL OFFICE LEASE
-----------------------
THIS LEASE, dated effective as of the date set forth in the Basic Lease
Information is made and entered into by and between each of the persons or
entities specified in the Basic Lease Information as Landlord ("Landlord") and
Tenant ("Tenant"), respectively.
1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
--------
from Landlord, the Premises, as specified in the Basic Lease Information and as
more particularly described in Exhibit A attached hereto, located within the
Building as specified in the Basic Lease Information for the term and subject to
the terms, covenants, agreements and conditions hereinafter set forth, to each
and all of which Landlord and Tenant hereby mutually agree.
2. Term; Completion of Improvements.
--------------------------------
(a) Term. The term of this Lease shall commence and, unless sooner
----
terminated as hereinafter provided, shall end on the dates specified in the
Basic Lease Information. If Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to Tenant at the commencement of the term, this Lease
shall not be void or voidable, the term of this Lease shall not be extended by
such delay, and the Landlord shall not be liable to Tenant for any loss or
damage resulting therefrom, but in that event, subject to any contrary
provisions in Exhibit B attached hereto, (i) commencement of the term shall be
deferred and the date on which rental commences shall be deferred for the period
of such delay and (ii) the term of the Lease shall be reduced by the number of
days of such delay.
1.
<PAGE>
(b) Completion of Improvements. The Premises are leased to Tenant in
--------------------------
their present "as-is" condition, except that prior to the date upon which Base
Rent first becomes payable Landlord shall construct or install in the Premises
Landlord's Work, as defined in the Work Letter attached hereto and incorporated
herein as Exhibit B (the "Work Letter"). Following the commencement of the term
of this Lease, Tenant shall construct or install in the Premises Tenant's Work,
as defined in and in compliance with the Work Letter. The cost of Landlord's
Work and Tenant's Work shall be borne as provided in the Work Letter.
(c) Early Occupancy. If Tenant occupies the Premises for the conduct
---------------
of its business prior to the date set forth in the Basic Lease Information for
the commencement of Base Rent the obligation to pay Base Rent shall commence
upon such occupancy and shall end on the date specified in the Basic Lease
Information.
3. Rental. Tenant shall pay to Landlord throughout the term of this Lease
------
the following sums as rental for the Premises:
(a) Base Rent. The monthly Base Rent payable during the term of the
---------
Lease shall be the sum specified in the Basic Lease Information as the Base Rent
subject to the further provisions hereof.
(b) Additional Rent on Account of Increases in Operating Expenses. In
-------------------------------------------------------------
addition to Base Rent, Tenant, subject to Section 3(d), shall pay to Landlord as
additional rent with respect to each calendar year of the term of this Lease
subsequent to the Base Year for Operating Expenses Increases as specified in the
Basic Lease Information Tenant's percentage share (as specified in the Basic
Lease Information) of the total dollar increase, if any, in Operating Expenses
paid or incurred by Landlord in such subsequent calendar year over the Base Year
2.
<PAGE>
Operating Expenses. For purposes hereof, "Operating Expenses" shall mean (i) all
direct and indirect costs of management, operation and maintenance of the
Building (including rentable areas occupied by Landlord) and including, without
limiting the foregoing: wages, salaries, employee benefits, and payroll burden
of personnel engaged in management, operation and maintenance of the Building,
maintenance of all Building systems (including electrical, mechanical, plumbing,
and intra-building network cable ("INC")), Building office rent or rental value,
power, heat, light, steam, air conditioning, gas, water, garbage, sewage and
waste disposal and other utilities, equipment, tools, materials and supplies,
maintenance and repairs, insurance, license, permit and inspection fees,
janitorial services, maintenance contracts and general services, and
depreciation on personal property, costs of compliance with environmental laws
(including costs of monitoring and tests), and (ii) the cost of any capital
improvements made to the Building by Landlord after the Base Year for Operating
Expenses Increases that (A) reduce Operating Expenses or that reduce or conserve
the amount of utilities consumed (e.g., electricity, gas or other fuels) such
cost of such capital improvements to be included to the extent of the amount of
the actual cost savings realized, or (B) are required under any governmental law
or regulation that was not applicable to the Building at the time this Lease was
entered into, such cost or allocable portion thereof to be amortized over such
reasonable period as Landlord shall determine together with interest on the
unamortized balance at the rate of 10 percent per year or such higher rate as
may have been paid by Landlord on funds borrowed for the purpose of constructing
such capital improvements; provided, however, that Operating Expenses shall not
-------- -------
include Property Taxes, depreciation on the Building other than depreciation on
personal property, costs of tenants' improvements, interest, capital items other
than those referred to in clause (ii) above, and payments on debt (principal or
3.
<PAGE>
interest). Actual Operating Expenses for both the Base Year and each subsequent
year of the term of this Lease shall be adjusted to equal Landlord's reasonable
estimate of Operating Expenses had the total rentable area of the Building been
occupied for both years. The determination of the costs of management,
operation, and maintenance of the Building and the costs of the capital
improvements referred to in clause (ii) above shall be in accordance with
generally accepted accounting principles consistently applied.
(c) Additional Rent on Account of Increases in Property Taxes. In
---------------------------------------------------------
addition to Base Rent, Tenant, subject to Section 3(d), shall pay to Landlord as
additional rent with respect to each calendar year of the term of this Lease
subsequent to the Base Year for Property Taxes Increases as specified in the
Basic Lease Information Tenant's percentage share (as specified in the Basic
Lease Information) of the total dollar increase, if any, in Property Taxes paid
or incurred by Landlord in such subsequent calendar year over the Base Year
Property Taxes. For purposes hereof, "Property Taxes" shall mean all real
property taxes, assessments (general or special), property tax reassessments
caused by a change in ownership of the Building or the Premises and all other
taxes (including any tax levied wholly or partly in lieu thereof) levied against
the Building (or this Lease, the occupancy of Tenant, the sums payable by Tenant
hereunder, or in any manner relative to the subject matter hereof), excluding
only taxes covered by Section 6 hereof and federal and California income and
death taxes imposed with respect to Landlord. For purposes hereof, "taxes" is
meant to be interpreted in its most comprehensive sense and to include any
impost, levy or the like levied by any governmental jurisdiction; and without
limiting the generality of the foregoing, "taxes" shall include any tax, fee,
excise, levy or other impost imposed by the United States, the State of
California or any political subdivision of the State (including any
4.
<PAGE>
county, city, city and county, public corporation, district or any other
political entity or public corporation thereof), however described (including
any so-called value-added tax) as a direct substitution in whole or in part for,
or in addition to, real property taxes and assessments.
(d) Procedure. The additional rent provided under Sections 3(b) and
---------
3(c) above shall be paid in accordance with the following procedures:
(i) As soon as is practicable following the first anniversary of
this Lease and the end of each calendar year thereafter occurring during the
term of this Lease, Landlord shall give Tenant written notice of its estimate of
any increased amounts payable under Section 3(b) and/or 3(c). On or before the
first day of the calendar month next following such notice, Tenant shall pay to
Landlord that portion of the estimated amounts that already shall have accrued
and thereafter on or before the first day of each succeeding calendar month
shall pay a ratable portion of the balance remaining over the relevant period
covered. If for any reason such notice is not given as provided above, Tenant
shall continue to pay on the basis of the then applicable rental until the month
after such notice is given. If at any time or times Landlord determines that the
increased amounts payable under Sections 3(b) and/or 3(c) above will vary from
its estimate by more than 10 percent, Landlord shall, by notice to Tenant,
revise its estimate for such year, and subsequent payments by Tenant for such
year shall be based upon such revised estimate.
(ii) Within 90 days after the close of each respective calendar
year during the term of this Lease subsequent to the Base Year (or as soon after
such 90-day period as practicable), Landlord shall deliver to Tenant a statement
of the adjustments to be made pursuant to Sections 3(b) and/or 3(c) above for
such calendar year which statement shall be audited and
5.
<PAGE>
shall be prepared in accordance with generally accepted accounting principles,
and such statement shall be final and binding upon Landlord and Tenant. If on
the basis of such statement Tenant owes an amount that is less than the
estimated payments for such year previously made by Tenant, Landlord shall
refund such excess to Tenant within 30 days of the delivery of such statement.
If on the basis of the statement Tenant owes an amount that is more than the
estimated payments for such year previously made by Tenant, Tenant shall pay the
deficiency to Landlord within 30 days after delivery of the statement.
(iii) If the date of the first anniversary of this Lease is a day
other than the first day of a calendar year, the amount of adjustment to be made
pursuant to Sections 3(b) and/or 3(c) above that is applicable to the calendar
year in which such first anniversary occurs shall be prorated on the basis that
the number of days from the first anniversary date to and including the last day
of such calendar year bears to 365.
(iv) If this Lease shall terminate on a day other than the last
day of a calendar year, the amount of adjustment to be made pursuant to Sections
3(b) and/or 3(c) above that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis that the number of days from
the commencement of such year to and including the termination date bears to
365. The termination of this Lease shall not affect the obligations of Landlord
and Tenant pursuant to subparagraph (ii) of this Section 3(d) to be performed
after such termination.
(e) Rental Commencement. Base Rent shall be paid to Landlord (i) upon
-------------------
the execution of this Lease for the first full month of the term of this Lease
for which rent is payable as set forth in the Basic Lease Information (as the
same may be deferred pursuant to Section 2(a)
6.
<PAGE>
hereof), and (ii) with respect to the second full month and each successive
calendar month thereafter for which rent is payable, on or before the first day
of each such month. If this Lease commences on other than the first day of a
calendar month or ends on other than the last day of a calendar month, the
second and last installments of rent shall be pro-rated for the partial months
involved.
(f) No Deduction or Offset: Interest. All rental and all other sums
--------------------------------
due and payable by Tenant to Landlord under any of the provisions of this Lease
shall be paid to Landlord, without abatement, deduction, offset, prior notice or
demand, in lawful money of the United States at Landlord's address for notices
or to such other person or at such other place as Landlord, from time to time,
may designate in writing. Tenant acknowledges that late payment by Tenant to
Landlord of rental or such sums will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impracticable to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and note secured by any encumbrance
covering the Building and/or the Premises. Therefore, if any installment of
rental or any other sum due and payable by Tenant to Landlord is not paid to and
received by Landlord within 10 days of the due date thereof (or, if Landlord has
notified Tenant in writing on two occasions during the 12 months preceding the
due date that Tenant has failed to pay rent or any other sum on the due date
thereof, then if Tenant fails to pay rent or other sum on the due date thereof):
(i) Tenant shall pay to Landlord an additional sum of five
percent (5%) of the overdue amount as a late charge. The parties agree that this
late charge represents a fair
7.
<PAGE>
and reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant; and
(ii) the sums due and payable shall bear interest from date due
until paid at the highest rate legally permitted by applicable law. Acceptance
of any late charge or interest shall not constitute a waiver of Tenant's default
on the overdue amount, or prevent Landlord from exercising any of the other
rights and remedies available to Landlord.
4. Use. The Premises shall be used for general office purposes and no
---
others. Tenant shall neither do nor permit to be done in or about the Premises,
nor bring or permit to be brought or kept therein, anything which is prohibited
by or will in any way conflict with any law, statute, ordinance or governmental
rule or regulation now in force or which may hereafter be enacted or
promulgated, or which now or hereafter is prohibited by any insurance policy
carried by Landlord, or will in any way increase the existing rate of or affect
any fire or any other insurance upon the Building or any of its contents, or
cause a cancellation of any insurance policy covering the Building or any part
thereof or any of its contents. Tenant, in its own respect and in respect of its
agents, servants and invitees, shall neither do nor permit anything to be done
in or about the Premises or the Building or any part thereof which will in any
way obstruct or interfere with the rights of other tenants of the Building
(including any noise audible or any odor or vibrations observable from outside
the Premises), or injure or annoy them, or use or allow the Premises or the
Building or any part thereof to be used for any improper, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises or the Building or any portion thereof, or commit
or suffer to be committed any waste
8.
<PAGE>
or damage in or about any of the same. Tenant shall not permit any materials to
be placed or stored in the common areas of the Building and shall not permit
debris to be placed therein, except in appropriate receptacles provided
therefor. Tenant, its agents, servants and invitees shall have the right on a 24
hour per day - seven day per week basis during the term hereof, subject to
compliance with Landlord's security procedures, to the (a) non-exclusive use of
the entrance lobby of the Building, its passenger and freight elevators, and the
common area of the floor of the Building in which the Premises are located, for
purposes of ingress to and egress from the Premises, and (b) the restrooms
located on the floor of the Building in which the Premises are located, and (c)
the exclusive use of the Premises. The provisions of Sections 11 and 12 of this
Lease shall apply to all such areas. Tenant shall not use any portion of the
Building (including, without limitation, the Building roof or portions of the
Building leased to other tenants) other than the Premises, excepting only as set
forth in the preceding sentence and such other portions of the Building as are
necessary for fire and other emergency ingress and egress purposes in accordance
with applicable law. Tenant shall not place any equipment in or otherwise
utilize the Premises in a manner that would exceed the floor load limits
specified by Landlord.
5. Services.
--------
(a) Services - General. Landlord (subject to the further provisions
------------------
of this Section 5) shall furnish the Premises:
(i) during the period from 7 a.m. to 6 p.m., Monday through
Friday (except holidays), or such shorter period as may be prescribed by any
applicable policies or regulations adopted by any utility or governmental
agency, with heat and air conditioning in such amounts
9.
<PAGE>
and at such temperatures as Landlord reasonably determines are required for
purposes of human comfort;
(ii) a reasonable amount of water;
(iii) electricity for lighting and the operation of office
machines and any equipment installed pursuant to Exhibit B hereof, for which
purposes Landlord will provide Tenant with an electric allowance of 21,593
kilowatt-hours per month. Tenant shall pay to Landlord upon demand for all
electric power Landlord determines is consumed by Tenant in excess of such
allowance. The determination of the amount of Tenant's electric power
consumption shall be made by Landlord in good faith and shall be final, binding
and conclusive, provided that, if Tenant so elects, Landlord shall install at
Tenant's expense a separate electric meter to measure the electrical power
actually consumed by Tenant;
(iv) non-attended, or attended, at Landlord's election, elevator
service, and
(v) daily (one shift) janitor service Monday through Friday
(except holidays) which shall be provided by Landlord in the manner that such
service is customarily furnished in comparable office buildings in the area.
Tenant shall notify Landlord within five (5) days following request thereby
of the nature and quantity of all Tenant's equipment and other items using
electricity in the Premises.
(b) Telecommunication Services. Landlord shall provide Tenant access
--------------------------
to such quantity of pairs in the Building INC as is determined to be available
by Landlord in its sole discretion, taking into account the capacity of such
system and the present and anticipated needs of all building tenants. Tenant's
access to the INC shall be solely by arrangements made by the Tenant directly
with Pacific Bell or Landlord (or such vendor as Landlord may designate) as
10.
<PAGE>
Tenant may elect, and Tenant shall pay all charges as may be imposed in
connection therewith. Tenant shall not itself (i) connect with or effect access
to the Building INC, or (ii) repair, modify, disturb or otherwise make any
access to or connection with the Building INC or its related equipment. Landlord
makes no warranty as to the quality, continuity or availability of the
telecommunications services in the Building, and Tenant hereby waives any claim
against Landlord for any actual or consequential damages (including damages for
loss of business) in the event Tenant's telecommunications services in any way
are interrupted, damaged or rendered less effective, except to the extent caused
by the grossly negligent or willful act or omission by Landlord, its agents or
employees. Tenant acknowledges that Landlord meets its duty of care to Tenant
with respect to the Building INC by contracting with a reliable third party
vendor to assume responsibility for the maintenance and repair thereof (which
contract contains provisions requiring such vendor to inspect the INC
periodically (the frequency of such inspections to be determined by such vendor
based on its experience and professional judgment), and requiring such vendor to
meet local and federal requirements for telecommunications material and
workmanship).
(c) Non-Liability. Landlord shall not be in default hereunder or be
-------------
liable for any damage directly or indirectly resulting from, nor shall the
rental herein reserved be abated by reason of, (i) failure to furnish or delay
in furnishing any services as provided in this Section 5 when such failure or
delay is caused by accident or any condition beyond the control of Landlord or
by the making of repairs or improvements to the Premises or the Building
(including Building systems), or (ii) the limitation, curtailment, rationing or
restrictions on use of or the failure of the supply by the relevant utility to
Tenant of, water, electricity, gas, or any other form of utility
11.
<PAGE>
services serving the Premises or the Building. Tenant expressly acknowledges
that all utility services are provided by the relevant utility involved, and
Landlord is to have no responsibility for the amount or quality of utility
services provided, including without limitation, the improper operation of
Tenant's equipment utilizing the same.
(d) Excess Electricity. Tenant, without the prior written consent of
------------------
Landlord, shall not use any apparatus or device in the Premises which alone or
collectively uses electricity in excess of the capacity of the electrical
circuits to the Premises installed pursuant to Exhibit B hereof, nor connect
with electric current, except through existing electrical outlets in the
Premises, any apparatus or device, for the purposes of using electric current.
If Tenant shall require electric current in excess of the capacity of the
electrical circuits to the Premises installed pursuant to Exhibit B hereof,
Tenant shall first obtain Landlord's consent to the installation of such
increased electrical capacity in accordance with the provisions of Section 7
hereof. Tenant agrees to pay Landlord for such excess electric current consumed
in excess of the allowance provided in Section 5(a) above.
(e) Excess Water. Tenant shall not use water in excess of that
furnished by Landlord for use of the Premises as general office space or connect
any apparatus or device for the purpose of using water. If Tenant shall require
water in excess of that usually furnished or supplied for use of the Premises as
general office space, Tenant shall first procure the written consent of Landlord
to the use thereof. Landlord, as a condition of Landlord's consent, may cause a
water meter to be installed, so as to measure the amount of excess water used.
The cost of any such meter and of installation, maintenance and repair thereof
shall be paid by Tenant, and Tenant agrees to pay to Landlord promptly upon
demand thereof by Landlord for all such excess
12.
<PAGE>
water so used. Unless and until Landlord installs such separate meter, Tenant
shall pay to Landlord promptly upon demand Landlord's good faith estimate of the
cost of the excess of the amount of water used by Tenant over that usually
furnished or supplied by Landlord for use of the Premises as general office
space, and Landlord's estimate of such excess amounts, based upon the
independent judgment of Landlord's engineer, the manufacturer of the equipment
involved, or the utility providing the service, shall be final, binding, and
conclusive upon Tenant.
(f) Excess Air-Conditioning. Tenant (except as otherwise provided in
-----------------------
Exhibit B) shall not use any apparatus or device in the Premises that will
increase the amount of air conditioning furnished by Landlord for general office
space.
6. Taxes Payable by Tenant. In addition to the monthly rental and other
-----------------------
charges that are payable by Tenant hereunder, Tenant shall reimburse Landlord
upon demand for any and all taxes payable by Landlord whether or not now
customary or within the contemplation of the parties hereto which are upon,
measured by, or reasonably attributable to the cost or value of Tenant's
equipment, furniture, fixtures, and other personal property located in the
Premises or by the cost or value of any leasehold improvements made in or to the
Premises by or for Tenant, other than tenant improvements made and paid for by
Landlord hereunder, regardless of whether title to such improvements shall be in
Tenant or Landlord.
7. Alterations, Additions or Improvements. Except for the initial
--------------------------------------
improvement of the Premises pursuant to Exhibit B, which shall be governed by
the provisions of Exhibit B, Tenant shall not make or suffer to be made any
alterations, additions, or improvements to or of the Premises or any part
thereof, or attach any fixtures or equipment thereto, without Landlord's prior
written consent. All such alterations, additions or improvements shall become
Landlord's
13.
<PAGE>
property immediately and, at the end of the term hereof, shall remain on the
Premises without compensation to Tenant unless Landlord elects by notice to
Tenant given at the time of Landlord's consent to have Tenant remove the same,
in which event Tenant shall promptly remove such alternations, additions or
improvements, repair any damage to the Premises, and restore the Premises to
their condition prior to the installation of such alterations, additions or
improvements.
Tenant at its expense shall obtain any and all permits and consents of
applicable governmental authorities in respect of such alterations, additions,
and improvements and shall comply with the requirements of all governmental
authorities in connection therewith, including all building codes; and Tenant
shall be liable to Landlord and shall reimburse Landlord for the costs of any
improvements to the Building (whether or not within the Premises) which may be
required by governmental authority as a consequence of Tenant's alterations,
additions and improvements.
All alterations made by Tenant with the prior written consent of
Landlord shall be effected through the use of contractors approved by Landlord
who shall furnish to Landlord upon demand such completion bonds and labor and
material bonds as Landlord may require so as to assure completion of such
alterations, additions or improvements on a lien-free basis (and the furnishing
of the same shall not relieve Tenant of its obligation under Section 8 hereof).
8. Liens. Tenant shall keep the Premises and the Building free and
-----
clear of and from any and all mechanics', materialmen's and other liens for work
or labor done, services performed and for materials used or furnished in or
about the Premises by or on behalf of Tenant. Tenant at all times shall pay and
discharge, promptly and fully, any and all claims upon which any such lien
14.
<PAGE>
may or could be based, provided that Tenant in good faith may contest any such
lien if Tenant obtains and records a statutory lien release bond the effect of
which is that the lien is expunged from Landlord's title as a matter of law.
Tenant shall save, defend, indemnify and hold Landlord, the Premises and the
Building free and harmless of and from any and all such liens or claims of liens
or suits or other proceedings pertaining thereto.
9. Repairs. By entry hereunder, Tenant accepts the Premises as being in
-------
the condition in which Landlord is obligated to deliver the Premises, subject
only to Landlord's Work. Tenant, at all times during the term hereof and at
Tenant's sole cost and expense, shall keep the Premises and every part thereof
in good condition and repair, excepting (a) ordinary wear and tear, and (b)
damage due to casualty with respect to which the provisions of Section 10 and 12
shall apply. Tenant hereby waives all right to make repairs at the expense of
Landlord or in lieu thereof to vacate the Premises as provided by California
Civil Code Section 1941 and 1942 or any other law, statute or ordinance now or
hereafter in effect. Landlord has no obligation and has made no promise to
alter, remodel, improve, repair, decorate, or paint the Premises or any part
thereof except as specifically herein set forth in Exhibit B. The maintenance of
the Building structure, Building systems, and common areas of the Building are
the sole responsibility of Landlord. Except as specifically set forth herein,
Landlord has not made any representations respecting the condition of the
Premises to Tenant.
10. Destruction or Damage.
---------------------
(a) Damage. If the Premises and/or other portion of the Building are
------
damaged by fire, earthquake, act of God, the elements, or other casualty,
Landlord shall forthwith repair the same, subject to the provisions of this
Section hereinafter set forth, if Landlord receives sufficient
15.
<PAGE>
insurance proceeds to cover the cost thereof, and if such repairs, in Landlord's
opinion, can be made within 90 days following the issuance of any building
permit required by relevant governmental authority (the "Rebuilding Period").
This Lease shall remain in full force and effect except that, if such damage is
not the result of the negligence or willful misconduct of Tenant or Tenant's
employees or invitees, a proportional abatement of rental (based upon square
footage) shall be allowed Tenant for such part of the Premises as shall be
rendered unusable by Tenant in the conduct of its business during the time such
part is so unusable. Landlord's determination that such repair may be made
within the Rebuilding Period shall not obligate Landlord to complete the same
within such period. For purposes of this Section 10, "repairs" shall include all
repair and restorative work Landlord in Landlord's good faith but nevertheless
sole discretion deems advisable, including without limitation, all work and
improvements Landlord deems advisable to improve the condition and quality of
the Building, whether in the form of government mandated building code upgrades
or otherwise.
(b) Repair. If Landlord does not receive sufficient insurance
------
proceeds to cover the cost of such repairs, or if such repairs, in Landlord's
opinion, cannot be made within the Rebuilding Period, Landlord shall elect, by
notice to Tenant within 30 days after the date of such fire or other casualty:
(i) to repair or restore such damage, in which event this Lease shall continue
in full force and effect (except that the rent shall be partially abated as
hereinabove provided) and Landlord shall repair and restore such damage with
reasonable diligence, or (ii) to terminate this Lease, in which event this Lease
shall terminate as of the date of such fire or other casualty.
16.
<PAGE>
(c) Waiver. Tenant waives California Civil Code Sections 1932(2) and
------
1933(4) providing for termination of hiring upon destruction of the thing hired.
(d) Costs of Repair. If the Premises are to be repaired under this
---------------
Section, Landlord (subject to the provisions of Section 12(b) hereof) shall
repair at its cost any injury or damage to the Building itself and the tenant
improvements in the Premises paid for by Landlord hereunder. Tenant shall repair
and pay the cost of repairing Tenant's alterations, Tenant's improvements,
Tenant's trade fixtures, Tenant's personal property and any other tenant
improvements in the Premises and shall be responsible for carrying such casualty
insurance as it deems appropriate with respect to such other tenant
improvements.
(e) Tenant's Right to Terminate Lease. If the Premises are not
---------------------------------
restored within one hundred eighty (180) days after the date of damage or
destruction, Tenant shall have the right to terminate this Lease.
11. Insurance; Waiver of Subrogation.
--------------------------------
(a) Insurance. Tenant, at Tenant's expense, shall maintain in full
---------
force during the term hereof a policy or policies of comprehensive broad form
general public liability insurance insuring against claims and liability for
personal injury, death and property damage arising in or about the Premises, the
Building and adjoining areas or ways, with a carrier or carriers acceptable to
Landlord, and which carrier or carriers in any event shall have a rating of not
less than A Plus XIII by Best's Insurance Guide. The liability under such
insurance shall not be less than $2,000,000 combined single limit bodily injury
and property damage. Such policy or policies of insurance shall (a) name
Landlord and Landlord's lender as additional insureds, (b) be nonassessable,
primary and noncontributory with any policies carried by Landlord, and (c)
provide
17.
<PAGE>
that the same may not be cancelled or materially amended except upon 30 days
prior written notice to Landlord. Tenant at all times shall maintain with
Landlord a current certificate or certificates of said policy or policies. The
amount of insurance coverage provided for in this Section shall be increased
from time to time during the term hereof upon demand of Landlord to the extent
reasonably required by circumstances then existing (including, but not limited
to increases in the cost of living as reflected in the Consumer Price Index
published by the U.S. Department of Labor and increases in personal injury and
wrongful death judgments or awards in the City and County of San Francisco).
(b) Subrogation. To the extent available without material incremental
-----------
premium, each party shall obtain from its insurers under all policies of
property insurance maintained by such party at any time during the term hereof
insuring or covering the Premises, the Building or any portion thereof or
operations therein, a waiver of all rights of subrogation which the insurer
might have against the other party, and each party shall indemnify the other
party against any loss or expense, including reasonable attorneys' fees,
resulting from the failure to obtain such waiver to the extent the same is so
available.
12. Waiver; Indemnity.
-----------------
(a) Tenant covenants and agrees that Landlord shall not at any time
after the date hereof or to any extent whatsoever be liable, responsible or in
anywise accountable for, and Tenant waives and releases any claim (including any
claim for contractual or implied indemnity) against Landlord, for Losses
(hereinafter defined) which at any time after the date hereof may be suffered or
sustained by:
(i) Tenant; or
18.
<PAGE>
(ii) Any person whosoever may at any time be using or occupying
or visiting the Premises or be in, on or about the same, or in or
about the common areas of the Building or the sidewalks adjacent
thereto, and which Losses are caused in whole or in part by any act or
omission (whether negligent, non-negligent or otherwise) of Tenant,
its agents, servants and invitees;
and whether in case of either clause (i) and/or (ii) such Losses shall be caused
- -----------
in part by any act, omission or negligence of Landlord, its agents or servants,
except to the extent caused by the grossly negligent or willful act or omission
of Landlord, its agents or employees.
(b) In addition to, and not in limitation of (a) above, Tenant shall
forever indemnify, defend, hold and save Landlord and Landlord's Lender free and
harmless of, from and against any and all Losses caused in whole or in part by
any act or omission (whether negligent, non-negligent, or otherwise) of Tenant,
its agents servants and invitees and suffered or sustained by:
(i) Landlord; and/or
(ii) any third person who asserts a claim against Landlord on account
thereof; and whether in case of either clause (i) and/or (ii) such Losses shall
-----------
be caused in part by any act, omission or negligence of Landlord, its agents or
servants, except to the extent caused by the grossly negligent or willful act or
omission of Landlord, its agents or employees. The foregoing indemnity
obligation of Tenant shall include reasonable attorneys' fees, investigation
costs, and all other reasonable costs and expenses incurred by Landlord from the
first notice that any claim or demand is to be made or may be made.
19.
<PAGE>
(c) For purposes hereof "Losses" shall mean any and all losses,
damages, costs and expenses, direct and indirect, actual and consequential, on
account of injury to or death of persons, or loss of or damage to property, of
any kind or nature, including without limitation, loss, injury, death, or damage
due to criminal act by third persons.
(d) The provisions of this Section 12 shall survive the termination
of this Lease with respect to any Losses occurring prior to such termination.
The insurance policy or policies required pursuant to the provisions of Section
11(a) by their terms shall cover the indemnity obligations of Tenant under
Section 12(b), except to the extent that any such obligation arises from
allegations of the willful misconduct of Tenant, its servants, or its agents.
13. Compliance with Legal Requirements.
----------------------------------
(a) General. During the term of this Lease, Tenant, with respect to
-------
the Premises, at its sole cost and expense shall comply promptly with (i) all
laws, statutes, regulations, ordinances, governmental rules, or requirements now
in force or which may hereafter be in force, (ii) the requirements of any board
of fire underwriters or other similar body now or hereafter constituted, (iii)
any direction or occupancy certificate issued pursuant to any law by any public
officer or officers, and (iv) the provisions of all recorded documents affecting
the Building or the Premises insofar as any of clauses (i) through (iv) relate
to or affect the condition, use or occupancy of the Premises, excluding
structural changes not necessitated by improvements made by or for Tenant
pursuant to Section 7 or by acts or other omissions of Tenant. The judgment of
any court of competent jurisdiction or the admission by Tenant (excluding from
the term "admission" any settlement or consent decree which by its terms does
not admit Tenant's liability) in any action or proceeding against Tenant
(whether Landlord be a party thereto or not) that
20.
<PAGE>
Tenant has violated any such law, statute or governmental rule, regulation, or
requirement, shall be conclusive of such violation as between Landlord and
Tenant.
(b) Environmental Matters.
---------------------
(i) As used herein, the following items shall have the following
meanings:
"Environmental Activity" means any actual, proposed or threatened
----------------------
use, storage, treatment, existence, release, emission, discharge, generation,
manufacture, disposal or transportation of any Hazardous Materials from, into,
on, under or about the Premises, or any other activity or occurrence that causes
or would cause any such event to exist.
"Environmental Requirements" means all present and future
--------------------------
federal, state, regional or local laws relating to the use, storage, treatment,
existence, release, emission, discharge, generation, manufacture, disposal or
transportation of any Hazardous Materials.
"Hazardous Material" means at any time any substances or
------------------
materials which at such time are classified or considered to be hazardous or
toxic under any Environmental Requirement.
(ii) Tenant shall not engage in nor permit the occurrence of any
Environmental Activity except in the ordinary course of Tenant's business and
only in compliance with all Environmental Requirements and prudent industry
practices. Tenant shall, at its own expense, procure, maintain in effect and
comply with all conditions of any and all permits, licenses, and other
governmental and regulatory approvals required under any Environmental
Requirements for any Environmental Activity by Tenant, including, without
limitation, the discharge of (appropriately treated) materials or wastes into or
through any sanitary sewer serving
21.
<PAGE>
the Premises, and upon termination of this Lease shall cause all of its
Hazardous Materials to be removed from the Premises in accordance with and in
compliance with all applicable Environmental Requirements.
(iii) Upon having knowledge thereof, Tenant shall immediately
notify Landlord in writing of:
(A) any regulatory action that has been instituted, or
threatened by any governmental agency or court with respect to Tenant that
relates to any Environmental Activity;
(B) any claim relating to any Environmental Activity by
Tenant in, on or about the Premises, or that arises out of or in connection with
any Hazardous Materials in, on, under or about the Premises or removed from the
Premises; or
(C) any actual or threatened material release on, under or
about the Premises or any adjacent property of any Hazardous Material, except
any Hazardous Material whose discharge or emission is expressly authorized by
and in compliance with a permit issued by a federal, state, regional or local
governmental agency pursuant to Environmental Requirements.
(iv) Tenant shall provide Landlord with copies of any
communications with federal, state, regional or local governments, agencies or
courts with respect to any Environmental Activity or Environmental Requirement
relating to the Premises and any communications with any third party relating to
any claim made or threatened with respect to any Environmental Activity by
Tenant in, on or about the Premises.
(v) Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect, and hold Landlord and each of Landlord's
partners, employees, agents,
22.
<PAGE>
attorneys, successors and assigns, free and harmless from and against any and
all claims, liabilities, penalties, forfeitures, losses or expenses (including
attorneys' fees) arising from or caused in whole or in part, directly or
indirectly, by (i) an Environmental Activity by Tenant; or (ii) Tenant's failure
to comply with any Environmental Requirement. Tenant's obligations under this
Section 13(b) shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any repair or cleanup, removal or remediation
action, or detoxification or decontamination of the Premises, or the preparation
and implementation of any closure, remedial action or other plans in connection
therewith that are required as a result of any Environmental Activity by Tenant,
and shall survive the expiration or earlier termination of the term of this
Lease.
(vi) The provisions of this Section 13(b) shall survive the
termination of this lease.
14. Assignment and Subletting.
-------------------------
(a) Assignment and Subletting. Except as expressly permitted pursuant
-------------------------
to this Section, Tenant shall not, without the prior written consent of
Landlord, assign this Lease, or any interest herein, or sublet the Premises, or
any part thereof, or permit the use or occupancy of the Premises (or any right
or privilege appurtenant thereto) by any party other than Tenant. For purposes
hereof, "assignment" shall include any proposed disposition or transfer,
voluntary or involuntary, or hypothecation; and where Tenant is a (i)
partnership, "assignment" shall include a transfer of 25% or more of the equity
interest therein (other than to an existing equity holder) or (ii) a corporation
"assignment" shall include any (A) merger, consolidation or other reorganization
(involving the equity securities of Tenant) of Tenant, (B) liquidation,
dissolution or disposition of all or substantially all of the assets of Tenant
or (C) change in ownership of 40% or more of the
23.
<PAGE>
equity interest therein except a transfer to an existing equity holder and
except with respect to a corporation whose stock is publicly traded). Any of the
foregoing acts without such consent of Landlord shall be void and shall, at the
option of Landlord, terminate this Lease. This Lease shall not, nor shall any
interest herein, be transferable or assignable as to the interest of Tenant by
operation of law without the written consent of Landlord. Notwithstanding the
foregoing, for purposes hereof, "assignment" shall not include any assignment by
Tenant to any corporation resulting from a merger or consolidation with Tenant,
or to any person or entity which acquires all the assets of Tenant as a going
concern in the business that is being conducted on the Premises, provided in
each instance that Tenant, or in the case of a sale of Tenant's assets, Tenant's
assignee, continues as an existing entity with substantially the same net worth
as the net worth of Tenant immediately prior to such transfer, assignment or
subletting, and before such assignment shall be effective, (i) the assignee
shall assume, in full, the obligations of Tenant under this Lease, and (ii)
Landlord shall be given written notice of such assignment and assumption. Any
such assignment shall not, in any way, affect or limit the liability of Tenant
under the terms of this Lease.
Landlord's consent to any assignment or subletting of all or any part
of the Premises shall not be unreasonably withheld or delayed. Without limiting
the other instances in which it may be reasonable for Landlord to withhold its
consent to an assignment or subletting, Landlord and Tenant acknowledge that it
shall be reasonable for Landlord to withhold its consent from a proposed
assignment or subletting in the following instances:
24.
<PAGE>
(i) If Landlord determines in its good faith but nevertheless
sole discretion that the use of the Premises by the proposed assignee or
sublessee would be in violation of Section 4 of this Lease;
(ii) If Landlord determines in its good faith but nevertheless
sole discretion that the financial worth of the proposed assignee or sublessee
does not meet the credit standards applied by Landlord for other tenants under
leases with comparable terms;
(iii) If Landlord determines in its good faith but nevertheless
sole discretion that the proposed assignee or sublessee does not have a
favorable reputation as a tenant of property;
(iv) If Landlord has received from any prior lessor to the
proposed assignee or subtenant a negative report concerning such prior lessor's
experience with the proposed assignee or subtenant;
(v) If Landlord has experienced previous defaults by or is in
litigation with the proposed assignee or subtenant;
(vi) If the use of the Premises by the proposed assignee or
subtenant will violate any applicable law, ordinance or regulation, or any use
permit issued for the use and occupancy of the Premises.
(b) Information; Landlord's Options. If at any time, or from time to
-------------------------------
time, during the term of this Lease, Tenant desires to assign, sublet or permit
the occupancy or use by another of all or any part of the Premises, Tenant shall
give notice to Landlord setting forth the following: (i) the name, address, and
legal composition of the proposed sublessee, occupier or user; (ii) the nature
of the business proposed to be carried on in the Premises (including proposed
25.
<PAGE>
number of employees to be located in the Premises, the proposed equipment to be
used therein, proposed floor loads and proposed electrical loads); (iii) a copy
of the proposed assignment or sublease agreement; and (iv) any other
documentation or information requested by Landlord, including financial
information covering the proposed assignee, sublessee, occupier or user with
respect to such proposed subletting. All such information may be considered by
Landlord in making Landlord's permitted determinations hereunder, including the
granting or withholding of consent in respect of a proposed assignment or
subletting. Such notice, once so given, shall not be withdrawn or rescinded by
Tenant. Landlord shall have the options, exercisable by notice given to Tenant
within 10 days after Tenant's notice is given, to do the following:
(i) In the case of a proposed subletting, Landlord may sublet
from Tenant such space at the rental and other terms set forth in this Lease,
prorated where appropriate to reflect obligations allocable to that portion of
the Premises to be sublet, unless the rental to be paid by the proposed
sublessee is lower than the rental, as so prorated, payable under the Lease, in
which event such lower rental shall be payable by Landlord to Tenant, or
(ii) In the case of either a proposed assignment or subletting,
Landlord may terminate this Lease as to that part or all of the Premises
proposed to be assigned or sublet, and in the case of termination as to a
portion of the Premises, Tenant's obligations under the Lease as to the balance
of the Premises remaining shall be proportionately reduced.
If Landlord sublets such space or terminates the Lease as to such
space, in each instance leaving a portion of the Premises occupied by Tenant,
Tenant shall provide Landlord without charge reasonable and appropriate access
to such space and reasonable use of any common areas and facilities appurtenant
thereto. For purposes hereof, "common area" shall mean the total area
26.
<PAGE>
on a floor consisting of rest rooms, janitor, telephone and electrical closets,
mechanical areas, and public corridors providing access to tenant space on such
floor, but excluding public stairs, elevator shafts and pipeshafts, together
with the enclosing walls thereof.
(c) Assignment or Subletting Conditions. Subject to (i) the other
------------------------ ----------
provisions of this Section 14 and (ii) Landlord's consent, which shall not be
unreasonably withheld or delayed, Tenant may assign or sublet such space to any
third party on the following conditions:
(i) In the case of a sublease, the same shall be subject and
subordinate to all of the provisions, terms and conditions of this Lease,
(ii) No assignment or sublease shall be valid and no assignee or
sublessee shall take possession of the Premises assigned or subleased until an
executed counterpart of such assignment or sublease, in form and substance
satisfactory to Landlord, shall have been delivered to Landlord, and Landlord
shall have expressly consented thereto in writing,
(iii) No assignee or sublessee shall have a further right to
assign or sublet,
(iv) An amount equal to 50% of all sums or other economic
consideration received by Tenant as a result of such assignment or subletting,
however denominated (whether as consideration for the assignment, rentals under
a sublease, or otherwise), which exceed in aggregate the total sums which Tenant
(or Tenant's assignee in case of an assignment) is obligated to pay Landlord
under this Lease (after deducting (a) bona fide charges for services provided by
the Tenant to subtenants at rates that are comparable to and not in excess of
rates charged for similar services in the area, and (b) Tenant's actual out-of-
pocket costs of such assignment or subletting, not to exceed $15 per net
rentable square foot multiplied by the number of net rentable square feet
involved, which deduction shall be amortized in the case
27.
<PAGE>
of a subletting in equal monthly installments over the term of the sublease),
prorated to reflect obligations allocable to that portion of the Premises
subject to such assignment or sublease, shall be payable to Landlord as
additional rental under this Lease without affecting or reducing any other
obligations of Tenant hereunder, provided that (A) in no event shall Tenant be
obligated to pay Landlord less than the rental specified in this Lease, and (B)
there are excluded from this clause (iv) any sublease or subleases totaling less
than 30% of the rentable area of the Premises, which exclusion is based on the
condition that at no time during the term of this lease shall there be any
assignment or subletting of 30% or more of the rentable area of the Premises,
(and in the event of the failure of such condition at any time this clause (iv)
shall apply to any consideration thereafter received on account of any
assignment or subletting, including the subletting of less than 30% of the
rentable area of the Premises to which the exclusion otherwise would apply). The
parties hereto acknowledge and agree that it is not their intention that
Tenant's leasehold interest in the Premises have any bonus value or marketable
value to Tenant even though the rentals provided for herein may from time to
time be less than the fair market rental value of the Premises.
(v) Tenant shall immediately and irrevocably assign to Landlord,
as security for Tenant's obligations under this Lease, all rental from any
subletting of all or a part of the Premises as permitted by this Lease, and
Landlord, as assignee and as attorney-in-fact for Tenant, or a receiver for
Tenant appointed on Landlord's application, may collect such rental and apply it
towards Tenant's obligations under this Lease; except that, until the occurrence
of an Event of Default by Tenant as defined in Section 17, Tenant shall have the
right to collect such rental.
28.
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(d) Primary Liability. Regardless of Landlord's consent, no
-----------------
subletting or assignment shall release Tenant of Tenant's obligation or alter
the primary liability of Tenant to pay the rental and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rental by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignees of Tenant or any successor of Tenant in the performance
of any of the terms hereof, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against such assignee or successor.
Landlord may consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of Tenant, without
notifying Tenant, or any successor of Tenant, and without obtaining its or their
consent thereto, and such action shall not relieve Tenant of liability under
this Lease, provided that any such amendments or modifications shall not
increase Tenant's liability hereunder.
(e) Attorneys' Fees. If Tenant shall assign or sublet the Premises or
---------------
request the consent of Landlord to any assignment or subletting, or if Tenant
shall request the consent of Landlord for any act that Tenant proposes to do,
then Tenant shall pay Landlord's reasonable attorneys' fees incurred in
connection therewith.
(f) Conflicting Provisions. The provisions of this Section shall
----------------------
prevail and govern over any conflicting provision in any assignment or
subletting to which Landlord gives written consent. Any modification of the
terms of this Lease as between Tenant and Sublessee shall be void and will not
be binding on the Landlord.
29.
<PAGE>
(g) Brokerage. Tenant shall forever save, indemnify and hold Landlord
---------
harmless from any and all claims for real estate brokerage of persons claiming
by or through Tenant arising from any assignment or subletting.
15. Rules. Tenant shall faithfully observe and comply with the rules and
-----
regulations annexed to this Lease and, after notice thereof, all reasonable
modifications thereof and additions thereto from time to time promulgated in
writing by Landlord. Landlord shall not be responsible to Tenant for the
nonperformance by any other tenant or occupant of the Building of any of said
rules and regulations.
16. Entry by Landlord. Landlord may enter the Premises at reasonable hours
-----------------
to (a) inspect the same, (b) exhibit the same to prospective purchasers,
lenders, or tenants, (c) determine whether Tenant is complying with all its
obligations hereunder, (d) supply janitor service and any other service to be
provided by Landlord to Tenant hereunder, (e) post notices of nonresponsibility
and (f) make repairs in the Premises or repairs to any adjoining space or
utility services or make repairs, alterations or improvements to any other
portion of the Building (provided, however, that all such work shall be done as
promptly as reasonably possible and so as to cause as little interference to
Tenant as reasonably possible). Without limiting the foregoing, Landlord may, at
any time or from time to time during the term of this Lease, perform substantial
renovation work in and to the Building or the systems serving the Building
(which work may include, but need not be limited to, the repair or replacement
of the Building's exterior facade, exterior window glass, elevators, electrical
systems, air conditioning and ventilating systems, plumbing system,
telecommunications system, common hallways, or lobby), any of which work may
require access to the same from within the Premises. Tenant agrees that (a)
Landlord shall
30.
<PAGE>
have access to the Premises at all reasonable times, upon reasonable notice, for
the purpose of performing such work, and (b) Landlord shall incur no liability
to Tenant, nor shall Tenant be entitled to any abatement of rent on account of
any noise, vibration, or other disturbance to Tenant's business at the Premises
(provided that Tenant is not denied access to said Premises and Tenant's ability
to conduct its business on the Premises is not substantially impaired thereby)
which shall arise out of said access by Landlord or by the performance by
Landlord of the aforesaid renovations at the Building. Landlord shall use
reasonable efforts (which shall not include any obligation to employ labor at
overtime rates) to avoid disruption of Tenant's business during any entry upon
the Premises by Landlord permitted by this Section 16.
Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises or any other loss occasioned by any such
entry or entries made by Landlord pursuant to any of the foregoing. Landlord
shall at all times have and retain keys with which to unlock all of the doors
in, on or about the Premises (excluding Tenant's vaults, safes and similar areas
designated in writing by Tenant and approved by Landlord in advance); and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open such doors in an emergency in order to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord by any of said
means, or otherwise, shall not under any circumstances be construed or deemed to
be a forcible or unlawful entry into or a detainer of the Premises or an
eviction, actual or constructive, of Tenant from the Premises, or any portion
thereof.
17. Events of Default. The occurrence of any one or more of the
-----------------
following events (an "Event of Default") shall constitute a breach of this Lease
by Tenant: (a) if Tenant shall fail to
31.
<PAGE>
pay rent or any other sum when and as the same becomes due and payable and such
failure shall continue for more than 10 days (except that if Landlord has
notified Tenant in writing on two occasions during the 12 months preceding the
due date that Tenant has failed to pay rent or any other sum on the due date,
then the failure to pay such rent or other sum on the due date shall constitute
an Event of Default); or (b) if Tenant shall default in the performance or
observance of any other term hereof or of the rules and regulations described in
Section 15 to be performed or observed by Tenant, and within 30 days following
written notice from Landlord to Tenant, Tenant shall have failed to completely
cure such default, or if the nature of such default is such that it cannot
reasonably be cured within such 30 day period, Tenant shall not within such 30
day period have commenced with prompt diligence the curing of such default, or,
having so commenced, shall thereafter have failed to prosecute with prompt
diligence the complete curing of such default; or (c) if Tenant shall make a
general 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 petition in
bankruptcy, or shall be adjudicated a bankrupt or as insolvent, or shall file a
petition in any proceeding seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future statute, law, or regulation, or shall file an answer admitting, or fail
to protest timely the material allegations of a petition filed against it in any
such proceeding, or shall seek or consent to or acquiesce in the appointment of
any trustee, receiver, or liquidator of Tenant or any material part of its
properties; or (d) if within 45 days after the commencement of any proceeding
against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future statute, law, or regulation, such proceeding shall not have been
dismissed, or if, within 30 days after the
32.
<PAGE>
appointment without the consent or acquiescence of Tenant, of any trustee,
receiver, or liquidator of Tenant or of any material part of its properties,
such appointment shall not have been vacated; or (e) if this Lease or any estate
of Tenant hereunder shall be levied upon under any attachment or execution and
such attachment or execution is not vacated within 30 days; or (f) if Tenant
shall abandon or surrender the Premises, or be dispossessed by process of law or
otherwise, or shall vacate or fail to take possession of the Premises.
18. Landlord's Right to Terminate. If an Event of Default shall
-----------------------------
occur, Landlord at any time thereafter may give a written termination notice to
Tenant, and on the date specified in such notice (which shall be not less than
three days after the giving of such notice) Tenant's right to possession shall
terminate, unless on or before such date all delinquent rent and all other sums
payable by Tenant under this Lease and all costs and expenses incurred by or on
behalf of Landlord hereunder shall have been paid by Tenant and all other
breaches of this Lease by Tenant at the time existing shall have been fully
remedied to the satisfaction of Landlord. Landlord may remove all persons and
property located therein and hold, administer and dispose of any or all of such
properties in accordance with applicable California law, including California
Civil Code Section 1980 et seq. and California Code of Civil Procedure Section
-- ---
1174. Landlord may do all things Landlord deems necessary in order to relet the
Premises, including, without limitation any alterations, repair and/or
restoration of the Premises. Upon such termination, Landlord may recover from
Tenant: (a) the worth at the time of award of the unpaid rental which had been
earned at the time of termination; (b) the worth at the time of award of the
amount by which the unpaid rental which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; (c) the worth
33.
<PAGE>
at the time of award of the amount by which the unpaid rental for the balance of
the term of this Lease after the time of award exceeds the amount of such rental
loss that Tenant proves could be reasonably avoided; and (d) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom. The "worth at the
time of award" of the amounts referred to in clauses (a) and (b) above is
computed by allowing interest at the highest rate legally permitted under
applicable law. The "worth at the time of award" of the amount referred to in
clause (c) above is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus 1% (one
percent). Notwithstanding any other provisions hereof, any efforts by Landlord
to mitigate damages caused by Tenant's breach of this Lease shall not constitute
a waiver of Landlord's right to recover damages hereunder and shall not affect
the right of Landlord to indemnification pursuant to the provisions of Section
12 hereof.
19. Continuation Notwithstanding Default. Even though Tenant has
------------------------------------
breached this Lease and abandoned the Premises, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession,
and Landlord may enforce all its rights and remedies under this Lease, including
the right to recover the rental as it becomes due under this Lease. Acts of
maintenance or preservation or efforts to relet the Premises or the appointment
of a receiver upon the initiative of Landlord to protect Landlord's interest
under this Lease shall not constitute a termination of Tenant's right to
possession.
20. Additional Remedies. The remedies provided for in this Lease are
-------------------
in addition to any other remedies available to Landlord at law or in equity by
statute or otherwise.
34.
<PAGE>
21. Landlord's Right to Cure Defaults. All agreements and provisions to be
---------------------------------
performed by Tenant under any of the terms of this Lease shall be at its sole
cost and expense and without any abatement of rental. If Tenant shall fail to
pay any sum of money, other than rental, required to be paid by it hereunder, or
shall fail to perform any other act on its part to be performed hereunder and
such failure shall continue for 10 days after notice thereof by Landlord,
Landlord may, but shall not be obligated to do so, and without waiving or
releasing Tenant from any obligations of Tenant, make any such payment or
perform any such other act on Tenant's part to be made or performed as in this
Lease provided. All sums so paid by Landlord and all necessary incidental costs
shall be deemed additional rent hereunder and shall be payable to Landlord on
demand, and Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of the nonpayment thereof by
Tenant as in the case of default by Tenant in the payment of rental.
22. Attorneys' Fees. If as a result of any breach or default in the
---------------
performance of any of the provisions of this Lease, Landlord uses the services
of an attorney in order to secure compliance with such provisions or recover
damages therefor, or to terminate this Lease or evict Tenant, Tenant shall
reimburse Landlord upon demand for any and all attorneys' fees and expenses so
incurred by Landlord, provided that if Tenant shall be the prevailing party in
any legal action brought by Landlord against Tenant, Tenant shall be entitled to
recover for the fees of its attorneys in such amount as the court may adjudge
reasonable.
23. Eminent Domain. If any part of the Premises shall be taken as a result
--------------
of the exercise of the power of eminent domain, this Lease shall terminate as to
the part of the Premises so taken as of the date of taking, and either Landlord
or Tenant shall have the right to terminate
35.
<PAGE>
this Lease as to the balance of the Premises remaining after a partial taking by
written notice to the other within 30 days after such date, provided, however,
that a condition to the exercise by Tenant of such right to terminate shall be
that such partial taking shall be to such extent and nature as to substantially
and permanently handicap, impede, or impair the conduct of Tenant's business
therein. If all of the Premises are taken as a result of the exercise of the
power of eminent domain, this Lease shall terminate upon the date of taking. If
any part of the Building (other than the Premises) shall be taken as a result of
the exercise of the power of eminent domain, Landlord shall have the right to
terminate this Lease by written notice to Tenant within 30 days from the date of
such taking; in the event that Landlord does not so elect, this Lease shall
continue in full force and effect, provided that Tenant is afforded continuous
access to the Premises.
Landlord shall be entitled to any and all compensation, damages,
income, rent, awards, or any interest therein whatsoever which may be paid or
made in connection with any exercise of the power of eminent domain, and Tenant
shall have no claim against Landlord for the value of any unexpired term of this
Lease or otherwise, except that Tenant shall be entitled to any specific award
made in favor of Tenant covering Tenant's trade fixtures and relocation
expenses. In the event of a partial taking of the Premises which does not result
in a termination of this Lease, the monthly rental thereafter to be paid shall
abate in proportion to that portion of the Premises that is rendered unusable by
Tenant in the conduct of its business.
It is understood and agreed that the foregoing provisions of this
Section are intended to and do fully define and set forth the respective rights
and obligations of the parties in the event of a taking of the Premises or a
part thereof, including without limitation the circumstances under
36.
<PAGE>
which this Lease shall or may be terminated, and the disposition of any
insurance or award, and Landlord and Tenant each expressly waives the benefit
and effect of any rights and/or obligations whether purporting to arise by law,
by governmental order, under any insurance contract, or otherwise (including the
provisions of the California Code of Civil Procedure section1265.130), which are
inconsistent with the rights and obligations set forth herein.
For purposes hereof the "date of taking" shall be deemed to be the date
that physical possession of the property taken is delivered to the condemning
authority.
24. Subordination. This Lease shall be subject and subordinate at all
-------------
times to (a) all ground or underlying leases which may hereafter be executed
affecting the Building and (b) the liens of all mortgages and deeds of trust now
or hereafter placed on or against the Building or on or against Landlord's
interest or estate therein or on or against all such ground or underlying
leases, all without the necessity of having further instruments executed on the
part of Tenant to effect such subordination; provided that if and for as long as
Tenant is not in default in the payment of rental or other sums or be otherwise
in default under the terms of this Lease, and Tenant attorns to the Landlord of
any such ground or underlying lease or to the purchaser upon foreclosure of the
lien of any mortgage or deed of trust, or, if requested, enters into a new lease
for the balance of the original or extended term hereof then remaining upon the
same terms and provisions as are in this Lease contained (which attornment or
entry into a new lease Tenant hereby agrees to do), the rights and possession of
Tenant under this Lease shall not be disturbed. Tenant agrees to execute and
deliver upon demand such further instruments evidencing such subordination of
this Lease to such ground or underlying leases, and to the liens of any such
mortgages or deeds of trust, as may be requested by Landlord and/or in such form
as is required
37.
<PAGE>
by Landlord's lender (including provisions waiving as against lender claims of,
and giving to lender notice of and the right to cure, Landlord defaults under
the Lease).
25. No Merger. The voluntary or other surrender of this Lease by Tenant,
---------
or a mutual cancellation thereof, shall not work a merger, and, at the option of
Landlord, either shall operate (a) to terminate all or any existing subleases or
subtenancies under the Lease or (b) as an assignment to Landlord of any or all
such subleases and subtenancies.
26. Sale. If the original Landlord hereunder, or any successor owner of
----
the Building, shall sell or convey the Building, all liabilities and obligations
on the part of the original Landlord, or such successor owner, under this Lease
accruing thereafter shall terminate, and thereupon all such liabilities and
obligations shall be binding upon the new owner. Tenant agrees to attorn to such
new owner.
27. Estoppel Certificate. Tenant shall execute, acknowledge and deliver to
--------------------
Landlord, within ten (10) days following request by Landlord a certificate
certifying (a) that this Lease is unmodified and in full force and effect (or if
there have been modifications, that this Lease is in full force and effect as
modified and stating the date and nature of each modification), (b) the date, if
any, to which rental and other sums payable hereunder have been paid, (c) that
no notice has been received by Tenant of any default which has not been cured,
except as to defaults specified in said certificate and (d) such other matters
as may be requested by Landlord or Landlord's lender. Any such certificate may
be relied upon by any prospective purchaser, mortgagee, or beneficiary under any
deed of trust on the Building or any part thereof.
38.
<PAGE>
28. No Light, Air, or View Easement. Any diminution or shutting off of
-------------------------------
light, air, or view by any structure which may be erected on lands adjacent to
the Building shall in no way affect this Lease or impose any liability on
Landlord.
29. Holding Over. If, without objection by Landlord, Tenant holds
------------
possession of the Premises after expiration of the term of this Lease, Tenant
shall become a tenant from month to month upon the terms, conditions and
provisions herein specified but at a monthly rental equivalent to 150 percent of
the then prevailing fair market rental as determined in good faith by the
Landlord but in no event less than the rental being paid by Tenant in the last
month of the term of this Lease, payable in advance on or before the first day
of each month. Each party shall give the other notice at least one month prior
to the date of termination of such monthly tenancy of its intention to terminate
such tenancy.
30. Abandonment. Tenant shall not vacate or abandon any part or all of the
-----------
Premises. If Tenant shall vacate, abandon, or surrender the Premises, or be
dispossessed by process of law or otherwise, any personal property belonging to
Tenant and left on the Premises shall be deemed to be abandoned, at the option
of the Landlord, except such property as may be mortgaged to Landlord.
31. Surrender. Tenant shall at the end of the term hereof surrender to
---------
Landlord the Premises and all alterations, additions and improvements thereto in
the same condition as when received, ordinary wear and tear and damage by fire,
earthquake, act of God, or the elements excepted. Subject to Landlord's right to
require removal pursuant to Section 7 hereto, all improvements installed in the
Premises by Tenant, shall, without compensation to Tenant, then become
Landlord's property free and clear of all claims to or against them by Tenant or
any third
39.
<PAGE>
person, and Tenant shall defend and indemnify Landlord against all liability and
loss arising from such claims or from Landlord's exercise of the rights
conferred by this Section.
32. Waiver. The waiver by either party of any term, agreement, condition,
------
or provision herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, agreement, condition, or
provision herein contained, nor shall any custom or practice which may grow
between the parties in the administration of the terms hereof be construed to
waive or to lessen the right of such party to insist upon the performance by the
other party in strict accordance with said terms. The subsequent acceptance of
rental hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, agreement, condition, or provision of this Lease,
other than the failure of Tenant to pay particular rental so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rental.
33. Notice. All notices, demands or other writings provided in this Lease
------
to be given or made or sent, or which may be given or made or sent by one party
to another party, shall be deemed to have been fully given or made or sent when
made in writing and upon personal delivery (whether by such party or its agent,
or by courier, or by electronic transmissions such as FAX or telex) or after 72
hours following deposit in the United States mail, registered or certified,
postage prepaid, and addressed to such party at the address specified in the
Basic Lease Information, or to such other place as such party may from time to
time designate in a notice to the other party or parties. Tenant hereby appoints
as its agent to receive the service of all dispossessory or distraint
proceedings and notices thereunder the person in charge of or occupying the
Premises at the time,
40.
<PAGE>
and, if no person shall be in charge of or occupying the same, then such service
may be made by attaching the same on the main entrance of the Premises.
34. Complete Agreement. There are no oral agreements between Landlord and
------------------
Tenant affecting this Lease, and this Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements, and understandings,
if any, between Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this Lease. There are no representations
between Landlord and Tenant other than those contained in this Lease, and all
reliance with respect to any representations is solely upon such
representations.
35. Corporate Authority. If Tenant signs as a corporation, each of the
-------------------
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, that Tenant
has and is qualified to do business in California, that the corporation has full
right and authority to enter into this Lease, and that the person(s) signing on
behalf of the corporation were authorized to do so.
36. Miscellaneous Provisions.
------------------------
(a) The words "Landlord" and "Tenant" as used herein shall include
the plural as well as the singular.
(b) If there be more than one Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several.
(c) Time is of the essence of this Lease and each and all of its
provisions.
(d) Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant.
41.
<PAGE>
(e) The agreements, conditions and provisions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
executors, administrators, successors and assigns of the parties hereto.
(f) If any provision of this Lease shall be determined to be illegal
or unenforceable, such determination shall not affect any other provision of
this Lease and all such other provisions shall remain in full force and effect.
(g) This Lease shall be governed by and construed pursuant to the
laws of the State of California.
(h) All remedies hereinbefore and hereafter conferred upon Landlord
shall be deemed cumulative and no one shall be exclusive of the other, or shall
in any way limit the availability to Landlord of any other remedy conferred by
law, whether or not specifically conferred by the provisions of this Lease.
(i) All indemnities of Tenant contained in this Lease shall survive
the expiration or other termination hereof with respect to any act, condition or
event which is the subject matter of such indemnity and which occurs prior to
such expiration or other termination.
(j) The parties acknowledge and agree that each party has reviewed
and revised, and has been provided the opportunity of its respective counsel to
review and revise, this Lease, and no rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall be employed
in the interpretation or construction of this Lease, or any amendments or
exhibits thereto, or any other document executed and delivered by either party
in connection therewith.
42.
<PAGE>
37. Exhibits. The exhibit(s) and addendum, if any, specified in any of the
--------
Sections of this Lease are attached to this Lease and by this reference made a
part hereof.
38. Security Deposit. Tenant has deposited with Landlord the sum specified
----------------
in the Basic Lease Information ("Deposit"). The Deposit shall be held by
Landlord as security for the faithful performance by Tenant of all of the
provisions of this Lease to be performed or observed by Tenant. If Tenant fails
to pay rent or other charges due hereunder, or otherwise defaults with respect
to any provision of this Lease, Landlord may use, apply or retain all or any
portion of the Deposit for the payment of any rent or other charge in default or
for the payment of any other sum to which Landlord may become obligated by
reason of Tenant's default or to compensate Landlord for any loss or damage
which Landlord may suffer thereby. If Landlord so uses or applies all or any
portion of the Deposit, Tenant, within 10 days after demand therefor, shall
deposit cash with Landlord in an amount sufficient to restore the Deposit to the
full amount thereof, and Tenant's failure to do so shall be a material breach of
this Lease. Landlord shall not be required to keep the Deposit separate from its
general accounts. If Tenant performs all of Tenant's obligations hereunder, the
Deposit, or so much thereof as has not theretofore been applied by Landlord,
shall be returned, without payment of interest or other increment for its use,
to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's
interest hereunder) at the expiration of the term hereof, and after Tenant has
vacated the Premises. No trust relationship is created herein between Landlord
and Tenant with respect to the Deposit.
39. Brokerage. Each party warrants and represents to the other that such
---------
party has not retained the services of any real estate broker, finder or any
other person whose services would form the basis for any claim for any
commission or fee in connection with this Lease or the
43.
<PAGE>
transactions contemplated hereby except for (a) real estate brokerage services
rendered to Land-lord by Grubb & Ellis Company, the commissions earned with
respect to which Landlord shall pay to such broker pursuant to separate
agreement between Landlord and such broker, and (b) such real estate brokerage
services as may have been rendered to Tenant for which Landlord is to have no
liability. Each party agrees to save, defend, indemnify and hold the other party
free and harmless from any breach of its warranty and representation as set
forth in the preceding sentence, including the other party's attorneys fees.
40. Limitation of Liability. With the exception of actions arising from
-----------------------
Landlord's fraud, bad faith or willful misconduct, any liability of Landlord
under this Lease shall be limited to Landlord's interest in the Building and the
parcel of real property on which the Building is located, and any appurtenant
rights thereto.
41. Parking Spaces. Landlord shall provide to Tenant two (2) parking
--------------
spaces in the garage of the Building for the term of the Lease. Tenant shall use
such parking spaces at its sole risk and liability, and no bailment shall be
created.
44.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
set forth in the Basic Lease Information.
LANDLORD: TENANT:
C & C INVESTMENTS 2BRIDGE SOFTWARE
a trust a California corporation
By ________________________ By ___________________________
Corwin Booth Mansoor Zakaria
Trustee Chief Executive Officer
By ___________________________
Ron Parks
Secretary
45.
<PAGE>
EXHIBIT A
[CHART OMITTED]
46.
<PAGE>
[CHART OMITTED]
<PAGE>
EXHIBIT B
INITIAL IMPROVEMENTS
1. General. Landlord shall install tenant improvements in the Premises,
-------
as provided in paragraphs 2 through 5, inclusive, below. Such improvements shall
include distribution of the heating, ventilating and air conditioning system,
distribution of electrical service and wiring, distribution of telephone
services, treatment of all interior surfaces, construction of all required
partitions and doors and such other improvements as may be requested by Tenant
and approved by Landlord.
2. Approval of Plans, Cost Estimate and Schedule.
---------------------------------------------
(a) Landlord and Tenant shall diligently pursue the preparation of
all plans and specifications for the improvements provided for in paragraph 1.
All such plans and specifications shall be approved by both Landlord and Tenant,
which approval shall not be unreasonably withheld by either party. As soon as
practicable after execution of this Lease, Tenant, at its expense, shall provide
Landlord's architect with instructions sufficient to enable Landlord's architect
to prepare complete plans and specifications for such improvements. Such plans
and specifications, a cost estimate, and a schedule for the work shall then be
prepared by Landlord's architect and submitted to Landlord and Tenant for
approval. When the plans and specifications, cost estimate, and schedule are so
approved by
1.
<PAGE>
Landlord and Tenant, Landlord shall be authorized and shall proceed with the
improvement of the Premises in accordance with such plans and specifications and
schedule. Landlord shall not be obligated to proceed with any improvement of the
Premises until such time as Landlord and Tenant approve plans and
specifications, cost estimate, and schedule for the work.
(b) Tenant shall bear the cost of any changes in the work requested
by Tenant after final approval of plans and specifications under (a) above,
provided that Tenant shall approve of such cost in advance.
3. Cost of Improvements to the Premises. Landlord shall bear the cost of
------------------------------------
such improvements up to a maximum of $185,128.00 (the "Allowance"). Tenant shall
bear any costs in excess of the Allowance as follows: up to $10,000 of such
excess shall be paid by an increase in monthly Base Rent for each month during
the term of the Lease for which rent is payable of $0.0221 for each $1 of such
excess, and any amount of such excess over $10,000 shall be paid by Tenant to
Landlord within 10 days of billing. The cost of such work shall include the sum
of the following costs:
(a) Payments made to contractors and subcontractors performing
construction work in connection with such construction;
(b) Fees for building permits, licenses, and inspection;
2.
<PAGE>
(c) Fees of engineers, surveyors, architects, and others providing
professional or extra services to Landlord in connection with such construction
or the supervision of such construction;
(d) Premiums for contractor's faithful performance and for mechanics'
lien bonds, if Landlord elects to obtain such bonds; and
(e) Such other costs as reasonably may be incurred by Landlord in
connection with such construction.
4. Payment of Tenant's Costs. Tenant shall pay to Landlord all amounts
-------------------------
payable by Tenant pursuant to this Exhibit B within 10 days after billing by
Landlord. Bills may be rendered during the progress of the work so as to enable
Landlord to pay its general contractor, architect, or engineer without advancing
Landlord's funds for Tenant's share of the cost of the work.
5. Other Work by Tenant. Any work not within the scope of this Exhibit B
--------------------
shall be furnished by Tenant or at Tenant's expense and shall be subject to the
provisions of Section 7 of this Lease. Tenant shall adopt a schedule in
conformance with the schedule of Landlord's contractors and conduct any such
work in such a manner as to maintain harmonious labor relations and as not to
interfere unreasonably with or delay the work of Landlord's contractors.
Tenant's contractors, subcontractors, and labor shall be acceptable to and
approved by Landlord and shall be subject to the administrative supervision of
Landlord's general contractor. Contractors and subcontractors engaged by
3.
<PAGE>
Tenant shall employ workers and means to insure so far as may be possible the
progress of the work without interruption on account of strikes, work stoppage,
or similar causes for delay. Landlord shall give access and entry to the
Premises to Tenant and its contractors and subcontractors and reasonable
opportunity and time and reasonable use of facilities to enable Tenant to adapt
the Premises for Tenant's use; provided, however, that if such entry is prior to
the commencement of the term of this Lease, such entry shall be subject to all
of the terms and conditions of this Lease except the payment of rent.
4.
<PAGE>
LANDLORD'S RULES
1. Signs. No sign, placard, picture, advertisement, name or notice shall
-----
be inscribed, displayed, printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Landlord first had and
obtained, and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice, without notice to and at the expense of
Tenant.
2. Building Directory. The directory of the Building will be provided
------------------
exclusively for the display of the name and location of Tenant and other tenants
in the building and Landlord reserves the right to exclude any other names
therefrom. Any changes by Landlord made to such a directory at the request of
Tenant shall be at Tenant's expense.
3. Locks. No additional locks shall be placed upon any doors of the
-----
Premises, and Tenant agrees not to have any duplicate keys made without the
consent of Landlord. An initial quantity of keys shall be provided to Tenant as
provided in Exhibit B of the Lease; additional keys shall be paid for by Tenant.
Upon termination of the Lease, Tenant shall surrender all keys.
4. Wiring. When wiring of any kind is introduced, it must be connected as
------
directed by Landlord, and no boring or cutting for wires will be allowed except
with the consent of Landlord. The location of telephones, electrical outlets,
and other office
1.
<PAGE>
equipment affixed to the Premises shall be prescribed by Landlord.
5. Landlord's Non-Responsibility. Landlord is not responsible to any
-----------------------------
tenant for the non-observance or violation of the rules and regulations by any
other tenant.
6. Obstructing Light. Tenant shall not allow anything to be placed
-----------------
against or near the glass in the partitions or in the doors between the Premises
leased and in the halls or corridors. The doors between the Premises and the
corridors of the Building shall at all times, except when in actual use for
ingress and egress, be kept closed.
7. Halls and Stairways. The entries, passages, stairways, and elevators
-------------------
shall not be obstructed by Tenant or used for any purpose other than ingress and
egress of persons to and from the respective offices. Tenant shall not bring
into or keep within the Premises any animal or vehicle.
8. Plumbing. The wash-bowls, water closets, and urinals shall not be used
--------
for any purpose other than those for which they were constructed.
9. Closing Precautions. Before leaving the Building, Tenant shall cause
-------------------
(a) all doors of the Premises to be closed and securely locked, (b) all water
faucets or water apparatus to be shut off, and (c) all unused electrical or gas
appliances to be shut off, all so as to prevent waste or damage.
10. Moving Equipment Safes, etc. No freight, furniture, supplies, books or
---------------------------
equipment of any kind shall be brought into or
2.
<PAGE>
removed from the Building without the consent of Landlord or Landlord's agent
and all moving of same into or out of the Building by Tenant shall be done at
such times and in such manner as Landlord shall designate (and unless otherwise
expressly designated by Landlord, the freight elevator not any passenger
elevator shall be used for any and all moving of the same). Landlord shall have
the right to prescribe the weight, size, and position of all safes and other
heavy property brought into the Building, and also the times and manner of
moving the same in and out of the Building. Landlord will not be responsible for
loss of or damages to any such safe or property from any cause and all damage
done to the Building by moving or maintaining any such safe or property shall be
repaired at the expense of Tenant.
11. Janitor Service. No Tenant shall employ any person or persons other
---------------
than the janitor of Landlord for the purpose of cleaning the Premises unless
otherwise agreed to by Landlord in writing. Except with the written consent of
Landlord, no person or persons other than those approved by Landlord shall be
permitted to enter the Building for the purpose of cleaning the same. No Tenant
shall cause any unnecessary labor by reason of such Tenant's carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting, cleaning, and vacuuming by the janitor assigned
to such work and shall not include beating of carpets or rugs or moving of
furniture or other special services. Window cleaning
3.
<PAGE>
shall be done only by Landlord, and at such intervals and such hours as Landlord
shall deem appropriate.
12. Violation of Rules. Landlord reserves the right to exclude or expel
------------------
from the Building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.
13. Requirements. The requirements of Tenant will be attended to only upon
------------
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from the office, and no employee will admit any person
(tenant or otherwise) to any office without specific instructions from the
office of the Building.
14. Rooms Used in Common. Rooms used in common by tenants shall be subject
--------------------
to such regulations as are posted therein.
15. Entrance Doors. Landlord reserves the right to close and keep locked
--------------
all entrance and exit doors of the Building during such hours as Landlord may
deem to be advisable for the adequate protection of the Building, provided,
however, that retail tenants shall have access and be responsible for entrance
and exit doors to their own Premises. Tenants who require access to the Building
during hours outside of the normal hours of operation as stated in Rule 16 shall
make arrangements with the Building manager.
4.
<PAGE>
16. Hours of Operation. The normal hours of operation for the Building
------------------
will be Monday through Friday (excluding holidays) from 7:00 a.m. to 6:00 p.m.
17. Food. Tenant shall not prepare or sell, or permit to be prepared or
----
sold, any food in the Premises, except that Tenant may (a) prepare coffee, teas
and like beverages for consumption by Tenant's employees on the Premises and (b)
prepare food in a microwave oven, provided that Tenant in so doing nevertheless
shall comply at all times with the provisions of Section 4 of the Lease.
18. Chair Pads. Tenant shall use pads under all chairs with rollers.
----------
5.
<PAGE>
EXHIBIT 10.7
COMMERCIAL OFFICE
LEASE
BETWEEN
C & C INVESTMENTS, LANDLORD
and
MZ GROUP, INC., TENANT
Premises: 221 Main Street
San Francisco, CA 94105
<PAGE>
COMMERCIAL OFFICE LEASE
-----------------------
BASIC LEASE INFORMATION
-----------------------
Lease Section
- -------------
Introductory Date: October 29, 1992
Paragraph
Landlord: C & C INVESTMENTS
Tenant: MZ GROUP, INC.
a California corporation
Section 1 Premises: a portion of the 7th floor
Building: 221 Main Street
San Francisco, CA 94105
Section 2 Term
Commencement: October 1, 1992
Section 2 Term
Expiration: September 30, 1997
Section 3 Base Rent: 10/1/92- $15,710.39 per month
12/31/92 (to be abated,
subject to
Section 41)
1/1/93 $15,710.39 per month
9/30/97
Section 3(b) Base Year
(for Operating
Expenses
Increases): Calendar year 1992
i.
<PAGE>
Section 3(c) Base Year
(for Property
Taxes
Increases): Calendar year 1992
Section 3(b) Tenant's
and 3(c) Percentage
Share (of
increases in
Operating
Expenses and
Property
Taxes): 3.22%
Section 33 Tenant's
Address for
Notices: Suite 700
221 Main Street
San Francisco, CA 94105
Section 33 Landlord's
Address for
Notices: Suite 404
101 Howard Street
San Francisco, CA 94105
Section 38 Deposit: $15,710.39
ii.
<PAGE>
The provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appear. Each such
reference shall incorporate the applicable Basic Lease Information.
LANDLORD: TENANT:
C & C INVESTMENTS MZ GROUP, INC.
a trust a California corporation
By_________________________ By______________________________
Corwin Booth Mansoor Zakaria
Trustee Chairman
iii.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Premises 1
--------
2. Term; Improvements 1
------------------
3. Rental 2
------
4. Use 9
---
5. Services 11
--------
6. Taxes Payable by Tenant 14
-----------------------
7. Alterations, Additions or Improvements 15
--------------------------------------
8. Liens 16
-----
9. Repairs 17
-------
10. Destruction or Damage 17
---------------------
11. Insurance; Waiver of Subrogation 19
--------------------------------
12. Waiver; Indemnity 21
-----------------
13. Compliance with Legal Requirements 23
----------------------------------
14. Assignment and Subletting 27
-------------------------
15. Rules 34
-----
16. Entry by Landlord 34
-----------------
17. Events of Default 36
-----------------
18. Landlord's Right to Terminate 38
-----------------------------
19. Continuation Notwithstanding Default 40
------------------------------------
20. Additional Remedies 40
-------------------
21. Landlord's Right to Cure Defaults 40
---------------------------------
22. Attorneys' Fees 41
---------------
23. Eminent Domain 41
--------------
24. Subordination 43
-------------
</TABLE>
iv.
<PAGE>
<TABLE>
<S> <C>
25. No Merger 44
---------
26. Sale 44
----
27. Estoppel Certificate 45
--------------------
28. No Light, Air, or View Easement 45
-------------------------------
29. Holding Over 45
------------
30. Abandonment 46
-----------
31. Surrender 46
---------
32. Waiver 47
------
33. Notice 47
------
34. Complete Agreement 48
------------------
35. Corporate Authority 48
-------------------
36. Miscellaneous Provisions 48
------------------------
37. Exhibits 50
--------
38. Security Deposit 50
----------------
39. Brokerage 51
---------
40. Limitation of Liability 52
-----------------------
41. Base Rent Abatement 52
-------------------
42. Parking Spaces 52
--------------
</TABLE>
Exhibit A -- Floor Plan
Exhibit B -- Initial Improvements
Landlord's Rules
v.
<PAGE>
COMMERCIAL OFFICE LEASE
-----------------------
THIS LEASE, dated effective as of the date set forth in the Basic Lease
Information is made and entered into by and between each of the persons or
entities specified in the Basic Lease Information as Landlord ("Landlord") and
Tenant ("Tenant"), respectively.
1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases
--------
from Landlord, the Premises, as specified in the Basic Lease Information and as
more particularly described in Exhibit A attached hereto, located within the
Building as specified in the Basic Lease Information for the term and subject to
the terms, covenants, agreements and conditions hereinafter set forth, to each
and all of which Landlord and Tenant hereby mutually agree.
2. Term; Improvements.
------------------
(a) Term. The term of this Lease shall commence and, unless sooner
----
terminated as hereinafter provided, shall end on the dates specified in the
Basic Lease Information. If Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to Tenant at the commencement of the term, this Lease
shall not be void or voidable, the term of this Lease shall not be extended by
such delay, and the Landlord shall not be liable to Tenant for any loss or
damage resulting therefrom, but in that event, subject to any contrary
provisions in Exhibit B attached hereto, (i) commencement of the term shall be
deferred and the
1.
<PAGE>
date on which rental commences shall be deferred for the period of such delay
and (ii) the term of the Lease shall be reduced by the number of days of such
delay.
(b) Improvements. The Premises are leased to Tenant in their present
------------
"as-is" condition, except that Landlord shall construct or install in the
Premises the improvements to be constructed or installed by Landlord pursuant to
the provisions of Exhibit B, and the costs for such improvements shall be borne
as provided in Exhibit B. Landlord's architect and Tenant shall conduct a joint
inspection of the Premises following substantial completion of such improvements
and shall prepare a joint punchlist of items to be completed. Landlord shall
complete such joint punchlist items within 30 days following preparation
thereof.
3. Rental. Tenant shall pay to Landlord throughout the term of this Lease
------
the following sums as rental for the Premises:
(a) Base Rent. The monthly Base Rent payable during the term of the
---------
Lease shall be the sum specified in the Basic Lease Information as the Base Rent
subject to the further provisions hereof.
(b) Additional Rent on Account of Increases in Operating Expenses. In
-------------------------------------------------------------
addition to Base Rent, Tenant, subject to Section 3(d), shall pay to Landlord as
additional rent with respect to each calendar year of the term of this Lease or
portion thereof occurring subsequent to October 1, 1993 Tenant's percentage
share (as specified in the Basic Lease Information) of
2.
<PAGE>
the total dollar increase, if any, in Operating Expenses paid or incurred by
Landlord in such subsequent calendar year or portion thereof over the Base Year
Operating Expenses. For purposes hereof, "Operating Expenses" shall mean (i) all
direct and indirect costs of management, operation and maintenance of the
Building (including rentable areas occupied by Landlord) and including, without
limiting the foregoing: wages, salaries, employee benefits, and payroll burden
of personnel engaged in management, operation and maintenance of the Building,
Building office rent or rental value, power, heat, light, steam, air
conditioning, gas, water, garbage, sewage and waste disposal and other
utilities, equipment, tools, materials and supplies, maintenance and repairs,
insurance, license, permit and inspection fees, janitorial services, maintenance
contracts and general services, and depreciation on personal property, costs of
compliance with environmental laws (including costs of monitoring and tests),
and (ii) the cost of any capital improvements made to the Building by Landlord
after the Base Year for Operating Expenses Increases that (A) reduce Operating
Expenses or that reduce or conserve the amount of utilities consumed (e.g.,
electricity, gas or other fuels) such cost of such capital improvements to be
included to the extent of the amount of the actual cost savings realized, or (B)
are required under any governmental law or regulation that was not applicable to
the Building at the time this Lease was entered into, such cost or allocable
portion thereof to be amortized over such reasonable
3.
<PAGE>
period as Landlord shall determine together with interest on the unamortized
balance at the rate of 10 percent per year or such higher rate as may have been
paid by Landlord on funds borrowed for the purpose of constructing such capital
improvements; provided, however that Operating Expenses shall not include
-------- -------
Property Taxes, depreciation on the Building other than depreciation on personal
property, costs of tenants' improvements, interest, capital items other than
those referred to in clause (ii) above, and payments on debt (principal or
interest). Actual Operating Expenses for both the Base Year and each subsequent
year of the term of this Lease shall be adjusted to equal Landlord's reasonable
estimate of Operating Expenses had the total rentable area of the Building been
occupied for both years. The determination of the costs of management,
operation, and maintenance of the Building and the costs of the capital
improvements referred to in clause (ii) above shall be in accordance with
generally accepted accounting principles consistently applied.
(c) Additional Rent on Account of Increases in Property Taxes. In
---------------------------------------------------------
addition to Base Rent, Tenant, subject to Section 3(d), shall pay to Landlord as
additional rent with respect to each calendar year of the term of this Lease or
portion thereof occurring subsequent to October 1, 1993 Tenant's percentage
share (as specified in the Basic Lease Information) of the total dollar
increase, if any, in Property Taxes paid or incurred by Landlord in such
subsequent calendar year or portion
4.
<PAGE>
thereof over the Base Year Property Taxes. For purposes hereof, "Property Taxes"
shall mean all real property taxes, assessments (general or special), property
tax reassessments caused by a change in ownership of the Building or the
Premises and all other taxes (including any tax levied wholly or partly in lieu
thereof) levied against the Building (or this Lease, the occupancy of Tenant,
the sums payable by Tenant hereunder, or in any manner relative to the subject
matter hereof), excluding only taxes covered by Section 6 hereof and federal and
California income and death taxes imposed with respect to Landlord. For purposes
hereof, "taxes" is meant to be interpreted in its most comprehensive sense and
to include any impost, levy or the like levied by any governmental jurisdiction;
and without limiting the generality of the foregoing, "taxes" shall include any
tax, fee, excise, levy or other impost imposed by the United States, the State
of California or any political subdivision of the State (including any county,
city, city and county, public corporation, district or any other political
entity or public corporation thereof), however described (including any so-
called value-added tax) as a direct substitution in whole or in part for, or in
addition to, real property taxes and assessments.
(d) Procedure. The additional rent provided under Sections 3(b) and
---------
3(c) above shall be paid in accordance with the following procedures:
(i) As soon as is practicable following the first anniversary of
this Lease and the end of each calendar year
5.
<PAGE>
thereafter occurring during the term of this Lease, Landlord shall give Tenant
written notice of its estimate of any increased amounts payable under Section
3(b) and/or 3(c). On or before the first day of the calendar month next
following such notice, Tenant shall pay to Landlord that portion of the
estimated amounts that already shall have accrued and thereafter on or before
the first day of each succeeding calendar month shall pay a ratable portion of
the balance remaining over the relevant period covered. If for any reason such
notice is not given as provided above, Tenant shall continue to pay on the basis
of the then applicable rental until the month after such notice is given. If at
any time or times Landlord determines that the increased amounts payable under
Sections 3(b) and/or 3(c) above will vary from its estimate by more than 10
percent, Landlord shall, by notice to Tenant, revise its estimate for such year,
and subsequent payments by Tenant for such year shall be based upon such revised
estimate.
(ii) Within 90 days after the close of each respective calendar
year during the term of this Lease subsequent to the Base Year (or as soon after
such 90-day period as practicable), Landlord shall deliver to Tenant a statement
of the adjustments to be made pursuant to Sections 3(b) and/or 3(c) above for
such calendar year which statement shall be audited and shall be prepared in
accordance with generally accepted accounting principles, and such statement
shall be final and binding upon Landlord and Tenant. If on the basis of such
6.
<PAGE>
statement Tenant owes an amount that is less than the estimated payments for
such year previously made by Tenant, Landlord shall refund such excess to Tenant
within 30 days of the delivery of such statement. If on the basis of the
statement Tenant owes an amount that is more than the estimated payments for
such year previously made by Tenant, Tenant shall pay the deficiency to Landlord
within 30 days after delivery of the statement.
(iii) If the date of the first anniversary of this Lease is a day
other than the first day of a calendar year, the amount of adjustment to be made
pursuant to Sections 3(b) and/or 3(c) above that is applicable to the calendar
year in which such first anniversary occurs shall be prorated on the basis that
the number of days from the first anniversary date to and including the last day
of such calendar year bears to 365.
(iv) If this Lease shall terminate on a day other than the last
day of a calendar year, the amount of adjustment to be made pursuant to Sections
3(b) and/or 3(c) above that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis that the number of days from
the commencement of such year to and including the termination date bears to
365. The termination of this Lease shall not affect the obligations of Landlord
and Tenant pursuant to subparagraph (ii) of this Section 3(d) to be performed
after such termination.
(e) Rental Commencement. Base Rent shall be paid to Landlord (i) upon
-------------------
the execution of this Lease for the first full month of the term of this Lease
for which rent is payable as set
7.
<PAGE>
forth in the Basic Lease Information (as the same may be deferred pursuant to
Section 2(a) hereof), and (ii) with respect to the second full month and each
successive calendar month thereafter for which rent is payable, on or before the
first day of each such month. If this Lease commences on other than the first
day of a calendar month or ends on other than the last day of a calendar month,
the second and last installments of rent shall be pro-rated for the partial
months involved.
(f) No Deduction or Offset; Interest. All rental and all other sums
--------------------------------
due and payable by Tenant to Landlord under any of the provisions of this Lease
shall be paid to Landlord, without abatement, deduction, offset, prior notice or
demand, in lawful money of the United States at Landlord's address for notices
or to such other person or at such other place as Landlord, from time to time,
may designate in writing. Tenant acknowledges that late payment by Tenant to
Landlord of rental or such sums will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impracticable to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and note secured by any encumbrance
covering the Building and/or the Premises. Therefore, if any installment of
rental or any other sum due and payable by Tenant to Landlord is not paid to and
received by Landlord within 10 days of the due date thereof (or, if Landlord has
notified Tenant in writing on two occasions
8.
<PAGE>
during the 12 months preceding the due date that Tenant has failed to pay rent
or any other sum on the due date thereof, then if Tenant fails to pay rent or
other sum on the due date thereof):
(i) Tenant shall pay to Landlord an additional sum of five
percent (5%) of the overdue amount as a late charge. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of late payment by Tenant; and
(ii) the sums due and payable shall bear interest from date due
until paid at the highest rate legally permitted by applicable law.
Acceptance of any late charge or interest shall not constitute a waiver of
Tenant's default on the overdue amount, or prevent Landlord from exercising any
of the other rights and remedies available to Landlord.
4. Use. The Premises shall be used for general office purposes and no
---
others. Tenant shall neither do nor permit to be done in or about the Premises,
nor bring or permit to be brought or kept therein, anything which is prohibited
by or will in any way conflict with any law, statute, ordinance or governmental
rule or regulation now in force or which may hereafter be enacted or
promulgated, or which now or hereafter is prohibited by any insurance policy
carried by Landlord, or will in any way increase the existing rate of or affect
any fire or any other insurance upon the Building or any of its contents, or
cause a cancellation
9.
<PAGE>
of any insurance policy covering the Building or any part thereof or any of its
contents. Tenant, in its own respect and in respect of its agents, servants and
invitees, shall neither do nor permit anything to be done in or about the
Premises or the Building or any part thereof which will in any way obstruct or
interfere with the rights of other tenants of the Building (including any noise
audible or any odor or vibrations observable from outside the Premises), or
injure or annoy them, or use or allow the Premises or the Building or any part
thereof to be used for any improper, unlawful or objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or about the Premises
or the Building or any portion thereof, or commit or suffer to be committed any
waste or damage in or about the Premises or the Building or any portion thereof.
Tenant shall not permit any materials to be placed or stored in the common areas
of the Building and shall not permit debris to be placed therein, except in
appropriate receptacles provided therefor. Tenant, its agents, servants and
invitees shall have the right on a 24 hour per day - seven day per week basis
during the term hereof, subject to compliance with Landlord's security
procedures, to the (a) non-exclusive use of the entrance lobby of the Building,
its passenger and freight elevators, and the common area of the floor of the
Building in which the Premises are located, for purposes of ingress to and
egress from the Premises, and (b) the restrooms located on the floor of the
Building in which the Premises are located, and (c) the exclusive use of the
10.
<PAGE>
Premises. The provisions of Sections 11 and 12 of this Lease shall apply to all
such areas. Tenant shall not use any portion of the Building (including, without
limitation, the Building roof or portions of the Building leased to other
tenants) other than the Premises, excepting only as set forth in the preceding
sentence and such other portions of the Building as are necessary for fire and
other emergency ingress and egress purposes in accordance with applicable law.
Tenant shall not place any equipment in or otherwise utilize the Premises in a
manner that would exceed the floor load limits specified by Landlord.
5. Services.
---------
(a) Reasonable Services. Landlord (subject to the further provisions
-------------------
of this Section 5) shall furnish the Premises:
(i) during the period from 7 a.m. to 6 p.m., Monday through
Friday (except holidays), or such shorter period as may be prescribed by any
applicable policies or regulations adopted by any utility or governmental
agency, with heat and air conditioning in such amounts and at such temperatures
as Landlord reasonably determines are required for purposes of human comfort;
(ii) a reasonable amount of water;
(iii) electricity for lighting and the operation of office
machines and any equipment installed pursuant to Exhibit B hereof, for which
purposes Landlord will provide Tenant with an electric allowance of 11,208
kilowatt-hours per month. Tenant shall pay to Landlord upon demand for all
electric power Landlord determines is consumed by Tenant in excess of such
11.
<PAGE>
allowance. The determination of the amount of Tenant's electric power
consumption shall be made by Landlord in good faith and shall be final, binding
and conclusive, provided that, if Tenant so elects, Landlord shall install at
Tenant's expense a separate electric meter to measure the electrical power
actually consumed by Tenant;
(iv) non-attended, or attended, at Landlord's election, elevator
service, and
(v) daily (one shift) janitor service Monday through Friday
(except holidays) which shall be provided by Landlord in the manner that such
service is customarily furnished in comparable office buildings in the area.
Tenant shall notify Landlord within five (5) days following request thereby
of the nature and quantity of all Tenant's equipment and other items using
electricity in the Premises.
Landlord shall not be in default hereunder or be liable for any damage
directly or indirectly resulting from, nor shall the rental herein reserved be
abated by reason of, (i) failure to furnish or delay in furnishing any such
services when such failure or delay is caused by accident or any condition
beyond the control of Landlord or by the making of repairs or improvements to
the Premises or to the Building (including the Building systems), or (ii) the
limitation, curtailment, rationing or restrictions on use of or the failure of
the supply by the relevant utility to Tenant of, water, electricity, gas, or any
other form of utility services serving the Premises or the
12.
<PAGE>
Building. Tenant expressly acknowledges that all utility services are provided
by the relevant utility involved, and Landlord is to have no responsibility for
the amount or quality of utility services provided, including without
limitation, the improper operation of Tenant's equipment utilizing the same.
(b) Excess Electricity. Tenant, without the prior written consent of
------------------
Landlord, shall not use any apparatus or device in the Premises which alone or
collectively uses electricity in excess of the capacity of the electrical
circuits to the Premises installed pursuant to Exhibit B hereof, nor connect
with electric current, except through existing electrical outlets in the
Premises, any apparatus or device, for the purposes of using electric current.
If Tenant shall require electric current in excess of the capacity of the
electrical circuits to the Premises installed pursuant to Exhibit B hereof,
Tenant shall first obtain Landlord's consent to the installation of such
increased electrical capacity in accordance with the provisions of Section 7
hereof. Tenant agrees to pay Landlord for such excess electric current consumed
in excess of the allowance provided in Section 5(a) above.
(c) Excess Water. Tenant shall not use water in excess of that
------------
furnished by Landlord for use of the Premises as general office space or connect
any apparatus or device for the purpose of using water. If Tenant shall require
water in excess of that usually furnished or supplied for use of the Premises as
general office space, Tenant shall first procure the written
13.
<PAGE>
consent of Landlord to the use thereof. Landlord, as a condition of Landlord's
consent, may cause a water meter to be installed, so as to measure the amount of
excess water used. The cost of any such meter and of installation, maintenance
and repair thereof shall be paid by Tenant, and Tenant agrees to pay to Landlord
promptly upon demand thereof by Landlord for all such excess water so used.
Unless and until Landlord installs such separate meter, Tenant shall pay to
Landlord promptly upon demand Landlord's good faith estimate of the cost of the
excess of the amount of water used by Tenant over that usually furnished or
supplied by Landlord for use of the Premises as general office space, and
Landlord's estimate of such excess amounts, based upon the independent judgment
of Landlord's engineer, the manufacturer of the equipment involved, or the
utility providing the service, shall be final, binding, and conclusive upon
Tenant.
(d) Excess Air-Conditioning. Tenant (except as otherwise provided in
-----------------------
Exhibit B) shall not use any apparatus or device in the Premises that will
increase the amount of air conditioning furnished by Landlord for general office
space.
6. Taxes Payable by Tenant. In addition to the monthly rental and other
-----------------------
charges that are payable by Tenant hereunder, Tenant shall reimburse Landlord
upon demand for any and all taxes payable by Landlord whether or not now
customary or within the contemplation of the parties hereto which are upon,
measured by, or reasonably attributable to the cost or value of Tenant's
equipment, furniture, fixtures, and other personal property
14.
<PAGE>
located in the Premises or by the cost or value of any leasehold improvements
made in or to the Premises by or for Tenant, other than tenant improvements made
and paid for by Landlord hereunder, regardless of whether title to such
improvements shall be in Tenant or Landlord.
7. Alterations, Additions or Improvements. Except for the initial
--------------------------------------
improvement of the Premises pursuant to Exhibit B, which shall be governed by
the provisions of Exhibit B, Tenant shall not make or suffer to be made any
alterations, additions, or improvements to or of the Premises or any part
thereof, or attach any fixtures or equipment thereto, without Landlord's prior
written consent. All such alterations, additions or improvements shall become
Landlord's property immediately and, at the end of the term hereof, shall remain
on the Premises without compensation to Tenant unless Landlord elects by notice
to Tenant given at the time of Landlord's consent to have Tenant remove the
same, in which event Tenant shall promptly remove such alterations, additions or
improvements, repair any damage to the Premises, and restore the Premises to
their condition prior to the installation of such alterations, additions or
improvements.
Tenant at its expense shall obtain any and all permits and consents of
applicable governmental authorities in respect of such alterations, additions,
and improvements and shall comply with the requirements of all governmental
authorities in connection therewith, including all building codes; and Tenant
shall be liable to Landlord and shall reimburse Landlord for the
15.
<PAGE>
costs of any improvements to the Building (whether or not within the Premises)
which may be required by governmental authority as a consequence of Tenant's
alterations, additions and improvements.
All alterations made by Tenant with the prior written consent of Landlord
shall be effected through the use of contractors approved by Landlord who shall
furnish to Landlord upon demand such completion bonds and labor and material
bonds as Landlord may require so as to assure completion of such alterations,
additions or improvements on a lien-free basis (and the furnishing of the same
shall not relieve Tenant of its obligation under Section 8 hereof).
8. Liens. Tenant shall keep the Premises and the Building free and clear
-----
of and from any and all mechanics', materialmen's and other liens for work or
labor done, services performed and for materials used or furnished in or about
the Premises by or on behalf of Tenant. Tenant at all times shall pay and
discharge, promptly and fully, any and all claims upon which any such lien may
or could be based, provided that Tenant in good faith may contest any such lien
if Tenant obtains and records a statutory lien release bond the effect of which
is that the lien is expunged from Landlord's title as a matter of law. Tenant
shall save, defend, indemnify and hold Landlord, the Premises and the Building
free and harmless of and from any and all such liens or claims of liens or suits
or other proceedings pertaining thereto.
16.
<PAGE>
9. Repairs. By entry hereunder, Tenant accepts the Premises as being in
-------
the condition in which Landlord is obligated to deliver the Premises, subject
only to the work to be performed by Landlord pursuant to Section 2(b) and
Exhibit B. Tenant, at all times during the term hereof and at Tenant's sole cost
and expense, shall keep the Premises and every part thereof in good condition
and repair, excepting (a) ordinary wear and tear, and (b) damage due to casualty
with respect to which the provisions of Section 10 and 12 shall apply. Tenant
hereby waives all right to make repairs at the expense of Landlord or in lieu
thereof to vacate the Premises as provided by California Civil Code Section 1941
and 1942 or any other law, statute or ordinance now or hereafter in effect.
Landlord has no obligation and has made no promise to alter, remodel, improve,
repair, decorate, or paint the Premises or any part thereof except as
specifically herein set forth in Exhibit B. The maintenance of the Building
structure, Building systems, and common areas of the Building are the sole
responsibility of the Landlord. Except as specifically set forth herein,
Landlord has not made any representations respecting the condition of the
Premises to Tenant.
10. Destruction or Damage.
---------------------
(a) Damage. If the Premises and/or the portion of the Building
------
necessary for Tenant's occupancy are damaged by fire, earthquake, act of God,
the elements, or other casualty, Landlord shall forthwith repair the same,
subject to the provisions of this Section hereinafter set forth, if such
repairs, in
17.
<PAGE>
Landlord's opinion, can be made within 90 days following the issuance of any
building permit required by relevant governmental authority (the "Rebuilding
Period"). This Lease shall remain in full force and effect except that, if such
damage is not the result of the negligence or willful misconduct of Tenant or
Tenant's employees or invitees, a proportional abatement of rental (based upon
square footage) shall be allowed Tenant for such part of the Premises as shall
be rendered unusable by Tenant in the conduct of its business during the time
such part is so unusable. Landlord's determination that such repair may be made
within the Rebuilding Period shall not obligate Landlord to complete the same
within such period. For purposes of this Section 10, "repairs" shall include all
repair and restorative work Landlord in Landlord's good faith but nevertheless
sole discretion deems advisable, including without limitation, all work and
improvements Landlord deems advisable to improve the condition and quality of
the Building, whether in the form of government mandated building code upgrades
or otherwise.
(b) Repair. If such repairs, in Landlord's opinion, cannot be made
------
within the Rebuilding Period, Landlord shall elect, by notice to Tenant within
30 days after the date of such fire or other casualty: (i) to repair or restore
such damage, in which event this Lease shall continue in full force and effect
(except that the rent shall be partially abated as hereinabove provided) and
Landlord shall repair and restore such damage with reasonable diligence, or (ii)
to terminate this Lease, in which
18.
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event this Lease shall terminate as of the date of such fire or other casualty.
(c) Waiver. Tenant waives California Civil Code Sections 1932(2) and
------
1933(4) providing for termination of hiring upon destruction of the thing hired.
(d) Costs of Repair. If the Premises are to be repaired under this
---------------
Section, Landlord (subject to the provisions of Section 12(b) hereof) shall
repair at its cost any injury or damage to the Building itself and the tenant
improvements in the Premises paid for by Landlord hereunder. Tenant shall repair
and pay the cost of repairing Tenant's alterations, Tenant's improvements,
Tenant's trade fixtures, Tenant's personal property and any other tenant
improvements in the Premises and shall be responsible for carrying such casualty
insurance as it deems appropriate with respect to such other tenant
improvements.
(e) Tenant's Right to Terminate Lease. If the Premises are not
---------------------------------
restored within one hundred eighty (180) days after the date of damage or
destruction, Tenant shall have the right to terminate this Lease.
11. Insurance; Waiver of Subrogation.
--------------------------------
(a) Insurance. Tenant, at Tenant's expense, shall maintain in full
---------
force during the term hereof a policy or policies of comprehensive broad form
general public liability insurance insuring against claims and liability for
personal injury, death and property damage arising in or about the Premises, the
Building and adjoining areas or ways, with a
19.
<PAGE>
carrier or carriers acceptable to Landlord, and which carrier or carriers in any
event shall have a rating of not less than A Plus XIII by Best's Insurance
Guide. The liability under such insurance shall not be less than $1,000,000
combined single limit bodily injury and property damage. Such policy or policies
of insurance shall (a) name Landlord and Landlord's lender as additional
insureds, (b) be nonassessable, primary and noncontributory with any policies
carried by Landlord, and (c) provide that the same may not be cancelled or
materially amended except upon 30 days prior written notice to Landlord. Tenant
at all times shall maintain with Landlord a current certificate or certificates
of said policy or policies. The amount of insurance coverage provided for in
this Section shall be increased from time to time during the term hereof upon
demand of Landlord to the extent reasonably required by circumstances then
existing (including, but not limited to increases in the cost of living as
reflected in the Consumer Price Index published by the U.S. Department of Labor
and increases in personal injury and wrongful death judgments or awards in the
City and County of San Francisco).
(b) Subrogation. To the extent available without material incremental
-----------
premium, each party shall obtain from its insurers under all policies of
property insurance maintained by such party at any time during the term hereof
insuring or covering the Premises, the Building or any portion thereof or
operations therein, a waiver of all rights of subrogation which
20.
<PAGE>
the insurer might have against the other party, and each party shall indemnify
the other party against any loss or expense, including reasonable attorneys'
fees, resulting from the failure to obtain such waiver to the extent the same is
so available.
12. Waiver; Indemnity.
-----------------
(a) Tenant covenants and agrees that Landlord shall not at any time
after the date hereof or to any extent whatsoever be liable, responsible or in
anywise accountable for, and Tenant waives and releases any claim (including any
claim for contractual or implied indemnity) against Landlord, for Losses
(hereinafter defined) which at any time after the date hereof may be suffered or
sustained by:
(i) Tenant; or
(ii) Any person whosoever may at any time be using or occupying
or visiting the Premises or be in, on or about the same, or in or
about the common areas of the Building or the sidewalks adjacent
thereto, and which Losses are caused in whole or in part by any act or
omission (whether negligent, non-negligent or otherwise) of Tenant,
its agents, servants and invitees;
and whether in case of either clause (i) and/or (ii) such Losses shall be caused
- ----------
in part by any act, omission or negligence of Landlord, its agents or servants,
except to the extent caused by the grossly negligent or willful act or omission
of Landlord, its agents or employees.
21.
<PAGE>
(b) In addition to, and not in limitation of (a) above, Tenant shall
forever indemnify, defend, hold and save Landlord and Landlord's Lender free and
harmless of, from and against any and all Losses caused in whole or in part by
any act or omission (whether negligent, non-negligent, or otherwise) of Tenant,
its agents servants and invitees and suffered or sustained by:
(i) Landlord; and/or
(ii) any third person who asserts a claim against Landlord on
account thereof;
and whether in case of either clause (i) and/or (ii) such Losses shall be caused
- -----------
in part by any act, omission or negligence of Landlord, its agents or servants,
except to the extent caused by the grossly negligent or willful act or omission
of Landlord, its agents or employees. The foregoing indemnity obligation of
Tenant shall include reasonable attorneys' fees, investigation costs, and all
other reasonable costs and expenses incurred by Landlord from the first notice
that any claim or demand is to be made or may be made.
(c) For purposes hereof "Losses" shall mean any and all losses,
damages, costs and expenses, direct and indirect, actual and consequential, on
account of injury to or death of persons, or loss of or damage to property, of
any kind or nature, including without limitation, loss, injury, death or damage
due to criminal act by third persons.
22.
<PAGE>
(d) The provisions of this Section 12 shall survive the termination
of this Lease with respect to any Losses occurring prior to such termination.
The insurance policy or policies required pursuant to the provisions of Section
11(a) by their terms shall cover the indemnity obligations of Tenant under
Section 12(b), except to the extent that any such obligation arises from
allegations of the willful misconduct of Tenant, its servants or its agents.
13. Compliance with Legal Requirements.
----------------------------------
(a) During the term of this Lease, Tenant, with respect to the
Premises, at its sole cost and expense shall comply promptly with (i) all laws,
statutes, regulations, ordinances, governmental rules, or requirements now in
force or which may hereafter be in force, (ii) the requirements of any board of
fire underwriters or other similar body now or hereafter constituted, (iii) any
direction or occupancy certificate issued pursuant to any law by any public
officer or officers, and (iv) the provisions of all recorded documents affecting
the Building or the Premises insofar as any of clauses (i) through (iv) relate
to or affect the condition, use or occupancy of the Premises, excluding
structural changes not necessitated by improvements made by or for Tenant
pursuant to Section 7 or by acts or other omissions of Tenant. The judgment of
any court of competent jurisdiction or the admission by Tenant (excluding from
the term "admission" any settlement or consent decree which by its terms does
not admit Tenant's liability) in any action or
23.
<PAGE>
proceeding against Tenant (whether Landlord be a party thereto or not) that
Tenant has violated any such law, statute or governmental rule, regulation, or
requirement, shall be conclusive of such violation as between Landlord and
Tenant.
(b) Environmental Matters.
---------------------
(i) As used herein, the following items shall have the following
meanings:
"Environmental Activity" means any actual, proposed or threatened
----------------------
use, storage, treatment, existence, release, emission, discharge, generation,
manufacture, disposal or transportation of any Hazardous Materials from, into,
on, under or about the Premises, or any other activity or occurrence that causes
or would cause any such event to exist.
"Environmental Requirements" means all present and future
--------------------------
federal, state, regional or local laws relating to the use, storage, treatment,
existence, release, emission, discharge, generation, manufacture, disposal or
transportation of any Hazardous Materials.
"Hazardous Material" means at any time any substances or
------------------
materials which at such time are classified or considered to be hazardous or
toxic under any Environmental Requirement.
(ii) Tenant shall not engage in nor permit the occurrence of any
Environmental Activity except in the ordinary course of Tenant's business and
only in compliance with all Environmental Requirements and prudent industry
practices.
24.
<PAGE>
Tenant shall, at its own expense, procure, maintain in effect and comply with
all conditions of any and all permits, licenses, and other governmental and
regulatory approvals required under any Environmental Requirements for any
Environmental Activity by Tenant, including, without limitation, the discharge
of (appropriately treated) materials or wastes into or through any sanitary
sewer serving the Premises, and upon termination of this Lease shall cause all
of its Hazardous Materials to be removed from the Premises in accordance with
and in compliance with all applicable Environmental Requirements.
(iii) Upon having knowledge thereof, Tenant shall immediately
notify Landlord in writing of:
(A) any regulatory action that has been instituted, or
threatened by any governmental agency or court with respect to Tenant that
relates to any Environmental Activity;
(B) any claim relating to any Environmental Activity by
Tenant in, on or about the Premises, or that arises out of or in connection with
any Hazardous Materials in, on, under or about the Premises or removed from the
Premises; or
(C) any actual or threatened material release on, under or
about the Premises or any adjacent property of any Hazardous Material, except
any Hazardous Material whose discharge or emission is expressly authorized by
and in compliance with a permit issued by a federal, state, regional or local
governmental agency pursuant to Environmental Requirements.
25.
<PAGE>
(iv) Tenant shall provide Landlord with copies of any
communications with federal, state, regional or local governments, agencies or
courts with respect to any Environmental Activity or Environmental Requirement
relating to the Premises and any communications with any third party relating to
any claim made or threatened with respect to any Environmental Activity by
Tenant in, on or about the Premises.
(v) Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect, and hold Landlord and each of Landlord's
partners, employees, agents, attorneys, successors and assigns, free and
harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) arising from or
caused in whole or in part, directly or indirectly, by (i) an Environmental
Activity by Tenant; or (ii) Tenant's failure to comply with any Environmental
Requirement. Tenant's obligations under this Section 13(b) shall include,
without limitation, and whether foreseeable or unforeseeable, all costs of any
repair or cleanup, removal or remediation action, or detoxification or
decontamination of the Premises, or the preparation and implementation of any
closure, remedial action or other plans in connection therewith that are
required as a result of any Environmental Activity by Tenant, and shall survive
the expiration or earlier termination of the term of this Lease.
(vi) The provisions of this Section 13(b) shall survive the
termination of this lease.
26.
<PAGE>
14. Assignment and Subletting.
-------------------------
(a) Assignment and Subletting. Except as expressly permitted pursuant
-------------------------
to this Section, Tenant shall not, without the prior written consent of
Landlord, assign this Lease, or any interest herein, or sublet the Premises, or
any part thereof, or permit the use or occupancy of the Premises (or any right
or privilege appurtenant thereto) by any party other than Tenant. For purposes
hereof, "assignment" shall include any proposed disposition or transfer,
voluntary or involuntary, or hypothecation; and where Tenant is a (i)
partnership, "assignment" shall include a transfer of 25% or more of the equity
interest therein (other than to an existing equity holder) or (ii) a corporation
"assignment" shall include (except with respect to a corporation whose stock is
publicly traded) any (A) merger, consolidation or other reorganization
(involving the equity securities of Tenant) of Tenant, (B) liquidation,
dissolution or disposition of all or substantially all of the assets of Tenant
or (C) change in ownership of 40% or more of the equity interest therein (other
than a transfer to an existing equity holder). Any of the foregoing acts without
such consent of Landlord shall be void and shall, at the option of Landlord,
terminate this Lease. This Lease shall not, nor shall any interest herein, be
transferable or assignable as to the interest of Tenant by operation of law
without the written consent of Landlord.
Landlord's consent to any assignment or subletting of all or any part of
the Premises shall not be unreasonably withheld or
27.
<PAGE>
delayed. Without limiting the other instances in which it may be reasonable for
Landlord to withhold its consent to an assignment or subletting, Landlord and
Tenant acknowledge that it shall be reasonable for Landlord to withhold its
consent from a proposed assignment or subletting in the following instances:
(i) If Landlord determines in its good faith but nevertheless
sole discretion that the use of the Premises by the proposed assignee or
sublessee would be in violation of Section 4 of this Lease;
(ii) If Landlord determines in its good faith but nevertheless
sole discretion that the financial worth of the proposed assignee or sublessee
does not meet the credit standards applied by Landlord for other tenants under
leases with comparable terms;
(iii) If Landlord determines in its good faith but nevertheless
sole discretion that the proposed assignee or sublessee does not have a
favorable reputation as a tenant of property;
(iv) If Landlord has received from any prior lessor to the
proposed assignee or subtenant a negative report concerning such prior lessor's
experience with the proposed assignee or subtenant;
(v) If Landlord has experienced previous defaults by or is in
litigation with the proposed assignee or subtenant;
(vi) If the use of the Premises by the proposed assignee or
subtenant will violate any applicable law, ordinance
28.
<PAGE>
or regulation, or any use permit issued for the use and occupancy of the
Premises.
(b) Information; Landlord's Options. If at any time, or from time to
-------------------------------
time, during the term of this Lease, Tenant desires to assign, sublet or permit
the occupancy or use by another of all or any part of the Premises, Tenant shall
give notice to Landlord setting forth the following: (i) the name, address, and
legal composition of the proposed sublessee, occupier or user; (ii) the nature
of the business proposed to be carried on in the Premises (including proposed
number of employees to be located in the Premises, the proposed equipment to be
used therein, proposed floor loads and proposed electrical loads); (iii) a copy
of the proposed assignment or sublease agreement; and (iv) any other
documentation or information reasonably requested by Landlord, including
financial information covering the proposed assignee, sublessee, occupier or
user with respect to such proposed subletting. All such information may be
considered by Landlord in making Landlord's permitted determinations hereunder,
including the granting or withholding of consent in respect of a proposed
assignment or subletting. Such notice, once so given, shall not be withdrawn or
rescinded by Tenant. Landlord shall have the options, exercisable by notice
given to Tenant within 10 days after Tenant's notice is given, to do the
following:
(i) In the case of a proposed subletting, Landlord may sublet
from Tenant such space at the rental and
29.
<PAGE>
other terms set forth in this Lease, prorated where appropriate to reflect
obligations allocable to that portion of the Premises to be sublet, unless the
rental to be paid by the proposed sublessee is lower than the rental, as so
prorated, payable under the Lease, in which event such lower rental shall be
payable by Landlord to Tenant, or
(ii) In the case of either a proposed assignment or subletting,
Landlord may terminate this Lease as to that part or all of the Premises
proposed to be assigned or sublet, and in the case of termination as to a
portion of the Premises, Tenant's obligations under the Lease as to the balance
of the Premises remaining shall be proportionately reduced.
If Landlord sublets such space or terminates the Lease as to such space, in
each instance leaving a portion of the Premises occupied by Tenant, Tenant shall
provide Landlord without charge reasonable and appropriate access to such space
and reasonable use of any common areas and facilities appurtenant thereto. For
purposes hereof, "common area" shall mean the total area on a floor consisting
of rest rooms, janitor, telephone and electrical closets, mechanical areas, and
public corridors providing access to tenant space on such floor, but excluding
public stairs, elevator shafts and pipeshafts, together with the enclosing walls
thereof.
(c) Assignment or Subletting Conditions. Subject to (i) the other
------------------------ ----------
provisions of this Section 14 and (ii) Landlord's consent, which shall not be
unreasonably withheld or delayed,
30.
<PAGE>
Tenant may assign or sublet such space to any third party on the following
conditions:
(i) In the case of a sublease, the same shall be subject and
subordinate to all of the provisions, terms and conditions of this Lease,
(ii) No assignment or sublease shall be valid and no assignee or
sublessee shall take possession of the Premises assigned or subleased until an
executed counterpart of such assignment or sublease, in form and substance
satisfactory to Landlord, shall have been delivered to Landlord, and Landlord
shall have expressly consented thereto in writing,
(iii) No assignee or sublessee shall have a further right to
assign or sublet,
(iv) An amount equal to 50% of all sums or other economic
consideration received by Tenant as a result of such assignment or subletting,
however denominated (whether as consideration for the assignment, rentals under
a sublease, or otherwise), which exceed in aggregate the total sums which Tenant
(or Tenant's assignee in case of an assignment) is obligated to pay Landlord
under this Lease (after deducting (a) bona fide charges for services provided by
the Tenant to subtenants at rates that are comparable to and not in excess of
rates charged for similar services in the area, and (b) Tenant's actual out-of-
pocket costs of such assignment or subletting, not to exceed $15 per net
rentable square foot multiplied by the number of net rentable square feet
involved, which deduction shall be amortized
31.
<PAGE>
in the case of a subletting in equal monthly installments over the term of the
sublease), prorated to reflect obligations allocable to that portion of the
Premises subject to such assignment or sublease, shall be payable to Landlord as
additional rental under this Lease without affecting or reducing any other
obligations of Tenant hereunder, provided that (A) in no event shall Tenant be
obligated to pay Landlord less than the rental specified in this Lease, and (B)
there are excluded from this clause (iv) any sublease or subleases totalling
less than 30% of the rentable area of the Premises, which exclusion is based on
the condition that at no time during the term of this lease shall there be any
assignment or subletting of 30% or more of the rentable area of the Premises,
(and in the event of the failure of such condition at any time this clause (iv)
shall apply to any consideration thereafter received on account of any
assignment or subletting, including the subletting of less than 30% of the
rentable area of the Premises to which the exclusion otherwise would apply). The
parties hereto acknowledge and agree that it is not their intention that
Tenant's leasehold interest in the Premises have any bonus value or marketable
value to Tenant even though the rentals provided for herein may from time to
time be less than the fair market rental value of the Premises.
(v) Tenant shall immediately and irrevocably assign to Landlord,
as security for Tenant's obligations under this Lease, all rental from any
subletting of all or a part of the Premises as permitted by this Lease, and
Landlord, as
32.
<PAGE>
assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed
on Landlord's application, may collect such rental and apply it towards Tenant's
obligations under this Lease; except that, until the occurrence of an Event of
Default by Tenant as defined in Section 17, Tenant shall have the right to
collect such rental.
(d) Primary Liability. Regardless of Landlord's consent, no
-----------------
subletting or assignment shall release Tenant of Tenant's obligation or alter
the primary liability of Tenant to pay the rental and to perform all other
obligations to be performed by Tenant hereunder. The acceptance of rental by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting. In the event of
default by any assignees of Tenant or any successor of Tenant in the performance
of any of the terms hereof, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against such assignee or successor.
Landlord may consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of Tenant, without
notifying Tenant, or any successor of Tenant, and without obtaining its or their
consent thereto, and such action shall not relieve Tenant of liability under
this Lease, provided that any such amendments or modifications shall not
increase Tenant's liability hereunder.
33.
<PAGE>
(e) Attorneys' Fees. If Tenant shall assign or sublet the
---------------
Premises or request the consent of Landlord to any assignment or subletting, or
if Tenant shall request the consent of Landlord for any act that Tenant proposes
to do, then Tenant shall pay Landlord's reasonable attorneys' fees incurred in
connection therewith.
(f) Conflicting Provisions. The provisions of this Section shall
----------------------
prevail and govern over any conflicting provision in any assignment or
subletting to which Landlord gives written consent. Any modification of the
terms of this Lease as between Tenant and Sublessee shall be void and will not
be binding on the Landlord.
(g) Brokerage. Tenant shall forever save, indemnify and hold
---------
Landlord harmless from any and all claims for real estate brokerage of persons
claiming by or through Tenant arising from any assignment or subletting.
15. Rules. Tenant shall faithfully observe and comply with the rules and
-----
regulations annexed to this Lease and, after notice thereof, all reasonable
modifications thereof and additions thereto from time to time promulgated in
writing by Landlord. Landlord shall not be responsible to Tenant for the
nonperformance by any other tenant or occupant of the Building of any of said
rules and regulations.
16. Entry by Landlord. Landlord may enter the Premises at reasonable hours
-----------------
to (a) inspect the same, (b) exhibit the same to prospective purchasers,
lenders, or tenants, (c) determine
34.
<PAGE>
whether Tenant is complying with all its obligations hereunder, (d) supply
janitor service and any other service to be provided by Landlord to Tenant
hereunder, (e) post notices of nonresponsibility and (f) make repairs in the
Premises or repairs to any adjoining space or utility services or make repairs,
alterations or improvements to any other portion of the Building (provided,
however, that all such work shall be done as promptly as reasonably possible and
so as to cause as little interference to Tenant as reasonably possible). Without
limiting the foregoing, Landlord may, at any time or from time to time during
the term of this Lease, perform substantial renovation work in and to the
Building or the systems serving the Building (which work may include, but need
not be limited to, the repair or replacement of the Building's exterior facade,
exterior window glass, elevators, electrical systems, air conditioning and
ventilating systems, plumbing system, common hallways, or lobby), any of which
work may require access to the same from within the Premises. Tenant agrees that
(a) Landlord shall have access to the Premises at all reasonable times, upon
reasonable notice, for the purpose of performing such work, and (b) Landlord
shall incur no liability to Tenant, nor shall Tenant be entitled to any
abatement of rent on account of any noise, vibration, or other disturbance to
Tenant's business at the Premises (provided that Tenant is not denied access to
said Premises and Tenant's ability to conduct its business on the Premises is
not substantially impaired thereby) which shall arise out of said access by
Landlord or by
35.
<PAGE>
the performance by Landlord of the aforesaid renovations at the Building.
Landlord shall use reasonable efforts (which shall not include any obligation to
employ labor at overtime rates) to avoid disruption of Tenant's business during
any entry upon the Premises by Landlord permitted by this Section 16.
Tenant hereby waives any claim for damages for any injury or inconvenience
to or interference with Tenant's business, any loss of occupancy or quiet
enjoyment of the Premises or any other loss occasioned by any such entry or
entries made by Landlord pursuant to any of the foregoing. Landlord shall at all
times have and retain keys with which to unlock all of the doors in, on or about
the Premises (excluding Tenant's vaults, safes and similar areas designated in
writing by Tenant and approved by Landlord in advance); and Landlord shall have
the right to use any and all means which Landlord may deem proper to open such
doors in an emergency in order to obtain entry to the Premises, and any entry to
the Premises obtained by Landlord by any of said means, or otherwise, shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or constructive,
of Tenant from the Premises, or any portion thereof.
17. Events of Default. The occurrence of any one or more of the following
-----------------
events (an "Event of Default") shall constitute a breach of this Lease by
Tenant: (a) if Tenant shall fail to pay rent or any other sum when and as the
same becomes due and payable and such failure shall continue for more than 10
days
36.
<PAGE>
(except that if Landlord has notified Tenant in writing on two occasions during
the 12 months preceding the due date that Tenant has failed to pay rent or any
other sum on the due date, then the failure to pay such rent or other sum on the
due date shall constitute an Event of Default); or (b) if Tenant shall default
in the performance or observance of any other term hereof or of the rules and
regulations described in Section 15 to be performed or observed by Tenant, and
within 30 days following written notice from Landlord to Tenant, Tenant shall
have failed to completely cure such default, or if the nature of such default is
such that it cannot reasonably be cured within such 30 day period, Tenant shall
not within such 30 day period have commenced with prompt diligence the curing of
such default, or, having so commenced, shall thereafter have failed to prosecute
with prompt diligence the complete curing of such default; or (c) if Tenant
shall make a general 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
petition in bankruptcy, or shall be adjudicated a bankrupt or as insolvent, or
shall file a petition in any proceeding seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future statute, law, or regulation, or shall file an answer
admitting, or fail to protest timely the material allegations of a petition
filed against it in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, or liquidator of Tenant
or
37.
<PAGE>
any material part of its properties; or (d) if within 45 days after the
commencement of any proceeding against Tenant seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future statute, law, or regulation, such proceeding
shall not have been dismissed, or if, within 30 days after the appointment
without the consent or acquiescence of Tenant, of any trustee, receiver, or
liquidator of Tenant or of any material part of its properties, such appointment
shall not have been vacated; or (e) if this Lease or any estate of Tenant
hereunder shall be levied upon under any attachment or execution and such
attachment or execution is not vacated within 30 days; or (f) if Tenant shall
abandon or surrender the Premises, or be dispossessed by process of law or
otherwise, or shall vacate or fail to take possession of the Premises.
18. Landlord's Right to Terminate. If an Event of Default shall occur,
-----------------------------
Landlord at any time thereafter may give a written termination notice to Tenant,
and on the date specified in such notice (which shall be not less than three
days after the giving of such notice) Tenant's right to possession shall
terminate, unless on or before such date all delinquent rent and all other sums
payable by Tenant under this Lease and all costs and expenses incurred by or on
behalf of Landlord hereunder shall have been paid by Tenant and all other
breaches of this Lease by Tenant at the time existing shall have been fully
remedied to the satisfaction of Landlord. Landlord may remove all persons and
38.
<PAGE>
property located therein and hold, administer and dispose of any or all of such
properties in accordance with applicable California law, including California
Civil Code Section 1980 et seq. and California Code of Civil Procedure Section
-- ---
1174. Landlord may do all things Landlord deems necessary in order to relet the
Premises, including, without limitation any alterations, repair and/or
restoration of the Premises. Upon such termination, Landlord may recover from
Tenant: (a) the worth at the time of award of the unpaid rental which had been
earned at the time of termination; (b) the worth at the time of award of the
amount by which the unpaid rental which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; (c) the worth at the time of award of
the amount by which the unpaid rental for the balance of the term of this Lease
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; and (d) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom. The "worth at the time of award" of
the amounts referred to in clauses (a) and (b) above is computed by allowing
interest at the highest rate legally permitted under applicable law. The "worth
at the time of award" of the amount referred to in clause (c) above is computed
by discounting such amount at the discount rate of the
39.
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Federal Reserve Bank of San Francisco at the time of award plus 1% (one
percent). Notwithstanding any other provisions hereof, any efforts by Landlord
to mitigate damages caused by Tenant's breach of this Lease shall not constitute
a waiver of Landlord's right to recover damages hereunder and shall not affect
the right of Landlord to indemnification pursuant to the provisions of Section
12 hereof.
19. Continuation Notwithstanding Default. Even though Tenant has breached
------------------------------------
this Lease and abandoned the Premises, this Lease shall continue in effect for
so long as Landlord does not terminate Tenant's right to possession, and
Landlord may enforce all its rights and remedies under this Lease, including the
right to recover the rental as it becomes due under this Lease. Acts of
maintenance or preservation or efforts to relet the Premises or the appointment
of a receiver upon the initiative of Landlord to protect Landlord's interest
under this Lease shall not constitute a termination of Tenant's right to
possession.
20. Additional Remedies. The remedies provided for in this Lease are in
-------------------
addition to any other remedies available to Landlord at law or in equity by
statute or otherwise.
21. Landlord's Right to Cure Defaults. All agreements and provisions to be
---------------------------------
performed by Tenant under any of the terms of this Lease shall be at its sole
cost and expense and without any abatement of rental. If Tenant shall fail to
pay any sum of money, other than rental, required to be paid by it hereunder, or
shall fail to perform any other act on its part to be performed
40.
<PAGE>
hereunder and such failure shall continue for 10 days after notice thereof by
Landlord, Landlord may, but shall not be obligated to do so, and without waiving
or releasing Tenant from any obligations of Tenant, make any such payment or
perform any such other act on Tenant's part to be made or performed as in this
Lease provided. All sums so paid by Landlord and all necessary incidental costs
shall be deemed additional rent hereunder and shall be payable to Landlord on
demand, and Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of the nonpayment thereof by
Tenant as in the case of default by Tenant in the payment of rental.
22. Attorneys' Fees. If as a result of any breach or default in the
---------------
performance of any of the provisions of this Lease, Landlord uses the services
of an attorney in order to secure compliance with such provisions or recover
damages therefor, or to terminate this Lease or evict Tenant, Tenant shall
reimburse Landlord upon demand for any and all attorneys' fees and expenses so
incurred by Landlord, provided that if Tenant shall be the prevailing party in
any legal action brought by Landlord against Tenant, Tenant shall be entitled to
recover for the fees of its attorneys in such amount as the court may adjudge
reasonable.
23. Eminent Domain. If any part of the Premises shall be taken as a result
--------------
of the exercise of the power of eminent domain, this Lease shall terminate as to
the part of the Premises so
41.
<PAGE>
taken as of the date of taking, and either Landlord or Tenant shall have the
right to terminate this Lease as to the balance of the Premises remaining after
a partial taking by written notice to the other within 30 days after such date,
provided, however, that a condition to the exercise by Tenant of such right to
terminate shall be that such partial taking shall be to such extent and nature
as to substantially and permanently handicap, impede, or impair the conduct of
Tenant's business therein. If all of the Premises are taken as a result of the
exercise of the power of eminent domain, this Lease shall terminate upon the
date of taking. If any part of the Building (other than the Premises) shall be
taken as a result of the exercise of the power of eminent domain, Landlord shall
have the right to terminate this Lease by written notice to Tenant within 30
days from the date of such taking; in the event that Landlord does not so elect,
this Lease shall continue in full force and effect, provided that Tenant is
afforded continuous access to the Premises.
Landlord shall be entitled to any and all compensation, damages, income,
rent, awards, or any interest therein whatsoever which may be paid or made in
connection with any exercise of the power of eminent domain, and Tenant shall
have no claim against Landlord for the value of any unexpired term of this Lease
or otherwise, except that Tenant shall be entitled to any specific award made in
favor of Tenant covering Tenant's trade fixtures and relocation expenses. In the
event of a partial taking of the Premises which does not result in a termination
of this Lease,
42.
<PAGE>
the monthly rental thereafter to be paid shall abate in proportion to that
portion of the Premises that is rendered unusable by Tenant in the conduct of
its business.
It is understood and agreed that the foregoing provisions of this Section
are intended to and do fully define and set forth the respective rights and
obligations of the parties in the event of a taking of the Premises or a part
thereof, including without limitation the circumstances under which this Lease
shall or may be terminated, and the disposition of any proceeds of any insurance
or award, and Landlord and Tenant each expressly waives the benefit and effect
of any rights and/or obligations whether purporting to arise by law, by
governmental order, under any insurance contract, or otherwise (including the
provisions of the California Code of Civil Procedure section1265.130), which are
inconsistent with the rights and obligations set forth herein.
For purposes hereof the "date of taking" shall be deemed to be the date
that physical possession of the property taken is delivered to the condemning
authority.
24. Subordination. This Lease shall be subject and subordinate at all
-------------
times to (a) all ground or underlying leases which may hereafter be executed
affecting the Building and (b) the liens of all mortgages and deeds of trust now
or hereafter placed on or against the Building or on or against Landlord's
interest or estate therein or on or against all such ground or underlying
leases, all without the necessity of having further instruments executed on the
part of Tenant to effect such
43.
<PAGE>
subordination; provided that if and for as long as Tenant is not in default in
the payment of rental or other sums or be otherwise in default under the terms
of this Lease, and Tenant attorns to the Landlord of any such ground or
underlying lease or to the purchaser upon foreclosure of the lien of any
mortgage or deed of trust, or, if requested, enters into a new lease for the
balance of the original or extended term hereof then remaining upon the same
terms and provisions as are in this Lease contained (which attornment or entry
into a new lease Tenant hereby agrees to do), the rights and possession of
Tenant under this Lease shall not be disturbed. Tenant agrees to execute and
deliver upon demand such further instruments evidencing such subordination of
this Lease to such ground or underlying leases, and to the liens of any such
mortgages or deeds of trust, as may be requested by Landlord and/or in such form
as is required by Landlord's lender (including provisions waiving as against
lender claims of, and giving to lender notice of and the right to cure, Landlord
defaults under the Lease).
25. No Merger. The voluntary or other surrender of this Lease by Tenant,
---------
or a mutual cancellation thereof, shall not work a merger, and, at the option of
Landlord, either shall operate (a) to terminate all or any existing subleases or
subtenancies under the Lease or (b) as an assignment to Landlord of any or all
such subleases and subtenancies.
26. Sale. If the original Landlord hereunder, or any successor owner of
----
the Building, shall sell or convey the
44.
<PAGE>
Building, all liabilities and obligations on the part of the original Landlord,
or such successor owner, under this Lease accruing thereafter shall terminate,
and thereupon all such liabilities and obligations shall be binding upon the new
owner. Tenant agrees to attorn to such new owner.
27. Estoppel Certificate. Tenant shall execute, acknowledge and deliver to
--------------------
Landlord, within ten (10) days following request by Landlord a certificate
certifying (a) that this Lease is unmodified and in full force and effect (or if
there have been modifications, that this Lease is in full force and effect as
modified and stating the date and nature of each modification), (b) the date, if
any, to which rental and other sums payable hereunder have been paid, (c) that
no notice has been received by Tenant of any default which has not been cured,
except as to defaults specified in said certificate and (d) such other matters
as may be requested by Landlord or Landlord's lender. Any such certificate may
be relied upon by any prospective purchaser, mortgagee, or beneficiary under any
deed of trust on the Building or any part thereof.
28. No Light, Air, or View Easement. Any diminution or shutting off of
-------------------------------
light, air, or view by any structure which may be erected on lands adjacent to
the Building shall in no way affect this Lease or impose any liability on
Landlord.
29. Holding Over. If, without objection by Landlord, Tenant holds
-----------
possession of the Premises after expiration of the term of this Lease, Tenant
shall become a tenant from month to
45.
<PAGE>
month upon the terms, conditions and provisions herein specified but at a
monthly rental equivalent to 150 percent of the then prevailing fair market
rental as determined in good faith by the Landlord but in no event less than the
rental being paid by Tenant in the last month of the term of this Lease, payable
in advance on or before the first day of each month. Each party shall give the
other notice at least one month prior to the date of termination of such monthly
tenancy of its intention to terminate such tenancy.
30. Abandonment. Tenant shall not vacate or abandon any part or all of the
-----------
Premises. If Tenant shall vacate, abandon, or surrender the Premises, or be
dispossessed by process of law or otherwise, any personal property belonging to
Tenant and left on the Premises shall be deemed to be abandoned, at the option
of the Landlord, except such property as may be mortgaged to Landlord.
31. Surrender. Tenant shall at the end of the term hereof surrender to
---------
Landlord the Premises and all alterations, additions and improvements thereto in
the same condition as when received, ordinary wear and tear and damage by fire,
earthquake, act of God, or the elements excepted. Subject to Landlord's right to
require removal pursuant to Section 7 hereto, all improvements installed in the
Premises by Tenant, shall, without compensation to Tenant, then become
Landlord's property free and clear of all claims to or against them by Tenant or
any third person, and Tenant shall defend and indemnify Landlord against all
liability
46.
<PAGE>
and loss arising from such claims or from Landlord's exercise of the rights
conferred by this Section.
32. Waiver. The waiver by either party of any term, agreement, condition,
------
or provision herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, agreement, condition, or
provision herein contained, nor shall any custom or practice which may grow
between the parties in the administration of the terms hereof be construed to
waive or to lessen the right of such party to insist upon the performance by the
other party in strict accordance with said terms. The subsequent acceptance of
rental hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, agreement, condition, or provision of this Lease,
other than the failure of Tenant to pay particular rental so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rental.
33. Notice. All notices, demands or other writings provided in this Lease
------
to be given or made or sent, or which may be given or made or sent by one party
to another party, shall be deemed to have been fully given or made or sent when
made in writing and upon personal delivery (whether by such party or its agent,
or by courier, or by electronic transmissions such as FAX or telex) or after 72
hours following deposit in the United States mail, registered or certified,
postage prepaid, and addressed to such party at the address specified in the
Basic Lease Information, or to such other place as such party may from
47.
<PAGE>
time to time designate in a notice to the other party or parties. Tenant hereby
appoints as its agent to receive the service of all dispossessory or distraint
proceedings and notices thereunder the person in charge of or occupying the
Premises at the time, and, if no person shall be in charge of or occupying the
same, then such service may be made by attaching the same on the main entrance
of the Premises.
34. Complete Agreement. There are no oral agreements between Landlord and
------------------
Tenant affecting this Lease, and this Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements, and understandings,
if any, between Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this Lease. There are no representations
between Landlord and Tenant other than those contained in this Lease, and all
reliance with respect to any representations is solely upon such
representations.
35. Corporate Authority. If Tenant signs as a corporation, each of the
-------------------
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, that Tenant
has and is qualified to do business in California, that the corporation has full
right and authority to enter into this Lease, and that the person(s) signing on
behalf of the corporation were authorized to do so.
36. Miscellaneous Provisions.
------------------------
(a) The words "Landlord" and "Tenant" as used herein shall include
the plural as well as the singular.
48.
<PAGE>
(b) If there be more than one Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several.
(c) Time is of the essence of this Lease and each and all of its
provisions.
(d) Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant.
(e) The agreements, conditions and provisions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
executors, administrators, successors and assigns of the parties hereto.
(f) If any provision of this Lease shall be determined to be illegal
or unenforceable, such determination shall not affect any other provision of
this Lease and all such other provisions shall remain in full force and effect.
(g) This Lease shall be governed by and construed pursuant to the
laws of the State of California.
(h) All remedies hereinbefore and hereafter conferred upon Landlord
shall be deemed cumulative and no one shall be exclusive of the other, or shall
in any way limit the availability to Landlord of any other remedy conferred by
law, whether or not specifically conferred by the provisions of this Lease.
(i) All indemnities of Tenant contained in this Lease shall survive
the expiration or other termination hereof with respect to any act, condition or
event which is the subject
49.
<PAGE>
matter of such indemnity and which occurs prior to such expiration or other
termination.
(j) The parties acknowledge and agree that each party has reviewed
and revised, and has been provided the opportunity of its respective counsel to
review and revise, this Lease, and no rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall be employed
in the interpretation or construction of this Lease, or any amendments or
exhibits thereto, or any other document executed and delivered by either party
in connection therewith.
37. Exhibits. The exhibit(s) and addendum, if any, specified in any of the
--------
Sections of this Lease are attached to this Lease and by this reference made a
part hereof.
38. Security Deposit. Tenant shall deposit with Landlord the sum specified
----------------
in the Basic Lease Information ("Deposit") prior to January 15, 1993.
Notwithstanding anything in this Lease to the contrary, receipt of the Deposit
shall be a condition precedent to Landlord's obligation to install improvements
to the Premises as provided in Section 2(b) and Exhibit B. The Deposit shall be
held by Landlord as security for the faithful performance by Tenant of all of
the provisions of this Lease to be performed or observed by Tenant. If Tenant
fails to pay rent or other charges due hereunder, or otherwise defaults with
respect to any provision of this Lease, Landlord may use, apply or retain all or
any portion of the Deposit for the payment of any rent or other charge in
default or for the
50.
<PAGE>
payment of any other sum to which Landlord may become obligated by reason of
Tenant's default or to compensate Landlord for any loss or damage which Landlord
may suffer thereby. If Landlord so uses or applies all or any portion of the
Deposit, Tenant, within 10 days after demand therefor, shall deposit cash with
Landlord in an amount sufficient to restore the Deposit to the full amount
thereof, and Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep the Deposit separate from its general
accounts. If Tenant performs all of Tenant's obligations hereunder, the Deposit,
or so much thereof as has not theretofore been applied by Landlord, shall be
returned, without payment of interest or other increment for its use, to Tenant
(or, at Landlord's option, to the last assignee, if any, of Tenant's interest
hereunder) at the expiration of the term hereof, and after Tenant has vacated
the Premises. No trust relationship is created herein between Landlord and
Tenant with respect to the Deposit.
39. Brokerage. Each party warrants and represents to the other that such
---------
party has not retained the services of any real estate broker, finder or any
other person whose services would form the basis for any claim for any
commission or fee in connection with this Lease or the transactions contemplated
hereby except for (a) real estate brokerage services rendered to Landlord by
Stubbs, Collenette and Associates, the commissions earned with respect to which
Landlord shall pay to such broker pursuant to separate agreement between
Landlord and such broker, and
51.
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(b) such real estate brokerage services as may have been rendered to Tenant for
which Landlord is to have no liability. Each party agrees to save, defend,
indemnify and hold the other party free and harmless from any breach of its
warranty and representation as set forth in the preceding sentence, including
the other party's attorneys fees.
40. Limitation of Liability. With the exception of actions arising from
-----------------------
Landlord's fraud, bad faith or willful misconduct, any liability of Landlord
under this Lease shall be limited to Landlord's interest in the Building and the
parcel of real property on which the Building is located, and any appurtenant
rights thereto.
41. Base Rent Abatement. Base Rent shall be abated as provided in the
-------------------
Basic Lease Information, and such abatement is provisional and conditioned upon
the full and faithful performance by Tenant of each and all of its obligations
under this Lease. Upon the occurrence of an Event of Default pursuant to Section
17, such condition shall have failed and, unless subsequently and expressly
waived in writing by Landlord, such abatement shall be cancelled and of no
further force or effect; and such Base Rent covered thereby shall be immediately
due and payable in full without demand or notice from Landlord.
42. Parking Spaces. Landlord shall provide to Tenant three parking spaces
--------------
in the garage of the Building for the term of the Lease. Tenant shall use such
parking spaces at its sole risk and liability, and no bailment shall be created.
52.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease as of the date set
forth in the Basic Lease Information.
LANDLORD: TENANT:
C & C INVESTMENTS MZ GROUP, INC.
a trust a California corporation
By ___________________________ By ________________________________
Corwin Booth Mansoor Zakaria
Trustee Chairman
53.
<PAGE>
EXHIBIT B
---------
WORK LETTER
-----------
The purpose of this Work Letter is to delineate the responsibilities of
Landlord and Tenant with respect to the costs and construction of the shell work
and interior improvements to the Premises. Except as otherwise defined herein,
capitalized terms shall have the meanings set forth in the Lease.
1. Landlord's Work. Landlord shall, at its direct cost, without any
---------------
application of funds from the Tenant Improvement Allowance (as hereinafter
defined), bring the restrooms on the 8th floor of the Building into compliance
with the requirements of the San Francisco Building Department for handicapped
accessibility.
2. Tenant's Work. After the commencement of the term of this Lease,
-------------
Tenant shall construct furnish or install within the Premises, at its sole cost
and expense, in compliance with its obligations under the Lease, all
improvements, equipment or fixtures that are necessary for Tenant's use and
occupancy of the Premises (the "Tenant's Work"). The construction, furnishing
and installation of Tenant's Work, is referred to herein as the "Improvement
Work". The Improvement Work shall be performed in accordance with the following
provisions:
(a) Tenant will be responsible for delivery of final working drawings and
specifications for the Premises to Landlord prior to beginning work. The final
working drawings and specifications shall include mechanical and electrical
drawings and decorating plans showing the location of partitions, reflected
ceiling plans including light fixtures, electrical outlets, telephone outlets,
sprinklers, doors, wall finishes, floor coverings and any other work required by
Tenant. The final working drawings and specifications are referred to herein as
"Tenant's Final Plans." Tenant shall cause all Tenant's Final Plans to be
prepared by licensed architects, and where appropriate, licensed mechanical,
electrical and structural engineers.
(b) Tenant's Final Plans shall be subject to Landlord's approval, which
approval shall not be unreasonably withheld. If Landlord disapproves Tenant's
Final Plans, or any portion
1.
<PAGE>
thereof, Landlord shall promptly notify Tenant thereof and of the revisions that
Landlord reasonably requires in order to obtain Landlord's approval. As promptly
as reasonably possible thereafter, Tenant shall submit to Landlord plans and
specifications incorporating the revisions required by Landlord. Said revisions
shall be subject to Landlord's approval, which shall not be unreasonably
withheld. This procedure shall be repeated until Tenant's Final Plans are
finally approved by Landlord and written approval has been received by Tenant.
Tenant shall pay Landlord for the review of plans and specifications at the
hourly rate of Landlord's architect, not to exceed a total of $1,500. The final
plans and specifications approved by Landlord, including any changes, additions
or alterations thereto approved by Landlord as provided in Paragraph 2(i) below,
shall be referred to as the "Approved Plans."
(c) Tenant shall obtain all building and other permits, licenses and other
approvals necessary to construct the Improvement Work in compliance with all
applicable laws (collectively, "Permits") prior to the commencement of such
work. Tenant's Work shall (i) be constructed in compliance with the Approved
Plans, with all of the terms and conditions of the Lease and with all applicable
laws, (ii) not involve changes to structural components of the Building nor
involve any floor penetrations unless approved by Landlord, in its sole and
absolute discretion, (iii) not require any material modifications of the
Building's mechanical or electrical systems unless approved by Landlord, in its
sole and absolute discretion, and (iv) not cause pipes or conduits to run over
or through any other tenant's space except as directed by Landlord.
(d) Prior to commencing construction, Tenant shall deliver to Landlord the
following:
(i) The address of Contractor (as hereinafter defined), and the
names of the primary subcontractors Contractor intends to engage for the
construction of the Premises.
(ii) The actual commencement date of construction and the estimated
date of completion of the work, including fixturization.
(iii) Executed copies of the applicable Permits for such work.
(e) After final approval of the Approved Plans by Landlord, Tenant shall
proceed promptly to commence performance of the Improvement Work. Tenant's
contractors and subcontractors shall be acceptable to and approved in writing by
Landlord, which approval shall not be unreasonably withheld, and shall be
subject to administrative supervision by Landlord in
2.
<PAGE>
their use of the Building, provided, however, that any such administrative
supervision shall not impose any liability or obligation whatsoever on Landlord.
Tenant shall furnish to Landlord a copy of the executed contract between Tenant
and Contractor covering all of Tenant's obligations under this Exhibit B.
Tenant's contractors shall conduct their work and employ labor in such manner as
to maintain harmonious labor relations and as not to interfere with any of
Landlord's other tenants in the Building. All Improvement Work shall be done
with union labor in accordance with the Northern California Master Labor
Agreement and shall comply with all laws, codes and ordinances of the City of
San Francisco, the State Fire Marshall's Office and any authority having
jurisdiction over the project.
(f) Tenant shall hire its own general contractor ("Contractor") to
complete Tenant's Work, which Contractor shall be subject to Landlord's prior
written approval, which approval shall not be unreasonably withheld.
(g) Contractor shall obtain a "course of construction" policy of insurance
in an amount and form and issued by a carrier reasonably satisfactory to
Landlord, endorsed to show Landlord as an additional insured, and Contractor and
subcontractors shall carry worker's compensation insurance for their employees
as required by law. The builder's risk policy of insurance shall name Landlord
as an additional insured and shall not be cancelable without at least 30 days'
prior written notice to Landlord.
(h) Tenant shall cause Contractor to use ACCO and CBF, Inc., for its HVAC
and electrical work, respectively.
(i) If Tenant shall request any change, addition or alteration in Tenant's
Work from the Approved Plans approved by Landlord, Tenant's Architect (as
hereinafter defined) shall prepare plans and specifications with respect to such
change, addition or alteration, which plans and specifications shall be
submitted to Landlord and shall be subject to Landlord's prior written approval,
which approval may be withheld in Landlord's sole discretion. Only new and
first-class materials shall be used in the construction of the Improvement Work,
except with the written consent of Landlord.
(j) Trash removal will be done continually at Tenant's cost and expense.
No trash, or other debris, or other waste may be deposited at any time outside
the Premises. If so, Landlord
3.
<PAGE>
may remove it at Tenant's expense, which expense shall equal the cost of removal
plus twenty-five percent (25%) of such costs as a management fee.
(k) Storage of Tenant's contractors' construction materials, tools and
equipment shall be confined within the Premises.
(l) Landlord shall have the right to post in a conspicuous location on
Tenant's Premises, as well as record with the City and County of San Francisco,
a Notice of Nonresponsibility.
(m) Tenant shall, upon completion of its work, submit to Landlord two (2)
complete sets of plans (one in electronic format compatible with AutoCAD Release
14 or earlier) and specifications covering all of the Improvement Work,
including architectural, electrical, and plumbing, as built.
3. Tenant Improvement Allowance.
----------------------------
(a) Landlord shall provide Tenant with a cash tenant improvement allowance
(the "Tenant Improvement Allowance") of up to $431,860. The Tenant Improvement
Allowance shall be applied to hard costs of construction and for Tenant's
architectural and engineering expenses in connection with the Improvement Work.
Tenant shall bear and pay the cost of the Improvement Work in excess of the
Tenant Improvement Allowance payable to Tenant. Based upon applications for
payment prepared, certified and submitted by Tenant, Landlord shall make a
progress payments from the Tenant Improvement Allowance in accordance with the
provisions of this Paragraph 3.
(b) As a condition to the first disbursement of the Tenant Improvement
Allowance, all of the following conditions must be satisfied:
(i) Tenant shall have delivered to Landlord duly executed originals
of each of (A) the agreement between Tenant and the licensed architect
("Tenant's Architect") engaged by Tenant and approved by Landlord, in its
reasonable discretion, for the design and oversight of the Improvement Work (the
"Architect Agreement") and (B) the guaranteed maximum cost contract with
Contractor for the construction of the Improvement Work (the "Tenant Improvement
Contract").
(ii) Landlord shall have approved the budget for the Improvement Work.
4.
<PAGE>
The Approved Plans shall have been completed and approved.
(iii) Tenant shall have obtained and be in compliance with all
Permits.
(c) Not later than the 25th day of each month Tenant shall submit
applications for payment to Landlord in a form satisfactory to Landlord,
certified as correct by an officer of Tenant and by Tenant's Architect, for
payment of that portion of the cost of the Improvement Work allocable to
expenses reimburseable from the Tenant Improvement Allowance incurred during the
period from the first day of the same month projected through the last day of
the month. Each application for payment shall set forth such information and
shall be accompanied by such supporting documentation as shall be requested by
Landlord, including the following:
(i) Fully executed conditional lien releases in the form prescribed
by law from the Contractor and all subcontractors and suppliers furnishing labor
or materials during such period and fully executed unconditional lien releases
from all such entities covering the prior payment period.
(ii) Contractor's worksheets showing percentages of completion,
detailing the portion of the work completed and the portion not completed, and
the ten percent (10%) retainage to be held by Tenant pursuant to the Tenant
Improvement Contract until substantial completion of the Improvement Work.
(iii) Contractor's certification as follows:
"There are no known mechanics' or materialmen's liens
outstanding at the date of this application for payment, all due and payable
bills with respect to the Building have been paid to date or shall be paid from
the proceeds of this application for payment, and there is no known basis for
the filing of any mechanics' or materialmen's liens against the Building, and,
to the best of our knowledge, waivers from all subcontractors are valid and
constitute an effective waiver of lien under applicable law to the extent of
payments that have been made or shall be made concurrently herewith."
(iv) All documents necessary to effect and perfect the transfer of
title to the materials or equipment for which application for payment is made.
(v) Invoices for labor rendered and materials delivered to the
Premises.
(d) On or before the 25th day of the month following submission of the
application for payment, Landlord shall make payment to Tenant of an amount
equal to the Tenant Improvement
5.
<PAGE>
Portion (as hereinafter defined) less the Retained Amount (as hereinafter
defined), provided that, (A) no default exists under the Lease, (B) no default
exists under either of the Tenant Improvement Contract or the Architect
Agreement, (C) no lien has been filed with respect to the Improvement Work that
has not been released, (D) Tenant is in compliance with all Permits, (E) all
insurance required hereunder and under the Lease is in full force and effect and
(F) Landlord does not dispute any request for payment based on non-compliance of
any work with the Approved Plans or due to any substandard work, or for any
other reason. Landlord has no obligation to make any payments to Contractor's
material suppliers or subcontractors or to determine whether amounts due them
from Contractor in connection with the Improvement Work have, in fact, been
paid. As used herein, the "Tenant Improvement Portion" shall be equal to the
amount requested by Tenant in the application for payment multiplied by a
fraction, the numerator of which is the amount of the Tenant Improvement
Allowance and the denominator of which is the total cost of the Improvement Work
as set forth in the Tenant Improvement Contract. Tenant agrees that Landlord
shall have the right, at all times prior to Tenant's satisfaction of all
conditions precedent to Landlord's final disbursement of the Tenant Improvement
Allowance, to withhold from each payment to Tenant of the Tenant Improvement
Portion an amount equal to ten percent (10%) of each such Tenant Improvement
Portion (the "Retained Amount"), which Retained Amount shall not be paid to
Tenant until all of the conditions set forth in Paragraph 3(e) below are
completed to Landlord's satisfaction.
(e) In addition to the requirements set forth above, as a condition to the
final disbursement of the Tenant Improvement Allowance, all of the following
conditions must be satisfied:
(i) The Improvement Work shall have been completed to the reasonable
satisfaction of Landlord.
(ii) Tenant shall have obtained and be in compliance with all
Permits, and have provided Landlord with a copy of each Permit fully and finally
approved by the appropriate authority.
(iii) Tenant shall submit an application for payment to Landlord,
certified as correct by Tenant, setting forth such information and accompanied
by such supporting documentation as shall be reasonably requested by Landlord.
6.
<PAGE>
(iv) Tenant shall have provided, to Landlord's satisfaction, all
items required in Paragraph 4 below.
(f) On or before the 30th day following submission of the application for
payment in full satisfaction of all conditions set forth in clause (e)
immediately above, Landlord shall make payment to Tenant of the final amount due
Tenant, including the Retained Amount.
(g) Notwithstanding anything contained herein, in no event shall Landlord
be obligated to make payments in excess of the Tenant Improvement Allowance.
(h) Landlord's payment of any amounts of the Tenant Improvement Allowance
shall in no event be deemed to be Landlord's approval or acceptance of the work
furnished or materials supplied as set forth in Tenant's payment request.
4. Evidence of Completion of Improvement Work. Upon the completion of the
------------------------------------------
Improvement Work, Tenant shall:
(a) Submit to Landlord a detailed breakdown of Tenant's final and total
construction costs, together with receipted evidence showing payment thereof,
satisfactory to Landlord.
(b) Submit to Landlord certifications from Contractor and Tenant's
architect that the Improvement Work has been substantially completed in
accordance with the Approved Plans.
(c) Submit to Landlord copies of final and unconditional lien releases
from all contractors and subcontractors.
(d) Submit to Landlord all evidence from governmental authorities showing
compliance with any and all other laws, orders and regulations of any and all
governmental authorities having jurisdiction over the Premises, including,
without limitation, authorization for physical occupancy of the Premises.
(e) Submit to Landlord the as-built plans and specifications referred to
above.
7.
<PAGE>
LANDLORD'S RULES
----------------
1. Signs. No sign, placard, picture, advertisement, name or notice shall
-----
be inscribed, displayed, printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Landlord first had and
obtained, and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice, without notice to and at the expense of
Tenant.
2. Building Directory. The directory of the Building will be provided
------------------
exclusively for the display of the name and location of Tenant and other tenants
in the building and Landlord reserves the right to exclude any other names
therefrom. Any changes by Landlord made to such a directory at the request of
Tenant shall be at Tenant's expense. Tenant shall have the right to use up to 21
strips in such directory.
3. Locks. No additional locks shall be placed upon any doors of the
-----
Premises, and Tenant agrees not to have any duplicate keys made without the
consent of Landlord. An initial quantity of keys shall be provided to Tenant as
provided in Exhibit B of the Lease; additional keys shall be paid for by Tenant.
Upon termination of the Lease, Tenant shall surrender all keys.
4. Wiring. When wiring of any kind is introduced, it must be connected as
------
directed by Landlord, and no boring or cutting for wires will be allowed except
with the consent of Landlord. The location of telephones, electrical outlets,
and other office equipment affixed to the Premises shall be prescribed by
Landlord.
5. Landlord's Non-Responsibility. Landlord is not responsible to any
-----------------------------
tenant for the non-observance or violation of the rules and regulations by any
other tenant.
6. Obstructing Light. Tenant shall not allow anything to be placed
-----------------
against or near the glass in the partitions or in the doors between the Premises
leased and in the halls or corridors. The doors between the Premises and the
corridors of the Building shall at all times, except when in actual use for
ingress and egress, be kept closed.
7. Halls and Stairways. The entries, passages, stairways, and elevators
-------------------
shall not be obstructed by Tenant or used for any purpose other than ingress and
egress of persons to and from the respective offices. Tenant shall not bring
into or keep within the Premises any animal or vehicle.
8. Plumbing. The wash-bowls, water closets, and urinals shall not be used
--------
for any purpose other than those for which they were constructed.
1.
<PAGE>
9. Closing Precautions. Before leaving the Building, Tenant shall cause
-------------------
(a) all doors of the Premises to be closed and securely locked, (b) all water
faucets or water apparatus to be shut off, and (c) all unused electrical or gas
appliances to be shut off, all so as to prevent waste or damage.
10. Moving Equipment Safes, etc. No freight, furniture, supplies, books or
---------------------------
equipment of any kind shall be brought into or removed from the Building without
the consent of Landlord or Landlord's agent and all moving of same into or out
of the Building by Tenant shall be done at such times and in such manner as
Landlord shall designate (and unless otherwise expressly designated by Landlord,
the freight elevator not any passenger elevator shall be used for any and all
moving of the same). Landlord shall have the right to prescribe the weight,
size, and position of all safes and other heavy property brought into the
Building, and also the times and manner of moving the same in and out of the
Building. Landlord will not be responsible for loss of or damages to any such
safe or property from any cause and all damage done to the Building by moving or
maintaining any such safe or property shall be repaired at the expense of
Tenant.
11. Janitor Service. No Tenant shall employ any person or persons other
---------------
than the janitor of Landlord for the purpose of cleaning the Premises unless
otherwise agreed to by Landlord in writing. Except with the written consent of
Landlord, no person or persons other than those approved by Landlord shall be
permitted to enter the Building for the purpose of cleaning the same. No Tenant
shall cause any unnecessary labor by reason of such Tenant's carelessness or
indifference in the preservation of good order and cleanliness. Janitor service
shall include ordinary dusting, cleaning, and vacuuming by the janitor assigned
to such work and shall not include beating of carpets or rugs or moving of
furniture or other special services. Window cleaning shall be done only by
Landlord, and at such intervals and such hours as Landlord shall deem
appropriate.
12. Violation of Rules. Landlord reserves the right to exclude or expel
------------------
from the Building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.
13. Requirements. The requirements of Tenant will be attended to only upon
------------
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties unless under
special instructions from the office, and no
2.
<PAGE>
employee will admit any person (tenant or otherwise) to any office without
specific instructions from the office of the Building.
14. Rooms Used in Common. Rooms used in common by tenants shall be subject
--------------------
to such regulations as are posted therein.
15. Entrance Doors. Landlord reserves the right to close and keep locked
--------------
all entrance and exit doors of the Building during such hours as Landlord may
deem to be advisable for the adequate protection of the Building, provided,
however, that retail tenants shall have access and be responsible for entrance
and exit doors to their own Premises. Tenants who require access to the Building
during hours outside of the normal hours of operation as stated in Rule 16 shall
make arrangements with the Building manager.
16. Hours of Operation. The normal hours of operation for the Building
------------------
will be Monday through Friday (excluding holidays) from 7:00 a.m. to 6:00 p.m.
17. Food. Tenant shall not prepare or sell, or permit to be prepared or
----
sold, any food in the Premises, except that Tenant may (a) prepare coffee, teas
and like beverages for consumption by Tenant's employees on the Premises and (b)
prepare food in a microwave oven, provided that Tenant in so doing nevertheless
shall comply at all times with the provisions of Section 4 of the Lease.
3.
<PAGE>
EXHIBIT 10.8
LEASE AGREEMENT
----- ---------
BY AND BETWEEN:
FIRST INDUSTRIAL, L.P.,
a Delaware limited partnership,
"Landlord"
- and -
2BRIDGE SOFTWARE, INC.
a California corporation,
"Tenant"
Premises: 11C PRINCESS ROAD
LAWRENCEVILLE, NEW JERSEY
DATED: Dec. 7th, 1999
PREPARED BY: ROBERT K. BROWN, ESQ.
November 23, 1999 (mf)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. LEASED PREMISES 1
2. TERM OF LEASE 2
3. RENT 4
4. PARKING AND USE OF EXTERIOR AREA 5
5. USE 5
6. CONDITION OF LEASED PREMISES 5
7. REPAIRS AND MAINTENANCE 6
8. UTILITIES 9
9. TAXES 9
10. INSURANCE 11
11. SIGNS 14
12. FIXTURES 14
13. BROKERAGE 15
14. FIRE AND CASUALTY 15
15. COMPLIANCE WITH LAWS, RULES AND REGULATIONS 16
16. INSPECTION BY LANDLORD 20
17. DEFAULT BY TENANT 20
18. LIABILITY OF TENANT FOR DEFICIENCY 23
19. NOTICES 23
20. NON-WAIVER 24
21. RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS 24
22. NON-LIABILITY OF LANDLORD 25
23. RESERVATION OF EASEMENT 25
</TABLE>
<PAGE>
<TABLE>
<S> <C>
24. POLLUTION 26
25. STATEMENT OF ACCEPTANCE 26
26. FORCE MAJEURE 27
27. STATEMENTS BY LANDLORD AND TENANT 27
28. CONDEMNATION 27
29. LANDLORD'S REMEDIES 29
30. QUIET ENJOYMENT 30
31. SURRENDER OF PREMISES 30
32. INDEMNITY 30
33. LEASE CONSTRUCTION 31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
34. BIND AND INURE CLAUSE 31
35. DEFINITIONS 31
36. DEFINITION OF TERM OF "LANDLORD" 32
37. COVENANTS OF FURTHER ASSURANCES 32
38. COVENANT AGAINST LIENS 32
39. SUBORDINATION 33
40. EXCULPATION OF LANDLORD 33
41. NET RENT 33
42. SECURITY 34
43. ASSIGNMENT AND SUBLETTING 34
44. OPTION TO RENEW 37
45. SECURITY MEASURES 38
46. FINANCIAL STATEMENTS 38
47. TENANCY REVIEW 38
48. EXECUTION AND DELIVERY 39
</TABLE>
Schedule "A" - Site Plan
<PAGE>
THIS AGREEMENT, made the day of 199 , by and between FIRST INDUSTRIAL,
L.P., a Delaware limited partnership, having an office at 354 Eisenhower
Parkway, Livingston, New Jersey 07039 (having a mailing address at P.O. Box
1639, Livingston, New Jersey 07039), hereinafter called the "Landlord"; and
2BRIDGE SOFTWARE, INC., a California corporation, about to have an office at 11
Princess Road, Lawrenceville, New Jersey 08532, hereinafter called the "Tenant".
WITNESSETH:
-----------
WHEREAS, the Landlord intends to lease to the Tenant Suite C, in the
building commonly known as 11 Princess Road, Lawrenceville, New Jersey,
hereinafter referred to as the "Building", which Suite contains approximately
5,000 square feet, outside outside dimensions to center line of common wall,
identified on the plot plan attached hereto and made a part hereof as Schedule
"A", hereinafter referred to as the "Leased Premises"; and
WHEREAS, the parties hereto wish to mutually define their rights, duties
and obligations in connection with the said lease,
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for the rents
reserved, the mutual considerations herein and the parties mutually intending to
be legally bound hereby, the Landlord does demise, lease and let unto the Tenant
and the Tenant does rent and take from the Landlord the Leased Premises as
described in Article 1, and the Landlord and Tenant do hereby mutually covenant
and agree as follows:
1. LEASED PREMISES
---------------
1.1 The Leased Premises shall consist of Suite C located in the
Building, which Suite contains approximately 5,000 square feet outside
dimensions to center line of common wall, identified on the plot plan attached
hereto and made a part hereof as Schedule "A", together with all easements,
improvements, tenements, appurtenances, hereditament, fixtures and rights and
privileges appurtenant thereto, and any and all fixtures and equipment which
have been installed in said Building by the
<PAGE>
Landlord for the use of the Tenant in its occupancy of the Leased Premises.
1.2 The Building is a part of the complex (the "Complex") upon which
Landlord has constructed three (3) additional buildings in addition to the
Building. The Complex comprises one designated lot and block (hereinafter
referred to as the "Property") as reflected on the Official Tax Map of the
Township of Lawrenceville. To the extent that Tenant shall be responsible under
this lease for Tenant's percentage of costs attributable to the Building only,
the same shall hereinafter be referred to as the "Building Percentage". To the
extent that Tenant's percentage of costs shall be applicable to the Property
(including the common areas thereof), exclusive of the Building and the other
buildings which have been constructed by Landlord, such Tenant's percentage
shall hereinafter be referred to as the "Common Area Percentage". For the
purposes of this lease the total gross rentable area of the Building is 55,000
square feet, and the total gross rentable area of all of the buildings on the
Complex is 118,750 square feet. The Building Percentage has been established at
9.1% and the current Common Area Percentage has been established at 4.2%. In the
event of any change in the size of the Leased Premises, Building or the Complex,
the Landlord shall certify to Tenant the resulting gross rentable area of the
Building, the Leased Premises and the Complex. If the certification indicates
applicable gross rentable area of the Leased Premises, Building and/or Complex
at variance with the square footage used to initially establish the Common Area
Percentage and the Building Percentage, Landlord and Tenant shall enter into a
lease amendment to reflect any required revisions and adjustment of such
applicable percentages, or any other applicable lease terms.
2. TERM OF LEASE
-------------
The Landlord leases unto the Tenant and the Tenant hires the Leased
Premises for the term of three (3) years, to commence on or about December 1,
1999, and to end on November 30, 2002, the
2
<PAGE>
obligation of the Tenant hereunder being subject to the following proviso:
2.1 That on or about December 1, 1999, the Landlord shall have
delivered to the Tenant a Certificate of Occupancy issued by the authorized
issuing officer of the governmental instrumentality having jurisdiction thereof.
Upon the delivery by the Landlord to the Tenant of the Leased Premises, and the
Certificate of Occupancy hereinabove mentioned, the lease term shall commence
and the Tenant's obligation to pay rent shall begin (subject to the provisions
of Article 2.2 hereof).
2.2 Subject to the terms and conditions of this lease, in the event
the Leased Premises are delivered to the Tenant in the manner provided in
Article 2.1 above, prior to or after December 1, 1999, the lease term of three
(3) years shall commence on the first day of the next succeeding month following
delivery of possession to the Tenant (hereinafter called the "Commencement
Date") and shall continue for a term of three (3) years thereafter. The Tenant
shall, however, pay to the Landlord a sum equal to the pro rata share of one (1)
month's rent for that portion of the month prior to the Commencement Date.
During said period of partial monthly occupancy, if any, all other terms and
conditions of this lease shall be applicable to the occupancy of the Leased
Premises by the Tenant.
2.3 In the event the Landlord has not delivered the Leased Premises
to Tenant within sixty (60) days of the later of (a) full execution of this
lease and (b) delivery by Tenant to Landlord of any executed application and/or
any other documentation required in order to obtain a certificate of occupancy.
Tenant acknowledges that the ability of the Landlord to deliver the Leased
Premises to the Tenant shall not be delayed due to the unavailability of the
carpet or paint selected by the Tenant. In such event, Tenant shall timely make
alternate choices of building standard carpet and paint in lieu of the
selections originally made.
3
<PAGE>
3. RENT
----
3.1 The Tenant covenants and agrees to pay, in good and useable
funds, the annual rent ("Base Rent") as follows:
(a) During the first (1st) and second (2nd) years of the lease term,
Tenant shall pay Base Rent in the amount of SIXTY THOUSAND AND 00/100
($60,000.00) DOLLARS per annum, in equal installments in the sum of FIVE
THOUSAND AND 00/100 ($5,000.00) DOLLARS per month.
(b) During the third (3rd) year of the lease term, Tenant shall pay
Base Rent in the amount of SIXTY ONE THOUSAND TWO HUNDRED FIFTY AND 00/100
($61,250.00) DOLLARS per annum, in equal monthly installments in the sum of FIVE
THOUSAND ONE HUNDRED FOUR AND 17/100 ($5,104.17) DOLLARS.
All of the foregoing monthly payments shall be made promptly in
advance on the first day of each and every month during the term of the lease
without demand and without off-set or deduction, together with such additional
rent and other charges ("Additional Rent") required to be paid by Tenant as are
herein-after set forth.
3.2 Simultaneously with the execution hereof, the Tenant has
delivered to the Landlord the first monthly installment of Base Rent payable
hereunder, together with the security deposit referred to herein.
3.3 Any installment of Base Rent or Additional Rent accruing
hereunder (collectively "rent"), and any other sum payable hereunder by Tenant
to Landlord which is not paid prior to the fifth (5th) day of any lease month,
shall bear a late charge of eight (8%) per cent of such Base Rent or Additional
Rent, to be paid therewith, and the failure to pay such charge shall be a
default. Such late charge shall be deemed to be Additional Rent hereunder. It is
expressly understood and agreed that the foregoing late charge is not a penalty,
but agreed upon compensation to the Landlord for administrative costs incurred
by Landlord in connection with any such late payment. In addition,
4
<PAGE>
any payment of Base Rent or Additional Rent, which is not paid within thirty
(30) days of the date upon which it is due shall require the payment of interest
at the rate of fifteen (15%) percent per annum, calculated from the date that
such payment was due through the date that any such payment is actually made.
4. PARKING AND USE OF EXTERIOR AREA
--------------------------------
4.1 The Tenant shall have the right, at no additional cost, to use
the parking spaces on a non-exclusive basis in common with other tenants of the
Complex and to use the access driveways and allocated parking spaces for its
business purposes and for those of its agents, servants, employees or invitees.
The Landlord reserves the right to allocate designated parking spaces if
Landlord chooses. The Landlord and Tenant mutually agree that they will not
block, hinder or otherwise obstruct the access driveways and parking areas so as
to impede the free flow of vehicular traffic in and out of the Complex. In
connection with the use of the loading platforms, if any, both Landlord and
Tenant agree that they will not use the same in connection with the conduct of
their business so as to unreasonably interfere with the use of the access
driveways and parking areas.
4.2 The Tenant may not utilize any portion of the land outside of the
Leased Premises for outside storage of raw materials or finished products.
5. USE
---
The Tenant covenants and agrees to use and occupy the Leased Premises
for office and warehouse purposes only, which use by Tenant, however, is and
shall be expressly subject to all applicable zoning ordinances, rules and
regulations of any governmental instrumentalities, boards or bureaus having
jurisdiction thereof.
6. CONDITION OF LEASED PREMISES
----------------------------
6.1 Anything herein contained to the contrary notwithstanding, it is
expressly understood and agreed that the Tenant shall take the Leased Premises
and improvements as of the
5
<PAGE>
Commencement Date of the within lease in an "as is" condition, except that
Landlord shall, prior to the delivery of the Leased Premises, recarpet the
existing office area, and also repaint the same, using building standard
materials
6.2 In the event that any changes or additions are required to the
Leased Premises by any governmental or quasi governmental entity having
jurisdiction over the Tenant, or its use and occupancy of the Leased Premises,
including any required modification to the fire suppression system serving the
same, any such changes or additions shall be performed by the Landlord at the
Landlord's sole cost and expense unless the same is required due to Tenant's
particular use of the Leased Premises. In addition, in the event that the
performance of any such changes or additions required due to Tenant's particular
use of the Leased Premises shall delay the Commencement Date hereunder, the
Commencement Date shall be established as of the date that the Leased Premises
would otherwise have been delivered by the Landlord to Tenant, but for such
additional requirements which are applicable to the Tenant.
7. REPAIRS AND MAINTENANCE
-----------------------
7.1 The Tenant shall take good care of the Leased Premises and, at
its cost and expense, keep and maintain in good repair the interior of the
Leased Premises, including all repairs to the floor, the air-conditioning and
heating plant, the plumbing, pipes, sewer lines and conduits, and fixtures
belonging thereto; and shall replace all air-conditioning, electrical, heating
and plumbing plants, fixtures and systems, including mechanical and working
parts as may be required; and shall replace all ballasts and fluorescent
fixtures; and shall maintain interior water and sewer pipes and connections, and
shall generally maintain and repair the interior of the Leased Premises, and
shall, at the end or the expiration of the term, deliver up the Leased Premises
in good order and condition, damages by fire or casualty, the elements and
ordinary wear and tear excepted. The Tenant expressly agrees that it shall enter
into a periodic maintenance agreement with a
6
<PAGE>
reputable heating, ventilating and air-conditioning contractor, which contract
shall provide for a minimum of two (2) inspections per year. A copy of said
contract shall be forwarded to the Landlord prior to the Commencement Date and
thereafter on an annual basis, and copies of inspection reports shall be
delivered to the Landlord within ten (10) days of receipt thereof by Tenant. The
Tenant covenants and agrees that it shall not cause or permit any waste (other
than reasonable wear and tear), damage or disfigurement to the Leased Premises,
or any overloading of the floors of the Building, constituting part of the
Leased Premises. Tenant shall reimburse Landlord in connection with exterior
maintenance and repairs as hereinafter provided in Article 7.2.
7.2 The Tenant shall pay to the Landlord monthly, as Additional Rent,
a sum equal to Tenant's Common Area Percentage of costs incurred by the Landlord
for the management, maintenance, repair and replacement of the following: (i)
parking lot and roadways, driveways, sidewalks, walkways, exterior lighting;
(ii) exterior sewer and utility lines; (iii) lawns and shrubbery; (iv) snow
removal; (v) signs serving the Complex; and (vi) detention ponds. In addition
the Tenant shall pay the Landlord monthly, as Additional Rent, Tenant's Building
Percentage of costs incurred by the Landlord for the maintenance, repair and
replacement of the following: roof, gutters, leaders, flashings, metal gravel
stops and roof drains. Landlord shall be responsible at its sole cost for the
maintenance, repair and replacement of the exterior walls, load bearing interior
walls and the foundation of the Leased Premises unless arising from the
negligence or willful misconduct of Tenant, its agents, employees or
contractors. Landlord shall be solely responsible for the cost of repairing
original construction defects and the costs of repairs and replacements incurred
by reason of fire or other casualty. Notwithstanding the above, the cost of any
replacement of the roof of the Building, exterior sewer and utility lines,
repaving of the parking lot or replacement of the heating, ventilating and air
conditioning system shall be each
7
<PAGE>
amortized on a straight line basis over its useful life which is deemed to be
ten (10) years in each instance and Tenant shall be responsible to reimburse the
Landlord for that portion of such amortized costs as is applicable to the then
remaining term of this lease based on Tenant's Common Area Percentage. In the
event of any subsequent renewal or extension of this lease, Tenant shall be
responsible to reimburse the Landlord for that portion of such amortized costs
which is applicable to the renewal or extension term based on Tenant's Common
Area Percentage.
7.3 During the first year of the lease term, the Landlord shall
estimate the cost of all of the management, maintenance, repair and replacement
services required pursuant to Article 7.2 above, inclusive of management fees.
Landlord shall furnish such estimate to the Tenant, and Tenant shall pay to
Landlord one-twelfth (1/12th) of its Common Area Percentage or Building
Percentage thereof, as applicable, during each month of the lease year as
Additional Rent. At the expiration of the first twelve (12) months of the lease
term, the Landlord shall furnish to Tenant a breakdown, certified by the
Landlord, as to the total cost of management, maintenance, repair and
replacement for the prior twelve (12) months. Upon Landlord's receipt of a
written request from Tenant within sixty (60) days after Tenant's receipt of the
annual certified statement, the Landlord shall forward copies of all relevant
invoices, contracts and other documentation in support of the Landlord's
certified statement for Tenant's review. In the event Tenant's pro rata share
shall be more than the aggregate paid by the Tenant during the preceding twelve
(12) month period, Tenant shall pay to the Landlord, in one lump sum, any
difference in such obligation, said sum to be paid within fifteen (15) days
after demand. In the event Tenant shall have overpaid its pro rata share, any
such overage shall be applied to the monthly management, maintenance, repair and
replacement charges prospectively due under the lease. This procedure shall be
followed during each year of the lease term, and at the expiration of the lease,
any overage or
8
<PAGE>
underage shall be credited or paid after computation by the Landlord, which
obligation of Landlord and Tenant shall survive the expiration of the lease
term.
7.4 The Tenant expressly covenants and agrees to replace any broken
glass in the windows or other apertures of the Leased Premises which become
damaged or destroyed, at Tenant's sole cost and expense.
8. UTILITIES
---------
8.1 The Tenant shall, at its own cost and expense, pay all utility
meter and service charges applicable to the Leased Premises, including gas,
sewer, electric, water, janitorial and garbage disposal services and Tenant's
Building Percentage of standby sprinkler charges, if any. It is understood and
agreed that if the Leased Premises are not separately metered for any utility
service, the Tenant shall pay its pro rata share of the charges indicated by the
applicable utility meter serving the Leased Premises, based upon the
relationship between the gross rentable area of the Leased Premises and the
gross rentable area of all of the premises served by said utility meter.
8.2 The Landlord is hereby granted the privilege of entering the
Leased Premises for the purpose of repairing any utility lines which serve the
Leased Premises. Any entry shall be upon reasonable prior oral notice except in
the event of emergency.
9. TAXES
-----
9.1 The Tenant, in addition to the rent reserved, shall, during the
term of the lease, promptly pay to the Landlord, monthly, in advance, its
proportionate part of all real estate and personal property taxes assessed
against the Complex for land, buildings and improvements. Said obligation shall
be prorated as of the commencement and expiration of the lease term. In addition
to the obligation to pay real estate taxes as hereinabove set forth, the Tenant
shall, during the term of this lease, pay to the Landlord monthly, in advance,
its proportionate part of any levy for the installation of local improvements
affecting the Complex as
9
<PAGE>
may be assessed by any governmental body having jurisdiction thereof. The real
estate tax obligation of the Tenant shall include any tax or imposition for
parking lot usage which may be levied by any governmental body having
jurisdiction thereof. For the purpose of this Lease Tenant's obligation to pay
taxes assessed against the land shall be based on the Common Area Percentage
applied to the assessed valuation of the land, and resultant taxes produced, and
if the Building is assessed separately Tenant's obligation for such portion of
the real estate taxes shall be based on the Building Percentage of such tax. If
however, all of the buildings in the Complex are not separately assessed the
Tenant's obligations shall be equal to the Common Area Percentage of the real
estate tax attributable thereto.
9.2 The Landlord may contest any assessment or levy of taxes on the
Complex. A contest conducted by the Landlord may include the Complex and other
land and buildings owned by the Landlord. The Tenant shall have no right to
prosecute a tax appeal affecting the Complex.
9.3 If at any time during the term of this lease the method or scope
of taxation prevailing at the commencement of the lease term shall be altered,
modified or enlarged so as to cause the method of taxation to be changed, in
whole or in part, so that in substitution for the real estate taxes now assessed
there may be, in whole or in part, a capital levy or other imposition based on
the value of the Complex, or the rents received therefrom, or some other form of
assessment based in whole or in part on some other valuation of the Complex,
then and in such event, such substituted tax or imposition shall be payable and
discharged by the Tenant in the manner required pursuant to such law promulgated
which shall authorize such change in the scope of taxation, and as required by
the terms and conditions of the within lease.
9.4 Nothing in this lease contained shall require the Tenant to pay
any franchise, estate, inheritance, succession, capital levy or transfer tax of
the Landlord, or Federal Income
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Tax, State Income Tax, or excess profits or revenue tax, unless such taxes are
in substitution for real property taxes.
9.5 The Tenant shall pay to Landlord monthly, as Additional Rent,
one-twelfth (1/12th) of Tenant's proportionate share of annual real estate taxes
and assessments to be paid by Tenant, as provided in Article 9.1 above. Landlord
shall adjust Tenant's rent payment from time to time based on annual tax
requirements, and Landlord shall furnish to Tenant, if requested, a computation
and breakdown of Tenant's tax obligation.
10. INSURANCE
---------
10.1 The Tenant agrees to pay monthly, in advance, as Additional Rent,
Tenant's Building Percentage of the annual insurance premium or premiums charged
to the Landlord for insurance coverage which insures the Building. The insurance
shall be for the full replacement value of all insurable improvements with any
customary extensions of coverage including, but not limited to, vandalism,
malicious mischief, sprinkler damage, flood insurance and comprehensive
liability for the whole of the land, Building and improvements of which the
Leased Premises are a part, including Landlord's cost for umbrella insurance
(excess coverage) in an amount not to exceed FIFTEEN MILLION ($15,000,000.00)
DOLLARS. Tenant shall pay the full premium attributable to casualty rent
insurance, insuring the value of one (1) year's gross rental obligation of
Tenant hereunder, including taxes and insurance premiums. Any increase in the
premiums hereinabove referred to due to change in rating of the Building,
attributable to the use of the Leased Premises by the Tenant shall be paid
entirely by the Tenant. Landlord shall certify annually, the annual cost of such
insurance premiums, and shall furnish to Tenant, if requested, a copy of all
insurance premium bills for which Tenant has been charged its pro rata share
thereof.
10.2 Tenant shall provide the following insurance coverage:
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(a) "All Risk" property insurance on a replacement cost basis,
covering all of Tenant's personal property, trade fixtures, furnishings and
equipment and all leasehold improvements installed in the Leased Premises by, or
on behalf of, Tenant, all in an amount not less than the full replacement cost
of all such property. Landlord and any other parties designated by Landlord
(including, but not limited to, its beneficiary, its general and limited
partners, and Landlord's mortgagees) shall be included as loss payee(s).
(b) Commercial general public liability and comprehensive
automobile liability (and, if necessary to comply with any conditions of this
Lease, umbrella liability insurance) covering Tenant against any claims arising
out of liability for bodily injury and death and personal injury and advertising
injury and property damage occurring in and about the Leased Premises, and/or
the Property and otherwise resulting from any acts and operations of Tenant, its
agents and employees, with limits of not less than total limits of $2,000,000.00
per occurrence and $5,000,000.00 annual general aggregate, per location. The
total amount of a deductible or otherwise self-insured retention with respect to
such coverage shall be not more than $10,000.00 per occurrence. Such insurance
shall include, inter alia: (i) "occurrence" rather than "claims made" policy
forms unless such "occurrence" policy forms are not available; (ii) any and all
liability assumed by Tenant under the terms of this Lease, to the extent such
insurance is available; (iii) premises medical-operations expenses in an amount
not less than $5,000.00 per person, per accident; (iv) a hostile fire
endorsement; (v) Landlord and any other parties designated by Landlord or Agent
(including, but not limited to, its beneficiary, its general and limited
partners, and Landlord's mortgagees) shall be designated as Additional
Insured(s) with respect to (x) the Leased Premises, and (y) all operations of
Tenant, and (z) and Property and areas and facilities of Landlord used by
Tenant, its employees, invitees,
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customers or guests; and (vi) severability of insured parties and any cross-
liability exclusion deleted so that the protection of such insurance shall be
afforded to Landlord in the same manner as if separate policies had been issued
to each of the insured parties.
(c) Workers' compensation and employer's liability insurance in
the state in which the Leased Premises and any other operations of Tenant are
located and any other state in which Tenant or its contractors or subcontractors
may be subject to any statutory or other liability arising in any manner
whatsoever out of the actual or alleged employment of others. The total limits
of the employer's liability coverage (including umbrella liability insurance)
shall not be less than the amounts specified in Subsection (b) above.
All insurance policies required to be obtained by Tenant under this
lease shall: (i) be issued by companies licensed to do business in the State in
which the Property is located and acceptable to Landlord and any Landlord's
mortgagees and any other party having any interest in the Property; (ii) not be
subject to cancellation or material change or non-renewal without at least
thirty (30) days' prior written notice to Landlord and any other parties
designated by Landlord (A) to be loss payee(s) or additional insured(s) under
the insurance policies required from Tenant, or (B) to receive such notices; and
(iii) be deemed to be primary insurance in relation to any other insurance
maintained by Landlord.
10.3 Notwithstanding anything to the contrary in this lease, the
parties hereto mutually covenant and agree that each party, in connection with
insurance policies required to be furnished in accordance with the terms and
conditions of this lease, or in connection with insurance policies which they
obtain insuring such insurable interest as Landlord or Tenant may have in its
own properties, whether personal or real, shall expressly waive any right of
subrogation on the part of the insurer against the
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Landlord or Tenant as the same may be applicable, which right to the extent not
prohibited or violative of any such policy is hereby expressly waived, and
Landlord and Tenant each mutually waive all right of recovery against each
other, their agents, or employees for any loss, damage or injury of any nature
whatsoever to property or person for which either party is required by this
lease to carry insurance.
11. SIGNS
-----
The Tenant shall have the right to install a sign on the entrance door
to the Leased Premises, subject to the prior written approval of the Landlord,
which approval shall not be unreasonably withheld. Said sign shall comply with
the applicable rules and regulations of all governmental boards and bureaus
having jurisdiction thereof. No other exterior signage of Tenant shall be
permitted.
12. FIXTURES
--------
The Tenant is given the right and privilege of installing and removing
property, machinery, equipment and fixtures in the Leased Premises during the
term of the lease subject to compliance with applicable rules and regulations of
governmental boards and bureaus having jurisdiction thereof, at the cost and
expense of Tenant. However, if the Tenant is in default and moves out, or is
dispossessed, and fails to remove any property, machinery, equipment and
fixtures or other property prior to such default, dispossess or removal, then
and in that event, the said property, machinery, equipment and fixtures or other
property shall be deemed, at the option of the Landlord, to be abandoned; or in
lieu thereof, at the Landlord's option, the Landlord may remove such property
and charge the reasonable cost and expense of removal, storage and disposal to
the Tenant, together with an additional twenty one (21%) per cent of such costs
for Landlord's overhead and profit, which total costs shall be deemed to be
additional rent hereunder. The Tenant shall be liable for any damage which it
causes in the removal of said property from the Leased Premises.
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13. BROKERAGE
---------
The parties mutually represent to each other that WEICHERT COMMERCIAL
REALTORS is the sole broker who negotiated and consummated the within
transaction, and that neither party dealt with any other broker in connection
with the within lease, it being understood and agreed that the Landlord shall be
responsible, at its sole cost and expense, to pay the real estate brokerage in
connection with this lease transaction. Landlord agrees to indemnify, defend and
save harmless Tenant in connection with the claims of any other real estate
brokers claiming commissions in connection with the within transaction and
claiming authority from Landlord. Tenant agrees to indemnify, defend and save
harmless Landlord in connection with the claims of any other real estate brokers
claiming commissions in connection with the within transaction and claiming
authority from Tenant.
14. FIRE AND CASUALTY
-----------------
14.1 In case of any damage to the Building by fire or other casualty
occurring during the term or previous thereto, which renders the Leased Premises
wholly untenantable so that the same cannot be repaired within one hundred
eighty (180) days from the happening of such damage, then the term hereby
created shall, at the option of the Landlord or Tenant, terminate from the date
of such damage. If the Landlord or Tenant elects to terminate the lease, the
terminating party shall notify the other party of such election within thirty
(30) days of the happening of the fire or casualty, and in such event the Tenant
shall immediately surrender the Leased Premises and shall pay Base Rent and
Additional Rent only to the time of such damage and the Landlord may re-enter
and re-possess the Leased Premises, discharged from this lease. In the event the
Landlord can restore the Leased Premises within one hundred eighty (180) days,
it shall advise the Tenant of such fact, and the lease shall remain in full
force and effect during the period of Landlord's restoration, except that Base
Rent and Additional Rent shall abate, upon the happening of fire or
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casualty, and while the repairs and restorations are being made, but the rent
shall recommence upon restoration of the Leased Premises and delivery of the
same by the Landlord to the Tenant. Landlord agrees that it will undertake
reconstruction and restoration of the Leased Premises with due diligence and
reasonable speed and dispatch, subject to the terms and conditions of Article 26
(Force Majeure).
14.2 If the Building shall be damaged, but the damage is repairable
within one hundred eighty (180) days the Landlord agrees to repair the same with
due diligence and reasonable speed and dispatch subject to the terms and
conditions of Article 26 (Force Majeure). In such event, the rent accrued and
accruing shall not abate, except for that portion of the Leased Premises that
has been rendered untenantable and as to that portion the rent shall abate,
based on equitable adjustments.
14.3 The Tenant shall immediately notify the Landlord in case of fire
or other damage to the Leased Premises.
14.4 Notwithstanding anything contained in Article 14.1 or 14.2 above,
if such repairs are for any reason not completed within two hundred ten (210)
days, then the Tenant shall have the right to terminate this lease upon written
notice to the Landlord of such election, and in such event of termination
Landlord and Tenant shall thereupon be released of liability one to the other,
and the within lease shall be deemed null and void.
14.5 Rent, as referred to in this Article 14, is intended to include
Base Rent, Additional Rent and all other lease charges required to be paid by
Tenant pursuant to this lease.
15. COMPLIANCE WITH LAWS, RULES AND REGULATIONS
-------------------------------------------
15.1 (i) The Tenant covenants and agrees that upon acceptance and
occupancy of the Leased Premises, it will, during the lease term, promptly, at
Tenant's cost and expense, execute and comply with all statutes, ordinances,
rules, orders, regulations and requirements of the Federal, State and Municipal
governments and of any and all their instrumentalities, departments and
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bureaus, applicable to the Leased Premises, as the same may require correction,
prevention and abatement of nuisances, violations or other grievances, in, upon
or connected with the Leased Premises, and/or arising from the operations of the
Tenant therein.
(ii) The Tenant covenants and agrees, at its own cost and
expense, to comply with such regulations or requests as may be required by the
fire or liability insurance carriers providing insurance for the Leased
Premises, and will further comply with such other requirements that may be
promulgated by the Board of Fire Underwriters, in connection with the use and
occupancy by the Tenant of the Leased Premises in the conduct of its business.
(iii) The Tenant covenants and agrees that it will not commit any
nuisance, nor permit the emission of any objectionable sound, noise or odors
which would be violative of any applicable governmental rule or regulation or
would per se create a nuisance. The Tenant further covenants and agrees that it
will handle and dispose of all rubbish, garbage and waste in connection with the
Tenant's operations in the Leased Premises in accordance with reasonable
regulations established by the Landlord from time to time in order to keep the
premises in an orderly condition and in order to avoid unreasonable emission of
dirt, fumes, odors or debris which may constitute a nuisance or induce pests or
vermin.
(iv) Notwithstanding anything to the contrary contained in this
Article 15.1, Tenant shall have no obligation to alter or improve the Leased
Premises or any portion thereof to comply with any legal or insurance
requirement unless such requirement is triggered by the particular specific
manner in which Tenant uses the Leased Premises.
15.2 In case the Tenant shall fail or neglect to comply with the
aforesaid statutes, ordinances, rules, orders, regulations and requirements or
any of them, or in case the Tenant shall neglect or fail to make any necessary
repairs, then the Landlord or the Landlord's agents may after ten (10) days'
notice (except for
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emergency repairs, which may be made immediately) enter the Leased Premises and
make said repairs and comply with any and all of the said statutes, ordinances,
rules, orders, regulations or requirements, at the cost and expense of the
Tenant and in case of the Tenant's failure to pay therefor, the said cost and
expense shall be added to the next month's rent and be due and payable as such,
or the Landlord may deduct the same from the balance of any sum remaining in the
Landlord's hands. This provision is in addition to the right of the Landlord to
terminate this lease by reason of any default (beyond any applicable notice and
cure periods) on the part of the Tenant, subject to the rights of the Tenant as
herein-above mentioned in the manner as in this lease otherwise provided.
15.3 Without limiting anything hereinabove contained in this Article
15, Tenant expressly covenants and agrees to fully comply with the provisions of
the New Jersey Industrial Site Recovery Act (N.J.S.A. 13:1K-6, et seq.)
hereinafter referred to as "ISRA", and all regulations promulgated thereto (or
under its predecessor statute, the New Jersey Environmental Cleanup
Responsibility Act) prior to the expiration or earlier termination of the within
lease or at any time that any action of the Tenant triggers the applicability of
ISRA. In particular, the Tenant agrees that it shall comply with the provisions
of ISRA in the event of any "closing, terminating or transferring" of Tenant's
operations, as defined by and in accordance with the regulations which have been
promulgated pursuant to ISRA. In the event evidence of such compliance is not
delivered to the Landlord prior to surrender of the Leased Premises by the
Tenant to the Landlord, it is understood and agreed that the Tenant shall be
liable to pay to the Landlord an amount equal to two times the annual Base Rent
then in effect, prorated on a monthly basis, together with all applicable
additional rent from the date of such surrender until such time as evidence of
compliance with ISRA has been delivered to the Landlord, and together with any
costs and expenses incurred by Landlord in enforcing Tenant's obligations under
this Article 15.3.
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Evidence of compliance, as used herein, shall mean a "letter of non-
applicability" issued by the New Jersey Department of Environmental Protection,
hereinafter referred to as "NJDEP", or an approved "no further action letter" or
a "remediation action workplan" which has been fully implemented and approved by
NJDEP. Evidence of compliance shall be delivered to the Landlord, together with
copies of all submissions made to, and received from, the NJDEP, including all
environmental reports, test results and other supporting documentation. In
addition to the above, Tenant hereby agrees that it shall cooperate with
Landlord in the event of the termination or expiration of any other lease
affecting the Property, or a transfer of any portion of the property indicated
on Schedule "A", or any interest therein, which triggers the provisions of ISRA.
In such case, Tenant agrees that it shall fully cooperate with Landlord in
connection with any information or documentation which may be requested by the
NJDEP. In the event that any remediation of the Property is required in
connection with the conduct by Tenant of its business in the Leased Premises,
Tenant expressly covenants and agrees that it shall be responsible for that
portion of said remediation which is attributable to the Tenant's use and
occupancy thereof. Tenant hereby represents and warrants that its Standard
Industrial Classification No. is , and that Tenant shall not generate,
manufacture, refine, transport, treat, store, handle or dispose of "hazardous
substances" as the same are defined under ISRA and the regulations promulgated
pursuant thereto. Tenant hereby agrees that it shall promptly inform Landlord of
any change in its SIC number or the nature of the business to be conducted in
the Leased Premises. Landlord hereby represents to the best of its knowledge
without making any independent inquiry that Landlord is not aware of any
environmental condition affecting the Property including the Leased Premises.
The Landlord hereby agrees that it shall indemnify, defend and save harmless the
Tenant from and against all claims or liabilities incurred in connection with
the environmental condition
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of the Leased Premises existing prior to the Commencement Date hereunder. In no
event shall Tenant be liable for hazardous substances migrating onto or under
the Leased Premises except if such migration is caused by Tenant, its agents,
employees or contractors. The within covenants shall survive the expiration or
earlier termination of the lease term.
16. INSPECTION BY LANDLORD
----------------------
The Tenant agrees that the Landlord's agents, and other
representatives, shall have the right, during normal business hours, to enter
into and upon the Leased Premises, or any part thereof, with reasonable prior
oral notice at all reasonable hours for the purpose of examining the same, or
for exhibiting the same to prospective tenants [within the last eight (8) months
of the term of this lease or at any time during which the Tenant is in default
under the terms and conditions of this lease] and purchasers (at all times) in
the presence of a representative of Tenant (except in the event of emergency) or
making such repairs or alterations therein as may be necessary for the safety
and preservation thereof, without unduly or unreasonably disturbing the
operations of the Tenant (except in the event of emergency).
17. DEFAULT BY TENANT
-----------------
17.1 Each of the following shall be deemed a default by Tenant and a
breach of this lease:
(1) (i) filing of a petition by the Tenant for adjudication as
a bankrupt, or for reorganization, or for an arrangement under any federal
or state statute, except in a Chapter 11 Bankruptcy where the Base Rent and
Additional Rent stipulated herein is being paid and the terms of the lease
are being complied with;
(ii) dissolution or liquidation of the Tenant;
(iii) appointment of a permanent receiver or a permanent
trustee of all or substantially all of the property of the Tenant, if such
appointment shall not be vacated within sixty (60) days, provided the Base
Rent and Additional Rent stipulated herein is being paid and the terms of
the lease are being complied with, during said one hundred twenty (120) day
period;
(iv) taking possession of the property of the Tenant by a
governmental officer or agency pursuant to statutory authority for
dissolution, rehabilitation, reorganization or liquidation of the Tenant if
such taking of possession shall not be vacated within sixty (60) days,
provided the Base Rent and Additional Rent stipulated herein is being paid
and the terms of the lease are being complied with, during said one hundred
twenty (120) day period;
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(v) making by the Tenant of an assignment for the benefit of
creditors;
(vi) abandonment of the Leased Premises by the Tenant.
If any event mentioned in this subdivision (1) shall occur, Landlord
may thereupon or at any time thereafter elect to cancel this lease by ten (10)
days' notice to the Tenant and this lease shall terminate on the day in such
notice specified with the same force and effect as if that date were the date
herein fixed for the expiration of the term of the lease.
(2) (i) Default in the payment of the Base Rent or Additional
Rent herein reserved or any part thereof for a period of seven (7) days
after the same is due and payable as in this lease required.
(ii) A default in the performance of any other covenant or
condition of this lease on the part of the Tenant to be performed for a
period of thirty (30) days after notice. For purposes of this subdivision
(2) (ii) hereof, no default on the part of Tenant in performance of work
required to be performed or acts to be done or conditions to be modified
shall be deemed to exist if steps shall have been commenced by Tenant
diligently after notice to rectify the same and shall be prosecuted to
completion with reasonable diligence, and if the Landlord is indemnified
against loss or liability arising from the default.
17.2 In case of any such default under Article 17.1 (2), at any time
following the expiration of the respective grace periods above mentioned,
Landlord may serve a notice upon the Tenant electing to terminate this lease
upon a specified date not less than seven (7) days after the date of serving
such notice and this Lease shall then expire on the date so specified as if that
date had been originally fixed as the expiration date of the term herein
granted; however, a default under Article 17.1 (2) hereof shall be deemed waived
if such default is made good before the date specified for termination in the
notice of termination served on the Tenant.
17.3 In case this Lease shall be terminated as hereinbefore provided,
or by summary proceedings or otherwise, Landlord or its agents may, immediately
or any time thereafter, re-enter and resume possession of the Leased Premises or
such part thereof, and remove all persons and property therefrom, either by
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summary proceedings or by a suitable action or proceeding at law, without being
liable for any damages therefor. No re-entry by landlord shall be deemed an
acceptance of a surrender of this lease.
17.4 In case this lease shall be terminated as hereinafter provided,
or by summary proceedings or otherwise, Landlord may, in its own name and in its
own behalf, relet the whole or any portion of the Leased Premises, for any
period equal to or greater or less than the remainder of the then current term,
for any sum which it may deem reasonable, to any tenant which it may deem
suitable and satisfactory, and for any use and purpose which it may deem
appropriate, and in connection with any such lease Landlord may make such
changes in the character of the improvements on the Leased Premises as Landlord
may determine to be appropriate or helpful in effecting such lease, and Landlord
may grant concessions or free rent. Landlord agrees that it will take reasonable
steps to mitigate Tenant's damages. It is specifically understood and agreed
that Landlord, by listing the Leased Premises for lease with a recognized real
estate broker doing business in the Lawrenceville, New Jersey area, shall be
conclusively deemed to have utilized reasonable efforts to mitigate Tenant's
damages. Landlord shall not in any event be required to pay Tenant any surplus
of any sums received by Landlord on a reletting of the Leased Premises in excess
of the rent reserved in this Lease.
17.5 (1) In case this lease be terminated by summary proceedings or
otherwise, as provided in this Article 17, and whether or not the Leased
Premises be relet, Landlord shall be entitled to recover from the Tenant, the
following:
(i) a sum equal to all expenses, if any, including
reasonable counsel fees, incurred by Landlord in recovering possession of
the Leased Premises, and all reasonable costs and charges for the care of
the Leased Premises while vacant, which damages shall be due and payable by
Tenant to Landlord at such time or times as such expenses shall have been
incurred by Landlord; and
(ii) a sum equal to all damages set forth in this Article 17
and in Article 18.
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(2) Without any previous notice or demand, separate actions may be
maintained by Landlord against Tenant from time to time to recover any damages
which, at the commencement of any such action, have then or theretofore become
due and payable to the Landlord under this Article 17 and subsections hereof
without waiting until the end of the then current term.
(3) All sums which Tenant has agreed to pay by way of adjustments to
rent or equitable adjustments in utility charges shall be deemed rent reserved
in this lease within the meaning of this Article 17 and subsections hereof.
(4) Notwithstanding anything in this lease to the contrary, all
amounts payable by Tenant to or on behalf of Landlord under this lease, whether
or not expressly denominated as rent, shall constitute rent for the purposes of
section 502(b)(6) of the Bankruptcy Code, 11 U.S.C. Section 502(b)(6), or any
successor statute.
18. LIABILITY OF TENANT FOR DEFICIENCY
----------------------------------
In the event that the relation of the Landlord and Tenant may cease or
terminate by reason of the default (beyond any applicable notice and cure
periods) by the Tenant and the re-entry of the Landlord as permitted by the
terms and conditions contained in this lease or by the ejectment of the Tenant
by summary proceedings or other judicial proceedings, or after the abandonment
of the Leased Premises by the Tenant, it is hereby agreed that the Tenant shall
remain liable to pay in monthly payments the rent which shall accrue subsequent
to the re-entry by the Landlord, and the Tenant expressly agrees to pay as
damages for the breach of the covenants herein contained the difference between
the rent reserved and the rent collected and received, if any, by the Landlord,
during the remainder of the unexpired term, as the amount of such difference or
deficiency shall from time to time be ascertained.
19. NOTICES
-------
All notices required or permitted to be given to the Landlord shall be
given by certified mail, return receipt
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requested, at the address hereinbefore set forth on the first page of this
lease, and/or such other place as the Landlord may designate in writing.
All notices required or permitted to be given to the Tenant shall be
given by certified mail, return receipt requested, at the Leased Premises,
and/or such other place as the Tenant may designate in writing.
20. NON-WAIVER
----------
The failure of either party to insist upon strict performance of any
of the covenants or conditions of this lease, or to exercise any option of the
Landlord or Tenant, as the case may be herein conferred in any one or more
instances, shall not be construed as a waiver by either party of any of their
respective rights or remedies in this Lease, and shall not be construed as a
waiver, relinquishment or failure of any such covenants, conditions, or options,
but the same shall be and remain in full force and effect.
21. RIGHT TO TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS
----------------------------------------------------
21.1 The Tenant may make alterations, additions or improvements to
the Leased Premises only with the prior written consent of the Landlord, which
consent shall not be unreasonably withheld, provided such alterations,
additions or improvements do not require structural changes in the Leased
Premises, or do not lessen the value of the Leased Premises. Any consent which
Landlord may give shall be conditioned upon Tenant furnishing to Landlord,
detailed plans and specifications with respect to any such changes, to be
approved by Landlord in writing. At the time of such consent, Landlord shall
notify Tenant if Tenant shall be required to remove, at Tenant's sole cost and
expense, any such alterations or additions by no later than the expiration of
the lease term. If Landlord does not require such removal, any such alterations
or additions shall be deemed to be part of the realty upon installation and
Tenant shall not be required to remove same. Landlord and Tenant hereby agree
that they shall conduct a walk
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through inspection of the Leased Premises at least ninety (90) days prior to the
Expiration Date of this lease, at which time Landlord shall confirm which
alterations and improvements, as aforesaid, will need to be removed by the
Tenant at Tenant's sole cost and expense, and which shall remain. All such
alterations, additions or improvements shall be only in conformity with
applicable governmental and insurance company requirements and regulations
applicable to the Leased Premises. Tenant shall hold and save Landlord harmless
and indemnify Landlord against any claim for damage or injury in connection with
any of the foregoing work which Tenant may make as hereinabove provided.
21.2 Nothing herein contained shall be construed as a consent on the
part of the Landlord to subject the estate of the Landlord to liability under
the Construction Lien Law of the State of New Jersey, it being expressly
understood that the Landlord's estate shall not be subject to such liability.
22. NON-LIABILITY OF LANDLORD
-------------------------
22.1 It is expressly understood and agreed by and between the parties
to this agreement that the Tenant shall assume all risk of damage to its
property, equipment and fixtures occurring in or about the Leased Premises,
whatever the cause of such damage or casualty.
22.2 It is expressly understood and agreed that in any event, the
Landlord shall not be liable for any damage or injury to property or person
caused by or resulting from steam, electricity, gas, water, rain, ice or snow,
or any leak or flow from or into any part of said Building, or from any damage
or injury resulting or arising from any other cause or happening whatsoever
unless due to the negligence or willful misconduct of Landlord, its agents,
employees or contractors.
23. RESERVATION OF EASEMENT
-----------------------
The Landlord reserves the right, easement and privilege to enter on
the Complex and Leased Premises in order to install, at its own cost and
expense, any storm drains and sewers and/or
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<PAGE>
utility lines in connection therewith as may be required by the Landlord. It is
understood and agreed that if such work as may be required by Landlord requires
an installation which may displace any paving, lawn, seeded area or shrubs the
Landlord, shall, at its own cost and expense, restore said paving, lawn, seeded
area or shrubs. The Landlord covenants that the foregoing work shall not
unreasonably interfere with the normal operation of Tenant's business, and the
Landlord shall indemnify and save the Tenant harmless in connection with such
installations.
24. POLLUTION
---------
The Tenant expressly covenants and agrees to indemnify, defend, and
save the Landlord harmless against any claim, damage, liability, costs,
penalties, or fines which the Landlord may suffer as a result of air, water or
ground, toxic or hazardous waste pollution caused by the Tenant in its use of
the Leased Premises. The Tenant covenants and agrees to notify the Landlord
immediately of any claim or notice served upon it with respect to any such claim
the Tenant is causing water, air or ground pollution; and the Tenant, in any
event, will take immediate steps to halt, remedy or cure any pollution of air,
water or ground, toxic or hazardous waste caused by the Tenant by its use of the
Leased Premises. The within covenant on the part of the Tenant shall survive the
expiration or earlier termination of this lease.
25. STATEMENT OF ACCEPTANCE
-----------------------
Upon the delivery of the Leased Premises to the Tenant, pursuant to
the terms and conditions of this lease, the Tenant covenants and agrees that it
will furnish to the Landlord a statement that it accepts the Leased Premises and
agrees to pay rent from the date of acceptance, subject to the terms and
conditions of the lease as herein contained, which statement may be in
recordable form if required by the Landlord, and which statement shall set forth
the Commencement Date and the date of expiration of the lease term.
26
<PAGE>
26. FORCE MAJEURE
-------------
Except for the obligation of the Tenant to pay rent and other charges
as in this lease provided, the period of time during which the Landlord or
Tenant is prevented from performing any act required to be performed under this
lease by reason of fire, catastrophe, strikes, lockouts, civil commotion, acts
of God or the public enemy, government prohibitions or preemptions, embargoes,
inability to obtain material or labor by reason of governmental regulations or
prohibitions, the act or default of the other party, or other events beyond the
reasonable control of Landlord or Tenant, as the case may be, shall be added to
the time for performance of such act.
27. STATEMENTS BY LANDLORD AND TENANT
---------------------------------
Landlord and Tenant agree at any time and from time to time upon not
less than ten (10) days' prior notice from the other to execute, acknowledge and
deliver to the party requesting same, a statement in writing, certifying that
this lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications) that it is not in default (or if claimed to be in default,
stating the amount and nature of the default) and specifying the dates to which
the basic rent and other charges have been paid in advance, if any; it being
intended that any such statement delivered pursuant to this Article may be
relied upon as to the facts contained therein.
28. CONDEMNATION
------------
28.1 If due to the condemnation or taking or seizure by any authority
having the right of eminent domain, (i) more than fifteen (15%) percent of the
Leased Premises is taken or rendered untenantable, or (ii) in the event that
more than twenty-five (25%) percent of the ground allocated to the Building is
taken (including the parking areas, but exclusive of front, side and rear set
back areas), or (iii) if access to the Leased Premises be denied, which taking
in the manner hereinabove referred to and in excess of the
27
<PAGE>
foregoing percentage amounts shall unreasonably or unduly interfere with the use
of the Building, ground area, parking area, or deny access to the Leased
Premises, then and in either of such events as hereinabove provided, the lease
term created shall, at the option of the Tenant, terminate, cease and become
null and void from the date when the authority exercising the power of eminent
domain takes or interferes with the use of the Building or the Leased Premises,
its use of the ground area, parking area, or area of access to the Leased
Premises. The Tenant shall only be responsible for the payment of rent until the
time of surrender. In any event, no part of the Landlord's condemnation award
shall belong to or be claimed by the Tenant. Without diminishing Landlord's
award, the Tenant shall have the right to make a claim against the condemning
authority for such independent claim which it may have and as may be allowed by
law, for costs and damages due to relocating, moving and other similar costs and
charges directly incurred by the Tenant and resulting from such condemnation.
28.2 In the event of any partial taking which would not be cause for
termination of the within lease or in the event of any partial taking in excess
of the percentages provided in Article 28.1, and in which event the Tenant shall
elect to retain the balance of the Leased Premises remaining after such taking,
then and in either event, the rent shall abate in an amount mutually to be
agreed upon between the Landlord and Tenant based on the relationship that the
character of the property prior to the taking bears to the property which shall
remain after such condemnation. In any event, no part of the Landlord's
condemnation award shall belong to or be claimed by the Tenant. However, the
Landlord shall, to the extent permitted by applicable law and as the same may be
practicable on the site of the Leased Premises, at the Landlord's sole cost and
expense, promptly make such repairs and alterations in order to restore the
Building and/or improvements to usable condition to the extent of the
condemnation award.
28
<PAGE>
29. LANDLORD'S REMEDIES
-------------------
29.1 The rights and remedies given to the Landlord in this lease are
distinct, separate and cumulative remedies, and no one of them, whether or not
exercised by the Landlord, shall be deemed to be in exclusion of any of the
others.
29.2 In addition to any other legal remedies for violation or breach
by or on the part of the Tenant or by any undertenant or by anyone holding or
claiming under the Tenant or any one of them, of the restrictions, agreements or
covenants of this lease on the part of the Tenant to be performed or fulfilled,
such violation or breach shall be restrainable by injunction at the suit of the
Landlord.
29.3 No receipt of money by the Landlord from any receiver, trustee
or custodian or debtors in possession shall reinstate, continue or extend the
term of this lease or affect any notice theretofore given to the Tenant, or to
any such receiver, trustee, custodian or debtor in possession, or operate as a
waiver or estoppel of the right of the Landlord to recover possession of the
Leased Premises for any of the causes therein enumerated by any lawful remedy;
and the failure of the Landlord to enforce any covenant or condition by reason
of its breach by the Tenant shall not be deemed to void or affect the right of
the Landlord to enforce the same covenant or condition on the occasion of any
subsequent default or breach.
29.4 Tenant agrees that it shall reimburse Landlord for Landlord's
reasonable attorney's fees incurred in enforcing the terms and conditions of
this lease on the part of the Tenant to be performed. Tenant further agrees to
reimburse Landlord for Landlord's attorney's fees incurred in connection with
the review ??y Landlord of any Landlord's waiver, assignment or sublet agreement
or any other documentation reviewed by Landlord at tenant's request (which in
the aggregate shall not exceed $2,500.00).
29
<PAGE>
30. QUIET ENJOYMENT
---------------
The Landlord further covenants that the Tenant, on paying the rental
and performing the covenants and conditions contained in this Lease, shall and
may peaceably and quietly have, hold and enjoy the Leased Premises for the term
aforesaid.
31. SURRENDER OF PREMISES
---------------------
On the last day, or earlier permitted termination of the lease term,
Tenant shall quit and surrender the Leased Premises in good and orderly
condition and repair as of the Commencement Date (reasonable wear and tear, and
damage by fire or other casualty excepted) and shall deliver and surrender the
Leased Premises to the Landlord peaceably, together with all alterations,
additions and improvements in, to or on the Leased Premises made by Tenant as
permitted under the lease. The Landlord reserves the right, however, to require
the Tenant at its cost and expense to remove any alterations or improvements
installed by the Tenant, which covenant shall survive the surrender and the
delivery of the Leased Premises as provided hereunder. Prior to the expiration
of the lease term the Tenant shall remove all of its property, fixtures,
equipment and trade fixtures from the Leased Premises. All property not removed
by Tenant shall be deemed abandoned by Tenant, and Landlord reserves the right
to charge the reasonable cost of such removal to the Tenant, which obligation
shall survive the lease termination and surrender hereinabove provided. If the
Leased Premises be not surrendered at the end of the lease term, Tenant shall
indemnify Landlord against loss or liability resulting from delay by Tenant in
surrendering the Leased Premises, including, without limitation any claims made
by any succeeding tenant founded on the delay.
32. INDEMNITY
---------
Anything in this Lease to the contrary notwithstanding, and without
limiting the Tenant's obligation to provide insurance pursuant to Article 10
hereunder but subject to the provisions of Article 10.3, the Tenant covenants
and agrees that it will
30
<PAGE>
indemnify, defend and save harmless the Landlord against and from all
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including without limitation reasonable attorneys' fees, which may be
imposed upon or incurred by Landlord by reason of any of the following occurring
during the term of this lease:
(i) Any matter, cause or thing arising out of Tenant's use,
occupancy, control or management of the Leased Premises and any part
thereof;
(ii) Any negligence on the part of the Tenant or any of its agents,
contractors, servants, employees, licensees or invitees;
(iii) Any accident, injury, damage to any person or property occurring
in, or about the Leased Premises;
(iv) Any failure on the part of Tenant to perform or comply with any
of the covenants, agreements, terms or conditions contained in this lease
on its part to be performed or complied with;
(v) Subject to the exceptions set forth in Article 22.1 hereof, the
foregoing shall not require indemnity by Tenant in the event of damage or injury
occasioned by the negligence or acts or omissions of the Landlord, its agents,
servants or employees.
Landlord shall promptly notify Tenant of any such claim asserted against it and
shall promptly send to Tenant copies of all papers or legal process served upon
it in connection with any action or proceeding brought against Landlord by
reason of any such claim.
33. LEASE CONSTRUCTION
------------------
This Lease shall be construed pursuant to the laws of the State of New
Jersey.
34. BIND AND INURE CLAUSE
---------------------
The terms, covenants and conditions of the within lease shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
35. DEFINITIONS
-----------
The neuter gender, when used herein and in the acknowledgment
hereafter set forth, shall include all persons and corporations, and words used
in the singular shall include words in the plural where the text of the
instrument so requires.
31
<PAGE>
36. DEFINITION OF TERM OF "LANDLORD"
--------------------------------
When the term "Landlord" is used in this lease it shall be construed
to mean and include only the owner of the title to the Building containing the
Leased Premises. Upon the transfer by the Landlord of the title, the Landlord
shall advise the Tenant in writing by certified mail, return receipt requested,
of the name of the Landlord's transferee. In such event, the Landlord shall be
automatically freed and relieved from and after the date of such transfer of
title of all personal liability with respect to the performance of any of the
covenants and obligations on the part of the Landlord herein contained to be
performed, provided any such transfer and conveyance by the Landlord is
expressly subject to the assumption by the grantee or transferee of the
obligations of the Landlord to be performed pursuant to the terms and conditions
of the within lease.
37. COVENANTS OF FURTHER ASSURANCES
-------------------------------
If, in connection with obtaining financing for the improvements on the
Complex, the Mortgage Lender shall request reasonable modifications in this
lease as a condition to such financing, Tenant will not unreasonably withhold,
delay or refuse its consent thereto, provided that such modifications do not in
Tenant's reasonable judgment increase the obligations of Tenant hereunder,
decrease Tenant's rights hereunder or adversely affect the leasehold interest
hereby created or Tenant's use and enjoyment of the Leased Premises.
38. COVENANT AGAINST LIENS
----------------------
Tenant agrees that it shall not encumber, or suffer or permit to be
encumbered, the Leased Premises or the fee thereof by any lien, charge or
encumbrance, and Tenant shall have no authority to mortgage or hypothecate this
lease in any way whatsoever. Any violation of this Article shall be considered a
breach of this lease.
32
<PAGE>
39. SUBORDINATION
-------------
This lease shall be subject and subordinate at all times to the lien
of any mortgages or ground leases or other encumbrances now or hereafter placed
on the land Complex without the necessity of any further instrument or act on
the part of Tenant to effectuate such subordination, but Tenant covenants and
agrees to execute and deliver upon demand such further instrument or instruments
evidencing such subordination of the lease to the lien of any such mortgage or
ground lease or other encumbrances as shall be desired by a mortgagee or
proposed mortgagee or by any person. Tenant appoints Landlord the attorney-in-
fact of the Tenant irrevocably, to execute and deliver any such instrument or
instruments for and in the name of Tenant. Notwithstanding the foregoing,
Landlord hereby agrees to obtain a Non-Disturbance and Attornment Agreement for
the benefit of the Tenant from any future mortgagee, if any, of Landlord to be
written upon such mortgagee's customary form.
40. EXCULPATION OF LANDLORD
-----------------------
Neither Landlord nor its principals shall have any personal obligation
for payment of any indebtedness or for the performance of any obligation under
this lease but the payment of the indebtedness and the performance of
obligations expressed herein may be enforced only against Landlord's interest in
the Complex, and the rents, issues and profits thereof, and the Tenant agrees
that no deficiency judgment or other judgment for money damages shall in any
event be entered by it against the Landlord or its principals personally in any
action; provided, however, that the provisions of this paragraph shall in no way
affect Tenant's other remedies for the payment of any indebtedness or for the
enforcement of Landlord's covenants under this lease.
41. NET RENT
--------
Intentionally Omitted.
33
<PAGE>
42. SECURITY
--------
Upon execution of this lease, the Tenant shall deposit with the
Landlord the sum of TEN THOUSAND TWO HUNDRED EIGHT AND 34/100 ($10,208.34)
DOLLARS as security for the full and faithful performance of this lease upon the
part of the Tenant to be performed. Upon termination of this lease, and
providing the Tenant is not in default hereunder and has performed all of the
conditions of this lease, the Landlord shall return the said sum of TEN THOUSAND
TWO HUNDRED EIGHT AND 34/100 ($10,208.34) DOLLARS to the Tenant. Anything herein
contained to the contrary notwithstanding, it is expressly understood and agreed
that the said security deposit shall not bear interest. Tenant covenants and
agrees that it will not assign, pledge, hypothecate, mortgage or otherwise
encumber the aforementioned security during the term of this lease. It is
expressly understood and agreed that the Landlord shall have the right to co-
mingle the security funds with its general funds and said security shall not be
required to be segregated.
43. ASSIGNMENT AND SUBLETTING
-------------------------
43.1 Tenant shall neither assign this lease nor sublet all or any
portion of the Leased Premises without Landlord's prior consent, which consent
shall not be unreasonably withheld, subject to Landlord's rights hereinafter
provided in Article 43.4. Landlord may withhold such consent if, in the
reasonable exercise of its judgment, it determines that any of the following
enumerated conditions are applicable:
(a) the proposed assignee's or subtenant's financial condition
is not sufficient to meet its obligations undertaken in such assignment or
sublease;
(b) the proposed use of the Leased Premises is not appropriate
for the Complex and in keeping with the character of its existing tenancies;
34
<PAGE>
(c) such assignee's or subtenant's occupancy will cause an excessive
density of traffic or make excessive demands on the Building's services,
maintenance or facilities;
(d) such assignee or subtenant is a tenant of and is vacating
premises in the Building, the Complex or any other building owned by or through
the persons constituting Landlord hereunder, including any corporation in which
Landlord's principals are majority stockholders, and any affiliates,
subsidiaries or parent of such corporation;
(e) the rental obligation of such assignee or subtenant would be less
than Tenant's rental obligations hereunder; or
(g) Landlord wishes to accept the offer as provided in Article 43.4.
43.2 Any request by Tenant for Landlord's consent to an assignment of
the lease shall state the proposed assignee's address and be accompanied by a
profit and loss and balance statements of the proposed assignee for the prior
three (3) years, as well as duplicate original of the instrument of assignment
(wherein the assignee assumes, jointly and severally with Tenant, the
performance of Tenant's obligations hereunder).
43.3 Any request by Tenant for Landlord's consent to a sublease shall
state the proposed subtenant's address and be accompanied by profit and loss and
balance statements of the proposed subtenant for the prior three (3) years, as
well as a duplicate original of the instrument of sublease (wherein Tenant and
the proposed subtenant agree that such sublease is subject to the lease and such
subtenant agrees that, if the lease is terminated because of Tenant's default,
such subtenant shall, at Landlord's option, attorn to Landlord).
43.4 Any request by Tenant for Landlord's consent to an assignment of
the lease or a sublease of all or substantially all of the Leased Premises shall
clearly set forth the proposed terms of such proposed assignment or sublease and
shall constitute
35
<PAGE>
Tenant's offer to cancel the lease. Landlord may accept such offer by notice to
Tenant within ninety (90) days after Landlord's receipt thereof, in which event,
the lease shall terminate as of the end of the month following the month in
which such notice is sent (with the same effect as if such date were the date
fixed herein for the natural expiration of the term), Base Rent and Additional
Rent shall be apportioned to such date, Tenant shall surrender the Leased
Premises on such date as herein provided, and subject to payment of required
lease adjustments, the parties shall thereafter have no further liability one to
the other. If Landlord fails to send such notice, Tenant, within twenty (20)
days after the expiration of such ninety (90) day period, may assign the lease
or sublet all or substantially all of the Leased Premises to the proposed
assignee or subtenant and upon the terms specified in such request, subject,
however, to Landlord's rights under Article 43.1(a) through (f).
43.5 In the event of a permitted assignment, Landlord may collect
Base Rent and Additional Rent directly from the assignee. In the event of a
permitted sublease, Landlord may, if Tenant defaults hereunder, collect Base
Rent and Additional Rent directly from the subtenant. In either such event,
Landlord may apply any amounts so collected to the Base Rent and Additional Rent
hereunder without thereby waiving any provisions hereof or releasing Tenant from
liability for the performance of its obligations hereunder. In any event, Tenant
shall pay to Landlord, as Additional Rent, amounts received by Tenant from any
assignee or subtenant, in excess of the pro rata (per square foot) Base Rent and
Additional Rent payable by Tenant hereunder. All reasonable expenses incurred by
Tenant in connection with the sublease or assignment (including, without
limitation, reasonable attorney's fees and brokerage commissions) shall be
deducted from the amounts received by Tenant from the assignee or subtenant in
determining the extent by which such amounts exceed the Base Rent.
36
<PAGE>
43.6 Landlord's consent to any assignment or sublease hereunder
shall not be deemed a consent to any further proposed assignment or sublease by
Tenant or any one claiming under or through the Tenant, except in accordance
with this Article 43.
43.7 It is expressly understood and agreed that Tenant's Option
to Renew, as hereinafter set forth in Article 44, shall be personal to Tenant
only, and may not be exercised by any permitted assignee or subtenant hereunder
except in the event of an assignment or sublet permitted pursuant to Article
44.8 hereof.. It is understood and agreed that Tenant's Option to Renew shall be
null and void in the event that fifty (50%) percent or more of the Leased
Premises have been sublet by the Tenant prior to the date set for the exercise
by Tenant of the Option to Renew hereinafter set forth.
43.8 Landlord's consent shall not be required and the terms and
conditions of Article 43.1 shall not apply as to Landlord's right of first
refusal to recapture if the Tenant assigns this lease or subleases the Leased
Premises to a parent, subsidiary, affiliate or company into which Tenant is
merged, upon which Tenant is consolidated or to the purchaser of all or
substantially all of the assets of Tenant.
44. OPTION TO RENEW
---------------
Provided the Tenant is not in default pursuant to the terms and
conditions of this lease, the Tenant is hereby given the right and privilege to
renew the within lease, for one (1) three (3) year renewal period, to commence
at the end of the initial term of this lease, which renewal shall be upon the
same terms and conditions as in this lease contained, except as follows:
(1) During the three (3) year renewal period, Tenant shall pay
Base Rent in the amount of SEVENTY THREE THOUSAND FIVE HUNDRED AND 00/100
($73,500.00) DOLLARS per annum, in equal installments in the sum of SIX THOUSAND
ONE HUNDRED TWENTY FIVE AND 00/100 ($6,125.00) DOLLARS per month, in the same
manner as required by Article 3 hereof.
37
<PAGE>
(2) The right, option, and privilege of the Tenant to renew this
lease as hereinabove set forth is expressly conditioned upon the Tenant
delivering to the Landlord, in writing, by certified mail, return receipt
requested, eight (8) months' prior notice of its intention to renew, which
notice shall be given to the Landlord by the Tenant no later than eight (8)
months prior to the date fixed for termination of the original term of this
lease.
(3) The obligation to pay the Fixed Rent as hereinabove provided
shall be in addition to the obligation to pay all Additional Rent and other
charges required by the terms and conditions of this lease.
45. SECURITY MEASURES
-----------------
Tenant acknowledges that the rent payable to Landlord does not include
the cost of guard services or other security measures and Landlord has no
obligation to provide such services or measures. Tenant assumes all
responsibility for security of Tenant, its employees, agents, contractors,
subcontractors, licenses, concessionaires and invitees, and the property owned
by all of such parties.
46. FINANCIAL STATEMENTS
--------------------
The Tenant agrees, at the request of the Landlord, to be made not more
than once during any lease year, to furnish its latest current income and
balance statements, certified to by an officer of the corporation. The Landlord
shall keep all such statements strictly confidential except that Landlord shall
be permitted to disclose such statements to its lenders, prospective purchasers
and its professional advisors including but not limited to the Landlord's
accountants and attorneys.
47. TENANCY REVIEW
--------------
The within lease is conditioned upon and subject to the approval of
the Tenant's use and occupancy of the Leased Premises by the Township of
Lawrenceville. In the event said approval is not obtained, the within lease
shall be deemed to be null and void.
38
<PAGE>
48. EXECUTION AND DELIVERY
----------------------
The submission of the within lease by Landlord to Tenant for review
and approval shall not be deemed an option to lease, an offer to lease, or a
reservation of the Leased Premises in favor of Tenant, it being intended that no
rights or obligations shall be created by Landlord or Tenant until the execution
and delivery of the within lease by Landlord and Tenant, one to the other.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals or
caused these presents to be signed by its proper corporate officers and caused
its proper corporate seal to be hereunto affixed, the day and year first above
written.
WITNESS: FIRST INDUSTRIAL, L.P.
By: FIRST INDUSTRIAL REALTY TRUST, INC.
_______________________ By: _____________________________
Hayden Tiger,
Regional Director
ATTEST: 2BRIDGE SOFTWARE, INC.
_______________________ BY: _____________________________
(Affix Corporate Seal here)
39
<PAGE>
SCHEDULE A
[CHART OMITTED]
<PAGE>
STATE OF NEW JERSEY )
)SS.:
COUNTY OF CSSE4 )
BE IT REMEMBERED, that on this 7th day of December, 1999, before me, the
subscriber, MARY ANN E. RUSSELL personally appeared HAYDEN TIGER, who, I am
satisfied, is the person who signed the within Instrument as Regional Director,
of FIRST INDUSTRIAL REALTY TRUST, INC., a Delaware corporation, a General
Partner of FIRST INDUSTRIAL, L.P., the Landlord named therein, and he thereupon
acknowledged that the said instrument made by the corporation and sealed with
its corporate seal, was signed and sealed with the corporate seal and delivered
by him as such officer, and is the voluntary act and deed of the corporation,
made by virtue of authority from its Board of Directors.
__________________________________
MARY ANN E. RUSSELL
Notary Public State of New Jersey
My Commission Expires July 20, 2003
STATE OF California )
)SS.
COUNTY OF San Francisco )
BE IT REMEMBERED, that on this 2 day of December, 1999, before me, the
subscriber, Geraldine L. Farrell, Notary Public personally appeared Ronald Parks
who, I am satisfied, is the person who signed the within Instrument as SVP,
Chief Fin Off of 2BRIDGE SOFTWARE, INC., a California corporation, the Tenant
named therein, and he thereupon acknowledged that the said instrument made by
the corporation and sealed with its corporate seal, was signed, sealed with the
corporate seal and delivered by him as such officer and is the voluntary act and
deed of the corporation, made by virtue of authority from its Board of
Directors.
__________________________________
GERALDINE L. FARRELL
Commission # 1206239
Notary Public - California
San Francisco County
My Comm. Expires Jan 24, 2003
<PAGE>
LEASE AGREEMENT
---------------
BY AND BETWEEN
FIRST INDUSTRIAL, L.P.,
a Delaware limited partnership,
"Landlord"
-and-
2BRIDGE SOFTWARE, INC.
a California corporation,
"Tenant"
-----------------------------------
DATED: Dec. 7, 1999
-----------------------------------
LAW OFFICES
EPSTEIN, BROWN, MARKOWITZ & GIOIA
A Professional Corporation
245 Green Village Road
P.O. Box 901
Chatham Township, NJ 07928-0901
(973) 593-4900
Fax (973) 593-4966
<PAGE>
EXHIBIT 10.9
AGREEMENT OF LEASE
between
FIRST PAC LIMITED, Landlord
and
AGORA DIGITAL CORPORATION, Tenant
Dated: December 4, 1997
PREMISES:
Portion of the Twenty-Second (22nd) Floor
Broad Financial Center
33 Whitehall Street
New York, New York 10004-2116
OFFICE LEASE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article 1 Rent 1
Article 2 Commencement of Term 3
Article 3 Adjustments of Rent 7
Article 4 Electricity 14
Article 5 Use 16
Article 6 Alterations and Installations 17
Article 7 Repairs 21
Article 8 Requirements of Law 23
Article 9 Insurance, Loss, Reimbursement, Liability 24
Article 10 Damage by Fire or Other Cause 28
Article 11 Assignment, Mortgaging, Subletting, Etc. 29
Article 12 Certificate of Occupancy 36
Article 13 Adjacent excavation - Shoring 36
Article 14 Condemnation 36
Article 15 Access to Demised Premises; Changes 38
Article 16 Conditions of Limitation 39
Article 17 Re-Entry by Landlord, Injunction 41
Article 18 Damages 42
Article 19 Landlord's Right to Perform Tenant's Obligations 43
Article 20 Quiet Enjoyment 44
Article 21 Services and Equipment 44
Article 22 Definitions 46
Article 23 Invalidity of Any Provision 47
Article 24 Brokerage 47
Article 25 Subordination 47
Article 26 Certificate of Tenant 49
Article 27 Legal proceedings, Waiver of Jury Trial 50
Article 28 Surrender of Premises 50
Article 29 Rules and Regulations 51
Article 30 Consents and Approvals 51
Article 31 Notices 51
Article 32 No Waiver 52
Article 33 Captions 53
Article 34 Inability to Perform 53
Article 35 No Representations by Landlord 53
Article 36 Name of Building 54
Article 37 Arbitration 54
Article 38 Indemnity 54
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Article 39 Approval of Mortgagee 55
Article 40 Security Deposit 55
Article 41 Miscellaneous 57
</TABLE>
SCHEDULES
A Floor Plan
B Description of Land
C HVAC Specifications
D Form of Estoppel Letter
E Rules and Regulations
F Cleaning Specifications
G Landlord's Work
ii
<PAGE>
AGREEMENT OF LEASE made as of this 4th day of December, 1997, between
FIRST PAC LIMITED, a Delaware corporation having an address c/o The Bank of Nova
Scotia, One Liberty Plaza, New York, New York 10006 Attention: Tenant Services
(hereinafter referred to as "Landlord") and AGORA DIGITAL CORPORATION, a
California corporation having an address at 221 Main Street, San Francisco,
California 94105 (hereinafter referred to as "Tenant").
WITNESSETH:
The parties hereby covenant and agree as follows:
ARTICLE 1
RENT
1.01. (a) Landlord hereby leases and Tenant hereby rents from Landlord
a portion of the twenty-second (22nd) floor, approximately as shown hatched on
the plan annexed hereto as Schedule A (hereinafter referred to as the "demised
premises") in the building (hereinafter referred to as the "Building") located
on the land (hereinafter referred to as the "Land") described in Schedule B
annexed hereto (the Land and the Building being hereinafter referred to as the
"Property"), for a term (hereinafter referred to as the "Term") of approximately
three (3) years commencing on the "Commencement Date" and ending on the
"Expiration Date" (as said terms are defined in Article 2 hereof) unless the
Term shall sooner cease and terminate as hereinafter provided. It is expressly
understood and agreed that the Building has no floor which is denominated as the
13th floor.
(b) Tenant agrees to pay to Landlord a fixed annual rent
(hereinafter referred to as the "fixed annual rent") at the annual rate of ONE
HUNDRED FOUR THOUSAND ONE HUNDRED FIFTEEN AND 00/100 ($104,115.00) DOLLARS per
annum, in equal monthly installments of Eight Thousand Six Hundred Seventy-Six
and 25/100 ($8,676.25) Dollars, each in advance on the first day of each
calendar month during the Term, at the office of Landlord or such other place as
Landlord may designate, without any setoff or deduction whatsoever, except such
deductions as are specifically referred to in Articles 10 and 14 hereof. The
first full month's installment of fixed annual rent and the Security Deposit
(described in Article 40 hereof) shall be paid by Tenant to Landlord upon the
execution of this Lease. Should the Commencement Date fall on any day other than
the first day of a month, then the fixed annual rent for such month shall be
prorated on a per diem basis, and Tenant agrees to pay the amount thereof for
such partial month on the Commencement Date.
1.02. Tenant shall pay the fixed annual rent and all additional rent
payable hereunder in lawful money of the United States by check (subject to
collection) drawn to the order of First Pac Limited, or such other party as
Landlord may from time to time designate, on a
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bank which is a member of The New York Clearinghouse Association or a successor
thereto. All sums, other than fixed annual rent, payable by Tenant hereunder
shall be deemed additional rent and shall be payable on demand unless other
payment dates are hereinafter provided. Landlord shall have the same rights and
remedies (including, without limitation, the right to commence a summary
proceeding) for a default in the payment of additional rent as for a default in
the payment of fixed annual rent notwithstanding the fact that Tenant may not
then also be in default in the payment of fixed annual rent.
1.03. (a) If Tenant shall fail to pay when due (i) any installment of
fixed annual rent or (ii) any additional rent and any such failure shall
continue for five (5) days, then Tenant shall pay Landlord, as additional rent,
a late charge equal to two (2%) percent of such installment or payment as an
agreed liquidated amount as compensation for Landlord's additional
administrative expenses relating to such late payment. The provisions of this
subsection 1.03(a) shall not apply to the first failure by Tenant to pay any
such overdue rental item during any 12-month period occurring during the term of
this Lease provided Tenant shall cure such failure within five (5) Business Days
after notice thereof from Landlord.
(b) If Tenant shall fail to pay when due (i) any installment of
fixed annual rent or (ii) any additional rent when due and such failure shall
continue beyond the five (5) day period specified in paragraph (a) above, Tenant
shall pay in addition to the late charge provided in paragraph (a) above,
interest on such amounts at the Interest Rate (as such term is defined in
Article 22 hereof), from the last day of such five-day period to the date the
same is paid to Landlord, and such interest shall be deemed additional rent.
(c) The provisions of this Section 1.03 are in addition to other
remedies available to Landlord for non-payment of fixed annual rent or
additional rent.
1.04. If any of the fixed annual rent or additional rent payable under
this Lease shall be or become uncollectible, reduced or required to be refunded
because of any Legal Requirement (as such term is defined in Article 22 hereof),
Tenant shall enter into such agreement(s) and take such other legally
permissible steps as Landlord may reasonably request to permit Landlord to
collect the maximum rents which from time to time during the continuance of such
Legal Requirement may be legally permissible and not in excess of the amounts
reserved therefor under this Lease. Upon the termination of such Legal
Requirement, (a) the rents hereunder shall be payable in the amounts reserved
herein for the periods following such termination and (b) Tenant shall pay to
Landlord, to the maximum extent legally permissible, an amount equal to (i) the
rents which would have been paid pursuant to this Lease but for such Legal
Requirement less (ii) the rents, if any, paid by Tenant during the period such
Legal Requirement was in effect.
1.05. Provided that Tenant is not then in default of any of the terms,
provisions or conditions of this Lease, the fixed annual rent payable by Tenant
pursuant to Section 1.01(b) hereof shall be abated during the thirty (30) day
period commencing on the Commencement Date and ending on the date which shall be
the twenty-ninth (29th) day immediately following
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the Commencement Date, both dates inclusive. The day which immediately follows
the expiration of the foregoing abatement period shall hereinafter be referred
to as the "Rent Commencement Date".
ARTICLE 2
COMMENCEMENT OF TERM
2.01. (a) The "Commencement Date" of the Term shall be the earlier of
(i) the date on which Landlord's Work is or is deemed to be substantially
completed (as hereinafter provided), or (ii) the date Tenant or anyone claiming
under or through Tenant first occupies the demised premises for the conduct of
its business.
(b) The "Expiration Date" of the Term shall be the last day of
the month in which occurs the third (3rd) anniversary of the Commencement Date.
2.02. (a) Tenant has examined the demised premises and agrees to
accept same on the Commencement Date in the condition in which it exists on the
date hereof, subject to the performance of Landlord's Work (as such term is
hereinafter defined), and understands and agrees that no work is to be performed
or materials to be supplied by Landlord in connection with preparing the demised
premises for Tenant's occupancy, except that Landlord shall, through contractors
engaged by Landlord at a cost to Landlord which shall not exceed $31,550.00
(hereinafter called the "Work Credit"), make and complete "Landlord's Work" (as
such term is hereinafter defined) in accordance with the final architectural,
mechanical, electrical and engineering drawings (collectively, the "Final
Plans") to be prepared by an architect selected by Landlord based on the
preliminary plans annexed hereto as Schedule G, so that the Final Plans will
encompass working construction drawings which reflect the scope and quantity of
work set forth in such preliminary plans. Tenant agrees to cooperate with
Landlord in the preparation of the Final Plans and shall promptly meet with
Landlord, if so requested by Landlord, and to timely respond to Landlord's
request for information necessary in order to prepare such Final Plans. In
connection with the performance of Landlord's Work, Landlord shall deliver to
Tenant a copy of an ACP-5 Certificate with respect to the demised premises.
To the extent that the cost of Landlord's Work (including, without
limitation, the cost of preparing and filing the Final Plans and obtaining all
necessary governmental permits and approvals in connection therewith) shall
exceed the amount of the Work Credit, Tenant shall be entirely responsible for
such excess (the "Excess Amount"). As a condition to the performance of, and
prior to the commencement of, Landlord's Work, Tenant shall pay to Landlord, as
additional rent hereunder, within three (3) Business Days after demand therefor,
the Excess Amount (subject to adjustment as hereinafter provided). To the extent
that any item of Landlord's cost cannot be precisely ascertained prior to the
commencement of Landlord's Work, Landlord shall be permitted to reasonably
estimate the same and at such times during or after the performance of
Landlord's Work as such costs may be determined precisely, the Excess Amount
shall be adjusted accordingly. If, after the actual costs of Landlord's Work
have been
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ascertained, there has been an underpayment by Tenant of the Excess Amount,
Tenant shall pay the amount of such underpayment to Landlord within three (3)
Business Days after demand therefor, and if there has been an overpayment
thereof, Landlord agrees to refund such amount to Tenant promptly after such
costs have been ascertained. If Tenant fails to timely pay any such underpayment
to Landlord within the foregoing time period, any delays in the performance of
Landlord's Work ensuing thereafter shall be attributable to Tenant as provided
in subsection 2.07(b). Landlord agrees that the following costs associated with
Landlord's Work shall be borne solely by Landlord: (i) costs incurred to remove
any asbestos or asbestos-containing materials from the demised premises or the
surrounding area; (ii) restoration costs in excess of insurance proceeds as a
consequence of casualties; (iii) off-site management or other general overhead
costs incurred by Landlord; and (iv) construction management, profit and
overhead charges in excess of five (5%) percent of the total cost of Landlord's
Work.
To the extent that the Final Plans do not specify any construction items,
materials or finishes in connection with the performance of Landlord's Work,
Landlord shall use such items, materials and finishes previously adopted by
Landlord in its sole discretion as standard for the Building.
(b) The Final Plans shall be submitted by Landlord's Construction Manager
to Tenant for Tenant's approval, which approval shall not be unreasonably
withheld or delayed. In the event that Tenant shall fail to approve the Final
Plans (or shall fail to respond to Landlord's request for approval of same)
within five (5) Business Days after the date of the submission thereof, the
Final Plans shall be deemed disapproved and all delays thereafter ensuing until
Tenant shall approve said Final Plans shall be attributable to Tenant as
hereinafter provided in Section 2.07(b) hereof. If Tenant shall respond to
Landlord's request for approval of the Final Plans within the foregoing 5-
Business Day period but shall request changes thereto, any delays ensuing from
such request for changes until the Final Plans shall be approved by Tenant shall
be attributable to Tenant as set forth in Section 2.07(b) hereof.
It is understood and agreed that Landlord may refuse to make any revisions
to the Final Plans requested by Tenant to the extent that the same would require
(i) materials, designs, capacities, finishes and colors other than of the
standard adopted by Landlord for the Building or commonly utilized by Landlord
for tenant installations in the Building (all of the foregoing are hereinafter
referred to as "Building Standard"), (ii) work or materials which do not comply
with all laws, rules and regulations of all public authorities having
jurisdiction in the Building with respect to Landlord's Work, (iii) the
performance of "Special Work" (as hereinafter defined), or (iv) work or
materials which shall adversely affect the ability of the building systems to
function properly. In the event that Landlord refuse requested changes to the
Final Plans solely for the reason set forth in clause (i) or (iii) of this
Section 2.02(b), Tenant shall have the right to override such action by Landlord
provided that Tenant shall assume, by written notice to Landlord, responsibility
for all delays of Landlord's Work resulting therefrom, and any such delays shall
be deemed to have resulted from an act of Tenant within the meaning of Section
2.07(b) of this Lease.
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It is further agreed that if Landlord shall be delayed in substantially
completing Landlord's Work as a result of: (i) Tenant's changes in the Final
Plans, (ii) any request by Tenant that Landlord delay the completion of any
Landlord's Work, (iii) any negligent or wrongful act of Tenant or its officers,
agents, servants or contractors, (iv) the inclusion in the Final Plans of
"Special Work" (as such term is hereinafter defined), or (v) any other act or
omission of Tenant, then any such delay shall be deemed to have resulted from
the act or omission of Tenant within the meaning of Section 2.07(b) of this
Lease.
(c) After Tenant has approved the Final Plans in accordance with subsection
2.02(b) above, Landlord or Landlord's Construction Manager shall promptly seek
at least three (3) bids for Landlord's Work for such trades where three (3) such
contractors are practicably available for bidding, from such contractors as
Landlord's Contractor shall select, except that Landlord shall not be obligated
to obtain bids for the following subtrades: life safety, sprinklering, and fire
detection systems and any work in a subtrade for which the aggregate cost is
less than $5,000. Landlord shall have no liability if any of the contractors
shall fail to timely submit a bid. Landlord's Contractor may select such bidder
that it believes will do the best job in the most timely manner. After Landlord
shall have completed the foregoing bidding process, Landlord shall submit to
Tenant for Tenant's review a statement of Landlord's Construction Manager
setting forth the projected cost of Landlord's Work for Tenant's approval, not
to be unreasonably withheld (herein called the "Construction Bid"). If Tenant
shall fail to approve the Construction Bid within five (5) Business Days after
submission thereof, the same shall be deemed disapproved by Tenant and all
delays thereafter ensuing until Tenant shall approve any such costs shall be
attributable to Tenant as hereinafter provided in subsection 2.07(b) hereof.
In the event of disapproval, Landlord shall not be restricted from
continuing the approved portion of Landlord's Work to the extent such approved
portions are, under good construction practices, capable of being installed
prior to the installation of such disapproved portions of Landlord's Work; and
if such approved portions of Landlord's Work are thereafter removed and
replaced, the cost of such removal and replacement shall be deemed part of
Landlord's Work and paid for by Tenant to Landlord as provided in subsection
2.04 hereof.
2.03. Landlord shall make and complete in and to the demised premises
the work and installations (herein called "Landlord's Work") specified in the
Final Plans using contractors therefor selected by Landlord in its discretion.
Landlord shall permit a representative of Tenant to inspect the progress of the
performance of Landlord's Work at intervals appropriate to the state of
construction, to familiarize Tenant with the progress of Landlord's Work.
Landlord or Landlord's contractor shall prepare and file all required
architectural, mechanical and electrical drawings and obtain all necessary
permits.
2.04. [Intentionally omitted]
2.05. As used in this Article 2, the term "Special Work" shall mean (i)
work that is unusually complex, or (ii) work which requires the performance of
work, labor or services or the application of skills not generally utilized in
the performance of tenant improvement work
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for normal office occupancy in comparable office buildings in New York City, or
(iii) work which requires labor or materials which are not readily available in
the New York City metropolitan area or (iv) work which takes longer to perform
or complete than Building Standard work.
2.06. Landlord shall, in accordance with the provisions of this Article
2, fix the Commencement Date and shall notify Tenant of the date so fixed. When
the Commencement Date has so been determined, the parties shall, within ten (10)
days thereafter, at either party's request therefor, execute a written agreement
confirming such date as the Commencement Date. Any failure of the parties to
execute such written agreement shall not affect the validity of the Commencement
Date as fixed and determined as aforesaid.
2.07. (a) Landlord's Work shall be deemed substantially completed
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment, or decoration remain to be performed, the non-completion
of which do not materially interfere with Tenant's use of the demised premises.
(b) If the substantial completion of Landlord's Work shall be delayed due
to any act or omission of Tenant or any of its employees, agents or contractors,
Landlord's Work shall be deemed substantially completed on the date when it
would have so been but for such delay. If a delay in the substantial completion
of Landlord's Work or any substantial portion of such delay is the result of a
strike or other labor trouble, fire or other casualty, governmental preemption
or priorities or other controls in connection with a national or other public
emergency or shortages of fuel, supplies or labor resulting therefrom, or any
other cause beyond Landlord's reasonable control, and such delay would not have
occurred but for a delay described in the preceding provisions of this Section
2.07(b), such delay shall be deemed added to the delay described in this Section
2.07(b).
2.08. Subject to the terms and provisions of Section 2.07 hereof, if
and when Tenant shall take actual possession of the demised premises, it shall
be conclusively presumed that the same were in satisfactory condition as of the
date of such taking of possession, unless within ten (10) Business Days after
such date Tenant shall give Landlord notice (hereinafter called the "punchlist")
specifying the respects in which the same was not so performed or completed.
With respect to latent defects not visually discoverable by Tenant in such walk-
through inspection of the demised premises, Tenant shall give Landlord notice
thereof within forty-five (45) days after the Commencement Date specifying the
items which were not in satisfactory condition, which items would not be
disclosed in such walk-through inspection of the demised premises. Landlord
agrees to diligently complete all items set forth in the punchlist as soon as
reasonably practicable, at Landlord's sole cost and expense, provided that in no
event shall Landlord be required to perform the same on an overtime or premium-
pay basis.
2.09. In the event that Landlord has not substantially completed the
performance of Landlord's Work by the date (the "Outside Date") occurring one
hundred twenty (120)
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days from the date that (i) Tenant shall have approved the Final Plans and the
cost of Landlord's Work and (ii) Landlord shall have obtained a building permit
from the New York City Building's Department and any required governmental
permits and approvals associated therewith (which Outside Date shall be extended
on a day-for day basis for each day that Landlord is delayed in substantially
completing Landlord's Work by reason of strikes, labor disputes, acts of God or
other circumstances constituting Force Majeure Causes, or by any act or omission
of Tenant, its employees, agents or contractors as defined in Section 2.07(b)
hereof), then Landlord shall have no liability to Tenant and provided and on
condition that as of the Outside Date Tenant shall not have taken occupancy of
any part of the demised premises, Tenant, as its sole remedy, shall have the
right to terminate this Lease by written notice given to Landlord within ten
(10) Business Days after the Outside Date (as such date may be extended as
hereinbefore provided) and such termination shall be effective on the date
occurring thirty (30) days from the date of the giving of Tenant's termination
notice unless the Commencement Date occurs within such thirty (30) day period.
If Tenant exercises such option to terminate this Lease, then upon such
termination, neither Landlord nor Tenant shall have any further obligations to
the other hereunder except that Landlord shall promptly thereafter return to
Tenant all sums theretofore paid by Tenant to Landlord hereunder.
ARTICLE 3
ADJUSTMENTS OF RENT
3.01 A. For purposes hereof, the following definitions shall apply:
(a) The term "Base Tax" shall mean the "Taxes" (as hereinafter
defined) for the Tax Year commencing July 1, 1997, as finally determined.
(b) The term "Tax Year" shall mean each period of twelve months
which includes any part of the Term which now or hereafter is or may be duly
adopted as the fiscal year for real estate tax purposes of the City of New York.
(c) The term "Taxes" shall means all real estate taxes,
assessments, governmental levies, municipal taxes, county taxes or any other
governmental charge, general or special, ordinary or extraordinary, unforeseen
as well as foreseen, of any kind or nature whatsoever, which are or may be
assessed, levied or imposed upon all or any part of the Property and the
sidewalks, plazas or streets adjacent thereto, including any tax, excise or fee
measured by or payable with respect to any rent (other than any occupancy or
rent tax payable by Tenant pursuant to Section 3.03), and levied against
Landlord and/or the Property under the laws of the United States, the City or
State of New York, or any political subdivision thereof. There shall be excluded
from the definition of the term "Taxes" any tax or assessement or any increase
therein (i) in excess of the amount which would be payable if such tax or
assessment were paid out over the longest possible term; (ii) imposed on land
and improvements other than the Property, except as otherwise expressly set
forth in this subsection 3.01.A(c), and (iii)
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attributable to Landlord's franchise, income, transit, or profit taxes;
provided, however, if due to a future change in the method of taxation or in the
taxing authority, a new or additional real estate tax, or a franchise, income,
transit, profit or other tax or governmental imposition, however designated,
shall be levied against Landlord, and/or the Property, in addition to, or in
substitution in whole or in part for any tax which would constitute "Taxes", or
in lieu of additional Taxes, such tax or imposition shall be deemed for the
purposes hereof to be included within the term "Taxes."
(d) The term "Tenant's Tax Share" shall mean 0 799%.
(e) The term "Escalation Statement" shall mean a statement
setting forth the amount payable by Tenant for a specified Tax Year or Operating
Year (as defined in Section 3.02 hereof), as the case may be, or for some
portion thereof pursuant to this Article 3.
B. Tenant shall pay to Landlord as additional rent for each Tax
Year a sum equal to Tenant's Tax Share of the amount by which the Taxes for such
Tax Year exceed the Base Tax (hereinafter referred to as "Tenant's Tax
Payment"). Landlord shall furnish to Tenant an annual Escalation Statement
(subject to revision as hereinafter provided) for each Tax Year setting forth
Tenant's Tax Payment for such Tax Year. Tenant's Tax Payment shall be due and
payable in two (2) equal installments, in advance, on the first day of each June
and December of each Tax Year based upon the Escalation Statement furnished with
respect to such Tax Year, until such time as a new Escalation Statement for a
subsequent Tax Year shall become effective. If an annual Escalation Statement is
furnished to the Tenant after the commencement of the Tax Year to which it
relates, then Tenant shall, within 20 days after such annual Escalation
Statement is furnished to Tenant, pay to Landlord an amount equal to any
underpayment of Tenant's Tax Payment theretofore paid by Tenant for such Tax
Year and, in the event of an overpayment by Tenant, Landlord shall permit Tenant
to credit against subsequent rental payments under this Lease the amount of such
overpayment. If there shall be any increase in Taxes for any Tax Year, whether
during or after such Tax Year, Landlord shall furnish a revised Escalation
Statement for such Tax Year to Tenant, and Tenant's Tax Payment for such Tax
Year shall be adjusted and paid or credited, as appropriate, in the same manner
as provided in the preceding sentence. If during the Term, Taxes are required to
be paid (either to the appropriate taxing authorities or as tax escrow payments
to the holder of a Superior Instrument (as defined in Section 25.01 hereof) in
full or in monthly, quarterly, or other installments, on any other date or dates
than as presently required, then at Landlord's option, Tenant's Tax Payments
shall be correspondingly accelerated or revised so that said Tenant's Tax
Payments are due at least 30 days prior to the date payments are due to the
taxing authorities or the superior mortgagee or ground lessor. The benefit of
any discount for any early payment or prepayment of Taxes shall accrue solely to
the benefit of Landlord and such discount shall not be subtracted from Taxes.
C. If Landlord shall receive a refund a taxes for any Tax Year,
Landlord shall permit Tenant to credit against subsequent rental payments under
this Lease,
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Tenant's Tax Share of the refund, but not in excess of, Tenant's Tax Payment
paid for such Tax Year.
D. If the Taxes comprising the Base Tax are reduced as a result of
an appropriate proceeding or otherwise, the Taxes as so reduced shall, for all
purposes be deemed to be the Taxes for the Base Tax and Landlord shall give
notice to Tenant of the amount by which the Tax Payments previously made were
less than the Tax Payments required to be made under this Article 3, and Tenant
shall pay the amount of the deficiency within ten (10) days after demand
therefor.
E. Tenant shall pay as additional rent hereunder within ten (10)
days after delivery of a statement therefor for each Tax Year Tenant's Tax Share
of any expenses incurred by Landlord, including payments to attorneys,
accountants and appraisers, in contesting any items of Taxes or the assessed
valuations of all or any part of the Property.
3.02. A. For purposes hereof the following definitions shall apply:
(a) The term "Expense Base Factor" shall mean the Expenses for
the Operating Year commencing January 1, 1997.
(b) The term "Operating Year" shall mean each calendar year which
includes any part of the Term.
(c) The term "Tenant's Expense Share" shall mean 0.799%.
(d) The term "Expenses" shall mean the total of all the costs and
expenses (and taxes thereon, if any) incurred by Landlord with respect to the
operation and maintenance of the Property and the services provided to the
tenants of the Building computed on an accrual basis including, without
limitation, the costs and expenses with respect to: steam, gas and any other
fuel or utilities; water rates and sewer rents, vault charges; air conditioning;
ventilation and heating; electricity for areas other than those leased to
individual tenants as indicated by meter, or if there be no meter, as determined
by Landlord's electrical consultant (as defined in Section 4.08 hereof);
elevators and escalators; metal, elevator cab, lobby, plaza, driveways,
sidewalk, reflective pool, clocks, obelisks, curb and other public area
maintenance and cleaning; interior and exterior landscaping and decoration;
painting of non-tenant areas; window cleaning; building standard cleaning
service supplied to tenants by Landlord; the purchase price or rental cost, as
applicable, of all building and cleaning supplies, tools, materials, machinery
and equipment; depreciation of hand tools and other movable equipment used in
the operation or maintenance of the Property; fire, extended coverage,
replacement value, boiler and machinery, sprinkler apparatus, public liability
and property damage, loss of rental, fidelity and plate glass insurance and any
other insurance required by the holder of any Superior Instrument or customarily
carried with respect to buildings similar to the Building; wages, salaries,
bonuses, disability benefits, hospitalization, medical, surgical, union and
general welfare benefits (including group life insurance), any pension,
retirement or life insurance plan and other benefit
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or similar expense respecting employees of the Landlord up to and including the
level of senior building manager; uniforms and working clothes for such
employees and the cleaning and replacement thereof; expenses imposed on the
Landlord pursuant to law or to any collective bargaining agreement with respect
to such employees; worker's compensation insurance, payroll, social security,
unemployment and other similar taxes with respect to such employees; salaries of
bookkeepers and accountants; professional and consulting fees, including legal
and accounting fees; charges for independent contractors performing work
included within the definition of Expenses; association fees or dues; telephone
and stationery; guards, watchmen, and other security personnel services and/or
systems; directory; building telephone; repairs, replacements and improvements
made or installed after the Operating Year 1997 which are necessary or
appropriate for the continued operation of the Building as a first-class office
building, including, without limitation, those relating to the heating, air-
conditioning, mechanical and electrical systems and the elevators (provided that
such improvements shall not include improvements expanding the size of the
Building); and management fees for the management of the Building, or if no
managing agent is employed by Landlord, a sum in lieu thereof which is not in
excess of the then prevailing rates for management fees in the Borough of
Manhattan for first-class office buildings similar to the Building. If under
general accounting principles consistently applied, any of the costs included
within Expenses are required to be capitalized, then such capitalized costs
together with interest thereon at the Interest Rate then in effect as of
December 31 of the year in which such expenditure is made, shall be amortized or
depreciated, as the case may be, over a period of time which shall be the
shorter of: (A) the useful life of the item in question, as reasonably
determined by Landlord, or (B) ten (10) years.
The following costs and expenses shall be excluded or deducted, as
appropriate, from Expenses:
(i) the cost of electricity furnished to the demised premises
and other space leased to tenants as measured by meters, or if there be no
meters, as determined by Landlord's electrical consultant;
(ii) leasing commissions;
(iii) salaries for Landlord's executives above the grade of
senior building manager;
(iv) amounts received by Landlord through proceeds of insurance
to the extent the proceeds are compensation for expenses which were previously
included in Expenses hereunder;
(v) cost of repairs or replacements incurred by reason of fire
or other casualty or condemnation to the extent to which Landlord is compensated
therefor through proceeds of insurance or condemnation award;
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(vi) advertising and promotional expenditures other than for
prospective employees of the Landlord (which expenditures shall be included
within the definition of Expenses);
(vii) Taxes;
(viii) costs for performing Landlord's Work for any individual
tenant or for performing work or furnishing services to or for individual
tenants at such tenant's expense;
(ix) costs of repairs, replacements, alterations and
improvements made in or to the Building or the demised premises to cure
conditions which constitute currently existing violations of Legal Requirements
(as defined in Article 22 hereof) to the extent that same are in effect as of
the date hereof; it being agreed that costs to comply with any reinterpretation,
amendment or modification of Legal Requirements in effect as of the date hereof
shall be includable in Expenses;
(x) costs of any renovation, improvement, painting or
redecorating of tenant improvements which are given as an inducement for a
tenant lease or lease amendment;
(xi) costs incurred in the removal, containment, encapsulation,
or disposal of asbestos in the Building;
(xii) legal fees or expenses incurred in connection with the
negotiation of leases for space in the Building, or of renewals, amendments,
financings, refinancings, or sales or in connection with enforcing the
provisions of any tenant's lease, other than a tenant who is disturbing other
tenants in the Building;
(xiii) interest, charges and fees incurred on debt, except to
the extent expressly otherwise set forth herein; and
(xiv) any other expenditure which would otherwise be an Expense
to the extent Landlord is reimbursed therefor by condemnation award or insurance
proceeds or by tenant refund (other than reimbursement by reason of escalation
type clauses in tenants' leases comparable to this Article 3).
If during all or part of any Operating Year including Operating Year 1997,
Landlord shall not furnish any particular item(s) of work or service (which
would constitute an Expense hereunder) to portions of the Building, due to the
fact that construction of the Building is not completed, or such portions are
not occupied or leased, or because such item of work or service is not required
or desired by the tenant of such portion, or such tenant is itself obtaining and
providing such item of work or service, or for other reasons, then, for the
purpose of computing the additional rent payable hereunder, the amount otherwise
includible in Expenses
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for such item for such period shall be increased by an amount equal to the
additional operating and maintenance expenses which would reasonably have been
incurred during such period by Landlord if it had at its own expense furnished
such item of work or services to such portion of the Building.
B. If the Expenses for any Operating Year exceed the Expense Base
Factor, Tenant shall pay to Landlord as additional rent for such Operating Year
an amount equal to Tenant's Expense Share of the excess of the Expenses for such
Operating Year over the Expense Base Factor (hereinafter referred to as
"Tenant's Expense Payment").
C. Landlord shall furnish to Tenant for each Operating Year an
Escalation Statement (subject to revision as hereinafter provided) setting forth
Landlord's estimate of Tenant's Expense Payment for such Operating Year. Tenant
shall pay to Landlord on the first day of each month during such Operating Year
an amount equal to one-twelfth (1/12) of Landlord's estimate of Tenant's Expense
Payment for such Operating Year. If Landlord shall furnish such estimate for an
Operating Year after the commencement thereof, then (a) until the first day of
the month following the month in which such estimate is furnished to Tenant,
Tenant shall pay to Landlord on the first day of each month an amount equal to
the monthly sum payable by Tenant to Landlord under this Paragraph C for the
last month of the preceding Operating Year; (b) Landlord shall notify Tenant in
the Escalation Statement containing such estimate whether the installments of
Tenant's Expense Payment previously paid for such Operating Year were more or
less than the installments which should have been paid for such Operating Year
pursuant to such estimate and (i) if there shall be an underpayment, Tenant
shall pay the amount thereof within twenty days after being furnished with such
Escalation Statement or (ii) if there shall be an overpayment, Tenant shall be
entitled to a credit in the amount thereof against subsequent rental payments
under this Lease; and (c) on the first day of the month following the month in
which such estimate is furnished to Tenant and monthly thereafter for the
balance of such Operating Year, Tenant shall pay to Landlord an amount equal to
one-twelfth (1/12) of Tenant's Expense Payment as shown on such estimate.
Landlord may at any time and from time to time (but not more often than three
times in any Operating Year) furnish to Tenant an Escalation Statement setting
forth Landlord's revised estimate of Tenant's Expense Payment for a particular
Operating Year and Tenant's Expense Payment for such Operating Year shall be
adjusted and paid or credited, as applicable, in the same manner as provided in
the preceding sentence.
D. After the end of each Operating Year Landlord shall submit to
Tenant an annual Escalation Statement prepared by Landlord setting forth the
Expenses for the preceding Operating Year and the balance of Tenant's Expense
Payment, if any, due to Landlord from Tenant for such Operating Year. If such
annual Escalation Statement shall show that the sums paid by Tenant under
subparagraph 3.02(C) above exceeded Tenant's Expense Payment for such Operating
Year, Tenant shall be entitled to a credit in the amount of such excess against
subsequent rental payments under this Lease. If such annual Escalation Statement
shall show that the sums so paid by Tenant were less than Tenant's Expense
Payment for such Operating
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Year, Tenant shall pay the amount of such deficiency to the Landlord within ten
days after being furnished with such annual Escalation Statement.
E. The annual Escalation Statements with respect to Expenses to be
furnished by Landlord as provided above shall be in reasonable detail but need
not be audited or certified. Landlord may use operating cost allocations and
estimates if such allocations or estimates are required for this Section 3.02.
3.03. Tenant shall pay to Landlord upon demand, as additional rent, any
occupancy tax or rent tax hereafter enacted, which Landlord is hereafter
required to pay with respect to the demised premises or this Lease.
3.04. If the Commencement Date shall be other than the first day of a Tax
Year or an Operating Year or if the date of the expiration or other termination
of this Lease shall be a day other than the last day of a Tax Year or an
Operating Year, then Tenant's Tax Payment and/or Tenant's Expense Payment for
such partial year shall be equitably adjusted taking into consideration the
portion of such Tax Year or Operating Year falling within the Term. Landlord
shall, as soon as reasonably practicable, cause an Escalation Statement with
respect to Taxes for the Tax Year and/or Expenses for the Operating Year in
which the Term expires to be prepared and furnished to Tenant. Such Escalation
Statement shall be prepared as of the expiration date of the Term if such date
is December 31, and if not, as of the first to occur of June 30 or December 31
after the expiration date of the Term. Landlord and Tenant shall thereupon make
appropriate adjustments of amounts then owing.
3.05. In no event shall the fixed annual rent ever be reduced by operation
of this Article 3. The rights and obligations of Landlord and Tenant under the
provisions of this Article 3 shall survive the termination of this Lease, and
payments shall be made pursuant to this Article 3 notwithstanding the fact that
an Escalation Statement is furnished to Tenant after the expiration or other
termination of the Term.
3.06. Landlord's failure to render an Escalation Statement with respect
to any Tax Year or Operating Year shall not prejudice Landlord's right to
thereafter render an Escalation Statement with respect thereto or with respect
to any subsequent Tax Year or Operating Year.
3.07. Each Escalation Statement shall be conclusive and binding upon
Tenant unless within 30 days after receipt of such Escalation Statement Tenant
shall notify Landlord that it disputes the correctness of such Escalation
Statement, specifying the particular respects in which such Escalation Statement
is claimed to be incorrect. Any dispute relating to any Escalation Statement,
not resolved within 30 days after the giving of such notice by Tenant, may be
submitted to arbitration by either party pursuant to Article 37 hereof. Pending
the determination of such dispute, Tenant shall pay additional rent in
accordance with the Escalation Statement that Tenant is disputing, without
prejudice to Tenant's position.
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ARTICLE 4
ELECTRICITY
4.01. Landlord agrees that prior to the Commencement Date risers,
feeders and wiring will be installed in the Building by Landlord to furnish
electrical service to the demised premises in accordance with the provisions of
this Article 4. After the Commencement Date any additional risers, feeders or
other equipment or service proper or necessary to supply Tenant's electrical
requirements, upon written request of Tenant, will be installed by Landlord at
the sole cost and expense of Tenant, if in Landlord's reasonable judgment the
same are necessary and will not cause permanent damage or injury to the Building
or the demised premises or cause or create a dangerous or hazardous condition or
entail excessive or unreasonable alterations, repairs or expense or interfere
with or disturb other tenants or occupants.
4.02. For the period commencing on the Commencement Date, Tenant
covenants and agrees to contract directly with and to pay directly to the
utility company supplying electric current for the demised premises the amounts
due for such electric current consumed as indicated by meters measuring Tenant's
consumption thereof.
4.03. (a) For the period commencing on the Commencement Date, if one
meter measures the consumption of electric current by Tenant and another lessee
of space in the Building (i.e., more than two tenants on a floor), or if there
is no meter measuring Tenant's consumption of electric current for any purpose,
including without limitation, air conditioning, ventilating and heating (e.g.,
more than one tenant on a floor with respect to air conditioning and
ventilating), Tenant agrees to pay to Landlord or Landlord's designated agent
charges for electric current consumed by Tenant as determined by Landlord's
electric consultant in accordance with Section 4.08 hereof. Bills therefor, at
the rate charged to Landlord for such electric current, plus the amount of sales
tax imposed thereon by any Governmental Authority, plus 5% of the total amount
thereof for administration and processing, shall be rendered at such times as
Landlord may elect based upon estimates of Landlord's electric consultant which
may be made from time to time as Landlord deems necessary. Until such time as
Landlord's electrical consultant first makes its estimate as aforesaid, Tenant
shall pay as its electricity charge hereunder (exclusive of HVAC Electricity (as
hereinafter defined) the sum of $3.00 per square foot per annum multiplied by
the rentable square footage of the demised premises (the "Base Charge") which
shall be payable in equal monthly installments together with the Tenant's
payments of fixed annual rent hereunder on the first day of each calendar month.
In the event Landlord's consultant shall determine that Tenant's electricity
charge should exceed the Base Charge, Tenant's Base Charge shall be adjusted
retroactively at such time as Landlord's electrical consultant's determination
is made. Any deficiency for such prior period shall be payable upon demand. In
no event shall the Base Charge be reduced pursuant to the terms hereof. Tenant
shall permit Landlord's electrical consultant to make surveys in the demised
premises from time to time during normal business hours regarding the electrical
equipment and fixtures and the use of electric current therein.
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(b) In the event the Tenant occupies a portion of a floor, with
respect to the electric current used (i) to run the air conditioning system on
Tenant's floor, including without limitation, for purposes of "early morning
warm-up" and (ii) for the lighting of the common areas on Tenant's floor,
Landlord shall charge Tenant its proportionate share of such charge plus sales
tax and the administrative fees referred to above based upon the proportion
which the rentable area of the demised premises bears to the rentable area of
that portion of the floor which is subject to leases whose terms have commenced.
(c) If Tenant pays for electric current consumed pursuant to
subsection (a) above, Landlord reserves the right to discontinue furnishing
electric energy to Tenant at any time that electric service may be obtained by
Tenant directly from the public utility company servicing the Building upon
thirty (30) days' prior written notice to Tenant, and from and after the
effective date of such termination, Landlord shall no longer be obligated to
furnish Tenant with electric energy, provided, however that such termination
date shall be extended for such time as is reasonably necessary for Tenant to
make arrangements to obtain electric service directly from the public utility
company servicing the Building. If Landlord exercises such right of termination,
this Lease shall remain unaffected thereby and shall continue in full force and
effect; and thereafter Tenant shall diligently arrange to obtain electric
service directly from the public utility company servicing the Building.
4.04. Tenant's use of electric current in the demised premises shall
not at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the demised premises.
4.05. To the extent permitted by applicable law, Landlord shall not be
liable in any way to Tenant for any failure or defect in the supply or character
of electric energy furnished to the demised premises by reason of any
requirement, act or omission of the public utility providing the Building with
electricity or for any other reason whatsoever.
4.06. At Landlord's option, Tenant shall purchase from Landlord or
Landlord's agent all lighting tubes, lamps, bulbs and ballasts used in the
demised premises and Tenant shall pay Landlord's reasonable charges for
providing and installing same on demand as additional rent.
4.07. Intentionally Omitted.
4.08. Any determinations with respect to charges for electricity on
floors occupied by more than one tenant or otherwise which must be made pursuant
to the terms of this Lease shall be made by a reputable, independent electrical
consultant selected by Landlord ("Landlord's electrical consultant"). Any
determination made by Landlord's electrical consultant pursuant to or in
connection with this Lease shall be binding and conclusive on Landlord and on
Tenant unless Tenant disputes such determination as hereinafter provided. Tenant
shall have the right to give a notice (the "Dispute Notice") to Landlord within
30 days after the date it is notified of any determination by Landlord's
electrical consultant that (i) Tenant has engaged its
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own electrical consultant ("Tenant's electrical consultant") to verify the
determination of Landlord's electrical consultant. If Tenant's electrical
consultant and Landlord's electrical consultant cannot agree within ten (10)
days after the Dispute Notice, if any, is given on what an appropriate
resolution of their dispute should be, then either party, upon notice to the
other, may submit the issue to arbitration in accordance with the provisions of
Article 37 of this Lease, the reasonable cost of any such arbitration (but not
the fees and expenses of Landlord's attorneys) to be borne solely by Tenant in
the event such dispute relates to a determination with respect to electricity
provided to a portion of the Building other than the demised premises. While
such dispute is being resolved, Tenant shall pay such charges and payments as
would be due hereunder if Landlord's electrical consultant's determination were
correct without prejudice to Tenant's position. In the event it is finally
determined that there has been an overpayment by Tenant, such overpayment shall
be credited against future rent payments due from Tenant under the Lease and in
the event of an underpayment, the amount of such underpayment by Tenant shall be
paid by Tenant to Landlord within 20 days after such determination is made.
ARTICLE 5
USE
5.01. The demised premises shall be used solely as and for executive
and general offices, and, as ancillary uses to office use, provided same do not
violate the Certificate of Occupancy, for software sales (but not retail sales
on an off-the-street basis), marketing, customer service, technical support,
research and development, and consulting services, and for no other purpose.
5.02. Tenant shall not use or permit the use of the demised premises or
any part thereof in any way which would violate any of the terms and conditions
of this Lease or for any unlawful purposes or in any unlawful manner or in
violation of the Certificate of Occupancy for the demised premises or the
Building, and Tenant shall not permit the demised premises or any part thereof
to be used in any manner or anything to be done, brought into or kept therein
which, in Landlord's judgment shall impair or interfere with (i) the character,
reputation or appearance of the Building as a high quality office building, (ii)
any of the Building services or the proper and economic heating, cleaning, air
conditioning or other servicing of the Building or the demised premises, or
(iii) the use of any of the other areas of the Building by, or occasion
discomfort, inconvenience or annoyance to, any of the other tenants or occupants
of the Building.
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ARTICLE 6
ALTERATIONS AND INSTALLATIONS
6.01. Tenant shall make no alterations, installations, additions or
improvements (other than purely decorative items such as painting and carpeting)
in or to the demised premises without Landlord's prior written consent and then
only by contractors or mechanics first recommended and approved by Landlord,
such approval as to contractors and mechanics not to be unreasonably withheld or
delayed. All such work, alterations, installations, additions and improvements
shall be done at Tenant's sole expense and at such times and in such manner as
Landlord may from time to time designate in its reasonable judgment.
All work in the demised premises shall be done solely in accordance with
plans and specifications first approved in writing by Landlord. Tenant shall
reimburse Landlord promptly upon demand for any costs and expenses incurred by
Landlord in connection with Landlord's review of such Tenant's plans and
specifications. Landlord will not unreasonably withhold or delay its consent to
requests for nonstructural alterations, additions and improvements (provided
they will not interfere with the operation of the Building nor affect the
outside of the Building nor adversely affect its structure, or its electrical,
HVAC, plumbing or mechanical systems).
Any such approved alterations and improvements shall be performed in
accordance with the foregoing and the following provisions of this Article 6:
1. All work shall be done in a good and workmanlike manner.
2. (a) Any contractor employed by Tenant to perform any work
permitted by this Lease, and all of its subcontractors, shall agree to
employ only such labor as will not result in jurisdictional disputes or
strikes or cause disharmony with other workers employed at the Building.
Tenant will inform Landlord in writing of the names of any contractor or
subcontractors Tenant proposes to use in the demised premises at least ten
(10) days prior to the beginning of work by such contractor or
subcontractors.
(b) Tenant covenants and agrees to pay to the contractor, as the
work progresses, the entire cost of supplying the materials and performing
the work shown on Tenant's approved plans and specifications; subject only
to customary retentions.
3. All such alterations shall be performed in compliance with all
Legal Requirements (as defined in Article 22 hereof).
4. Tenant shall keep the Building and the demised premises free and
clear of all liens for any work or material claimed to have been furnished
to
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Tenant or to the demised premises on Tenant's behalf, and all work to be
performed by Tenant shall be done in a manner which will not unreasonably
interfere with or disturb other tenants or occupants of the Building.
5. During the progress of the work to be done by Tenant, said work
shall be subject to inspection by representatives of Landlord who shall be
permitted access and the opportunity to inspect, at all reasonable times,
but this provision shall not in any way whatsoever create any obligation on
Landlord to conduct such an inspection or constitute approval by Landlord
of such work or subject Landlord to liability for the manner of
performance.
6. Tenant agrees to pay to Landlord's managing agent, as additional
rent, promptly upon being billed therefor, a sum equal to Landlord's
actual, out-of-pocket costs incurred on account of Landlord's indirect
costs, field inspection and coordination in connection with such work.
7. Prior to commencement of any work, Tenant shall furnish to
Landlord certificates evidencing the existence of:
(a) Worker's compensation insurance covering all persons
employed for such work with statutorily required limits; and
(b) Employer's liability coverage including bodily injury
caused by disease with limits of not less than $100,000 per employee;
(c) Comprehensive general liability insurance including but
not limited to completed operations coverage, products liability
coverage, contractual coverage, broad form property damage,
independent contractor's coverage and personal injury coverage naming
(i) Landlord as well as such representatives and consultants of
Landlord as Landlord shall reasonably specify (collectively
"Landlord's Consultants"), including, but not limited to, as of the
date hereof Insignia/Edward S. Gordon Company, Inc. and The
Shorenstein Company, as well as Tenant, as additional insureds, with
coverage of not less than $3,000,000 combined single limit coverage
(or such higher limits as Landlord may from time to time impose in its
reasonable judgment);
(d) Tenant shall require all contractors engaged or employed
by the Tenant to indemnify and hold Tenant, Landlord, and Landlord's
Consultants, including but not limited to, as of the date hereof
harmless in accordance with the following clauses (with such
modifications therein as may be required from time to time by reason
of a change in the parties constituting Landlord's Consultants):
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"The contractor hereby agrees to the fullest extent permitted by
law to assume the entire responsibility and liability for and
defense of and to pay and indemnify the Landlord, Tenant, and
Landlord's Consultants against any loss, cost, expense, liability
or damage and will hold each of them harmless from and pay any
loss, cost, expense, liability or damage (including, without
limitation, judgments, attorney's fees, court costs, and the cost
of appellate proceedings), which the Landlord and/or Tenant
and/or Landlord's Consultants incurs because of injury to or
death of any person or on account of damage to property,
including loss of use thereof, or any other claim arising out of,
in connection with, or as a consequence of the performance of the
work by the contractor and/or any acts or omissions of the
contractor or any of its officers, directors, employees, agents,
sub-contractors or anyone directly or indirectly employed by the
contractor or anyone for whose acts the contractor may be liable
as it relates to the scope of this Contract, whether such
injuries to person or damage to property are due or claimed to be
due to any negligence of the Landlord and/or Tenant and/or
Landlord's Consultants, its or their employees or agents or any
other person."
The contractor's insurance shall specifically insure the
foregoing hold harmless provision verbatim.
(e) Such insurance shall be placed with solvent and
responsible companies reasonably satisfactory to the Landlord and
licensed or authorized to do business in the State of New York, and
the policies shall provide that they may not be cancelled without 30
days' prior notice in writing to the Landlord.
8. Movement of all men and materials shall only be done at the
direction, the times and in the manner designated by Landlord in its
reasonable judgment.
9. No improvements estimated to cost more than $25,000 (as estimated
by Landlord's architect or engineer or general contractor) shall be
undertaken (i) except under the supervision of a licensed architect or
licensed professional engineer reasonably satisfactory to Landlord, (ii)
except after at least thirty days' prior written notice to Landlord and
(iii) prior to Tenant delivering to Landlord an unconditional letter of
credit in form and substance and drawn on a bank satisfactory to Landlord
in an amount equal to 125% of such estimated cost or other assurances
reasonably satisfactory to Landlord that adequate provisions have been made
for the payment of the cost of such improvements.
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6.02 Notice is hereby given that Landlord shall not be liable for any
labor or materials furnished or to be furnished to Tenant upon credit, and that
no mechanic's or other lien for any such labor or materials shall attach to or
affect the reversion or other estate or interest of Landlord in and to the
demised premises. Any mechanic's lien, filed against the demised premises or the
Building for work claimed to have been done for or materials claimed to have
been furnished to Tenant shall be discharged by Tenant at its expense within
thirty (30) days after such filing, by payment, filing of the bond required by
law or otherwise. Failure to comply with the provisions of this Section 6.02
shall constitute a material default by Tenant under this Lease entitling
Landlord to exercise any or all of the remedies provided in this Lease in the
event of Tenant's default.
6.03. All alterations, installations, additions and improvements made
and installed by Landlord, at its expense, shall be the property of Landlord and
shall remain upon and be surrendered with the demised premises as a part thereof
at the end of the Term.
6.04. All alterations, installations, additions and improvements made
and installed by Tenant, or at Tenant's expense, upon or in the demised premises
which are of a permanent nature and which cannot be removed without damage to
the demised premises or Building including, without limitation, any so-called
"raised flooring" or supplementary air conditioning units, shall become the
property of Landlord, and shall remain upon and be surrendered with the demised
premises as a part thereof at the end of the Term (and shall not be removed
prior thereto without Landlord's written consent), except that Landlord shall
have the right at any time up to six months prior to the expiration of the Term
to serve notice upon Tenant that any of such alterations, installations,
additions and improvements, except for Landlord's Work, which are of a non-
Building Standard office nature such as vaults, auditoriums, kitchens and the
like, shall be removed and, in the event of service of such notice, Tenant will,
at Tenant's own cost and expense, remove the same in accordance with such
request, and repair any damage to the demised premises caused by such removal.
6.05. Where furnished by or at the expense of Tenant all furniture,
furnishings and trade fixtures (exclusive of raised flooring), but including
without limitation, murals, business machines and equipment, counters, screens,
grille work, cages, partitions, metal railings, closets, free standing lighting
fixtures and equipment, drinking fountains, and any other moveable property not
connected to the demised premises or the Building's systems shall remain the
property of Tenant which may at its option remove all or any part thereof at any
time prior to the expiration of the Term. In case Tenant shall decide not to
remove any part of such property, Tenant shall notify Landlord in writing not
less than three (3) months prior to the expiration of the Term, specifying the
items of property which it has decided not to remove. If, within thirty (30)
days after the service of such notice, Landlord shall request Tenant to remove
any of the said property, Tenant shall at its expense remove the same. As to
such property which Landlord does not request Tenant to remove, the same shall
be, if left by Tenant, deemed abandoned by Tenant and thereupon the same shall
become the property of Landlord.
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6.06 If any alterations, installations, additions, improvements or
other property which Tenant shall have the right to remove or be requested by
Landlord to remove as provided in Sections 6.04 and 6.05 hereof (herein in this
Section 6.06 called the "property") are not removed on or prior to the
expiration of the Term, Landlord shall have the right to remove the property and
to dispose of the same without accountability to Tenant and at the sole cost and
expense of Tenant. In case of any damage to the demised premises or the Building
resulting from the removal of the property Tenant shall repair such damage or,
in default thereof, shall reimburse Landlord for Landlord's cost in repairing
such damage. This obligation shall survive any termination of this Lease.
6.07. Tenant shall keep records of Tenant's alterations, installations,
additions and improvements costing in excess of $10,000, and of the cost
thereof. Tenant shall, within 15 days after demand by Landlord, furnish to
Landlord copies of such records if Landlord shall require same in connection
with any proceeding to reduce the assessed valuation of the Building, or in
connection with any proceeding instituted pursuant to Article 14 hereof.
ARTICLE 7
REPAIRS
7.01. Tenant shall, at its sole cost and expense, make such repairs to
the demised premises and the fixtures and appurtenances therein as are
necessitated by the act, omission, occupancy or negligence of Tenant or by the
use of the demised premises in a manner contrary to the purposes for which same
are leased to Tenant, as and when needed to preserve them in good working order
and condition. Except as otherwise provided in Section 9.05 hereof, all damage
or injury to the demised premises and to its fixtures, appurtenances and
equipment caused by Tenant moving property in or out of the Building or by
installation or removal of furniture, fixtures or other property, shall be
repaired, restored or replaced promptly by Tenant at its sole cost and expense,
which repairs, restorations and replacements shall be in quality and class equal
to the original work or installations. If Tenant fails to make such repairs,
restoration or replacements, same may be made by Landlord at the expense of
Tenant and such expense shall be collectible as additional rent and shall be
paid by Tenant within 10 days after rendition of a bill therefor.
The exterior walls of the Building, the portions of any window sills
outside the windows and the windows are not part of the premises demised by this
Lease and Landlord reserves all rights to such parts of the Building.
7.02 Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot of area which such floor was
designed to carry. Such floor is designed for the following superimposed
loading:
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Live Load 50 pounds per square foot
Partitions 12 pounds per square foot
Suspended Ceiling & Mechanical 10 pounds per square foot
Additional Floor Load 10 pounds per square foot
-------------------------
Total Tenant Load 82 pounds per square foot
7.03. Business machines and mechanical equipment used by Tenant which
cause vibration, noise, cold or heat that may be transmitted to the Building
structure or to any leased space to such a degree as to be objectionable to
Landlord or to any other tenant in the Building shall be placed and maintained
by Tenant at its expense in settings of cork, rubber or spring type vibration
eliminators sufficient to absorb and prevent such vibration or noise, or prevent
transmission of such cold or heat. The parties hereto recognize that the
operation of elevators, air conditioning and heating equipment will cause some
vibration, noise, heat or cold which may be transmitted to other parts of the
Building and demised premises. Landlord shall be under no obligation to endeavor
to reduce such vibration, noise, heat or cold beyond what is customary in
current good building practice for buildings of the same type as the Building.
7.04. Except as otherwise specifically provided in this Lease, there
shall be no allowance to Tenant for a diminution of rental value and no
liability on the part of Landlord by reason of inconvenience, annoyance or
injury to business arising from the making of any repairs, alterations,
additions or improvements in or to any portion of the Building or the demised
premises or in or to fixtures, appurtenances or equipment thereof. Landlord
shall exercise reasonable diligence so as to minimize any interference with
Tenant's business operations, but shall not be required to perform the same on
an overtime or premium pay basis.
7.05. Except as otherwise provided in this Lease, Landlord shall,
throughout the Term, keep and maintain in good order and condition the following
items, but only to the extent that such items affect the use and enjoyment of
the demised premises for the conduct of Tenant's business: (a) the lobbies,
common corridors, sidewalks and other common elements of the Building; (b) the
roof, exterior, load-bearing columns, and foundation of the Building, and (c)
the systems of the Building including elevators, HVAC, plumbing, electrical and
other Building systems and equipment servicing the demised premises to the point
of entry into the demised premises, provided however that Landlord shall not be
liable for any defects or deficiencies thereof which shall be caused by Tenant's
equipment, alterations or installations, or which shall result from any act or
omission of Tenant, its contractors, employees, agents, representatives,
licensees, subtenants or invitees.
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ARTICLE 8
REQUIREMENTS OF LAW
8.01 Tenant shall comply with all Legal Requirements (including, without
limitation, the Disabilities Act, as defined in Section 22.04 hereof) which
shall impose any violation, order or duty upon Landlord or Tenant with respect
to the demised premises, or the use or occupation thereof; provided, however,
that Tenant shall not be required to make structural alterations in order to
effect such compliance unless the need therefor shall result from, or arise in
connection with (i) a negligent or wrongful act or omission of Tenant, its
agents, representatives, contractors or invitees, or (ii) a default under this
Lease by Tenant, or (iii) Tenant's particular manner of use of the demised
premises, or (iv) any alterations performed by, or on behalf of, Tenant in the
demised premises (excluding Landlord's Work). Tenant shall pay all the costs,
expenses, fines, penalties and damages which may be imposed upon Landlord by
reason of or arising out of Tenant's failure to fully and promptly comply with
and observe the provisions of this Section.
8.02 Notwithstanding the provisions of Section 8.01 hereof, Tenant, at its
own cost and expense, in its name and/or (whenever necessary) Landlord's name,
may contest, in any manner permitted by law (including appeals to a court, or
governmental department or authority having jurisdiction in the matter), the
validity or the enforcement of any Legal Requirements with which Tenant is
required to comply pursuant to this Lease, and may defer compliance therewith
provided that:
(a) such non-compliance shall not subject Landlord to criminal
prosecution or subject the Property to lien or sale (without limiting the
application of the above, Landlord shall be deemed subject to prosecution for a
crime if Landlord, or its managing agent, or any officer, director, partner,
shareholder or employee of Landlord or its managing agent as an individual, is
charged with a crime of any kind or degree whatever, whether by summons or
otherwise);
(b) such non-compliance shall not be in violation of any mortgage,
or of any ground or underlying lease or any mortgage thereon;
(c) Tenant shall first deliver to Landlord a surety bond issued by a
surety company of recognized responsibility, or other security satisfactory to
Landlord, indemnifying and protecting Landlord against any loss or injury by
reason of such non-compliance; and
(d) Tenant shall promptly, diligently and continuously prosecute
such contest.
Without limiting the applications of the above, Landlord shall be deemed
subject to prosecution for a crime, if Landlord, or its managing agent, or any
officer, director, partner,
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shareholder or employee of Landlord or its managing agent, as an individual, is
charged with a crime of any kind or degree whatever, whether by summons or
otherwise.
Landlord, without expense or liability to it, shall cooperate with Tenant
and execute any documents or pleadings required for such purpose, provided that
Landlord shall reasonably be satisfied that the facts set forth in any such
documents or pleadings are accurate.
ARTICLE 9.
INSURANCE, LOSS, REIMBURSEMENT, LIABILITY
9.01. Tenant shall not do or permit to be done any act or thing upon or
about the demised premises which will (i) result in the assertion of any defense
by the insurer to any claim under, (ii) invalidate or (iii) be in conflict with
the policies covering the Building, and fixtures and property therein, or which
would increase the rate of fire insurance applicable to the Building to an
amount higher than it otherwise would be; and Tenant shall neither do nor permit
to be done any act or thing upon or about the demised premises or the Building
which shall or might subject Landlord to any liability or responsibility for
injury to any person or persons or to property; but nothing in this Section 9.01
shall prevent Tenant's use of the demised premises for the purposes stated in
Article 5 hereof.
9.02. If, as a result of any act or omission by or on the part of Tenant
or violation of this Lease, whether or not Landlord has consented to the same,
the rate of "all risk" or other type of insurance maintained by Landlord on the
Building and fixtures and property therein, shall be increased to an amount
higher than it otherwise would be, Tenant shall reimburse Landlord for all
increases of such insurance premiums so caused; such reimbursement to be
additional rent payable within 20 days after demand therefor by Landlord. In any
action or proceeding wherein Landlord and Tenant are parties, a schedule or
"make-up" of rates for the Building or demised premises issued by the body
making fire insurance rates or established by insurance carrier providing
coverage for the Building or demised premises, shall be conclusive evidence of
the facts stated therein including the items and charges taken into
consideration in fixing the "all risk" insurance rate then applicable to the
Building or demised premises.
9.03. Landlord, Landlord's Consultants, or their agents, servants or
employees shall not be liable for any injury or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity, water,
rain or snow or leaks from any part of the Building, or from the pipes,
appliances or plumbing works or from the roof, street or subsurface or from any
other place or resulting from dampness or resulting from any other cause of
whatsoever nature, unless (but only to the extent) any of the foregoing shall be
caused by or due to the negligence of Landlord, its agents, servants or
employees. Notwithstanding the preceding provisions of this Section 9.03, Tenant
covenants, and agrees that (i) any rights of Tenant to make a claim against
Landlord, Landlord's Consultants, or their agents, servants or employees as
contemplated herein shall be subject to the waiver of subrogation provisions set
forth in
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Article 9.08 of this Lease, and (ii) in no event shall Tenant be entitled to
make a claim for consequential, indirect or special damages pursuant to this
Section 9.03.
9.04. Landlord, Landlord's Consultants, or their agents shall not be
liable for any damage which Tenant may sustain, if at any time any window of the
demised premises is broken, or temporarily or permanently closed, darkened or
bricked upon for any reason whatsoever, except only Landlord's arbitrary acts if
the result is permanent, and Tenant shall not be entitled to any compensation
therefor or abatement of rent or to any release from any of Tenant's obligations
under this Lease, nor shall the same constitute an eviction or constructive
eviction.
9.05. Tenant shall reimburse Landlord and Landlord's Consultants, for all
expenses, damages or fines incurred or suffered by Landlord or Landlord's
Consultants, by reason of any breach, violation or non-performance by Tenant, or
its agents, servants or employees, of any covenant or provision of this Lease,
or by reason of damage to persons or property caused by moving property of or
for Tenant in or out of the Building, or by the installation or removal of
furniture or other property of or for Tenant, or by reason of or arising out of
the carelessness, negligence or improper conduct of Tenant, or its agents,
servants or employees, in the use or occupancy of the demised premises. Tenant
shall have the right, at Tenant's own cost and expense, to participate in the
defense of any action or proceeding brought against Landlord or Landlord's
Consultants and in negotiations for settlement thereof if, pursuant to this
Section 9.05, Tenant would be obligated to reimburse Landlord or Landlord's
Consultants for expenses, damages or fines incurred or suffered by Landlord or
Landlord's Consultants.
9.06. Tenant shall give Landlord notice in case of fire or accidents in
the demised premises promptly after Tenant is aware of such event.
9.07. (a) No recourse shall be had on any of Landlord's obligations
hereunder or for any claim based thereon or otherwise in respect thereof against
any incorporator, subscriber to the capital stock, shareholder, officer or
director, past, present or future, of any corporation or any partner or joint
venturer which shall be Landlord hereunder or included in the term "Landlord" or
of any successor of any such corporation, or against any principal, disclosed or
undisclosed, or any affiliate of any party which shall be Landlord or included
in the term "Landlord," whether directly or through Landlord or through any
receiver, assignee, trustee in bankruptcy or through any other person, firm or
corporation, whether by virtue of any constitution, statute or rule of law or by
enforcement of any assessment or penalty or otherwise, all such liability being
expressly waived and released by Tenant.
(b) Tenant shall look solely to Landlord's estate and interest in
the Building for the satisfaction of any right of Tenant for the collection of a
judgment or other judicial process or arbitration award requiring the payment of
money by Landlord, and no other property or assets of Landlord, Landlord's
agents, incorporators, shareholders, officers, directors, partners, principals
(disclosed or undisclosed) or affiliates shall be subject to levy, lien,
execution, attachment, or other enforcement procedure for the satisfaction of
Tenant's rights and
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remedies under or with respect to this Lease, the relationship of Landlord and
Tenant hereunder, or under law, or Tenant's use and occupancy of the demised
premises, or any other liability of Landlord to Tenant.
9.08. (a) Notwithstanding anything to the contrary contained in this
Lease, Tenant agrees that it will, at its sole cost and expense, include in its
property insurance policies appropriate clauses pursuant to which the insurance
companies (i) waive all right of suborgation against Landlord, Landlord's
Consultants, and any tenant of space in the Building with respect to losses
payable under such policies and (ii) agree that such policies shall not be
invalidated should the insured waive in writing prior to a loss any or all right
of recovery against any party for losses covered by such policies. Tenant shall
furnish Landlord upon demand evidence satisfactory to Landlord evidencing the
inclusion of said clauses in Tenant's property insurance policies.
(b) Provided that Landlord's right of full recovery under its
property insurance policies is not adversely affected or prejudiced thereby, and
so long as the waivers provided for in Section 9.08(a) remain in full force and
effect, Landlord hereby waives any and all right of recovery which it might
otherwise have against Tenant, its servants, agents and employees, for loss or
damage occurring to the Building and the fixtures, appurtenances and equipment
therein, to the extent the same would be covered by Landlord's insurance, as
required under Section 9.10 of this Lease whether or not such insurance is
maintained, notwithstanding that such loss or damage may result from the
negligence or fault of Tenant, its servants, agents or employees. Tenant hereby
waives any and all right of recovery which it might otherwise have against
Landlord, its servants, and employees, and against every other tenant in the
Building who shall have executed a similar waiver as set forth in this Section
9.08(b) for loss or damage to, Tenant's furniture, furnishings, fixtures and
other property removable by Tenant under the provisions hereof to the extent
that same would be covered by Tenant's insurance as required under this Lease
whether or not such insurance is maintained, notwithstanding that such loss or
damage may result from the negligence or fault of Landlord, its servants, agents
or employees, or such other tenant or the servants, agents or employees thereof.
9.09. Tenant covenants and agrees to provide at its expense on or before
the Commencement Date and to keep in force during the Term naming Landlord, its
Agent, Landlord's Consultants and Tenant as insured parties (x) a comprehensive
general liability insurance policy or such successor comparable form of coverage
in the broadest form then available (hereinafter referred to as a "Liability
Policy") written on "an occurrence basis", including, without limitation,
blanket contractual liability coverage, broad form property damage, independent
contractor's coverage and personal injury coverage protecting Landlord,
Landlord's Consultants and Tenant against any liability whatsoever, occasioned
by any occurrence on or about the demised premises or any appurtenances thereto
and (y) a fire and other casualty policy (a "Fire Policy") insuring the full
replacement value of all Tenant's improvements and betterments installed by or
on behalf of Tenant after the Commencement Date and all of the furniture, trade
fixtures and other personal property of Tenant located in the demised premises
against loss or damage by fire, theft and such other risks or hazards as are
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insurable under present and future forms of "All Risk" insurance policies, and
(z) policy of insurance against loss or damage to the major components of the
air conditioning and/or heating system, flywheels, steam pipes, steam turbines,
steam engines, steam boilers, other pressure vessels, high pressure piping and
machinery, if any, such as are installed by or on behalf of Tenant in the
demised premises. Such policies shall also insure against physical damage to the
demised premises arising out of an accident covered thereunder, such policies
are to be written by good and solvent insurance companies licensed to do
business in the State of New York satisfactory to Landlord, and shall be in such
limits and with such maximum deductibles as Landlord may reasonably require. As
of the date of this Lease, Landlord reasonably requires limits of liability
under (x) the Liability Policy of not less than $5,000,000 combined single limit
per occurrence for bodily or personal injury (including death) and property
damage combined; (y) under the Fire Policy equal to the value of all Tenant's
improvements and betterments and furniture, trade fixtures and other personal
property with a deductible of no more than $1,000,00; and (z) under machinery
insurance for full replacement cost of equipment with a deductible of no more
than $1,000.00. Tenant will furnish Landlord with such information as Landlord
may reasonably request from time to time as to the value of the items specified
in clause (y) above within ten (10) days after request therefor. Such insurance
may be carried under a blanket policy covering the demised premises and other
locations of Tenant, if any, provided that each such policy shall in all
respects comply with this Article and shall specify (i) that the portion of the
total coverage of such policy that is allocated to the demised premises is in
the amounts required pursuant to this Section 9.09 and (ii) any sublimits in
such blanket policy and such policy shall specify, or Tenant shall furnish
Landlord a written statement from the insurer under such policy that the
protection afforded Tenant under any such blanket policy shall be no less than
that which would have been afforded under a separate policy relating only to the
demised premises. Prior to the time such insurance is first required to be
carried by Tenant and thereafter, at least 15 days prior to the expiration date
of any such policy, Tenant agrees to deliver to Landlord a certificate
evidencing such insurance Said certificate shall contain an endorsement that
such insurance may not be cancelled or materially changed except upon 30 days'
prior written notice to Landlord. If, due to abandonment of, or failure to
occupy the demised premises by Tenant, any such insurance required to be carried
by Tenant shall be cancelled by the insurance carrier, then Tenant hereby
indemnifies Landlord against liability which would have been covered by such
insurance. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder entitling Landlord
to exercise any or all of the remedies provided in this Lease in the event of
Tenant's default. Notwithstanding anything to the contrary contained in this
Lease, the carrying of insurance by Tenant in compliance with this Section shall
not modify, reduce, limit or impair Tenant's obligations and liability under
Article 38 hereof.
9.10 Landlord covenants and agrees to provide at its expense from and
after the date on which this Lease is executed and delivered and thereafter so
long as this Lease remains in full force and effect a fire and casualty
insurance policy, with such limits and deductibles as shall be required by the
holder of the institutional first mortgage which is then a lien on the Building,
or if there shall be no such mortgage, the limits and deductibles that would
then generally be required by the holder of an institutional first mortgage on
the Building.
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ARTICLE 10
DAMAGE BY FIRE OR OTHER CAUSE
10.01. If the Building or the demised premises shall be partially or
totally damaged or destroyed by fire or other cause (and if this Lease shall not
have been terminated as in this Article 10 hereinafter provided), (a) Landlord
shall, with reasonable dispatch after notice to it of the damage or destruction
and the collection of the insurance proceeds attributable to such damage, repair
the damage and restore and rebuild the Building and/or the demised premises,
such restoration of the demised premises to include Tenant's improvements and
betterments (but excluding Tenant's personal property) and (b) Tenant shall
repair the damage to and restore and repair Tenant's furniture, fixtures and
other personal property as set forth in clause (y) of Section 9.09 hereof with
reasonable dispatch after such damage or destruction. Such work by Tenant shall
be subject to all the provisions of this lease. The proceeds of policies
providing coverage for Tenant's improvements and betterments (which Tenant is
required to maintain pursuant to Section 9.09 hereof) shall be paid to Landlord,
and concurrently with the collection of any insurance proceeds attributable to
the damage of Tenant's improvements and betterments, Tenant shall pay to
Landlord (i) the amount of any deductible under the policy insuring Tenant's
improvements and betterments and (ii) the amount, if any, by which the cost of
repairing and restoring Tenant's improvements and betterments as estimated by a
reputable contractor designated by Landlord exceeds the available insurance
proceeds therefor. The amounts due in accordance with clauses (i) and (ii) of
the preceding sentence shall be additional rent under this lease and payable by
Tenant to Landlord upon demand.
10.02. If the Building or the demised premises shall be damaged or
destroyed by fire or other cause, then the rents payable hereunder shall be
abated to the extent that the demised premises shall have been rendered
untenantable for the period from the date of such damage or destruction to the
date the damage shall be substantially repaired or restored; provided, however,
that should Tenant reoccupy a portion of the demised premises during the period
the restoration work is taking place and prior to the date that the whole of
said demised premises are made tenantable, fixed annual rent and additional
rents allocable to such portion shall be payable by Tenant from the date of such
occupancy.
10.03. If the Building shall be so damaged or destroyed by fire or other
cause (whether or not the demised premises are damaged or destroyed) as to
require a reasonably estimated expenditure made by Landlord or a reputable
contractor designated by Landlord of more than 30% of the full insurable value
of the Building immediately prior to the casualty, then Landlord may terminate
this Lease by giving Tenant notice to such effect within 90 days after the date
of the casualty. In case of any damage or destruction to the demised premises
mentioned in this Article 10 which Landlord is required to repair and restore,
Tenant may terminate this Lease by notice to Landlord if Landlord has not
substantially completed the making of such required repairs and restorations
within (a) nine (9) months after the date of such damage or destruction if the
damage or destruction takes place on or before the first (1st) anniversary of
the Commencement Date, or within such period after the date nine (9) months
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after the date of such damage or destruction (not exceeding 6 months) as shall
equal the aggregate period Landlord may have been delayed in doing so by Force
Majeure Causes (as defined in Article 34 hereof); (b) four (4) months after the
date of such damage or destruction if the damage or destruction takes place
after the first (1st) anniversary of the Commencement Date, or within such
period after the date four (4) months after the date of such damage or
destruction (not exceeding 6 months) as shall equal the aggregate period
Landlord may have been delayed in doing so by Force Majeure Causes; or (c) two
(2) months after the date of such damage or destruction if the damage or
destruction took place after the second (2nd) anniversary of the Commencement
Date, or within such period after the date two (2) months after the date of such
damage or destruction (not exceeding 6 months) as shall equal the aggregate
period Landlord may have been delayed in doing so by Force Majeure Causes.
10.04. No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the demised premises or of the Building pursuant
to this Article 10.
10.05. Landlord will not carry separate insurance of any kind on Tenant's
property (including, without limitation, any property of the Tenant which shall
become the property of Landlord as provided in Article 6 hereof), and, except as
provided by law, Landlord shall not be obligated to repair any damage thereto or
replace or clean the same, or any other decorations, installations, equipment or
fixtures installed by or for Tenant at Tenant's expense. Tenant shall maintain
such fire and casualty insurance as it deems advisable, but not less than the
limits provided in clause (y) of Section 9.09 hereof. If Tenant shall fail to
maintain such insurance, Landlord shall have the right (but in no way shall
Landlord be obligated or in any way be adversely affected if Landlord fails or
elects not to do so) to obtain insurance on Tenant's property and the cost
thereof shall be additional rent under this Lease and payable by Tenant to
Landlord on demand.
10.06. The provisions of this Article 10 shall be considered an express
agreement governing any case of damage or destruction of the demised premises by
fire or other casualty, and Section 227 of the Real Property Law of the State of
New York, providing for such a contingency in the absence of an express
agreement, and any other law of like import, now or hereafter in force, shall
have no application in such case.
ARTICLE 11
ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
11.01. Except as otherwise expressly provided in this Article 11, Tenant
shall not without, in each instance, obtaining the prior consent of Landlord,
(a) assign or otherwise transfer this Lease or the term and estate hereby
granted, (b) sublet all or part of the demised premises or allow the same to be
used or occupied by others or in violation of Article 5, (c) mortgage, pledge or
encumber this Lease or all or part of the demised premises in any
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manner by reason of any act or omission on the part of Tenant, or (d) advertise,
or authorize a broker to advertise, for a subtenant for all or part of the
demised premises or for an assignee of this Lease. For purposes of this Article
11, (i) the transfer of a majority of the issued and outstanding capital stock
of any corporate tenant or subtenant, or the transfer of a majority of the total
interest in any other entity (partnership or otherwise) which is a tenant or
subtenant, however accomplished, whether in a single transaction or in a series
of related or unrelated transactions, shall not be deemed an assignment of this
Lease, or of such sublease, as the case may be, provided that such transfer was
not primarily for the purpose of transferring Tenant's leasehold interest
hereunder, (ii) any person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Article 11, and (iii) a modification, amendment
or extension without Landlord's prior written consent of a sublease previously
consented to by Landlord shall be deemed a new sublease. Tenant agrees to
furnish to Landlord upon demand at any time and from time to time such
information and assurances as Landlord may reasonably request that neither
Tenant, nor any subtenant, shall have violated the provisions of this Section
11.01.
11.02. The provisions of clauses (a) and (b) of Section 11.01 hereof shall
not apply to transactions entered into by Tenant with a corporation into or with
which Tenant is merged or consolidated or with an entity to which substantially
all of Tenant's assets are transferred, provided (a) such merger, consolidation
or transfer of assets is for a good business purpose and not principally for the
purpose of transferring the leasehold estate created hereby, and (b) the
assignee or successor entity has a net worth at least equal to or in excess of
the net worth of Tenant either (i) immediately prior to such merger,
consolidation or transfer or (ii) as of the date hereof, whichever is greater.
11.03. Any assignment or transfer, whether made with Landlord's consent as
required by Section 11.01 or without Landlord's consent pursuant to Section
11.02, shall not be effective unless and until (a) the assignee shall execute,
acknowledge and deliver to Landlord a recordable agreement, in form and
substance reasonably satisfactory to Landlord, whereby the assignee shall (i)
assume the obligations and performance of this Lease and agree to be personally
bound by all of the covenants, agreements, terms, provisions and conditions
hereof on the part of Tenant to be performed or observed on and after the
effective date of any such assignment and (ii) agree that the provisions of this
Article 11 shall, notwithstanding such assignment or transfer, continue to be
binding upon it in the future, and (b) in the case of an assignment or transfer
pursuant to Section 11.02 Tenant or its successor shall have delivered to
Landlord financial statements certified by a reputable firm of certified public
accountants evidencing satisfaction of the net worth requirements referred to in
Section 11.02. Tenant covenants that, notwithstanding any assignment or
transfer, whether or not in violation of the provisions of this Lease, and
notwithstanding the acceptance of fixed annual rent by Landlord from an assignee
or transferee or any other party, Tenant shall remain fully and primarily and
jointly and severally liable for the payment of the fixed annual rent and all
additional rent due and to become due under this Lease and for the performance
and observance of all of the covenants, agreements, terms, provisions and
conditions of this Lease on the part of Tenant to be performed or observed.
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11.04. The liability of Tenant, and the due performance by Tenant of the
obligations on its part to be performed under this Lease, shall not be
discharged, released or impaired in any respect by an agreement or stipulation
made by Landlord or any grantee or assignee of Landlord, by way of mortgage, or
otherwise, extending the time of, or modifying any of the obligations contained
in this Lease, or by any waiver or failure of Landlord to enforce any of the
obligations on Tenant's part to be performed under this Lease, and Tenant shall
continue liable hereunder. If any such agreement or modification operates to
increase the obligations of a tenant under this Lease, the liability under this
Section 11.04 of the tenant named in the Lease or any of its successors in
interest (unless such party shall have expressly consented in writing to such
agreement or modification) shall continue to be no greater than if such
agreement or modification had not been made.
11.05. Provided that Tenant is not in default of any of Tenant's
obligations under this Lease beyond the expiration of any applicable notice and
cure periods, Landlord shall not unreasonably withhold or delay its consent to
an assignment of this Lease or a subletting of the whole or a part of the
demised premises for substantially the remainder of the term of this Lease,
provided:
(a) Tenant shall furnish Landlord with the name and business
address of the proposed subtenant or assignee, information with respect to the
nature and character of the proposed subtenant's or assignee's business, or
activities, such references and current financial information with respect to
net worth, credit and financial responsibility as are reasonably satisfactory to
Landlord, and an executed counterpart of the sublease or assignment agreement;
(b) The proposed subtenant or assignee is a reputable party
whose financial net worth, credit and financial responsibility is, considering
the responsibilities involved, reasonably satisfactory to Landlord;
(c) The nature and character of the proposed subtenant or
assignee, its business or activities and intended use of the demised premises
are, in Landlord's reasonable judgment, in keeping with the standards of the
Building and the floor or floors on which the demised premises are located;
(d) Neither (i) the proposed subtenant or assignee nor (ii) any
person which, directly or indirectly, controls, is controlled by, or is under
common control with, the proposed assignee or subtenant, is then an occupant of
any part of the Building or a party who dealt with Landlord or Landlord's agent
(directly or through a broker) with respect to space in the Building during the
12 months immediately preceding Tenant's request for Landlord's consent;
(e) All costs incurred with respect to providing reasonably
appropriate means of ingress and egress from the sublet space or to separate the
sublet space
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from the remainder of the demised premises shall, subject to the provisions of
Article 6 with respect to alterations, installations, additions or improvements,
be borne by Tenant;
(f) Each assignment or sublease shall specifically state that
(i) it is subject to all of the terms, covenants, agreements, provisions, and
conditions of this Lease, (ii) the subtenant or assignee, as the case may be,
will not have the right to further assign or sublet all or part of the demised
premises or to allow same to be used by others, without the consent of Landlord
in each instance, (iii) a consent by Landlord thereto shall not be deemed or
construed to modify, amend or affect the terms and provisions of this Lease, or
Tenant's obligations hereunder, which shall continue to apply to the premises
involved, and the occupants thereof, as if the sublease or assignment had not
been made, (iv) if Tenant defaults in the payment of any rent, Landlord is
authorized to collect any rents due or accruing from any assignee, subtenant or
other occupant of the demised premises and to apply the net amounts collected to
the fixed annual rent and additional rent due hereunder, (v) the receipt by
Landlord of any amounts from an assignee or subtenant, or other occupant of any
part of the demised premises shall not be deemed or construed as releasing
Tenant from Tenant's obligations hereunder or the acceptance of that party as a
direct tenant, and (vi) the subtenant shall be required to pay its proportionate
share of Tenant's Tax Payment and Tenant's Expense Payment;
(g) Tenant shall, together with requesting Landlord's consent
hereunder, have paid Landlord any costs incurred by Landlord to review the
requested consent including any attorney's fees incurred by Landlord;
(h) The proposed subtenant or assignee is not (i) a bank or
trust company, safe deposit business, savings and loan association or loan
company; (ii) employment or recruitment agency; (iii) school, college,
university or educational institution whether or not for profit; or (iv) a
government or any subdivision or agency thereof;
(i) In the case of a subletting of a portion of the demised
premises, the portion so sublet shall be regular in shape and suitable for
normal renting purposes;
(j) Tenant shall have granted to Landlord or its agent, at
Landlord's election, the exclusive right to sublease the demised premises or
such portion thereof as Tenant proposes to sublet, or to assign this Lease, as
the case may be, for a period of three months;
(k) The subletting or assignment shall not be advertised
publicly for a lower rental rate than that being charged by Landlord at the time
for similar space then available in the Building; and
(l) The proposed assignment or sublease shall provide that it is
subject to the Landlord's rights under Section 11.06 hereof. Tenant shall have
complied with the provisions of said Section 11.06 and Landlord shall not have
made any of the elections provided for therein.
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11.06. (a) Should Tenant agree to assign this Lease or to sublet all or
any portion of the demised premises (other than by an assignment or sublease
permitted by Section 11.02 hereof), Tenant shall, as soon as any such agreement
is consummated but no later than 60 days prior to the effective date thereof
(the "Effective Date") deliver to Landlord executed counterparts of any such
agreement and of all ancillary agreements with the proposed assignee or
sublessee, as applicable, and Landlord shall then have the right to elect by
notice to Tenant given within 30 days after such delivery (x) to consent or
refuse to consent to such assignment or sublease in accordance with the terms of
this Lease or (y) to elect to:
A. With respect to a proposed assignment of this Lease:
(i) terminate this Lease as of the Effective Date as if it
were the Expiration Date set forth herein; or
(ii) accept an assignment of this Lease from Tenant in which
event Tenant shall promptly execute and deliver to Landlord or Landlord's
designee an assignment of this Lease in form reasonably satisfactory to
Landlord's counsel which shall be effective as of the Effective Date;
B. With respect to a proposed subletting of the entire demised
premises:
(i) proceed under (i) or (ii) of A above; or (ii) accept a
sublease from Tenant of the entire demised premises in which event Tenant shall
promptly execute and deliver to Landlord or Landlord's designee a sublease for
the remainder of the term hereof less one day commencing with the Effective Date
on (x) the rental terms specified in the proposed sublease or (y) the rental
terms specified in this Lease, as elected by Landlord in its notice to proceed
under this subclause (ii); and
C. With respect to a proposed subletting of less than the
entire demised premises:
(i) terminate this Lease as to the portion of the demised
premises affected by such subletting as of the Effective Date in which case
Tenant shall promptly execute and deliver to Landlord an appropriate
modification of this Lease in form satisfactory to Landlord; or
(ii) accept a sublease from Tenant of the portion of the
demised premises affected by such subletting in which event Tenant shall
promptly execute and deliver to Landlord or Landlord's designee a sublease for
the remainder of the term hereof less one day commencing with the Effective Date
at (x) the rental terms specified in the proposed sublease or (y) the rental
terms specified in this Lease on a per rentable square foot basis, as elected by
Landlord in its notice to proceed under this subclause (ii).
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(b) In the event that this Lease shall be assigned to Landlord or
Landlord's designee or if all or part of the demised premises shall be sublet to
Landlord or Landlord's designee pursuant to this Section 11.06, the provisions
of any such assignment or sublease and the obligations of Landlord and the
rights of Tenant with respect thereto shall not be binding upon or otherwise
affect the rights of any holder of a superior mortgage or of a superior lease
unless such holder shall elect by written notice to Tenant to succeed to the
position of Landlord or its designee, as the case may be, thereunder.
(c) If Landlord should elect to have Tenant execute and deliver a
sublease pursuant to the provisions of paragraph (a) above, said sublease shall
be in form reasonably satisfactory to Landlord's counsel and on all the terms
contained in this Lease, except that:
(i) The rental terms shall be those specified by Landlord as
provided in subparagraph 11.06(a) hereof;
(ii) The sublease shall not provide for any work to be done for
the subtenant or for any initial rent concessions or contain provisions
inapplicable to a sublease, except that in the case of a subletting of a portion
of the demised premises Tenant shall pay to subtenant (x) the cost of erecting
such demising walls as are necessary to separate the subleased premises from the
remainder of the demised premises and to provide access thereto and (y) the
estimated cost of such other work as was to be paid for or performed by Tenant
pursuant to any sublease for which Landlord's consent was requested;
(iii) The subtenant thereunder shall have the right to underlet
the subleased premises, in whole or in part, or assign the sublease, without
Tenant's consent;
(iv) The subtenant thereunder shall have the right to make, or
cause to be made, any changes, alterations, decorations, additions and
improvements that such subtenant may desire or authorize;
(v) Such sublease shall expressly negate any intention that
any estate created by or under such sublease be merged with any other estate
held by either of the parties thereto;
(vi) Any consent required of Tenant, as lessor under that
sublease, shall be deemed granted if consent with respect thereto is granted by
Landlord;
(vii) There shall be no limitation as to the use of the
sublet premises by the subtenant thereunder;
(viii) Any failure of the subtenant thereunder to comply with the
provisions of said sublease, other than with respect to the payment of rent to
Tenant,
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shall not constitute a default thereunder or hereunder if Landlord has consented
to such non-compliance, and
(ix) Such sublease shall provide that Tenant's obligations with
respect to vacating the demised premises and removing any changes, alterations,
decorations, additions or improvements made in the subleased premises shall be
limited to those which accrued and related to such of the foregoing as were made
prior to the effective date of the sublease.
(d) If pursuant to the exercise of any of Landlord's options under
this Section 11.06, this Lease is terminated as to only a portion of the demised
premises, then the fixed annual rent payable hereunder and the additional rent
payable pursuant to Article 3 hereof shall be adjusted in proportion to the
portion of the demised premises affected by such termination and Landlord, at
Tenant's expense, may make such alterations as may be required or deemed
necessary by Landlord to physically separate such portion from the balance of
the demised premises and to comply with any Legal Requirements relating to such
separation.
(e) If the Landlord shall give its consent to any assignment of this
Lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as additional rent:
(i) in the case of an assignment, an amount equal to all sums
and other considerations paid to Tenant by the assignee for or by reason of such
assignment (including, but not limited to, sums paid for the sale of Tenant's
fixtures, leasehold improvements, equipment, furniture, furnishings or other
personal property, less, in the case of a sale thereof, the then net unamortized
or undepreciated cost thereof determined on the basis of Tenant's federal income
tax returns); and
(ii) in the case of a sublease, any rents, additional charges or
other consideration payable under the sublease to Tenant by the subtenant which
is in excess of the fixed annual rent and additional rent accruing during the
term of the sublease in respect of the subleased space (at the rate per square
foot payable by Tenant hereunder) pursuant to the terms hereof (including, but
not limited to, sums paid for the sale or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture or furnishings, other personal property,
less, in the case of the sale thereof, the then net unamortized or undepreciated
cost thereof determined on the basis of Tenant's federal income tax returns)
after subtracting "Tenant's Costs" (as such term is defined in Section 11.06(g)
hereof).
The sums payable under this Section 11.06(e) shall be paid to Landlord as
and when paid by the assignee or subtenant to Tenant.
(f) If Landlord exercises any of its options under this Section
11.06, Landlord shall be free to, and shall have no liability to Tenant if
Landlord shall,
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lease the demised premises or any portion thereof with respect to which one of
such options exercised, to Tenant's proposed assignee or subtenant, as the case
may be.
(g) As used herein, the term "Tenant's Costs" shall mean the
reasonable brokerage commissions, legal expenses and advertising expenses
incurred by Tenant to third parties in connection with the subletting in
question; and the actual out-of-pocket cost to Tenant of erecting a demising
wall to separate the sublet premises from the balance of the demised premises,
the foregoing cost to be amortized ratably over the term of the sublease in
question.
Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord
of Tenant's Costs within thirty (30) days after the commencement date of the
sublease to which same apply.
ARTICLE 12
CERTIFICATE OF OCCUPANCY.
12.01 Landlord represents that the Certificate of Occupancy for the
Building will permit the use of the demised premises for ordinary office
purposes.
ARTICLE 13
ADJACENT EXCAVATION - SHORING
13.01. If an excavation or other substructure work shall be made upon land
adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
shall be necessary to preserve the wall of or the Building of which the demised
premises form a part from injury or damage and to support the same by proper
foundations without any claim for damages or indemnity against Landlord, or
diminution or abatement of rent.
ARTICLE 14
CONDEMNATION
14.01. In the event that the whole of the demised premises shall be
lawfully condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. In the event that only a part of
the demised premises shall be so condemned or taken, then, effective as of the
date of vesting of title, the fixed annual rent under Article 1 hereof shall be
reduced by
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the amounts allocable to the part of the demised premises so taken or condemned.
In the event that only a part of the Building shall be so condemned or taken,
then (a) Landlord (whether or not the demised premises be affected) may, at
Landlord's option, terminate this Lease and the term and estate hereby granted
as of the date of such vesting of title by notifying Tenant in writing of such
termination within 60 days following the date on which Landlord shall have
received notice of vesting of title, provided that Landlord also terminates the
leases of all other tenants on the same floor as the demised premises, or (b) if
such condemnation or taking shall be of a substantial part of the demised
premises (25% or more) or of a substantial part of the means of access thereto,
Tenant may, at Tenant's option, by delivery of notice in writing to Landlord
within 30 days following the date on which Tenant shall have received notice of
vesting of title, terminate this Lease and the term and estate hereby granted as
of the date of vesting of title, or (c) if neither Landlord nor Tenant elects to
terminate this Lease, as aforesaid, this Lease shall be and remain unaffected by
such condemnation or taking, except that the fixed annual rent payable under
Article 1 shall be abated to the extent hereinbefore provided in this Article
14.
14.02. In the event of termination of this Lease in any of the cases
hereinbefore provided, this Lease and the term and estate hereby granted shall
expire as of the date of such termination with the same effect as if that were
the Expiration Date, and the fixed annual rent payable hereunder shall be
apportioned as of such date.
14.03. In the event of any condemnation or taking of all or a part of the
Building, Landlord shall be entitled to receive the entire award in the
condemnation proceeding, including any award made for the value of the estate
vested by this Lease in Tenant. Tenant hereby expressly assigns to Landlord any
and all right, title and interest of Tenant now or hereafter arising in or to
any such award or any part thereof, and agrees that it shall not be entitled to
receive any part of such award; provided, however, that Tenant shall be entitled
to make a separate claim for its trade fixtures and moving expenses.
14.04. In the event of any taking of less than the whole of the Building
which does not result in a termination of this Lease, Landlord, at its expense,
shall proceed with reasonable diligence to repair, alter and restore the
remaining parts of the Building and the demised premises to substantially their
former condition to the extent that the same may be feasible and so as to
constitute a complete and tenantable Building and demised premises.
14.05. In the event any part of the demised premises be taken to effect
compliance with any law or requirement of public authority other than in the
manner hereinabove provided in this Article 14, then, (i) if such compliance is
the obligation of Tenant under this Lease, Tenant shall not be entitled to any
diminution or abatement of rent or other compensation from Landlord therefor,
but (ii) if such compliance is the obligation of Landlord under this Lease, the
fixed annual rent hereunder shall be reduced in the same manner as is provided
in Section 14.01 according to the reduction in rentable area of the demised
premises resulting from such taking.
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14.06. If the whole or any part of the demised premises shall be taken in
condemnation proceedings or by any right of eminent domain for temporary use or
occupancy, the foregoing provisions of this Article shall not apply and Tenant
shall continue to pay, in the manner and at the times herein specified, the full
amounts of fixed annual rent and all additional rent and other charges payable
by Tenant hereunder, and, except only to the extent that Tenant may be prevented
from so doing pursuant to the terms of the order of the condemning authority,
Tenant shall perform and observe all of the other terms, covenants, conditions
and obligations hereof upon the part of Tenant to be performed and observed, as
though such taking had not occurred. Tenant shall be entitled to receive the
entire amount of the condemnation proceeds (after deducting Landlord's
reasonable costs and expenses, if any, in obtaining same) (the "net proceeds")
made for such temporary taking, whether paid by way of damages, rent or
otherwise, unless such period of temporary use or occupancy shall extend beyond
the termination of this Lease, in which case the net proceeds shall be
apportioned between Landlord and Tenant upon receipt thereof as of the date of
termination of this Lease. Tenant shall, upon expiration of any such period of
temporary use or occupancy during the term of this Lease, restore the demised
premises, as nearly as may be reasonably practicable, to the condition in which
the same were immediately prior to such taking. Any portion of the net
condemnation proceeds received by Tenant as compensation for the cost of
restoration of the demised premises shall, if such period of temporary use or
occupancy shall extend beyond the Term, be paid to Landlord on the date of
termination of this Lease to the extent not theretofore disbursed by Tenant in
connection with restoration of the demised premises.
ARTICLE 15
ACCESS TO DEMISED PREMISES; CHANGES
15.01. Tenant shall permit Landlord to erect, use and maintain pipes,
ducts and conduits in and through the demised premises, provided the same are
installed adjacent to or concealed behind walls and ceilings of the demised
premises. Landlord shall to the extent practicable install such pipes, ducts and
conduits by such methods and at such locations as will not materially interfere
with or impair Tenant's layout or use of the demised premises. Landlord or its
agents or designees shall have the right, but only upon notice to Tenant or any
authorized employee of Tenant at the demised premises, to enter the demised
premises, during business hours, (a) for the making of such repairs or
alterations as Landlord may deem necessary for the Building or which Landlord
shall be required to or shall have the right to make by the provisions of this
Lease or any other lease in the Building and (b) for the purpose of inspecting
them or exhibiting them to existing or prospective assignees, agents or
designees of any such parties. Land, Building or Property or to prospective
assignees, agents or designees of any such parties. Landlord shall be allowed to
take all material into and upon the demised premises that may be required for
the repairs or alterations above mentioned without the same constituting an
actual or constructive eviction of Tenant in whole or in part, and the rent
reserved hereunder shall not abate while said repairs or alterations are being
made by reason of loss or interruption of the business of Tenant because of the
prosecution of any such work. Landlord shall exercise
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reasonable diligence so as to minimize the disturbance to Tenant but nothing
contained herein shall be deemed to require Landlord to perform the same on an
overtime or premium pay basis.
15.02. Landlord reserves the right, without the same constituting an
actual or constructive eviction and without incurring liability to Tenant
therefor, to change the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairways, toilets and other
public parts of the Building; provided, however, that access to the Building
shall not be cut off and that there shall be no unreasonable obstruction of
access to the demised premises or unreasonable interference with the use or
enjoyment thereof.
15.03. Landlord may, during the twelve (12) months prior to expiration of
the Term exhibit the demised premises to prospective tenants.
15.04. If Tenant shall not be personally present to open and permit an
entry into the demised premises at any time when for any reason an entry therein
shall be urgently necessary by reason of fire or emergency, Landlord or
Landlord's agents may forcibly enter the same without rendering Landlord or such
agents liable therefor (if during such entry Landlord or Landlord's agents shall
accord reasonable care to Tenant's property) and without in any manner affecting
the obligations and covenants of this Lease.
ARTICLE 16
CONDITIONS OF LIMITATION
16.01. This Lease and the term and estate hereby granted are subject to
the limitation that whenever Tenant shall make an assignment of the property of
Tenant for the benefit of creditors, or if a petition shall be filed by or
against Tenant under any provisions of the United States Bankruptcy Act or under
the provisions of any other bankruptcy or insolvency law or any law of like
import, or whenever a permanent receiver of Tenant or of or for the property of
Tenant shall be appointed, then, Landlord may, (a) at any time after receipt of
notice of the occurrence of any such event, or (b) if such event occurs without
the acquiescence of Tenant, at any time after the event continues for thirty
(30) days, give Tenant a notice of intention to end the Term of this Lease at
the expiration of 5 days from the date of service of such notice of intention,
and upon the expiration of 5 days period this Lease and the Term and estate
hereby granted, whether or not the Term shall theretofore have commenced, shall
terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 18.
16.02. This Lease and the term and estate hereby granted are subject to
the limitation that:
(a) whenever Tenant shall fail to pay any installment of fixed
annual rent or any additional rent or any other charge payable by Tenant to
Landlord, on the day the
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same is due and payable pursuant to the terms hereof, and such default shall
continue for 5 days after Landlord shall have given Tenant a notice specifying
such default, or
(b) whenever Tenant shall do or permit anything to be done, whether
by action or inaction, contrary to any of Tenant's obligations hereunder, and if
such situation shall continue and shall not be remedied by Tenant within 15 days
after Landlord shall have given to Tenant a notice specifying the same, or, in
the case of a happening or default which cannot with due diligence be cured
within a period of 15 days and the continuation of the period required for cure
will not subject Landlord to the risk of criminal liability (as more
particularly described in Article 8 hereof) or termination of any superior lease
or foreclosure of any superior mortgage, if Tenant shall not, (i) within said 15
day period advise Landlord of Tenant's intention to duly institute all steps
necessary to remedy such situation, (ii) duly institute within said 15 day
period, and thereafter diligently and continuously prosecute to completion all
steps necessary to remedy the same and (iii) complete such remedy within such
time after the date of the giving of said notice of Landlord as shall reasonably
be necessary, or
(c) whenever any event shall occur or any contingency shall arise
whereby this Lease or the estate hereby granted or the unexpired balance of the
Term hereof would, by operation of law or otherwise, devolve upon or pass to any
person, firm or corporation other than Tenant, except as expressly permitted by
Article 11, or
(d) whenever Tenant shall abandon the demised premises (unless as a
result of a casualty), or
(e) whenever in case any other lease held by Tenant from Landlord
shall expire and terminate (whether or not the term thereof shall then have
commenced) as a result of the default of Tenant thereunder, or
(f) whenever Tenant shall default in the due keeping, observing or
performance of any covenant, agreement, provision or condition of Article 5
hereof on the part of Tenant to be kept, observed or performed and if such
default shall continue and shall not be remedied by Tenant within three (3)
business days after Landlord shall have given to Tenant a notice specifying the
same, then in any of said cases set forth in the foregoing Subsections (a), (b),
(c), (d), (e), and (f), Landlord may give to Tenant a notice of intention to end
the Term at the expiration of 3 days from the date of the service of such notice
of intention, and upon the expiration of said 3 days this Lease and the Term and
estate hereby granted, whether or not the Term shall theretofore have commenced,
shall terminate with the same effect as if that day were the Expiration Date,
but Tenant shall remain liable for damages as provided in Article 18.
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ARTICLE 17
RE-ENTRY BY LANDLORD, INJUNCTION
17.01. If Tenant shall fail to pay any installment of fixed annual rent,
or of any additional rent, or any other charge payable by Tenant to Landlord on
the date the same is due and payable, and if such default shall continue for 5
days after Landlord shall have given to Tenant a notice specifying such default,
or if this Lease shall terminate as in Article 16 provided, Landlord or
Landlord's agents and employees may immediately or at any time thereafter re-
enter the demised premises, or any part thereof, either by summary dispossess
proceedings or by any suitable action or proceeding at law, without being liable
to indictment, prosecution or damages therefrom. The word re-enter, as herein
used, is not restricted to its technical legal meaning.
17.02. In the event of a breach or threatened breach by Tenant of any of
its obligations under this Lease, Landlord shall also have the right of
injunction. The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies or means
of redress to which Landlord may lawfully be entitled at any time and Landlord
may invoke any remedy allowed at law or in equity as if specific remedies were
not provided for herein.
17.03. If this Lease shall terminate under the provisions of Article 16,
or if Landlord shall re-enter the demised premises under the provisions of this
Article 17, or in the event of the termination of this Lease, or of re-entry by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, then (a) Tenant
shall thereupon pay to Landlord the fixed annual rent and additional rent
payable by Tenant to Landlord up to the time of such termination of this Lease,
or of such recovery of possession of the demised premises by Landlord, as the
case may be, and shall also pay to Landlord damages as provided in Article 18,
and (b) Landlord shall be entitled to retain all moneys, if any, paid by Tenant
to Landlord, whether as advance rent, security or otherwise, but such moneys
shall be credited by Landlord against any fixed annual rent or additional rent
due from Tenant at the time of such termination or re-entry or, at Landlord's
option against any damages payable by Tenant under Articles 16 and 18 or
pursuant to law.
17.04. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of the demised premises, by reason of the violation by Tenant of any
of the covenants and conditions of this Lease or otherwise.
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ARTICLE 18
DAMAGES
18.01. If this Lease is terminated under the provisions of Article 16, or
if Landlord shall re-enter the demised premises under the provisions of Article
17, or in the event of the termination of this Lease, or of re-entry by or under
any summary dispossess or other proceeding or action or any provision of law by
reason of default hereunder on the part of Tenant, Tenant shall pay to Landlord
as damages, at the election of Landlord, either
(a) a sum which at the time of such termination of this Lease or at
the time of any such re-entry by Landlord, as the case may be, represents the
then present value of the excess, if any, of:
(1) the aggregate of the fixed annual rent and the additional
rent payable hereunder which would have been payable by Tenant
(conclusively presuming the additional rent to be the same as was
payable for the year immediately preceding such termination) for the
period commencing with such earlier termination of this Lease or the
date of any such re-entry, as the case may be, and ending with the
Expiration Date, had this Lease not so terminated or had Landlord
not so re-entered the demised premises, over
(2) the aggregate rental value of the demised premises for the
same period, or
(b) sums equal to the fixed annual rent and the additional rent
payable hereunder which would have been payable by Tenant had this Lease not so
terminated, or had Landlord not so re-entered the demised premises, payable upon
the due dates therefor specified herein following such termination or such re-
entry and until the Expiration Date, provided, however, that if Landlord shall
re-let the demised premises during said period, Landlord shall credit Tenant
with the net rents received by Landlord from such re-letting, such net rents to
be determined by first deducting from the gross rents as and when received by
Landlord from such re-letting, the expenses incurred or paid by Landlord in
terminating this Lease or in re-entering the demised premises and in securing
possession thereof, as well as the expenses of re-letting, including altering
and preparing the demised premises for new tenants, brokers' commissions, legal
fees, and all other expenses properly chargeable against the demised premises
and the rental thereof; it being understood that any such re-letting may be for
a period shorter or longer than the remaining term of this Lease. In no event
shall Tenant be entitled to receive any excess of such net rents over the sums
payable by Tenant to Landlord hereunder for the period of such re-letting, or
shall Tenant be entitled in any suit for the collection of damages pursuant to
this subsection to a credit in respect of any net rents from a re-letting,
except to the extent that such net rents are actually received by Landlord. If
the demised premises or any part thereof should be re-let in combination with
other space, then proper apportionment on a square foot basis shall
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be made of the rent received from such re-letting and of the expenses of re-
letting. If the demised premises or any part thereof be re-let by Landlord for
the unexpired portion of the term of this Lease, or any part thereof, before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent payable pursuant to such re-letting shall, prima facie, be the
fair and reasonable rental value for the demised premises, or part thereof, so
re-let during the term of the re-letting.
18.02. Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the Term would have expired if it had not been so terminated
under the provisions of Article 16, or under any provision of law, or had
Landlord not re-entered the demised premises. Nothing herein contained shall be
construed to limit or preclude recovery by Landlord against Tenant of any sums
or damages to which, in addition to the damages particularly provided above,
Landlord may lawfully be entitled by reason of any default hereunder on the part
of Tenant. Nothing herein contained shall be construed to limit or prejudice the
right of Landlord to prove for and obtain as liquidated damages by reason of the
termination of this Lease or re-entry of the demised premises for the default of
Tenant under this Lease, an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, such damages are to be proved whether or not such amount be greater,
equal to, or less than any of the sums referred to in Section 18.01.
ARTICLE 19
LANDLORD'S RIGHT TO PERFORM TENANTS OBLIGATIONS
19.01. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under any of the
terms or provisions of this Lease, (a) Landlord may remedy such default for the
account of Tenant, immediately and without notice in case of emergency, or in
any other case if Tenant shall fail to remedy such default with all reasonable
dispatch after Landlord shall have notified Tenant in writing of such default
and the applicable grace period for curing such default shall have expired; and
(b) if Landlord makes any expenditures or incurs any obligations for the payment
of money in connection with such default including, but not limited to,
reasonable attorneys' fees in instituting, prosecuting or defending any action
or proceeding, such sums paid or obligations incurred, with interest at the
Interest Rate, shall be deemed to be additional rent hereunder and shall be paid
by Tenant to Landlord upon rendition of a bill to Tenant therefor. The
provisions of this Article 19 shall survive the expiration or other termination
of this Lease.
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ARTICLE 20
QUIET ENJOYMENT
20.01. Landlord covenants and agrees that subject to the terms and
provisions of this Lease, if, and so long as, Tenant keeps and performs each and
every covenant, agreement, term, provision and condition herein contained on the
part or on behalf of Tenant to be kept or performed, then Tenant may quietly
enjoy the demised premises during the Term without hindrance by Landlord or any
person claiming through or under Landlord subject however, to (i) the
obligations of this Lease, and (ii) the provisions of Article 25 hereof with
respect to Superior Instruments which affect this Lease.
ARTICLE 21
SERVICES AND EQUIPMENT
21.01. So long as Tenant is not in default under any of the covenants of
this Lease beyond the expiration of any applicable grace period, Landlord shall:
(a) Provide necessary elevator facilities on business days from
8:00 a.m. to 6:00 p.m. and shall have at least one elevator subject to call at
all other times. At Landlord's option, the elevators shall be operated by
automatic control or by manual control, or by a combination of both of such
methods.
(b) Maintain in good repair the air conditioning, heating and
ventilating systems installed by Landlord as part of the base Building systems.
The base Building air conditioning, heating and ventilation systems will
function when seasonably required on business days from 8:00 a.m. to 6:00 p.m.
as more fully described in Schedule C annexed hereto and made a part hereof. The
air conditioning system (as it relates to the demised premises) shall have
separate controls in the demised premises and may be operated by Tenant as
required if the demised premises constitute an entire floor; with respect to
partial floors said controls shall be located in an area on Tenant's floor of
the Building accessible to Tenant. Landlord has informed Tenant that the windows
of the demised premises and the Building are sealed, and that the demised
premises may become uninhabitable and the air therein may become unbreathable
during the hours or days when Landlord is not required pursuant to this
paragraph to furnish heat or ventilation or when Tenant does not operate the
air-conditioning system. Any use or occupancy of the demised premises during
such hours shall be at the sole risk, responsibility and hazard of Tenant, and
Landlord shall have no responsibility or liability therefor. Such condition of
the demised premises shall not constitute nor be deemed to be a breach or a
violation of this Lease or of any provision thereof, nor shall it be deemed an
actual or constructive eviction nor shall Tenant claim or be entitled to claim
any abatement of rent nor make any claim for any damages or compensation by
reason of such condition of the demised premises. Tenant shall cause and keep
entirely unobstructed all the vents, intakes, outlets and
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grilles, at all times and shall comply with and observe all regulations and
requirements prescribed by Landlord for the proper functioning of the heating,
ventilating and air-conditioning systems. Nothing contained herein shall be
deemed to require Landlord to furnish at Landlord's expense such electric energy
as is required to operate the air conditioning system serving the demised
premises. Subject to the provisions of Article 4 hereof all such electric energy
shall be furnished to Tenant at Tenant's cost and expense. In the event that
Tenant shall require heating, air conditioning or ventilation after hours,
Tenant shall pay Landlord's customary charges therefor as additional rent. All
tenants requesting after hours heating shall give Landlord reasonable advance
notice of such requirement. All tenants who require after hours air-conditioning
or ventilating shall have the responsibility of operating the air-conditioning
and ventilation systems by use of a separate key which Landlord shall provide.
(c) Provide the cleaning and janitorial services described on
Schedule F annexed hereto on business days.
(d) Furnish water for lavatory and drinking and office cleaning
purposes. If Tenant requires, uses or consumes water for any other purposes,
Tenant agrees that Landlord may install a meter or meters or other means to
measure Tenant's water consumption, and Tenant further agrees to reimburse
Landlord for the cost of the meter or meters and the installation thereof, and
to pay for the maintenance of said meter equipment and/or to pay Landlord's cost
of other means of measuring such water consumption by Tenant. Tenant shall
reimburse Landlord for the cost of all water consumed, as measured by said meter
or meters or as otherwise measured, including sewer rents.
(e) Landlord will at Tenant's request supply condenser water to any
supplementary air conditioning units installed by Tenant in the demised premises
in accordance with the provisions of this Lease and Tenant agrees to pay
Landlord its customary charges for so providing such condenser water to the
demised premises. In the event Tenant installs supplementary air conditioning
units serving the demised premises, Tenant covenants and agrees, at its sole
cost and expense, to maintain in full force and effect for so long as such air
conditioning unit remains in the Building, a maintenance agreement for the
periodic maintenance of such unit on customary terms with a contractor
reasonably acceptable to Landlord and to furnish a copy of said contract and all
extensions thereof to Landlord within five (5) days after demand.
21.02. Landlord reserves the right without any liability whatsoever, or
abatement of fixed annual rent, or additional rent, to stop the heating, air
conditioning, elevator, plumbing, electric and other systems when necessary by
reason of accident or emergency or for repairs, alterations, replacements or
improvements, provided that except in case of emergency, Landlord will notify
Tenant in advance, if possible, of any such stoppage and, if ascertainable, its
estimated duration, and will proceed diligently with the work necessary to
resume such service as promptly as possible and in a manner so as to minimize
interference with the Tenant's use and enjoyment of the demised premises, but
Landlord shall not be obligated to employ overtime or premium labor therefor.
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21.03. Tenant shall reimburse Landlord for the cost to Landlord of removal
from the demised premises and the Building of so much of any refuse and rubbish
of Tenant as shall exceed that ordinarily accumulated daily in the routine of
general business office occupancy.
21.04. Tenant agrees to employ such office maintenance contractor as
Landlord may from time to time designate, for all waxing, polishing, lamp
replacement, cleaning (other than those cleaning services Landlord is obligated
to furnish) and maintenance work in the demised premises, provided that the
quality thereof and the charges therefor are reasonably comparable to that of
other contractors. Tenant shall not employ any other contractor without
Landlord's prior written consent.
21.05. Landlord will not be required to furnish any other services, except
as otherwise provided in this Lease.
ARTICLE 22
DEFINITIONS
22.01. The term "Landlord" as used in this Lease means only the owner, or
the mortgagee in possession, for the time being of the Land and Building (or the
owner of a lease of the Building or of the Land and Building), so that in the
event of any transfer of title to said Land and Building or said lease, or in
the event of a lease of the Building, or of the Land and Building, upon
notification to Tenant of such transfer or lease the said transferor landlord
shall be and hereby is entirely freed and relieved of all future covenants,
obligations and liabilities of Landlord hereunder, and it shall be deemed and
construed as a covenant running with the land without further agreement between
the parties or their successors in interest, or between the parties and the
transferee of title to said Land and Building or said lease, or the said lessee
of the Building or of the Land and Building, that the transferee or the lessee,
as applicable, has assumed and agreed to carry out any and all such covenants,
obligations and liabilities of Landlord hereunder.
22.02. The term "Business Days" or "business days" as used in this Lease
shall exclude Saturdays, Sundays and all days observed as legal holidays and
defined as Public Holidays in the Official Directory of the City of New York as
well as all other days recognized as holidays under applicable union contracts.
22.03. "Interest Rate" shall mean a rate per annum equal to the lesser of
(a) 2% above the so-called "prime rate" of Republic National Bank, as publicly
announced from time to time or if Republic National Bank shall cease to exist or
cease to announce such rate, any similar rate designated by Landlord which is
publicly announced from time to time by any other bank in the City of New York
having combined capital and surplus in excess of $100,000,000 or (b) the maximum
rate of interest, if any, which Tenant may legally contract to pay.
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22.04. "Legal Requirements" shall mean laws, statutes and ordinances
including building codes and zoning regulations and ordinances and the orders,
rules, regulations, directives and requirements of all federal, state, county,
city and borough departments, bureaus, boards, agencies, offices, commissions
and other subdivisions thereof, or of any official thereof, or of any other
governmental, public or quasi-public authority, whether now or hereafter in
force, which may be applicable to the Land or Building or the demised premises
or any part thereof, or the sidewalks, curbs or areas adjacent thereto
including, without limitation, the Americans with Disabilities Act of 1990,
Public Law 101-336, 42 U.S.C.A. sections12102 et seq. (herein called the
"Disabilities Act"), and all requirements, obligations and conditions of all
instruments of record on the date of this Lease.
ARTICLE 23
INVALIDITY OF ANY PROVISION
23.01. If any term, covenant, condition or provision of this Lease or the
application thereof to any circumstance or to any person, firm or corporation
shall be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease shall not be affected thereby and each
remaining term, covenant, condition and provision of this Lease shall be valid
and shall be enforceable to the fullest extent permitted by law.
ARTICLE 24
BROKERAGE
24.01. Tenant covenants, represents and warrants that Tenant has had no
dealings or negotiations with any broker or agent other than Insignia/Edward S.
Gordon Company, Inc. (which is representing Landlord) and Newmark & Company Real
Estate, Inc. (which is representing Tenant), in connection with the consummation
of this Lease, and Tenant covenants and agrees to pay, hold harmless and
indemnify Landlord from and against any and all cost, expense (including
reasonable attorneys' fees and court costs), loss and liability for any
compensation, commissions or charges claimed by any broker or agent, other than
the brokers specifically set forth in this Section 24.01, with respect to this
Lease or the negotiation thereof.
ARTICLE 25
SUBORDINATION
25.01. This Lease is and shall be subject and subordinate to all ground or
underlying leases which may now or hereafter affect the Land or the Building and
to all
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mortgages which may now or hereafter affect such leases, the Land or the
Building, and to all renewals, refinancings, modifications, replacements and
extensions thereof (hereinafter called "Superior Instruments"). The provisions
of this Section 25.01 shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall promptly execute and deliver at its own cost and expense any instrument,
in recordable form if required, that Landlord, the holder of any Superior
Instrument or any of their respective successors in interest may request to
evidence such subordination, and Tenant hereby constitutes and appoints Landlord
or its successors in interest to be Tenant's attorney-in-fact, irrevocably and
coupled with an interest, to execute and deliver any such instrument for and on
behalf of Tenant.
25.02. In the event of a termination of any ground or underlying lease, or
if the interests of Landlord under this Lease are transferred by reason of, or
assigned in lieu of, foreclosure or other proceedings for enforcement of any
mortgage, or if the holder of any mortgage acquires a lease in substitution
therefor, then Tenant under this Lease will, at the option to be exercised in
writing by the holder of any such Superior Instrument or any purchaser, assignee
or lessee, as the case may be, either (i) attorn to it and will perform for its
benefit all the terms, covenants and conditions of this Lease on Tenant's part
to be performed with the same force and effect as if it were the landlord
originally named in this Lease, or (ii) enter into a new lease with it for the
remaining term of this Lease and otherwise on the same terms and conditions and
with the same options, if any, then remaining. The foregoing provisions of
clause (i) of this Section 25.02 shall enure to the benefit of such holder of a
Superior Instrument, purchaser, assignee or lessee, shall be self-operative upon
the exercise of such option, and no further instrument shall be required to give
effect to such option, and no further instrument shall be required to give
effect to said provisions. Tenant, however, upon demand of any such holder of a
Superior Instrument, purchaser, assignee or lessee agrees to execute, from time
to time, instruments in confirmation of the foregoing provisions of this Section
25.02, satisfactory to any such holder of a Superior Instrument, purchaser,
assignee or lessee, acknowledging such attornment and setting forth the terms
and conditions of its tenancy. Tenant hereby constitutes and appoints Landlord
or its successors in interest to be the Tenant's attorney-in-fact, irrevocably
and coupled with an interest, to execute and deliver such instrument of
attornment, or such new lease, if the Tenant refuses or fails to do so promptly
upon request.
25.03. Anything herein contained to the contrary notwithstanding, under no
circumstances shall any such holder of a Superior Instrument, purchaser,
assignee or lessee, as the case may be, whether or not it shall have succeeded
to the interests of the landlord under this Lease, be
(a) liable for any act, omission or default of any prior landlord;
or
(b) subject to any offsets, claims or defenses which the Tenant
might have against any prior landlord; or
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(c) bound by any rent or additional rent which Tenant might have paid
to any prior landlord for more than one month in advance or for more than three
months in advance where such rent payments are payable at intervals of more than
one month; or
(d) bound by any modification, amendment or abridgment of the Lease,
or any cancellation or surrender of the same, made without its prior written
approval;
(e) obligated to do or complete any work in the demised premises
pursuant to Article 2 hereof or otherwise be obligated to prepare the demised
premises for occupancy in accordance with the provisions of this Lease.
25.04. If, in connection with the financing of the Building, the holder of
any mortgage shall request reasonable modifications in this Lease as a condition
of approval thereof, Tenant will not unreasonably withhold, delay or defer
making such modifications provided the same do not (i) increase the fixed annual
rent or additional rents payable by Tenant, (ii) reduce the term hereof or (iii)
extend the term hereof.
ARTICLE 26
CERTIFICATE OF TENANT
26.01. Tenant shall, without charge, at any time and from time to time,
within ten (10) days after request by Landlord or the holder of a Superior
Instrument, as the case may be, execute, acknowledge and deliver to Landlord,
the holder of a Superior Instrument or any other person, firm or corporation
specified by Landlord, a written instrument (an "Estoppel Certificate") in the
form attached hereto as Schedule D or such other form as may be required by the
holder of any Superior Instrument. Prior to taking occupancy of the demised
premises, and as a condition precedent thereto, Tenant shall execute,
acknowledge and deliver such an estoppel certificate to Landlord
26.02. Tenant agrees that, except for the first month's rent hereunder, it
will pay no rent under this Lease more than thirty (30) days in advance of its
due date, if so restricted by any existing or future Superior Instrument or by
an assignment of this Lease to the holder of such Superior Instrument, and, in
the event of any act or omission by Landlord which would give Tenant the right
to terminate this Lease, Tenant will not exercise such right until Tenant shall
have first given written notice of such act or omission to the holder of any
Superior Instrument who shall have furnished such holder's last address to
Tenant, and until a reasonable period for remedying such act or omission shall
have elapsed following the giving of such notices (which reasonable period shall
in no event be less than the period to which Landlord would be entitled under
this Lease or otherwise, after similar notice, to effect such remedy), during
which time such holder shall have the right, but shall not be obligated, to
remedy or cause to be remedied such act or omission. Tenant further agrees not
to exercise any such right if the holder of any
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such Superior Instrument commences to cure such act or omission within a
reasonable time after having received notice thereof and diligently prosecutes
such cure thereafter.
ARTICLE 27
LEGAL PROCEEDINGS, WAIVER OF JURY TRIAL
27.01. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other on any matters whatsoever arising out of or in any way in connection with
this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy
of the demised premises, and/or any other claims (except claims for personal
injury or property damage), and any emergency statutory or any other statutory
remedy. It is further mutually agreed that in the event Landlord commences any
summary proceeding for non-payment of rent, Tenant will not interpose and does
hereby waive the right to interpose any counterclaim of whatever nature or
description in any such proceeding except mandatory counter claims. Tenant shall
reimburse Landlord upon demand for all costs and expenses (including attorneys'
fees and disbursements and court costs) incurred by Landlord in connection with
enforcing Tenant's obligations hereunder or in protecting Landlord's rights
hereunder whether incurred in connection with an action or proceeding commenced
by Landlord, by Tenant, by a third party or otherwise. All such amounts shall be
deemed to be additional rent and shall be collectible in the same manner as
provided in Section 1.02 hereof.
ARTICLE 28
SURRENDER OF PREMISES
28.01. Upon the expiration or other termination of the Term, Tenant shall
quit and surrender to Landlord the demised premises, broom clean, in good order
and condition, ordinary wear and tear and damage by fire, the elements or other
casualty excepted, and Tenant shall remove all of its property as herein
provided. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of the Term.
28.02. If Tenant shall, without the written consent of Landlord, hold over
after the expiration of the Term, and if Landlord shall then not proceed to
remove Tenant from the demised premises in the manner permitted by law, such
tenancy shall be deemed a month-to-month tenancy, which tenancy may be
terminated as provided by applicable law. During such tenancy, Tenant agrees to
(a) pay to Landlord, each month, the greater of the fair market rental value for
the demised premises or the sum of (i) one hundred fifty (150%) percent of the
fixed annual rent and (ii) one hundred (100%) percent of the additional rent
payable by Tenant for the last month of the Term and (b) be bound by all of the
terms, covenants and conditions herein specified.
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ARTICLE 29
RULES AND REGULATIONS
29.01. Tenant and Tenant's servants, employees and agents shall observe
faithfully and comply strictly with the Rules and Regulations set forth in
Schedule E attached hereto and made part hereof entitled "Rules and Regulations"
and such other and further reasonable Rules and Regulations as Landlord or
Landlord's agents may from time to time adopt provided, however, that in case of
any conflict or inconsistency between the provisions of this Lease and of any of
the Rules and Regulations as originally or as hereafter adopted, the provisions
of this Lease shall control. Reasonable written notice of any additional Rules
and Regulations shall be given to Tenant.
Nothing in this Lease contained shall be construed to impose upon Landlord
any duty or obligation to enforce the Rules and Regulations or the terms,
covenants or conditions in any other lease, against any other tenant of the
Building, and Landlord shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
ARTICLE 30
CONSENTS AND APPROVALS
30.01. Wherever in this Lease Landlord's consent or approval is required,
if Landlord shall delay or refuse such consent or approval, Tenant in no event
shall be entitled to make, nor shall Tenant make, any claim, and Tenant hereby
waives any claim, for money damages (nor shall Tenant claim any money damages by
way of set-off, counterclaim or defense) based upon any claim or assertion by
Tenant that Landlord unreasonably withheld or unreasonably delayed its consent
or approval. Tenant's sole remedy shall be an action or proceeding to enforce
any such provision, for specific performance, injunction or declaratory
judgment, and such remedy shall be available only in those cases where Landlord
has expressly agreed in writing not to unreasonably withhold its consent or
where as a matter of law Landlord may not unreasonably withhold its consent.
ARTICLE 31
NOTICES
31.01. Any notice or demand, consent, approval or disapproval, or
statement (collectively called "Notices") required or permitted to be given by
the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing and unless otherwise required by such law or regulation, shall be
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sent by either (i) United States mail postage prepaid as registered or certified
mail, return receipt requested, or (ii) nationally recognized overnight courier
(e.g., Federal Express). Any Notice shall be addressed to Landlord or Tenant, as
applicable, at its address set forth on page 1 of this Lease as said address may
be changed from time to time as hereinafter provided. After Tenant shall occupy
the demised premises, the address of Tenant for Notices shall be the Building.
By giving the other party at least ten days prior written notice, either party
may, by Notice given as above provided, designate a different address or
addresses for Notices.
31.02. Any Notice shall be deemed given (i) three (3) business days after
being deposited in the U.S. mail, as hereinbefore set forth, or (ii) one (1)
business day after being sent by nationally recognized overnight courier.
31.03. In addition to the foregoing, either Landlord or Tenant may, from
time to time, request in writing that the other party serve a copy of any Notice
on one other person or entity designated in such request, such service to be
effected as provided in Section 31.01 hereof.
ARTICLE 32
NO WAIVER
32.01. No agreement to accept a surrender of this Lease shall be valid
unless in writing signed by Landlord. No employee of Landlord or of Landlord's
agents shall have any power to accept the keys of the demised premises prior to
the termination of this Lease. The delivery of keys to any employee of Landlord
or of Landlord's agent shall not operate as a termination of this Lease or a
surrender of the demised premises. In the event of Tenant at any time desiring
to have Landlord sublet the premises for Tenant's account, Landlord or
Landlord's agents are authorized to receive said keys for such purpose without
releasing Tenant from any of the obligations under this Lease. The failure of
Landlord to seek redress for violation of, or to insist upon the strict
performance of, any covenant or condition of this Lease or any of the Rules and
Regulations set forth herein, or hereafter adopted by Landlord, shall not
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. The failure of Landlord to enforce
any of the Rules and Regulations set forth herein, or hereafter adopted, against
Tenant and/or any other tenant in the Building shall not be deemed a waiver of
any such Rules and Regulations. No provision of this Lease shall be deemed to
have been waived by Landlord, unless such waiver be in writing signed by
Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly rent herein stipulated shall be deemed to be other than on the
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment of rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this Lease provided.
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32.02. This Lease contains the entire agreement between the parties, and
any executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
ARTICLE 33
CAPTIONS
33.01. The captions are inserted only as a matter of convenience and for
reference, and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof.
ARTICLE 34
INABILITY TO PERFORM
34.01. If, by reason of (1) strike, (2) labor troubles, (3) governmental
pre-emption in connection with a national emergency, (4) any rule, order or
regulation of any governmental agency, (5) conditions of supply or demand which
are affected by war or other national, state or municipal emergency, or any
other cause, (6) fire or other casualty, (7) adjustment of insurance claims, (8)
acts of God, or (9) any other cause beyond Landlord's reasonable control
(collectively hereinafter referred to as "Force Majeure Causes"), Landlord shall
be unable to fulfill its obligations under this Lease or shall be unable to
supply any service which Landlord is obligated to supply, this Lease and
Tenant's obligation to pay rent hereunder shall in no wise be affected, impaired
or excused.
ARTICLE 35
NO REPRESENTATIONS BY LANDLORD
35.01. Landlord or Landlord's agents have made no representations or
promises with respect to the Building or demised premises except as herein
expressly set forth.
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ARTICLE 36
NAME OF BUILDING
36.01. The name of the Building shall be Broad Financial Center. Landlord
shall have the full right at any time to name and change the name of the
Building and to change the designated address of the Building. The Building may
be named after any person, firm, or otherwise, whether or not such name is, or
resembles, the name of a tenant of the Building.
ARTICLE 37
ARBITRATION
37.01. In each case specified in this Lease in which resort to arbitration
shall be required, such arbitration (unless otherwise specifically provided in
other Sections of this Lease) shall be in New York County, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and the provisions of this Lease. The decision and award of the
arbitrators shall be in writing, shall be final and conclusive on the parties,
and counterpart copies thereof shall be delivered to each of the parties. In
rendering such decision and awards, the arbitrators shall not add to, subtract
from or otherwise modify the provisions of this Lease. Judgment may be had on
the decision and award of the arbitrators so rendered in any court of competent
jurisdiction.
ARTICLE 38
INDEMNITY
38.01 Subject to the terms of Article 9 hereof relating to waivers of
subrogation Tenant shall indemnify and defend Landlord (including Landlord's
shareholders, officers, directors, partners, join venturers and agents) and save
it harmless from and against any and all liability, damages, costs or expenses,
including attorneys' fees, arising from (i) any act, omission, or negligence of
Tenant or its officers, contractors, licensees, agents, employees, guests,
invitees, or visitors in or about the demised premises or the Building, (ii) any
breach or default under this Lease by Tenant, (iii) or relating to, the
enforcement by Landlord of the provisions of this Lease as against Tenant, or
(iv) any accident, injury, or damage, howsoever and by whomsoever caused, to any
person or property, occurring within the demised premises. This provision shall
not be construed to make Tenant responsible for loss, damage, liability or
expense if (but only to the extent) caused by the negligence of Landlord, or its
officers, contractors, licensees, agents, employees, or invitees, and nothing
contained herein shall be deemed to release Landlord from liability for its
negligence or wilful misconduct.
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ARTICLE 39
APPROVAL OF MORTGAGEE
39.01. This Lease is conditioned on Landlord obtaining the approval of
this Lease by the holder of the first mortgage on the Land and Building.
ARTICLE 40
SECURITY DEPOSIT
40.01. Tenant has deposited with Landlord the sum of $55,680.00 as security
for the full and punctual performance by Tenant of all of the terms of this
Lease. Landlord shall hold such security deposit in an interest-bearing account,
to be selected by Landlord, and the interest earned thereon (less an
administrative fee of one (1%) percent per annum of the principal) shall be
returned to Tenant upon Tenant's written request but not more frequently than
annually. In the event Tenant defaults in the performance of any of the terms of
this Lease, Landlord may apply the whole or any part of the security so
deposited to the extent required for the payment of (i) any rent or (ii) any sum
which Landlord may expend or may be required to expend by reason of Tenant's
default including, without limitation, any damages or deficiency in the re-
letting of the demised premises, whether accruing before or after summary
proceedings or other re-entry by Landlord. Upon each such application, Tenant
shall, on demand, pay to Landlord the sum so applied which shall be added to the
security deposit so that the same shall be restored to the amount first set
forth above. The amount of the security deposit, with interest, shall be
returned to Tenant after the termination of this Lease and delivery of exclusive
possession of the demised premises to Landlord. In the event of a sale or lease
of the Building, Landlord shall have the right to transfer the security to the
vendee or lessee and Landlord shall ipso facto be released by Tenant from all
liability for the return of such security; and Tenant agrees to look solely to
the new landlord for the return of said security and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new landlord. Tenant shall not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and neither Landlord
nor its successors or assigns shall be bound by any such assignment,
encumbrance, or attempted assignment or encumbrance.
40.02. In lieu of the cash security deposit provided for in Section 40.01
hereof, Tenant may at any time during the term hereof deliver to Landlord and
shall thereafter, except as otherwise provided herein, maintain in effect at all
times during the term hereof, an irrevocable letter of credit, in form and
substance reasonably satisfactory to Landlord in the amount of the security
required pursuant to this Article 40 issued by a banking corporation
satisfactory to Landlord and having its principal place of business or its duly
licensed branch or agency in the State of New York. Such letter of credit shall
have an expiration date no earlier than the first anniversary of the date of
issuance thereof and shall be automatically renewed from year to year unless
terminated by the issuer thereof by notice to Landlord given not less than
forty-five (45) days prior to the expiration thereof. Except as otherwise
provided in this Article 40, Tenant shall,
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throughout the term of this lease deliver to Landlord, in the event of the
termination of any such letter of credit, replacement letters of credit in lieu
thereof (each such letter of credit and such extensions or replacements thereof,
as the case may be, is hereinafter referred to as a "Security Letter") no later
than forty-five (45) days prior to the expiration date of the preceding Security
Letter. The term of each such Security Letter shall be not less than one (1)
year and shall be automatically renewable from year to year as aforesaid. If
Tenant shall fail to obtain any replacements of a Security Letter within the
time limits set forth in this Section 40.02, Landlord may draw down the full
amount of the existing Security Letter and retain the same as security
hereunder.
40.03. In the event Tenant defaults in respect of any of the terms,
provisions, covenants and conditions of this lease, beyond any applicable grace
period, including, but not limited to, the payment of fixed annual rent and
additional rent, Landlord may use, apply or retain the whole or any part of the
security so deposited to the extent required for the payment of any fixed annual
rent and additional rent or any other sum as to which Tenant is in default or
for any sum which Landlord may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms, provisions, covenants, and
conditions of this lease, including but not limited to, any damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. To insure that Landlord may utilize the security represented by the
Security Letter in the manner, for the purposes, and to the extent provided in
this Article 40, each Security Letter shall provide that the full amount thereof
may be drawn down by Landlord upon the presentation to the issuing bank of
Landlord's sight draft drawn on the issuing bank.
40.04. In the event that Tenant defaults in respect of any of the terms,
provisions, covenants and conditions of the lease and Landlord utilizes all or
any part of the security represented by the Security Letter but does not
terminate this Lease as provided in Article 16 hereof, Landlord may, in addition
to exercising its rights as provided in Section 40.03 hereof, retain the
unapplied and unused balance of the principal amount of the Security Letter as
security for the faithful performance and observance by Tenant thereafter of the
terms, provisions, and conditions of this lease, and may use, apply, or retain
the whole or any part of said balance to the extent required for payment of
fixed annual rent, additional rent, or any other sums as to which Tenant is in
default or for any sum which Landlord may expend or be required to expend by
reason of Tenant's default in respect of any of the terms, covenants, and
conditions of this lease. In the event Landlord applies or retains any portion
or all of the security delivered hereunder, Tenant shall forthwith restore the
amount so applied or retained so that at all times the amount deposited shall be
not less than the security required by this Article 40.
40.05. The security or any balance thereof to which Tenant is entitled
shall be returned or paid over to Tenant reasonably promptly after the date
fixed as the end of this lease and after delivery to Landlord of entire
possession of the Premises. In the event of any sale, transfer or leasing of
Landlord's interest in the Building whether or not in connection with a sale,
transfer or leasing of the Land to a vendee, transferee or lessee, Landlord
shall transfer the unapplied part of the security and the interest thereof, if
any, to which Tenant is entitled, or any interest it may have in the Security
Letter, as the case may be, to the vendee, transferee or lessee
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and Landlord shall thereupon be released by Tenant from all liability for the
return or payment thereof, and Tenant shall look solely to the new Landlord for
the return or payment of the same. The provisions of the preceding sentence
shall apply to every subsequent sale, transfer or leasing of the Building, and
any successor of Landlord shall, upon a sale, transfer, leasing or other
cessation of the interest of such successors in the Building whether in whole or
in part, pay over any unapplied part of said security or any interest it may
have in the Security Letter, as the case may be, to any vendee, transferee or
lessee of the Building, and shall thereupon be relieved of any liability with
respect thereto. In the event of a sale of the Building, Landlord shall have the
right to require Tenant to deliver a replacement Security Letter naming the new
Landlord as beneficiary and, if Tenant shall fail to timely deliver the same, to
draw down the existing Security Letter and retain the proceeds as security
hereunder until a replacement Security Letter is delivered. Except in connection
with a permitted assignment of this lease, Tenant shall not assign or encumber
or attempt to assign or encumber the monies deposited herein as security or any
interest thereon to which Tenant is entitled, and neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance. In any event, in the absence of
evidence satisfactory to Landlord of an assignment of the right to receive the
security, or the remaining balance thereof, Landlord may return the security to
the original Tenant regardless of one or more assignments of this lease.
40.06. Provided and on condition that Tenant shall not then be in default
under any of the terms and conditions of this Lease after notice and the
expiration of any applicable grace period, and further provided that Tenant
shall not, more than once within any 12-month period during the Term hereof,
have paid any payments of fixed annual rent or additional rent more than seven
(7) days after their due date, then in such event, the amount of the security
requirement set forth in Section 40.01 shall be reduced as follows: (x) to
$37,120 as of the first (1st) anniversary of the Rent Commencement Date, and (y)
to $18,560 as of the second (2nd) anniversary of the Rent Commencement Date. If
the security shall be in the form of a Security Letter, then such Security
Letter then in effect may be replaced by Tenant with a Security Letter in the
amount of $37,120 as of the first (1st) anniversary of the Rent Commencement
Date, and $18,560.00 as of the second (2nd) anniversary of the Rent Commencement
Date, in the same form and manner as described heretofore in this Article 40.
ARTICLE 41
MISCELLANEOUS
41.01. Irrespective of the place of execution or performance, this Lease
shall be governed by and construed in accordance with the laws of the State of
New York.
41.02. This Lease shall be construed without regard to any presumption or
other rule requiring construction against the party causing this Lease to be
drafted.
57
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41.03. Except as otherwise expressly provided in this Lease, each
covenant, agreement, obligation or other provision of this Lease on Tenant's
part to be performed shall be deemed and construed as a separate and independent
covenant of Tenant, not dependent on any other provision of this Lease.
41.04. All terms and words used in this Lease, regardless of the number or
gender in which they are used, shall be deemed to include any other number and
any other gender as the context may require.
41.05. Time shall be of the essence with respect to the exercise of any
option on the part of Tenant to extend the term of this Lease.
41.06. Except as otherwise provided herein whenever payment of interest is
required by the terms hereof it shall be at the Interest Rate.
41.07. If the demised premises or any additional space to be included
within the demised premises shall not be available for occupancy by Tenant on
the date hereinbefore designated for the commencement of the term of this Lease
or for the inclusion of such space for any reason whatsoever, then this Lease
shall not be affected thereby but, in such case, said specific date shall be
deemed to be postponed until the date when the demised premises or such
additional space shall be available for occupancy by Tenant, and Tenant shall
not be entitled to possession of the demised premises or such additional space
until the same are available for occupancy by Tenant; provided, however, Tenant
shall have no claim against Landlord, and Landlord shall have no liability to
Tenant by reason of any such postponement of said specific date, and the parties
hereto further agree that any failure to have the demised premises or such
additional space available for occupancy by Tenant on said specific date or on
the Commencement Date shall in no way affect the obligations of Tenant hereunder
nor shall the same be construed in any way to extend the Term. This Section
41.07 shall be deemed to be an express provision to the contrary of Section 223-
a of the Real Property Law of the State of New York and any other law of like
import now or hereafter in force.
41.08. In the event that Tenant is in arrears in payment of fixed annual
rent or additional rent hereunder, Tenant waives Tenant's right, if any, to
designate the items against which any payments made by Tenant are to be
credited, and Tenant agrees that Landlord may apply any payments made by Tenant
to any items it sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items against which any such payments shall be
credited.
41.09. All Schedules referred to in this Lease are hereby incorporated in
this Lease by reference.
41.10. The covenants, conditions and agreements contained in this Lease
shall bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributees, executors, administrators, successors, and except as
otherwise provided in this Lease, their assigns.
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41.11. No remedy or election hereunder shall be deemed exclusive but
shall, whenever possible, be cumulative with all other remedies at law or in
equity.
41.12. Under no circumstances shall Tenant record a copy of this Lease or
a memorandum of this Lease without Landlord's prior written consent.
41.13 It is understood and agreed that this Lease is submitted to Tenant
on the understanding that it shall not be considered an offer and shall not bind
Landlord in any way whatsoever until (i) Tenant has duly executed and delivered
duplicate originals to Landlord, and (ii) Landlord has executed and delivered
one of said fully executed originals to Tenant. This Lease may be executed in
one or more counterparts by some or all of the parties hereto, each of which
counterparts shall be an original and all of which together shall constitute a
single agreement.
41.14. With respect to any equipment which Tenant shall be permitted to
install and operate in the demised premises including, without limitation,
supplemental air conditioning equipment, Tenant shall at Tenant's expense,
obtain and maintain all permits, licenses and other authorizations which are
required by Legal Requirements in order to install, maintain and operate such
equipment in the demised premises.
41.15. Any expenditure permitted or required to be incurred by Landlord or
Tenant under this Lease, for which such party is entitled hereunder to demand
and does demand reimbursement from the other party, shall be limited to the
commercially reasonable cost of the goods and services involved, shall be
reasonably incurred, and shall be substantiated by documentary evidence
available for inspection and review by the other party or its representative
during normal business hours.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
FIRST PAC LIMITED, Landlord
By: ______________________________
Treasurer
By: ______________________________
SECRETARY
AGORA DIGITAL CORPORATION, Tenant
By: ______________________________
CFO
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STATE OF California )
: ss.:
COUNTY OF San Francisco )
On this 4th day of December, 1997, before me personally came Ronald Parks,
--- ------------
to me known, who, being duly sworn by me, did depose and say that he resides in
San Rafael, California; that he is the Chief Financial Officer CFO of AGORA
- ----------------------
DIGITAL CORPORATION, the corporation described in and which executed the above
instrument and that he signed his name thereto by order of the board of
directors of said corporation.
________________________________
Arnalde Tolentina, Notary Public
ARNALDO TOLENTINO
Commission # 1128965
Notary Public -- California
San Mateo County
My Comm. Expires Mar 6, 2001
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SCHEDULE A
FLOOR PLAN
[CHART OMITTED]
<PAGE>
SCHEDULE B
DESCRIPTION OF LAND
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the Borough of
Manhattan, City, County and State of New York, bounded and described as follows:
BEGINNING at the corner formed by the intersection of the easterly side of
Whitehall Street with the northerly side of Pearl Street; thence northerly along
the easterly side of Whitehall Street 49 feet 5 inches to an angle point; thence
continuing northerly along the easterly side of Whitehall Street 32 feet 7-1/2
inches; thence easterly on a line forming an angle of 92 degrees 25 minutes 00
seconds on its westerly side with the preceding course 5 feet 5 inches; thence
easterly on a line forming an angle of 84 degrees 36 minutes 00 seconds on its
northerly side with the preceding course 36 feet 11 inches; thence northerly on
a line forming an angle of 90 degrees 21 minutes 00 seconds on its westerly side
with the preceding course 31 feet 4-5/8 inches to the southerly side of Bridge
Street; thence easterly along the southerly side of Bridge Street 94 feet 2-5/8
inches; thence southerly on a line forming an angle of 107 degrees 39 minutes 10
seconds on its westerly side with the southerly side of Bridge Street 75 feet 9-
3/4 inches to the northerly side of Pearl Street 93 feet 1/2 inch to an angle
point therein; thence continuing westerly along the northerly side of Pearl
Street 68 feet 2-1/2 inches to the point and place of BEGINNING.
SAID PREMISES being known as 25-35 Pearl Street, 20-24 Bridge Street, 33
Whitehall Street.
Together with development rights appurtenant thereto conveyed pursuant to
certain Development Rights Agreement between The New York Clearing House
Building Company ("Clearing") and Broad Financial Center Partners ("BFCP") dated
October 7, 1983 and recorded in the Office of the City Register of New York
County on October 12, 1983, in reel 725, page 929, and a certain Declaration of
Restrictions Agreement between Clearing and BFCP dated October 7, 1983 and
recorded in said Register's Office on October 12, 1983 in reel 725, page 916.
Together with development rights appurtenant thereto conveyed pursuant to
certain Development Rights Agreement between Clearing, BFCP and 27 Whitehall
Street Group ("Whitehall") dated January 5, 1984 and recorded in said Register's
Office on January 12, 1984 in reel 754, page 1084 and a certain Declaration of
Restrictions Agreement between Clearing, BFCP and Whitehall dated January 5,
1984 and recorded in said Register's Office on January 12, 1984 in reel 754,
page 1110.
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Together with all development rights appurtenant thereto as may be acquired
by BFCP from Clearing pursuant to Agreement of Sale between BFCP and Clearing
dated as of May 25, 1984.
Together with the benefits of that certain Easement Agreement dated as of
October 7, 1983 between Clearing and BFCP and recorded in said Register's Office
in reel 725, page 946.
Together with the benefits of that certain Easement Agreement between
Whitehall and BFCP dated as of January 5, 1984 between Whitehall and BFCP and
recorded in said Register's Office in reel 754, page 1128.
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SCHEDULE C
HEATING, VENTILATING AND AIR-CONDITIONING SPECIFICATIONS
A year-round air conditioning system provides ventilation, cooling and
morning warm up of tenant space. The perimeter radiation system provides heating
with varying water temperature automatically set by an outside temperature
sensor.
a) The system is designed to operate within the requirements of the New
York State Energy Conservation Code and is capable of maintaining
inside conditions of approximately 78degree F and 50% relative
humidity when the summer outside conditions are not more than 91degree
F dry bulb and 76degree F wet bulb and approximately 70degree F when
the outside winter temperature is 10degree F.
b) The design capabilities of the system are based upon and limited to
the following conditions:
(i) occupancy does not exceed one (1) person for each 100
square feet of area.
(ii) a total connected electrical load of 4.0 volt/amps per
rentable square foot.
(iii) Proper use of blinds to control sun load.
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SCHEDULE D
FORM OF ESTOPPEL CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. The undersigned is the Lessee (Tenant) under that certain lease dated
_______ by and between First Pac Limited as Lessor (Landlord) and
__________ as Lessee (Tenant), covering those certain premises commonly
known and designated as ______________ ________ of the building known as
Broad Financial Center and located at 33 Whitehall Street, New York, New
York (the "Lease").
2. The Lease has not been modified, changed, altered or amended in any way
(except as indicated following this sentence) and is the only Lease or
agreement between the undersigned and the Lessor affecting said premises.
3. The undersigned has accepted the premises, the lease term began __________,
the rent for said premises has been paid to and including _____, 199_. No
rent has been prepaid for more than one (1) month. The fixed minimum rent
being paid as above is _____ per month.
4. To the best of the undersigned's knowledge, the Lease is in full force and
effect and there are no defaults thereunder, and as of the date hereof, the
undersigned is entitled to no credit, offset or deduction in rent.
5. The Lease does not contain and the undersigned does not have any
outstanding options or rights of first refusal to purchase the premises or
any part thereof or the real property of which the premises are a part.
6. No actions, whether voluntary or otherwise, are pending against the
undersigned under the bankruptcy or insolvency laws of the United States or
any state thereof.
7. This certification is made to induce __________ to make a mortgage loan on
the property located at 33 Whitehall Street, New York, New York, knowing
that _________ __ relies upon the truth of this certification in making
such loan.
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8. The amount of Security Deposit, if any, deposited with the Landlord
pursuant to the terms of the Lease is $_______.
Dated this ______ day of
____________________, _____.
TENANT
By: _______________________
---------------------------
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SCHEDULE E
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators and
escalators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees and invitees,
and no tenant shall use, or permit the use of, the entrances, corridors,
escalators or elevators for any other purpose. No tenant shall invite to the
tenant's premises, or permit the visit of, persons in such numbers or under such
conditions as to interfere with the use and enjoyment of any of the plazas,
entrances, corridors, escalators, elevators and other facilities of the Building
by other tenants. Fire exits and stairways are for emergency use only, and they
shall not be used for any other purposes by the tenants, their employees,
licensees or invitees. No tenant shall encumber or obstruct, or permit the
encumbrance or obstruction of any of the sidewalks, plazas, entrances,
corridors, escalators, elevators, fire exits or stairways of the Building. The
Landlord reserves the right to control and operate the public portions of the
Building and the public facilities, as well as facilities furnished for the
common use of the tenants, in such manner as it deems best for the benefit of
the tenants generally.
2. The cost of repairing any damage to the public portions of the Building
or the public facilities or to any facilities used in common with other tenants,
caused by a tenant or the employees, licensees or invitees of the tenant, shall
be paid by such tenant.
3. The Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge or not having a
pass issued by the Landlord or not properly identified, and may require all
persons admitted to or leaving the Building outside of ordinary business hours
to register. Tenant's employees, agents and visitors shall be permitted to enter
and leave the Building whenever appropriate arrangements have been previously
made between the Landlord and the tenant with respect thereto. Each tenant shall
be responsible for all persons for whom such tenant requests such permission and
shall be liable to the Landlord for all acts of such persons. Any person whose
presence in the Building at any time shall, in the judgment of the Landlord, be
prejudicial to the safety, character, reputation and interests of the Building
or its tenants may be denied access to the Building or may be ejected therefrom.
In case of invasion, riot, public excitement or other commotion the Landlord may
prevent all access to the Building during the continuance of the same, by
closing the doors or otherwise, for the safety of the tenants and protection of
property in the Building. The Landlord may require any person leaving the
Building with any package or other object to exhibit a pass from the tenant from
whose premises the package or object is being removed, but the establishment and
enforcement of such requirements shall not impose any responsibility on the
Landlord for the protection of any tenant against the removal of property from
the premises of the tenant. The Landlord shall, in no way, be liable to any
tenant for damages or loss arising
E-1
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from the admission, exclusion or ejection of any person to or from the tenant's
premises or the Building under the provisions of this rule.
4. No tenant shall obtain or accept or use in its premises ice, drinking
water, food, beverage, towel, barbering, boot blacking, floor polishing,
lighting maintenance, cleaning or other similar services from any persons not
authorized by the Landlord in writing to furnish such services, provided always
that charges for such services by persons authorized by the Landlord are not
excessive. Such services shall be furnished only at such hours, in such places
within the tenant's premises and under such regulations as may be fixed by the
Landlord.
5. No awnings or other projections over or around the windows shall be
installed by any tenant and only such window blinds as are supplied or permitted
by the Landlord shall be used in a tenant's premises.
6. There shall not be used in any space, or in the public halls of the
Building, either by the Tenant or by jobbers or others, in the delivery or
receipt of merchandise or mail any hand trucks, except those equipped with
rubber tires and side guards. All deliveries to tenants, except mail, shall be
made to such place as Landlord shall designate and shall be distributed to
tenants only during the hours from 8:00 A.M. to 12:00 noon and 2:00 P.M. to 4:00
P.M., Monday through Friday.
7. All entrance doors in each tenant's premises shall be left locked when
the tenant's premises are not in use. Entrance doors shall not be left open at
any time. All windows in each tenant's premises shall be kept closed at all
times and all blinds or drapes therein above the ground floor shall be lowered
or closed when and as reasonably required because of the position of the sun,
during the operation of the Building air conditioning system to cool or
ventilate the tenant's premises Tenant shall not tamper with or adjust
tamperproof or covered thermostats which have been preset by Landlord to control
the operation of the air conditioning system. All such adjustments shall be made
only by Landlord.
8. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of the Landlord, might disturb other tenants
in the Building shall be made or permitted by any tenant and no cooking shall be
done in the Tenant's premises except as expressly approved by the Landlord.
Nothing shall be done or permitted in any tenant's premises, and nothing shall
be brought into or kept in any tenant's premises, which would impair or
interfere with any of the Building services or the proper and economic heating,
cleaning or other servicing of the Building or the premises, or the use or
enjoyment by any other tenant of any other premises, nor shall there be
installed by any tenant any ventilating, air conditioning, electrical or other
equipment of any kind which, in the judgment of the Landlord, might cause any
such impairment or interference. No dangerous, inflammable, combustible or
explosive object or material shall be brought into the Building by any tenant or
with the permission of any tenant.
E-2
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9. Tenant shall not permit any cooking or food odors emanating from the
demised premises to seep into other portions of the Building.
10. No acids, vapors or other materials shall be discharged or permitted
to be discharged into the waste lines, vents or flues of the Building which may
damage them. The water and wash closets and other plumbing fixtures in or
serving any tenant's premises shall not be used for any purpose other than the
purpose for which they were designed or constructed and no sweepings, rubbish,
rags, acids or other foreign substances shall be deposited therein. All damages
resulting from any misuse of the fixtures shall be borne by the tenant who, or
whose servants, employees, agents, visitors or licensees, shall have caused the
same.
11. Tenant shall not display any sign, graphics, notice, picture, or
poster, or any advertising matter whatsoever, anywhere in or about the demised
premises or the Building at places visible from anywhere outside or at the
entrance to the demised premises without first obtaining Landlord's written
consent thereto, such consent to be at Landlord's sole discretion. Any such
consent by Landlord shall be upon the understanding and condition that Tenant
will remove the same at the expiration or sooner termination of this Lease and
Tenant shall repair any damage to the demised premises or the Building caused
thereby.
In the event of the violation of the foregoing by any tenant, Landlord may
remove the same without any liability, and may charge the expense incurred by
such removal to the tenant or tenants violating this rule. Interior signs and
lettering on doors and elevators shall be inscribed, painted, or affixed for
each by Landlord at the expense of such tenant, and shall be of a size, color
and style acceptable to Landlord. Landlord shall have the right to prohibit any
advertising by any tenant which impairs the reputation of the Building or its
desirability as a building for offices, and upon written notice from Landlord,
tenant shall refrain from or discontinue such advertising.
12. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows in any tenant's premises and no lock on any door therein
shall be changed or altered in any respect. Duplicate keys for a tenant's
premises and toilet rooms shall be procured only from the Landlord, which may
make a reasonable charge therefor. Upon the termination of a tenant's lease, all
keys to the tenant's premises and toilet rooms shall be delivered to the
Landlord.
13. No tenant shall mark, paint, drill into, or in any way deface any part
of the Building or the premises demised to such tenant. No boring, cutting or
stringing of wires shall be permitted, except with the prior written consent of
Landlord, and as Landlord may direct. No tenant shall install any resilient tile
or similar floor covering in the premises demised to such tenant except in a
manner approved by Landlord.
14. No tenant or occupant shall engage or pay any employees in the
Building, except those actually working for such tenant or occupant in the
Building or advertise for laborers giving an address at the Building.
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15. No premises shall be used, or permitted to be used, at any time, as a
store for the sale or display of goods or merchandise of any kind, or as a
restaurant, shop, booth, bootblack or other stand, or for the conduct of any
business or occupation which involved direct patronage of the general public in
the premises demised to such tenant, or for manufacturing or for other similar
purposes.
16. The requirements of tenants will be attended to only upon application
at the office of the Building. Employees of Landlord shall not perform any work
or do anything outside of the regular duties, unless under special instructions
from the office of the Landlord.
17. Each tenant shall, at its expense, provide artificial light in the
premises demised to such tenant for Landlord's agents, contractors and employees
while performing janitorial or other cleaning services and making repairs or
alterations in said premises.
18. The tenant's employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
19. Tenant, at its sole cost and expense, shall cause its premises to be
exterminated, from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
20. Any cuspidors or similar containers or receptacles used in any
tenant's premises shall be cared for and cleaned by and at the expense of the
tenant.
21. Tenant shall use only the service elevator for deliveries and only at
hours prescribed by Landlord. Bulky materials, as determined by Landlord, may
not be delivered during usual business hours but only thereafter. Tenant agrees
to pay for use of the service elevator at rates prescribed by Landlord.
22. Tenant shall have no right of access to the roof of the demised
premises or the Building and shall not install, repair or replace any aerial,
fan, air conditioner or other device on the roof of the demised premises or the
Building without the prior written consent of Landlord. Any aerial, fan, air
conditioner or device installed without such written consent shall be subject to
removal, at tenant's expense, without notice, at any time.
23. There will be no building directory.
24. At Landlord's election, all messenger deliveries shall be made through
the designated messenger entrance on Bridge Street subject to such reasonable
procedures as Landlord may adopt.
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SCHEDULE F
CLEANING SPECIFICATIONS
1. GENERAL OFFICE AREAS
A. Nightly
1. All stone, ceramic, tile, marble, terrazzo and other unwaxed
flooring to be mopped nightly, using approved dust-down
preparations; wash flooring weekly, scrubbed when necessary.
All unwaxed flooring used as corridors adjacent to the core shall
be cleaned and wet mopped nightly.
2. All linoleum, vinyl, rubber, asphalt tile and other similar types
of flooring (that may be waxed) to be swept nightly using
approved dust-down preparation. Waxing, if any, shall be done at
tenant's expense.
Mop up and wash floors for spills, smears and foot tracks
throughout, including tenant's space, as needed and wash floor in
general as required.
3. All carpeting and rugs to be vacuumed nightly.
4. Hand dust with treated cloth and wipe clean all furniture,
fixtures, and window enclosures nightly.
5. Empty and clean all waste receptacles nightly and remove from the
demised premises wastepaper to designated areas.
6. Empty and clean all ash trays and screen all sand urns nightly.
7. Dust interior of all waste disposal cans and baskets nightly;
damp-dust as necessary.
8. Wash clean all water fountains and coolers nightly.
9. Dust all door and other ventilating louvers within reach; damp
wipe as necessary.
10. Dust all telephones nightly and wash monthly.
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11. Keep locker and slop sink rooms in a neat and orderly condition
at all times.
12. Wipe clean all brass, if necessary; and other bright work
nightly.
13. Sweep, vacuum or wash all private staircases nightly.
14. Metal doors of elevator cars to be properly maintained daily.
15. Remove all gum and foreign matter on sight.
16. Clean all glass furniture tops.
17. Collect and remove wastepaper, cardboard boxes (which Contractor
will flatten) and waste material to a designated area in the
premises. Waste and/or rubbish (heavy duty plastic) bags shall be
furnished by Contractor and shall be adequate to hold contents
without breaking. Owner shall have the right to approve trash
removal containers and janitorial carts.
18. Dust and vacuum closet and coat room shelving, coat racks and
flooring nightly.
B. PERIODIC CLEANING - (To be performed as needed unless otherwise
specified but not less than once each week or as hereinafter
provided);
1. Vacuum all furniture fabric and drapes not less than once each
week.
2. Wash and remove all finger marks, ink stains, smudges, scuff
marks and other marks from metal partitions, sills, all vertical
surfaces (doors, walls, window sills), including elevator doors,
and other surfaces, as necessary. Clean and sweep any vacant
areas.
3. Dust and clean electric fixtures, all baseboards and other
fixtures or fittings as necessary, but not less than once each
quarter.
C. HIGH DUSTING
1. Do all high dusting every three (3) months, unless otherwise
specified, including, but not limited to, the following:
a. Vacuum and dust all pictures, frames, charts, graphs and
similar wall hangings not reached in nightly cleaning. Damp
dust as required.
F-2
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b. Vacuum and dust all vertical surfaces such as walls,
partitions, doors, bucks and ventilating louvers, grills,
high moldings, and other surfaces not reached in nightly
cleaning.
c. Dust all overhead pipes, sprinklers, ventilating and air
conditioning louvers, ducts, high moldings and other high
areas not reached in nightly cleaning.
d. Dust all venetian blinds, with a Masslin treated dust
control cloth, every three months. Dust all window frames.
e. Dust exterior and interior of lighting fixtures.
f. Wash all furniture glass as needed.
g. Vacuum and dust ceiling tiles around ventilators and clean
and wash air conditioning diffusers as required.
2. ELEVATOR LOBBY AND PUBLIC CORRIDORS (MULTI-TENANT FLOORS)
A. Vacuum floors nightly and machine scrub floors monthly. Wax, buff,
apply sealer and finishes as required.
B. Wipe down all metal surfaces in lobby, and polish as required.
C. High dust and wash if necessary all electrical and air conditioning
ceiling fixtures at least once per month.
D. Dust walls nightly and wash as required.
E. Clean and dust mail depository in lobby.
F. Clean cigarette urns, screen sand and supply sand as necessary.
G. Burned out lamps shall be replaced promptly with lamps supplied by
Contractor.
3. ELEVATORS
A. Clean saddles and frames on floors above lobby once per week and
vacuum dirt from door tracks nightly.
B. Dust elevator doors.
C. Clean floors twice daily and polish weekly by machine.
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4. LAVATORIES IN BASE BUILDING (TWO (2) MAIN LAVATORIES PER FLOOR)
A. Nightly
1. Scour, wash and disinfect all toilet seats (both sides), basins,
bowls, urinals and tile walls near urinals, throughout.
2. Sweep and wash all lavatory floors using proper disinfectants.
3. Wash and polish all mirrors, powder shelves, bright work and
enameled surfaces in all lavatories.
Contractor shall use only non-abrasive material to avoid damage
and deterioration to chrome fixtures.
4. Hand dust and clean, washing where necessary, all partitions,
dispensers and receptacles in all lavatories and rest rooms.
5. Service sanitary napkin dispensers. (Napkins supplied by
Contractor.)
6. Empty paper towel and sanitary napkin disposal receptacles and
remove paper to designated areas.
7. Fill toilet tissue holders nightly. (Tissue to be supplied by
Contractor.)
8. Fill all toilet tissue holders, soap dispensers, towel dispensers
and sanitary napkin vending dispensers. (Materials to be supplied
by Contractor as approved by Landlord.)
9. Empty and clean sanitary disposal receptacles.
10. Clean and wash all receptacles and dispensers.
11. Remove finger marks from painted surfaces.
B. Periodic
1. Clean and wash all partitions once every week.
2. Scrub floors as necessary, but not less than once each week.
3. Hand dust, clean and wash all tile walls and ceilings including
washable acoustical tile, once each week, more if necessary.
F-4
<PAGE>
4. High dusting shall be done once each month which will include
lights, walls and grills.
5. Wash all lighting fixtures as necessary.
F-5
<PAGE>
SCHEDULE G
LANDLORD'S WORK
[CHART OMITTED]
<PAGE>
Exhibit 10.10
Sand Hill Capital
Innovative Financing Solutions
LOAN AGREEMENT
Dated as of November 15, 1999
by and between
SAND HILL CAPITAL II, LP
as lender
and
2BRIDGE, a California Corporation
as borrower
TOTAL CREDIT AMOUNT: $5,050,000
Maturity: July 31, 2000
Formula: None
Loan Fee: $50,000
Interest: Prime Rate plus 3.0%, floating
Warrants:
Number of shares: 15% Coverage
Class of stock: See Warrant
Initial exercise price: See Warrant
Purchase Option:
Number of shares: The Holder or any one of its affiliates, have the
right to invest up to and equal to $500,000 in the next equity
round of preferred stock at a price per share equivalent to that
round This option will be at the Holder's sole discretion.
Class of stock: Preferred Stock
Initial exercise price: At the price per share of that round (see
Conversion Sub-Section "Number of shares" above).
The terms and information set forth on this cover page are a part of the
attached Loan Agreement, dated as of the date first written above (as amended,
modified or otherwise supplemented from time to time, this "Agreement"), entered
into by and among Sand Hill Capital II, LP ("Sand Hill") and 2Bridge, a
California corporation ("Borrower") set forth above. The terms and conditions of
the Agreement agreed to between Sand Hill and Borrower are as follows:
<PAGE>
1. Advances. Borrower may request one or more advances (each, an "Advance"
--------
and collectively, the "Advances") from time to time in an aggregate outstanding
amount not to exceed the principal sum of $5,050,000 (the "Committed Line") and
pursuant to the terms and conditions of this Agreement. Subject to the terms and
conditions of this Agreement, amounts borrowed pursuant to Section 1(a) may be
repaid and reborrowed at any time during the term of this Agreement.
Borrower shall pay interest on each Advance from the date made until
Maturity or until prepaid in accordance with this Agreement at a floating rate
equal to the Prime Rate, as published in the Western Edition of The Wall Street
---------------
Journal from time to time, plus three (3.0) percent. Interest shall be payable
- -------
in arrears on the first business day of each month. On the Maturity Date
specified on the cover page, the entire outstanding principal balance of the
Advances and all accrued and unpaid interest thereon shall be immediately due
and payable. Advances can be prepaid in whole or in part at any time without
premium or penalty.
All payments on this Agreement shall be applied first to fees and expenses,
then to interest and then to principal. If any payment is not made within ten
(10) days of the due date, Borrower shall pay a late payment fee equal to the
lesser of 5% of the amount of such late payment or the maximum amount permitted
by law. Any principal or interest payments on this Agreement outstanding after
the occurrence and during the continuance of a default under this Agreement
shall bear interest at a rate equal to the greater of 18% or 5% above the rate
otherwise applicable under this Agreement. The provision in this Paragraph for
extension, late fees and default interest shall not be construed as Sand Hill's
consent to Borrower's failure to pay any amounts in strict accordance with this
Agreement, and Sand Hill's acceptance of any such payments shall not restrict
Sand Hill's exercise of any remedies arising out of any such failure.
2. Secured Agreement. To secure repayment of all obligations evidenced by
-----------------
this Agreement and performance of all of Borrower's obligations hereunder
(including interest accruing after an Insolvency Event), Borrower grants Sand
Hill a security interest in the property described in Exhibit A attached hereto
---------
(the "Collateral").
3. Representations and Warranties. Borrower represents to Sand Hill as
------------------------------
follows: (a) Borrower is not in material default under any material agreement
under which Borrower owes any money, or any agreement, the violation or
termination of which could have a material adverse effect on Borrower; (b)
Borrower has taken all action necessary to authorize the execution, delivery and
performance of this Agreement; (c) there are no liens, security interests or
other encumbrances ("Liens") on the Collateral, except for purchase money
security interests and leases on particular items of equipment (additionally,
Borrower will be permitted to purchase equipment and then enter into a sale and
lease back arrangement for such equipment), and mechanic's liens on Borrower's
real property or improvements thereon and Permitted Lien; (d) the execution and
performance of this Agreement do not conflict with; or constitute a default
under, any material agreement to which Borrower is party or by which Borrower is
bound; (e) the information provided by Borrower to Sand Hill on or prior to the
date of this Agreement in connection with the transactions contemplated by this
Agreement is true and correct in all material respects or, with respect to any
financial or business projections so provided, were prepared in good faith and
based upon assumptions believed to be reasonable by Borrower; (f) all financial
statements and other information provided to Sand Hill fairly present in all
material respects Borrower's financial condition, and there has not been a
material adverse change in the financial condition of Borrower since the date of
the most recent of the financial statements submitted to Sand Hill; (g) Borrower
is in material compliance with all laws and orders applicable to it; (h) except
as disclosed by Borrower to Sand Hill, Borrower is not party to any litigation
and is not the subject of any government investigation that could reasonably be
expected to result in damages or costs to Borrower of $50,000 or more, and
Borrower has no knowledge of any pending litigation or investigation or the
existence of circumstances that reasonably could be expected to give rise to
such litigation or investigation; and (i) no representation or other statement
made by Borrower to Sand Hill contains any untrue statement of a material fact
or omits to state a material fact necessary to make any statements made to Sand
Hill not misleading.
1
<PAGE>
4. Covenants.
---------
(a) Borrower will provide to Sand Hill in a form reasonably
acceptable to Sand Hill (i) monthly unaudited financial statements within thirty
(30) days of the last day of each month; (ii) audited fiscal year end financial
statements with an unqualified opinion within one hundred twenty (120) days of
the last day of each fiscal year (Sand Hill acknowledges that a "going concern"
qualification may appear in such audited financial statements); and (iii) upon
request, such other financial reports relating to Borrower's operations and
condition, including information on equity and funding status as Sand Hill may
reasonably request from time to time. Sand Hill shall have the right to review
and copy Borrower's books and record from time to time upon reasonable notice to
Borrower. Borrower will pay Sand Hill for the reasonable costs it may incur from
time to time in auditing the Collateral.
(b) Borrower will maintain insurance on the Collateral that includes
a lender's loss payable endorsement in favor of Sand Hill as an additional loss
payee. Borrower will maintain insurance in a form reasonably acceptable to Sand
Hill relating to the Collateral and Borrower's business in amounts and of a type
that are customary to businesses similar to Borrower's. In addition, Borrower
shall carry product liability insurance in a form reasonably acceptable to Sand
Hill.
(c) Borrower will maintain its corporate existence and good standing
and will maintain in force all licenses and agreements, the loss of which could
have a material adverse effect on Borrower's business. Borrower will pay all
taxes on or before the date such taxes are due, except for taxes being contested
in good faith or by and appropriate proceedings and for which adequate reserves
have been made in accordance with generally accepted accounting principles, and
will comply in all material respects with all laws and orders applicable to it.
(d) Borrower will not (i) make any material investments in, or loans
or advances to, any person other than in the ordinary course of business as
currently conducted, (ii) acquire any material assets other than in the ordinary
course of business as currently conducted, (iii) make any distributions or pay
any dividends to any person on account of Borrower's shares, (iv) borrow any
money except under equipment lease agreements and under the existing Imperial
Bank line of credit, or (v) dispose of or encumber any portion of its assets,
except for dispositions in the ordinary and normal course of business as now
conducted including, without limitation, the selling of any property or other
asset accompanied by the leasing of the same.
(e) Borrower will register on an expedited basis with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Intellectual Property Security Agreement delivered to Sand Hill by Borrower.
Borrower will register such additional intellectual property rights developed or
acquired by Borrower from time to time in connection with any product prior to
the sale or licensing of such product to any third party. Borrower will execute
such documents and take such other actions as Sand Hill may reasonably request
to perfect the security interest granted in such rights.
(f) Borrower agrees that so long as any loans, obligations or
Advances remain outstanding that Borrower will not, without the prior written
consent of Sand Hill, which consent will not be unreasonably withheld or
delayed: (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any person or other entity; or (2) liquidate or dissolve
or commence any proceedings therefor; or (3) except in the ordinary and normal
course of its business as now conducted, sell (including, without limitation,
the selling of any property or other asset accompanied by the leasing back of
the same) any assets including any fixed assets, any property, or other assets
necessary for the continuance of its business as now conducted. Notwithstanding
the foregoing, Borrower may proceed with the repurchase of any of its franchised
businesses (a) so long as no Event of Default has occurred and is continuing or
would exist after giving effect to such transaction, and (b) prior to
consummating such transaction Borrower executes and delivers to Sand Hill all
such additional agreements, documents and instruments as Sand Hill may require
in order to affirm, effectuate or further assure its continuing, priority lien
in the Collateral after giving effect to such transaction.
2
<PAGE>
(g) If Borrower does not repay the entire outstanding balance
hereunder on or before July 31, 2000. the number of shares that Sand Hill may
purchase under the Warrant issued as of the date hereof shall be adjusted in
accordance with the Warrant.
(h) If Borrower merges or consolidates with any person or entity such
that Borrower is not the surviving entity, Sand Hill shall have the right to
terminate this Agreement and require Borrower to pay all unpaid principal,
interest, and any other amounts owing hereunder on the effective date of such
merger or consolidation.
(i) Borrower shall notify (shall include but is not limited to the
time and location) Sand Hill at least two weeks in advance of any regularly
scheduled meeting or as soon as reasonably possible of any unscheduled meeting
of the Board of Directors. Additionally, Lender has the right to attend and
observe any Board of Directors meeting it so chooses, however, this is not in
any manner to be construed as having a seat, along with the rights associated
therewith, on the Board of Directors.
(j) Borrower shall take such actions as Sand Hill requests from time
to time to perfect or continue the security interest granted hereunder. Borrower
shall not dispose of or encumber or permit to be encumbered or attached any part
of the Collateral without Sand Hill's prior written consent except for (i)
dispositions in the ordinary and normal course of business as now conducted
including, without limitation, the selling of any property or other asset
accompanied by the leasing of the same and (ii) Permitted Liens. "Permitted
Liens" means (i) Liens for taxes not yet delinquent or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves have been established, (ii) Liens in respect of property or assets
imposed by law which were incurred in the ordinary course of business and which
do not in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the business of
Borrower, (iii) Liens created by this Agreement and the Intellectual Property
Security Agreement executed in connection with this Agreement, (iv) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, mechanic's Liens, carrier's Liens and other Liens to secure the
performance of tenders, statutory obligations, contract bids, government
contracts, performance bonds and similar obligations, in each case incurred in
the ordinary course of business, whether pursuant to statutory requirements,
common law or consensual requirements, and (v) easements, rights-of-way, zoning
or other restrictions, charges, encumbrances, defects in title, prior rights of
other person and obligations contained in, or to which the rights of the owner
or lessor are subject.
5. Fees, Expenses and Deliveries. On the date of this Agreement, Borrower
-----------------------------
shall pay Sand Hill the Loan Fee specified on the cover page, plus all legal and
underwriting expenses up to a maximum of $5,000 that Sand Hill incurs in
connection with this Agreement. Borrower shall also deliver to Sand Hill, in
form and substance satisfactory to Sand Hill, the following: (a) a warrant to
purchase stock; and (b) evidence of liability insurance. Borrower shall pay all
reasonable costs that Sand Hill incurs in enforcing this Agreement or exercising
any rights with respect to the Collateral (including all costs incurred after
the occurrence of an Insolvency Event), including without limitation reasonable
attorneys fees and expenses.
6. Events of Default; Remedies. Any one or more of the following shall
---------------------------
constitute an Event of Default under this Agreement:
(a) Borrower's failure to cure any of the following defaults within
ten (10) days after such obligations are due: (i) to pay all or any part of the
principal or interest hereunder on the date due and payable, or (ii) to comply
with any agreement or covenant set forth in this Agreement, or (iii) to comply
with the terms of any material contract to which Borrower is a party and any
agreement pursuant to which Borrower has incurred indebtedness, or (iv) to
comply with any law to which Borrower is subject and which Borrower's failure to
comply with such law will result in a material adverse impact on Borrower; or
(b) Borrower becomes insolvent, or becomes the subject of any case or
proceeding under the United States Bankruptcy Code or any other law relating to
the reorganization or restructuring of debt (an "Insolvency Event"); or
3
<PAGE>
(c) any representation made to Sand Hill in this Agreement, the
Warrant issued of even date herewith, or any information given to Sand Hill by
or on behalf of Borrower shall be incorrect in any material respect on the date
made; or
(d) the occurrence of a material adverse change in the financial or
other condition of Borrower.
(e) Lender's determination, in its reasonable discretion, that
Borrower may not be able to pay all or any part of the obligation(s), or to
satisfy any condition, or to perform any obligation under this Agreement.
Upon the occurrence and during the continuance of an Event of Default
hereunder, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Sand Hill, be immediately collectible by or on
behalf of Sand Hill, and Sand Hill may exercise all of the rights of a secured
party under the California Uniform Commercial Code. In such case, Sand Hill
shall have a right to dispose of the Collateral in any commercially reasonable
manner, and shall have a royalty-free license to use any name, trademark,
advertising matter or any property of a similar nature to complete production
of, advertisement for, and disposition of any Collateral and Sand Hill shall
have a license to enter into, occupy and use Borrower's premises and the
Collateral without charge to exercise any of Sand Hill's rights or remedies
under this Agreement. Borrower irrevocably appoints Sand Hill (and any of Sand
Hill's designated employees or agents) as Borrower's true and lawful attorney in
fact to: endorse Borrower's name on any checks or other forms of payment; make,
settle and adjust all claims under and decisions with respect to Borrower's
policies of insurance; settle and adjust disputes and claims respecting accounts
receivable with account debtors; execute and deliver all notices, instruments
and agreements in connection with the perfection of the security interest
granted in this Agreement; and sell, lease or otherwise dispose of all or any
part of the Collateral. The appointment of Sand Hill as Borrower's attorney in
fact, and each of Sand Hill's rights and powers, being coupled with an interest,
is irrevocable until all amounts owing to Sand Hill have been repaid in full and
may be exercised only while an Event of Default has occurred and is continuing.
7. Waivers; Indemnity. Borrower waives presentment and demand for payment,
------------------
notice of dishonor, protest and notice of protest of this Agreement, and shall
pay all costs of collection when incurred, including reasonable attorneys' fees,
costs and expenses incurred before, after or in connection with of an Insolvency
Event. Borrower shall indemnify and hold Sand Hill harmless from any claim,
obligation or liability (including without limitation reasonable attorneys fees
and expenses) arising out of this Agreement or the transactions contemplated
hereby, including any claim, obligation or liability arising before, after or in
connection with an Insolvency Event.
8. Miscellaneous. Sand Hill may assign all or any part of its interest in
-------------
this Agreement and the Advances to any person or entity, or grant a
participation of any interest in this Agreement, without notice to, or the
consent of, Borrower. This Agreement can be amended only by an instrument signed
by Sand Hill and Borrower. All prior agreements are superseded by this
Agreement. Borrower may not assign any obligation hereunder without Sand Hill's
consent. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one
instrument. This Agreement shall be governed by the internal laws of the State
of California, without regard to conflicts of laws rules. Borrower and Sand Hill
consent to the exclusive jurisdiction of the United States District Court of the
Northern District of California and the state courts for Santa Clara County,
California.
4
<PAGE>
9. JURY WAIVER. SAND HILL AND BORROWER EACH WAIVES ANY RIGHT TO A JURY
-----------
TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN.
2BRIDGE SAND HILL CAPITAL II, LP
By: /s/ Ronald Parks By: /s/ Robert A. Johnson
------------------------------- -------------------------------
Title: CFO Title: PRINCIPAL
---------------------------- ----------------------------
By:_______________________________
Its:______________________________
5
<PAGE>
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) 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;
(b) 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, and
Borrower's books relating to any of the foregoing;
(c) 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;
(d) 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 and Borrower's books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, financial
assets, securities entitlements, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
books relating to the foregoing;
(f) 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
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
6
<PAGE>
SECRETARY'S CERTIFICATE
2Bridge
I, Ronald Parks, hereby certify that I am the duly elected and qualified
Secretary of 2Bridge, a California corporation (the "Corporation") and that, as
such, I am authorized to execute this Secretary's Certificate on behalf of the
Corporation. This Secretary's Certificate is being delivered in connection with
the Loan Agreement, dated as of November 15, 1999, by and between Sand Hill
Capital II, LP and the Corporation. I further certify that:
Attached hereto as Exhibit A is a true and complete copy of the written
---------
consent of the Directors of the Corporation dated November 19, 1999. The
resolutions contained in the written consent attached hereto as Exhibit A are
----------
the only resolutions of the Board of Directors of the Corporation with respect
to the Credit Documents and Warrant referred to therein, are in full force and
effect on and as of the date hereof and have not been modified, amended or
repealed.
The undersigned has executed this Secretary's Certificate as of this 2nd
day of December, 1999.
/s/ Ronald Parks
--------------------------------------
Ronald Parks, Secretary
7
<PAGE>
EXHIBIT 10.11
2BRIDGE SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is made and entered into as of
____________, 1999 ("Effective Date") by and between 2Bridge, a California
corporation with a place of business at 221 Main Street, Suite 800, San
Francisco, California 94105 ("2Bridge") and _________________________
("Subscriber"), a ____________________corporation with a place of business at
____________________________________________________________.
2Bridge is the owner and operator of a service ("2Bridge Service")
pursuant to which certain computer programs owned or licensed by 2Bridge
("2Bridge Software") are made available on a remote access basis to subscribers
by way of certain computer processing capability including server computers
owned by or operated for 2Bridge ("2Bridge Network") under the terms and
conditions set forth in this Agreement. This Agreement consists of this "Cover
Sheet," the "Standard Terms and Conditions," and the attached Schedule A
("2Bridge Order Form") and Schedule B ("Service Overview").
Subscriber agrees to pay the nonrefundable monthly subscription and related
fees to 2Bridge for access to and use of the 2Bridge Service in accordance with
the Standard Terms and Conditions as outlined in Schedule A Order Form.
IN WITNESS WHEREOF, the duly authorized representatives have executed
this Agreement as of the Effective Date written above.
2BRIDGE SOFTWARE: SUBSCRIBER:
By:______________________________ By: ____________________________
Name:____________________________ Name: __________________________
Title: __________________________ Title: _________________________
Date:____________________________ Date: __________________________
<PAGE>
2BRIDGE SUBSCRIPTION AGREEMENT
STANDARD TERMS AND CONDITIONS
1. Usage of 2Bridge Service.
1.1 Access Grant. 2Bridge agrees to grant Subscriber remote access to the
------------
2Bridge Service on a subscription basis as set forth herein. Access shall be
limited to the total number of employees or contractors under nondisclosure
agreements with Subscriber that are given access privileges to the 2Bridge
Service ("Authorized Users"), as identified in Schedule A, Subscriber may add
additional 2Bridge Software identified in Schedule A or additional Authorized
Users to Subscriber's subscription to the 2Bridge Service upon execution of a
2Bridge Order Form and payment of fees.
1.2 Usage Limitation. The 2Bridge Service may only be used by Subscriber
----------------
and its branches, subsidiaries, and companies under common control in existence
as of the date of this Agreement ("User" entity). Upon request by Subscriber and
written approval by 2Bridge, Subscriber may add or remove branches,
subsidiaries, or companies under common control to the list of authorized User
entities. 2Bridge may cause to be excluded from the scope of the User entities
any entity or location for which 2Bridge reasonably determines that Subscriber
has failed to adequately administer the terms of this Agreement. As used herein,
all references to Subscriber shall be deemed to include reference to User
entities and Authorized Users.
1.3 Subscriber Set-Up. 2Bridge shall perform certain set-up services to
-----------------
enable Subscriber and its Authorized Users to access the 2Bridge Service via the
2Bridge Network, which includes without limitation providing to Subscriber a
login ID for use by its Authorized Users and configuring the 2Bridge Network to
permit access by Subscriber. Subscriber shall safeguard such login ID and shall
restrict disclosure of such login ID solely to Authorized Users.
2. Subscriber Support.
2.1 Subscriber Support. Subscriber shall be entitled to the support
------------------
services set forth and described in 2Bridge's Service Overview in Schedule B
("Support Services"). Such Support Services include efforts to (i) answer
Subscriber's questions communicated to 2Bridge through a designated Subscriber
technical liaison regarding the proper utilization of the 2Bridge Service, (ii)
identify defective source code, (iii) update the 2Bridge Software made available
on the 2Bridge Service with versions to correct any material program errors or
to provide minor functional enhancements that are made available by 2Bridge to
subscribers at no additional charge ("Updates").
2.2 Support Policies. Procedures for contacting 2Bridge are set forth in
----------------
Schedule B. 2Bridge shall have no obligation to provide Support Services until
it has received the monthly fees due for the then-existing Term. Subscriber
acknowledges that all reported errors may not be corrected, and 2Bridge shall
have no obligation to correct any errors which 2Bridge is unable to reproduce or
which are caused by Subscriber's hardware or network equipment or by use of the
2Bridge Service for other than the specific purpose for which the 2Bridge
Service is designed. All restrictions and limitations relating to the 2Bridge
Service apply to such Updates. 2Bridge reserves the right to impose additional
fees for any releases which 2Bridge designates as new products.
2.3 Communications Requirements. 2Bridge's support obligations hereunder
---------------------------
are contingent upon Subscriber maintaining access to the Internet ("Internet
Access") meeting the minimum specifications set forth in Schedule A under
"Internet Access Specifications". Acquiring, installing, maintaining and
operating the Internet Access is solely the Subscriber's responsibility.
3. Proprietary Rights to 2Bridge Service.
3.1 Ownership Rights. Subscriber acknowledges that 2Bridge or its licensors
----------------
retain all title, copyright and other proprietary rights in and to the 2Bridge
Service and that Subscriber will obtain only such rights to use the 2Bridge
Service as are expressly provided herein. Subscriber may not: (i) make available
to, or permit use of the 2Bridge Service by any third party or any users beyond
the allowed maximum number of Authorized Users, (ii) sell, rent, lease,
timeshare, encumber, license, sublicense, transfer or assign Subscriber's access
rights to the 2Bridge Service, (iii) modify, decompile, disassemble or reverse
engineer the 2Bridge Service in whole or in part, or take any other action in
derogation of 2Bridge's intellectual property rights, or (iv) use the 2Bridge
Service to provide processing services to third parties, on a "service bureau"
basis, or otherwise permit any use of the 2Bridge Service that provides the
benefit of the 2Bridge Service's functionality to third parties.
4. Warranty and Indemnity.
4.1 Limited Warranty. 2BRIDGE WARRANTS THAT THE 2BRIDGE SOFTWARE MADE
----------------
AVAILABLE THROUGH THE 2BRIDGE
-2-
<PAGE>
SERVICE WILL PERFORM SUBSTANTIALLY IN ACCORDANCE WITH ITS DOCUMENTATION. THIS
WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED.
2BRIDGE MAKES NO WARRANTY REGARDING THE STABILITY OR RELIABILITY OF THE 2BRIDGE
NETWORK MADE AVAILABLE THROUGH THE 2BRIDGE SERVICE, WHICH IS PROVIDED ON AN AS-
IS BASIS.
4.2 Limited Remedy. In the event of a material breach of the foregoing
--------------
warranty, 2Bridge shall use reasonable commercial efforts pursuant to its
provision of Support Services to promptly provide an update to the 2Bridge
Software to render it compliant with the foregoing warranty, or refund the
monthly fee allocable to the non-conforming 2Bridge Software for the month(s) in
which such software was non-conforming following notification by Subscriber. THE
FOREGOING CONSTITUTES SUBSCRIBER'S SOLE AND EXCLUSIVE REMEDY FOR BREACH BY
2BRIDGE OF WARRANTY UNDER THIS AGREEMENT.
4.3 Infringement Indemnity. 2Bridge shall defend Subscriber against any
----------------------
third-party claim based upon an allegation that the 2Bridge Software made
available through the 2Bridge Service infringes a United States intellectual
property right, but only if 2Bridge is notified promptly in writing of such
claim and is given sole control of the defense of such claim and of all related
settlement negotiations relating thereto. At its option, 2Bridge may terminate
this Agreement upon written notice to Subscriber and release the Subscriber of
remaining contract obligations. THE FOREGOING STATES 2BRIDGE'S ENTIRE LIABILITY
AND SUBSCRIBER'S SOLE REMEDY IN CONNECTION WITH ANY INTELLECTUAL PROPERTY
INFRINGEMENT CLAIMS ARISING OUT OF OR RELATED TO THE 2BRIDGE SERVICE.
4.4 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH ABOVE, 2BRIDGE EXPRESSLY
----------
DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS, EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, SATISFACTORY QUALITY, AND NONINFRINGEMENT, AND THEIR
EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION. WITHOUT LIMITING THE FOREGOING,
2BRIDGE DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE 2BRIDGE SERVICE
WILL MEET SUBSCRIBER'S REQUIREMENTS, OR THAT THE OPERATION OF THE 2BRIDGE
SERVICE WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT DEFECTS IN THE 2BRIDGE
SERVICE WILL BE CORRECTED.
5. Fees and Payment Terms.
5.1 Invoicing and Payment. Invoices for payment of all subscription and
---------------------
other fees shall be payable as specified in Schedule A or the applicable 2Bridge
Order Form. All fees shall be deemed overdue if they remain unpaid 30 days after
they become payable. All license fees and other fees payable hereunder are non-
refundable. All overdue amounts shall bear interest at the rate of one and one-
half percent (1-1/2%) per month or the maximum legal rate, if less, however,
nothing herein shall limit 2Bridge's right to terminate this Agreement under
Section 6.2 below. Subscriber shall reimburse 2Bridge for all reasonable costs
incurred (including reasonable attorneys' fees) in collecting past due amounts.
5.2 Taxes. The fees listed in this Agreement do not include taxes. The
-----
Subscriber shall pay or reimburse 2Bridge for all sales, use, excise, personal
property, value-added, or other federal, state or local taxes, duties, or any
similar assessments based on the access rights granted or the services provided
under this Agreement or on the Subscriber's use of the 2Bridge Service; however
the Subscriber shall have no responsibility for 2Bridge's income or franchise
taxes.
6. Term and Termination.
6.1 Term. The "Term" of this agreement shall be one (1) year or as
----
described in Schedule A, and shall commence on the Effective Date. Unless
terminated as set forth in Section 6.2, the Term shall automatically renew for
one or more successive terms of one (1) year on an annual subscription or the
period specified in Schedule A, each upon the expiration of the then-current
Term.
6.2 Termination. Either party may terminate this Agreement in the event of
-----------
a material breach by the other party that is not cured within thirty (30) days
of the nonbreaching party giving written notice of the breach and its intent to
terminate if uncured; provided that the cure period for payment obligations
shall be ten (10) days. Additionally, Subscriber may terminate this Agreement
upon the expiration of the then-current Term, upon sixty (60) days advance
written notice to 2Bridge.
6.3 Effect of Termination. Upon termination, Subscriber shall have access
---------------------
to Subscriber's information on 2Bridge's system for ten
-3-
<PAGE>
(10) business days, solely for the purpose of downloading such information.
After such time, Subscriber shall no longer have access to the 2Bridge Service
or 2Bridge Network or any information it contains and 2Bridge may remove
Subscriber's information from its system.
7. Limitation of Liability. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL
THEORY, TORT, CONTRACT, OR OTHERWISE, SHALL 2BRIDGE BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING
WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS OR LOST DATA, BUSINESS
INTERRUPTION, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES OCCASIONED BY THE USE OF THE 2BRIDGE SERVICE. NOTWITHSTANDING
ANYTHING TO THE CONTRARY HEREIN, IN NO EVENT WILL 2BRIDGE'S AGGREGATE LIABILITY
ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED THE TOTAL PAYMENTS MADE BY
SUBSCRIBER HEREUNDER, EVEN IF 2BRIDGE SHALL HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
8. Nondisclosure Obligations.
8.1 Confidential Information. 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 2Bridge Service
and information related thereto, all information clearly marked as confidential,
and other terms as agreed by the parties in writing.
8.2 Exceptions. A party's Confidential Information shall not include
----------
information which (i) is or becomes a part of the public domain through no act
or omission of the other party; or (ii) 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; or (iii) is lawfully
disclosed to the other party by a third party without restriction on disclosure,
or (iv) is independently developed by the other party without reference to the
disclosing party's Confidential Information. Results of benchmark tests run by
the Subscriber may not be disclosed absent 2Bridge's prior written consent which
may be withheld for any reason.
8.3 Nondisclosure. The parties agree, both during the term of this
-------------
Agreement and for a period of five (5) years after termination hereof, to hold
each other's Confidential Information in confidence. The parties agree not to
make each other's Confidential Information available in any form to any third
party or to use each other's Confidential Information for any purpose other than
the implementation of this Agreement without the other party's prior written
consent. 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 provisions of this Agreement.
9. Miscellaneous.
9.1 Governing Law; Jurisdiction. This Agreement will be interpreted and
---------------------------
construed in accordance with the laws of the State of California and the United
States of America, without regard to conflict of law principles or the United
Nations Convention on Contracts for the International Sale of Goods. For any
disputes arising out of this Agreement, the parties consent to the personal and
exclusive jurisdiction of, and venue in, the state or federal court of San
Francisco County, California,
9.2 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of 2Bridge's and Subscriber's successors and assigns. However, neither
this Agreement, nor any access rights to the 2Bridge Service may be assigned,
sublicensed, sold, mortgaged, or pledged by Subscriber, whether by operation of
law or otherwise, without the prior written consent of 2Bridge. Any attempted
assignment in violation of this Section 9.2 shall be null and void.
9.3 Agreement Binding on Users. Subscriber represents that it has the power
--------------------------
and authority to bind all User entities to the terms and conditions of this
Agreement. Any act by a User entity that would constitute a breach of this
Agreement shall be deemed a breach by Subscriber.
9.4 Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties on the subject matter and supersedes all prior agreements and
understandings. All amendments must be in writing signed by both parties. No
waiver of any breach of the Agreement shall constitute a waiver of a subsequent
breach. If any provision of this Agreement is held invalid or unenforceable by
an agency of competent jurisdiction, the remaining provisions shall nevertheless
remain valid.
9.5 Force Majeure. Except for payment obligations, neither party shall be
-------------
liable for any delay or failure to perform as required by this Agreement as a
result of any causes or conditions beyond such party's reasonable control,
including without
-4-
<PAGE>
limitation, acts of God, acts of sabotage, power outages, or network failure.
9.6 Independent Contractors. The parties to this Agreement are independent
-----------------------
contractors. This Agreement shall not be interpreted or construed to create any
association, joint venture or partnership between the parties. Each party shall
bear its own costs and expenses in performing this Agreement.
-5-
<PAGE>
SCHEDULE A
2BRIDGE ORDER FORM
- --------------------------------------------------------------------------------
2Bridge Software, 221 Main Street, Suite 800, San Francisco, CA 94105
Subscriber Name and Address:
---------------------------------------------------
License Agreement No.:
---------------------------------------------------------
If Tax Exempt, Number (attach certificate): N/A
------------------------------------
Installation/Service Site Location (if different from above):
------------------
- --------------------------------------------------------------------------------
Installation/Service Site I.D. No.:
--------------------------------------------
Subscriber Technical Contact Person: Phone:
---------------------- ------------
Subscriber Billing Address (if different from above): same
--------------------------
Subscriber Billing Contact Person (if different from above):
--------------------
Phone:
-------------------------------------------------------------------------
Subscriber Shipping Address (if different from above):
-------------------------
Subscriber Shipping Contact Person (if different from above):
-----------------
Phone:
-------------------------------------------------------------------------
Subscriber P.O. No. (if required):
---------------------------------------------
2Bridge 2Bridge Software or Operating Database Maximum Initial
SKU Services System Users Invoice Amount
Number (Net of Taxes)
- --------------------------------------------------------------------------------
2Share Twelve Month XXXXX XXXXXX [fill-in] [fill-in]
Subscription
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Professional Services N/A N/A N/A [fill-in]
- --------------------------------------------------------------------------------
Effective Date of this Order:
-------------------
[ ] Annual Subscription: Twelve equal payments in the amount of [fill-in]
per month
- --------------------------------------------------------------------------------
(See Reverse Side for a detailed description of each Pay Option and for
additional important provisions.)
2Bridge Subscriber:
By: By:
----------------------- -----------------------
(Authorized Signature) (Authorized Signature)
- --------------------------- ---------------------------
Name of Person Signing Name of Person Signing
- --------------------------- ---------------------------
Title Title
Date Date
---------------------- ----------------------
<PAGE>
PAY OPTION PLAN DESCRIPTIONS
Twelve equal monthly payments for a one-year term license, inclusive of
maintenance for the one-year period. Thereafter, the license will be renewed on
the same terms and conditions, but subject to the then prevailing Annual
Subscription fee. In the event that Subscriber or 2Bridge elects not to renew
this Annual Subscription license, Subscriber agrees to return all material and
cease all usage of any 2Bridge Software.
TERMS, RENEWALS AND TERMINATION.
The "Term" of this agreement shall be one (1) year or as described in Schedule
A, and shall commence on the Effective Date. Unless terminated as set forth in
Section 6.2, the Term shall automatically renew for one or more successive terms
of one (1) year on a yearly subscription or the period specified in Schedule A,
each upon the expiration of the then-current Term.
CLIENT SERVICES
All of the terms and conditions contained in the Subscription Agreement referred
to in this Order Form shall apply to the Services ordered hereunder. All
programs, documentation, reports, techniques, designs and other materials
prepared or created by 2Bridge shall remain the property of 2Bridge and shall
not constitute work made for hire under the Copyright Act. The fees set forth
in this Order Form for Services, as more fully set forth in the attached
description(s), do not include out-of-pocket expenses (such as transportation,
lodging, meal per diem, and other expenses) incurred by 2Bridge while providing
the Services ordered, which expenses will be charged to the Subscriber from time
to time or upon completion of the ordered Services. If performance of the
Services is delayed due to Subscriber's failure to provide required computer
access or personnel or similar reasons Subscriber shall pay 2Bridge's then
prevailing daily charge, plus reimbursement of all such out-of-pocket expenses,
for each additional day for each person assigned by 2Bridge to provide the
Services. Subscriber shall review the Services on a continuous basis, and if
all or any part of the Services is not acceptable to Subscriber, Subscriber
shall notify 2Bridge, in writing, within ten (10) days following completion of
all or such part of the Services by 2Bridge. Such notice shall specify the
reason or reasons the work has been deemed unacceptable. Upon any such notice,
2Bridge shall modify its performance of the Services so as to make them
reasonably acceptable to Subscriber. The passage of the ten (10) days following
completion of all or a part of the Services without written notice of non-
acceptance, or the use by Subscriber of any 2Bridge Software employing of all or
of a part of the Services in any productive mode, shall constitute acceptance by
Subscriber of such Services.
REFERENCED LICENSE AGREEMENT
The terms and conditions of the License Agreement or prior Order Form,
as the case may be, referenced by this Order Form shall apply to this Order
Form. If any provision of the License Agreement or prior Order Form, as the
case may be, shall contradict any provision of this Order Form, the provisions
of this Order Form shall apply with respect to the 2Bridge Software described
herein.
NOTICES
All notices which either party hereto is required or may desire to give
the other party hereto shall be given by addressing the communication to the
address set forth in this Order Form, and may be given by certified or
registered mail. Such notices shall be deemed given on the date of receipt (or
refusal) of delivery.
<PAGE>
[LOGO OF 2BRIDGE]
SCHEDULE B
SERVICE OVERVIEW
2Share Service Overview
A. Installation and Support
2Bridge will install, support, and provide upgrades to a 2Share application
environment to be used by the Client. Included in the installation and support
are:
- - Server Hardware
* Compaq Proliant 1850R rack-mounted server hardware (or equivalent)
* 1 Pentium III 550 Mhz Processor with 256MB RAM
* 27 GB RAID storage (18 GB Useable Disk Space)
* Disk Fault Tolerance provided through Hardware
- - Operating System Software
* Microsoft NT & Netscape web server
- - Database Software
* Informix 7.3
- - Application Software
* 2Bridge 2Share
- - Providing web hosting services for the 2Share implementation
- - Providing upgrades to the most current version of the 2Share application
environment
*2Bridge reserves the right to modify the hardware/software configuration
B. Management and Maintenance
2Bridge will host and maintain server and network systems in support of the
2Share client application environment including:
- - 7x24 Systems Administration and Database Administration Support
- - 12x5 (Mon.-Fri. 7 a.m.-7p.m. Pacific) Application Functional Support related
to the 2Share Application
- - System backup and recovery
- - Server housing in data center with full backup power and physical security
- - Proactive monitoring of all infrastructure components
File systems and database nightly backups
C. Technical Support
The Client will obtain technical support by calling 1-650-210-0590.
2Bridge will provide "Level 1," "Level 2," and "Level 3" support for the 2Bridge
Software. "Level 1" support is the handling of calls in which resolution can be
accomplished directly by the support representative. "Level 2" support is the
handling of calls in which the resolution requires the involvement of an
application specialist. "Level 3" support is technical support that is usually
required only when there is a defect or obscure usage of the product.
D. Reporting
2Bridge will provide the following reports to the Client as part of regular
service. Reports will be generated on a monthly basis.
- - Number of Calls to Support Center by Type
- - Number of Service Outages
- - Percent Availability of the 2Share application environment
<PAGE>
E. Service Level Target
2Bridge's percentage availability target for the 2Share Application is 99%.
F. Scheduled Maintenance
2Bridge will perform maintenance on the 2Share Application environment Sunday on
a weekly basis during the hours of 12 a.m.-6 a.m. Pacific Time. The Application
will be unavailable to the Client while this maintenance is performed.
<PAGE>
EXHIBIT 10.12
2BRIDGE SUBSCRIPTION AGREEMENT
NON-HOSTED
This Subscription Agreement (the "Agreement") is made and entered into as of
____________, 1999 ("Effective Date") by and between 2Bridge, a California
corporation with a place of business at 221 Main Street, Suite 800, San
Francisco, California 94105 ("2Bridge") and _________________________
("Subscriber"), a ____________________corporation with a place of business at
____________________________________________________________.
2Bridge offers certain computer programs owned or licensed by 2Bridge to
subscribers under the terms and conditions set forth in this Agreement. This
Agreement consists of this "Cover Sheet," the "Standard Terms and Conditions,"
and the attached Schedule A ("2Bridge Order Form"). In addition, 2Bridge's
standard shrinkwrap or download license agreement ("Shrinkwrap Agreement")
accompanies 2Bridge's 2Share Server software. To the extent that there is any
inconsistency between this Agreement and the Shrinkwrap Agreement, the terms of
this Agreement shall prevail.
Subscriber agrees to pay the nonrefundable subscription and related fees to
2Bridge for the Software (as defined in the Agreement) in accordance with the
Standard Terms and Conditions as outlined in the 2Bridge Order Form.
IN WITNESS WHEREOF, the parties' duly authorized representatives have
executed this Agreement as of the Effective Date written above.
2BRIDGE: SUBSCRIBER:
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
Date: Date:
------------------------------ ------------------------------
<PAGE>
2BRIDGE SUBSCRIPTION AGREEMENT
STANDARD TERMS AND CONDITIONS
1. Definitions.
1.1 "Documentation" means the user manuals and operator instructions
issued by 2Bridge in conjunction with the Software.
1.2 "Software" means the software specified on Schedule A or a 2Bridge
Order Form executed by the parties.
2. Grant of License.
2.1 In consideration of Subscriber's payment of the applicable license
fees, 2Bridge grants Subscriber a non-transferable, non-exclusive license to:
(a) install the Software on a single computer or internal network server; (b)
permit up to the number of employees set forth on Exhibit A hereto ("Authorized
Users") to use the Software, including without limitation, the right for each
Authorized User to access the Software; (c) permit an unlimited number of
internal users to view information through the 2Share Viewer, including without
limitation, employees or contractors under Non-disclosure Agreements with
Subscriber; and (d) make one copy of the Software for archival purposes only,
provided that any such copy must contain all of the original Software's
proprietary notices. Subscriber may add additional software or add or substitute
Authorized Users upon execution of a 2Bridge Order Form and payment of all
applicable fees.
2.2 Subscriber may not: (a) provide, disclose, divulge or make available
to, or permit use of the Software by any third party or any users beyond the
allowed maximum number of Authorized Users except under the terms of this
Agreement, (b) modify, translate or create derivative works based on the
Software, (c) sell, rent, lease, timeshare, encumber, license, sublicense,
transfer or assign the Software, (d) attempt to decompile, disassemble or
reverse engineer the Software in whole or in part, or otherwise attempt to
derive the source code of the Software or take any other action in derogation of
2Bridge's intellectual property rights (except to the extent such restriction is
expressly prohibited by law), (e) use the Software to provide processing
services to third parties, (f) use the Software on a "service bureau" basis, or
otherwise permit any use of the Software that provides the benefit of the
Software's functionality to third parties, or (g) remove any proprietary notices
or labels on the Software.
2.3 Subscriber acknowledges that 2Bridge or its licensors retain all
title, copyright and other proprietary rights in and to the Software and that
Subscriber will obtain only such rights to use the Software as are expressly
provided herein.
3. Administration of License.
3.1 License Administrator. Subscriber will appoint and identify to
---------------------
2Bridge an individual who will administer Subscriber's obligations hereunder and
respond to all inquiries by 2Bridge in connection with Subscriber's performance
hereunder ("License Administrator"). The License Administrator shall be
responsible for maintaining a current and updated list of all User names and
locations, as well as all installed server copies of the Software, and shall
provide a copy of that list to 2Bridge upon request.
3.2 Scope of "Authorized User". Copies of the Software may only be used
--------------------------
by Subscriber and its branches, subsidiaries, and companies under common control
in existence as of the date of this Agreement. Upon request by Subscriber and
written approval by 2Bridge, Subscriber may add or remove branches,
subsidiaries, or companies under common control to the list of Authorized User
entities. 2Bridge may cause to be excluded from the scope of such user entities
any entity or location for which 2Bridge reasonably determines that Subscriber
has failed to adequately administer the terms of this Agreement.
3.3 Audit and Inspection Rights. In order to enable 2Bridge to confirm
---------------------------
the accuracy of information and protect its intellectual property rights
hereunder, Subscriber agrees: (i) to run the standard usage reports generated by
the Software, the 2Share Server Reports, upon 2Bridge's request; and (ii) to
allow 2Bridge's certified public accountants to audit and analyze the records of
Software use and location or other records of Subscriber to confirm the number
of copies of the Software used and installed at any Authorized User entity's
location. Any such audit shall be permitted by such user entity upon receipt of
reasonable notice, during normal business hours, at a time mutually agreed by
2Bridge and such user entity. The cost of such an audit will be borne by
2Bridge. Audits shall be made no more frequently than semi-annually and will not
-2-
<PAGE>
interfere unreasonably with the Authorized User entity's business activities.
4. Subscriber Support.
4.1 Subscriber Support. Subscriber shall be entitled to support
------------------
services ("Support Services"). Such Support Services include efforts to: (i)
answer Subscriber's questions communicated to 2Bridge through a designated
Subscriber technical liaison regarding the proper utilization of the Software,
(ii) identify defective source code, (iii) update the Software with versions to
correct any material program errors or to provide minor functional enhancements
that are made available by 2Bridge to subscribers at no additional charge
("Updates").
4.2 Support Policies. 2Bridge shall have no obligation to provide
----------------
Support Services until it has received the monthly fees due for the then-
existing Term. Subscriber acknowledges that all reported errors may not be
corrected, and 2Bridge shall have no obligation to correct any errors which
2Bridge is unable to reproduce or which are caused by: (i) Subscriber's hardware
or network equipment, (ii) use of the Software for other than the specific
purpose for which the Software is designed, (iii) accident, transportation,
neglect, misuse, modification or enhancement of the Software, or (iv) any
alterations of or additions to the Software performed by parties other than
2Bridge. All restrictions and limitations relating to the Software apply to
Updates. 2Bridge reserves the right to impose additional fees for any releases
which 2Bridge designates as new products.
5. Warranty and Indemnity.
5.1 Limited Warranty. 2Bridge warrants for Subscriber's sole benefit
----------------
for a period of 90 days from the date of delivery of the Software to Subscriber
(the "Warranty Period"): (a) that the media on which the Software was delivered,
if provided by 2Bridge, will be free from defects in material and workmanship;
(b) that the Software will function substantially in accordance with the
specifications in the applicable Documentation in effect when the Software is
delivered; (c) that the Software Documentation shall be accurate in all material
respects; and (d) the Software shall be free of any willfully introduced
computer virus or any other similarly harmful, malicious or hidden program or
data including without limitation, any hardware or software device or code which
shall prevent any Authorized User from accessing or using the Software or any
portion thereof.
5.2 Limited Remedy. In the event of a material breach of the foregoing
--------------
warranty, 2Bridge shall use reasonable commercial efforts pursuant to its
provision of Support Services to promptly provide an Update to the 2Bridge
Software to render it compliant with the foregoing warranty, or refund the
monthly fee allocable to the non-conforming Software for the month(s) in which
such Software was non-conforming following notification by Subscriber. THE
FOREGOING CONSTITUTES SUBSCRIBER'S SOLE AND EXCLUSIVE REMEDY FOR BREACH BY
2BRIDGE OF WARRANTY UNDER THIS AGREEMENT.
5.3 Infringement Indemnity. 2Bridge shall defend Subscriber against any
----------------------
third-party claim based upon an allegation that the Software infringes a United
States copyright, trademark, or trade secret, but only if 2Bridge is notified
promptly in writing of such claim and is given sole control of the defense of
such claim and of all related settlement negotiations relating thereto. At its
option, 2Bridge may terminate this Agreement upon written notice to Subscriber
and release the Subscriber of its remaining contract obligations.
NOTWITHSTANDING THE FOREGOING, 2BRIDGE SHALL NOT BE LIABLE FOR ANY CLAIM ARISING
FROM OR BASED UPON ANY ALTERATION OR MODIFICATION OF THE SOFTWARE. THE FOREGOING
STATES 2BRIDGE'S ENTIRE LIABILITY AND SUBSCRIBER'S SOLE REMEDY IN CONNECTION
WITH ANY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS ARISING OUT OF OR RELATED TO
THE 2BRIDGE SERVICE.
5.4 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH ABOVE, 2BRIDGE EXPRESSLY
----------
DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS, EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, SATISFACTORY QUALITY, AND NONINFRINGEMENT, AND THEIR
EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION. IF APPLICABLE LAW IMPLIES ANY
WARRANTIES OR CONDITIONS WITH RESPECT TO THE SOFTWARE, ALL SUCH WARRANTIES OR
CONDITIONS ARE LIMITED IN DURATION TO THIRTY (30) DAYS FROM THE DATE OF USER'S
FIRST INSTALLATION OF THE SOFTWARE. WITHOUT LIMITING THE FOREGOING, 2BRIDGE
DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE SOFTWARE WILL MEET
SUBSCRIBER'S
-3-
<PAGE>
REQUIREMENTS, OR THAT THE OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR
ERROR-FREE, OR THAT DEFECTS IN THE SOFTWARE WILL BE CORRECTED.
6. Limitation of Liability. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY,
TORT (INCLUDING NEGLIGENCE), CONTRACT, OR OTHERWISE, SHALL 2BRIDGE BE LIABLE FOR
ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER,
INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS OR LOST DATA, BUSINESS
INTERRUPTION, COMPUTER FAILURE OR MALFUNCTION, OR ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSSES OCCASIONED BY THE USE OF THE SOFTWARE. NOTWITHSTANDING
ANYTHING TO THE CONTRARY HEREIN, IN NO EVENT WILL 2BRIDGE'S AGGREGATE LIABILITY
ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED THE TOTAL PAYMENTS MADE BY
SUBSCRIBER HEREUNDER, EVEN IF 2BRIDGE SHALL HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
7. Fees and Payment Terms.
7.1 Invoicing and Payment. Invoices for payment of all subscription and
---------------------
other fees shall be payable as detailed on Schedule A or the applicable 2Bridge
Order Form. All fees shall be deemed overdue if they remain unpaid 30 days after
they become payable. All subscription fees and other fees payable hereunder are
non-refundable. All overdue amounts shall bear interest at the rate of one and
one-half percent (1-1/2%) per month or the maximum legal rate, if less, however,
nothing herein shall limit 2Bridge's right to terminate this Agreement under
Section 8.2 below. Subscriber shall reimburse 2Bridge for all reasonable costs
incurred (including reasonable attorneys' fees) in collecting past due amounts.
7.2 Taxes. The fees listed in this Agreement do not include taxes. The
-----
Subscriber shall pay or reimburse 2Bridge for all sales, use, excise, personal
property, value-added, or other federal, state or local taxes, duties, or any
similar assessments based on the rights granted or the services provided under
this Agreement or on the Subscriber's use of the Software; however, the
Subscriber shall have no responsibility for 2Bridge's income or franchise taxes.
7.3 Shipment. All shipments of Software shall be F.O.B. 2Bridge's
--------
facility or an authorized reseller's facility and uninsured, unless Subscriber
requests in writing that 2Bridge obtains insurance on Subscriber's behalf and
agrees to pay the additional charge for such insurance. 2Bridge will use
reasonable efforts to ship on or before estimated shipping dates. Shipping dates
are approximate.
8. Term and Termination.
8.1 Term. The "Term" of this Agreement and the license granted hereunder
----
shall be one (1) year for an annual subscription or as described in Schedule A
or the applicable 2Bridge Order Form, and shall commence on the Effective Date.
Unless terminated as set forth in Section 8.2, the Term shall automatically
renew for one or more successive terms of one (1) year on a annual subscription
or for such periods as are described in Schedule A, each upon the expiration of
the then-current Term.
8.2 Termination. Either party may terminate this Agreement in the event
-----------
of a material breach by the other party that is not cured within thirty (30)
days of the nonbreaching party giving written notice of the breach and its
intent to terminate if uncured; provided that the cure period for payment
obligations shall be ten (10) days. Additionally, Subscriber may terminate this
Agreement upon the expiration of the then-current Term, upon sixty (60) days
advance written notice to 2Bridge.
8.3 Effect of Termination. Upon termination, Subscriber must, within
---------------------
thirty (30) days of such termination, erase the Software, and all portions
thereof, from all computer memories and storage devices within Subscriber's
possession or control, and represent in writing to 2Bridge that it has done so.
Termination of this Agreement or any license shall not limit either party from
pursuing any other remedies available to it, including injunctive relief, nor
shall such termination relieve the Subscriber's obligation to pay all fees that
accrued prior to such termination. Sections 2.4, 3.3, 5.4, 6, 8.3, 9, and 10
shall survive any expiration or termination of this Agreement.
9. Nondisclosure Obligations.
9.1 Confidential Information. By virtue of this Agreement, each party
------------------------
may have access to information that is confidential to the other party
("Confidential Information"). Confidential Information shall be limited to the
Software, Documentation, and
-4-
<PAGE>
information related thereto, all information clearly marked as confidential, and
other terms as agreed by the parties in writing.
9.2 Exceptions. A party's Confidential Information shall not include
----------
information which: (i) is or becomes a part of the public domain through no act
or omission of the receiving party; or (ii) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the receiving
party either directly or indirectly from the disclosing party; (iii) is lawfully
disclosed to the receiving party by a third party without restriction on
disclosure, or (iv) is independently developed by the receiving party without
reference to the disclosing party's Confidential Information. Results of
benchmark tests run by the Subscriber may not be disclosed absent 2Bridge's
prior written consent which may be withheld in 2Bridge's sole discretion.
9.3 Nondisclosure. The parties agree, both during the term of this
-------------
Agreement and for a period of five (5) years after termination hereof, to hold
each other's Confidential Information in confidence. The parties agree not to
make each other's Confidential Information available in any form to any third
party or to use each other's Confidential Information for any purpose other than
the implementation of this Agreement without the other party's prior written
consent. 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 provisions of this Agreement.
10. Miscellaneous.
10.1 Export Controls. User may not export or re-export the Software or
---------------
any underlying information or technology without the prior written consent of
2Bridge. Any such export or re-export shall be in full compliance with all
United States and other applicable laws and regulations, including, without
limitation, all United States Department of Commerce and export laws. Subscriber
hereby represents and warrants that no Authorized User is located in, under
control of, or a national or resident of any country to which the export of the
Software is prohibited.
10.2 Governing Law; Jurisdiction. This Agreement will be interpreted
---------------------------
and construed in accordance with the laws of the State of California and the
United States of America, without regard to conflict of law principles or the
United Nations Convention on Contracts for the International Sale of Goods. For
any disputes arising out of this Agreement, the parties consent to the personal
and exclusive jurisdiction of, and venue in, the state or federal court of San
Francisco County, California.
10.3 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of 2Bridge's and Subscriber's successors and assigns. However, neither
this Agreement, nor any part of the Software may be assigned, sublicensed, sold,
mortgaged, pledged, or otherwise transferred by Subscriber, whether by operation
of law or otherwise, without the prior written consent of 2Bridge. Any attempted
assignment in violation of this Section 10.3 shall be null and void.
10.4 Agreement Binding on Authorized Users. Subscriber represents that
-------------------------------------
it has the power and authority to bind all Authorized Users to the terms and
conditions of this Agreement. Any act by an Authorized User that would
constitute a breach of this Agreement shall be deemed a breach by Subscriber.
10.5 Entire Agreement. This Agreement constitutes the entire agreement
----------------
of the parties on the subject matter and supersedes all prior agreements and
understandings. All amendments must be in writing signed by both parties. No
waiver of any breach of the Agreement shall constitute a waiver of a subsequent
breach. If any provision of this Agreement is held invalid or unenforceable by
an agency of competent jurisdiction, the remaining provisions shall nevertheless
remain valid.
10.6 Force Majeure. Except for payment obligations, neither party shall
-------------
be liable for any delay or failure to perform as required by this Agreement as a
result of any causes or conditions beyond such party's reasonable control,
including without limitation, acts of God, acts of sabotage, power outages, or
network failure.
10.7 Independent Contractors. The parties to this Agreement are
-----------------------
independent contractors. This Agreement shall not be interpreted or construed to
create any association, joint venture or partnership between the parties. Each
party shall bear its own costs and expenses in performing this Agreement.
-5-
<PAGE>
SCHEDULE A
2BRIDGE ORDER FORM
[Insert applicable prices and other terms.]
_______________________________________________________________________________
2Bridge Software, 221 Main Street, Suite 800, San Francisco, CA 94105
Subscriber Name and Address:
------------------------------------------------
License Agreement No.:
------------------------------------------------------
If Tax Exempt, Number (attach certificate): N/A
-------------------------------
Installation/Service Site Location (if different from above):
---------------
- ----------------------------------------------------------------------------
Installation/Service Site I.D. No.:
-----------------------------------------
Subscriber Technical Contact Person: Phone:
----------------------------------------
Subscriber Billing Address (if different from above): same
-----------------------
Subscriber Billing Contact Person (if different from above):
----------------
Phone:
----------------------------------------------------------------------
Subscriber P.O. No. (if required):
------------------------------------------
<TABLE>
<CAPTION>
Initial Invoice
2Bridge SKU Maximum Amount (Net of
Number Software or Services Operating System Database Users Taxes)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
2Share Twelve Month [fill-in] [fill-in] [fill-in] [fill-in]
Subscription
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Professional Services N/A N/A N/A [fill-in]
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Effective Date of this Order: ________________
<S> <C>
[ ] Annual Subscription: Twelve equal payments in the amount of ______ per month
____________________________________________________________________________________
(See Reverse Side for a detailed description of each Pay Option and for additional important provisions.)
</TABLE>
2Bridge: Subscriber:
By: By:
---------------------------------- ---------------------------------
(Authorized Signature) (Authorized Signature)
- ------------------------------------- ------------------------------------
Name of Person Signing Name of Person Signing
- ------------------------------------- ------------------------------------
Title Title
Date: Date:
-------------------------------- -------------------------------
<PAGE>
PAY OPTION PLAN DESCRIPTIONS
Annual Subscription: Twelve equal monthly payments for a one-year term
license, inclusive of maintenance for the one-year period. Thereafter, the
license will be renewed on the same terms and conditions, but subject to the
then prevailing Annual Subscription fee. In the event that Subscriber or
2Bridge elects not to renew the Annual Subscription license, Subscriber agrees
to return all material and cease all usage of any Software.
TERMS, RENEWALS AND TERMINATION
The "Term" of this agreement shall be one (1) year, as described in
Schedule A, and shall commence on the Effective Date. Unless terminated as set
forth in Section 8.2, the Term shall automatically renew for one or more
successive terms of one (1) year on a yearly subscription or otherwise specified
in Exhibit A, each upon the expiration of the then-current Term.
CLIENT SERVICES
All of the terms and conditions contained in the Subscription Agreement
referred to in this Order Form shall apply to the Software or Services ordered
hereunder. All programs, documentation, reports, techniques, designs and other
materials prepared or created by 2Bridge shall remain the property of 2Bridge
and shall not constitute work made for hire under the Copyright Act. The fees
set forth in this 2Bridge Order Form for Software and Services, as more fully
set forth in the attached description(s), do not include out-of-pocket expenses
(such as transportation, lodging, meal per diem, and other expenses) incurred by
2Bridge while providing any Services ordered, which expenses will be charged to
the Subscriber from time to time or upon completion of the ordered Services. If
performance of the Services or delivery of Software is delayed due to
Subscriber's failure to provide required computer access or personnel or similar
reasons Subscriber shall pay 2Bridge's then prevailing daily charge, plus
reimbursement of all such out-of-pocket expenses, for each additional day for
each person assigned by 2Bridge to provide the Services. Subscriber shall
review the Services on a continuous basis, and if all or any part of the
Services is not acceptable to Subscriber, Subscriber shall notify 2Bridge, in
writing, within ten (10) days following completion of all or such part of the
Services by 2Bridge. Such notice shall specify the reason or reasons the work
has been deemed unacceptable. Upon any such notice, 2Bridge shall modify its
performance of the Services so as to make them reasonably acceptable to
Subscriber. The passage of the ten (10) days following completion of all or a
part of the Services without written notice of non-acceptance, or the use by
Subscriber of any Software employing of all or of a part of the Services in any
productive mode, shall constitute acceptance by Subscriber of such Services.
REFERENCED LICENSE AGREEMENT
The terms and conditions of the License Agreement or prior 2Bridge Order
Form, as the case may be, referenced by this 2Bridge Order Form shall apply to
this 2Bridge Order Form. If any provision of the License Agreement or prior
2Bridge Order Form, as the case may be, shall contradict any provision of this
2Bridge Order Form, the provisions of this 2Bridge Order Form shall apply with
respect to the Software described herein.
NOTICES
All notices which either party hereto is required or may desire to give the
other party hereto shall be given by addressing the communication to the address
set forth in this 2Bridge Order Form, and may be given by certified or
registered mail. Such notices shall be deemed given on the date of receipt (or
refusal) of delivery.
<PAGE>
EXHIBIT 10.13
2BRIDGE
PROFESSIONAL SERVICES AGREEMENT
This PROFESSIONAL SERVICES AGREEMENT (this "Agreement") is entered into by
and between the customer whose name, address and other contact information are
set forth as Exhibit A hereto ("Customer"), and 2Bridge ("2Bridge"), with
offices at 221 Main Street, Suite 800, San Francisco, CA 94105, as of
____________ (the "Effective Date"), and describes the terms and conditions
pursuant to which 2Bridge will provide certain professional services as defined
below.
In consideration of the mutual promises and upon the terms and conditions
set forth below, the parties agree as follows:
1. Definitions
-----------
1.1. "Application" means the software application to be developed by
2Bridge specifically for Customer at Customer's exclusive expense, in accordance
with the Specifications, through the use of the Software and other proprietary
programming tools of 2Bridge.
1.2. "Confidential Information" means this Agreement, its Exhibits and
any addenda hereto, all source code relating to the Application, the Software
and Documentation, the 2Bridge Tools, and all information, data, drawings,
benchmark tests, specifications, trade secrets, and any other proprietary
information supplied to one party by the other, including all items defined as
"confidential information" in any other agreement between Customer and 2Bridge,
whether executed prior to or after the date of this Agreement, or any
information identified in writing as proprietary and confidential when delivered
to the other party. Confidential Information shall not include information that
is: (i) publicly available, (ii) already in that party's possession and not
subject to a confidentiality obligation, (iii) obtained from third parties
without restrictions on disclosure or breach of a duty of nondisclosure by such
third party, (iv) independently developed by that party without reference to
Confidential Information, or (v) required to be disclosed by order of a court or
other governmental entity.
1.3. "Documentation" means any instructions, manuals, on-line help files,
or other materials regarding the use of the Application.
1.4. "2Bridge Tools" means all software programs of general applicability
not specific or identifiable to the Application, as well as all development
tools, software code modules, objects, subroutines, programming techniques,
interfaces, specifications, designs, processes, techniques, concepts,
improvements, discoveries, and inventions made or developed by 2Bridge, whether
or not in connection with the Services, and as they may be further developed in
the course of the development of the Application.
1.5. "Software" means the 2Bridge computer software program(s) to be
utilized hereunder, specified in Exhibit A attached hereto and incorporated
herein by reference.
1.6. "Specifications" means the written and approved specifications
submitted and agreed to by the parties. The Specifications, when completed,
shall be incorporated herein by reference.
2. Scope of Services
-----------------
2.1. Services. 2Bridge shall provide the professional services (the
--------
"Services") described in Exhibit B attached hereto, according to the milestone
schedule set forth in Exhibit C attached hereto (the "Schedule"), both as may be
amended from time to time by agreement of the parties. 2Bridge will retain the
sole and exclusive right to
-1-
<PAGE>
control or direct the manner or means by which the Services are performed.
2.2. Change Orders. If Customer desires an addition, modification, or
-------------
change to the Specifications or the Application, other than a modification
pursuant to the Warranty set forth in Section 8.1, Customer shall submit such
request in writing authorizing such additional Services and setting forth the
schedule, additional costs, and personnel and other resources required for the
work to be performed (a "Change Order"). 2Bridge's acceptance and performance of
any Change Order will be subject to its having the technical capability and
qualified personnel to perform the work requested and to 2Bridge's acceptance of
Customer's estimate of additional costs and completion times. 2Bridge shall not
be obligated to perform any additional or different Services until it gives
Customer written acceptance of the Change Order.
2.3. Software. The Services will generally consist of enhancements or
--------
customizations to a current release of the Software, in accordance with the
Specifications. 2Bridge will not be responsible for the migration or re-
implementation of the Services or the Application for future releases of the
Software unless Customer separately contracts for such migration or re-
implementation.
3. Customer's Duties and Responsibilities
--------------------------------------
3.1. Data and Information. Customer shall make available in a timely
--------------------
manner at no charge to 2Bridge all computer facilities, data, programs, files,
documentation, artwork, graphics, or other information and resources required by
2Bridge for the performance of the Services. Customer will be responsible for,
and assumes the risk of any problems resulting from, the content, accuracy,
completeness and consistency of all such data, materials and information
supplied by Customer.
3.2. Equipment. Customer shall provide, at no charge to 2Bridge,
---------
services, and equipment (such as copies, fax machines, and modems) as 2Bridge
reasonably requires to perform the Services.
3.3. Notification. Customer shall promptly respond to all deliverables
------------
or reports requiring Customer acceptance, as well as all requests for
information or Customer materials submitted by 2Bridge. All materials submitted
by 2Bridge requiring such prompt response shall be prominently marked by 2Bridge
as a "Deliverable" and shall specify the time required for response by Customer.
Customer understands and agrees that time is of the essence in the performance
of this Agreement, and failure to cooperate or provide such approvals or
responses in the time required may result in delays or increased cost to
Customer for the Services.
4. Relationship of Parties
-----------------------
4.1. Independent Contractors. Each party will be and act as an
-----------------------
independent contractor and not as an agent or partner of, or joint venturer
with, the other party for any purpose related to this Agreement or the
transactions contemplated by this Agreement, and neither party by virtue of this
Agreement will have any right, power or authority to act or create any
obligation, expressed or implied, on behalf of the other party. Each party will
be responsible for the supervision, direction and control of its own personnel
and, except as otherwise set forth herein, shall bear its own costs and expenses
in connection with the Services.
4.2. Contact Person. Each party will appoint in writing an employee or
--------------
agent of such party to act as the "Contact Person" for all communication between
the parties related to the Services. The Contact Person will be responsible for
monitoring the status of the Services and will schedule regular meetings with
both technical and management personnel of each party to review the status of
the Services. The initial Contact Person for each Party is set forth in Exhibit
A hereto, and either party may change its Contact Person upon written notice to
the other.
4.3. Nonsolicitation. Customer acknowledges and agrees that the employees
---------------
and consultants of 2Bridge who perform the Services are valuable assets to
2Bridge and are difficult to replace. Accordingly, Customer agrees that, for a
period of six (6) months after the completion of the Services, it will not offer
employment as an employee,
-2-
<PAGE>
independent contractor, or consultant to any 2Bridge employee or consultant who
performs any of the Services.
4.4. Services for Others. Customer understands and acknowledges that
-------------------
2Bridge performs and shall continue to perform services substantially similar to
the Services to other licensees of the Software, and nothing herein shall be
interpreted as restricting 2Bridge or any of its employees from performing such
services for third parties.
5. Fees and Payments
-----------------
5.1. Fees. Customer shall pay 2Bridge the fees set forth on Exhibit A
----
attached hereto and incorporated herein by reference. 2Bridge will invoice
Customer upon acceptance by Customer of each milestone set forth on Exhibit C
hereto. All payments for fees and expenses must be made within thirty (30) days
of the date of invoice, or shall then be considered overdue and subject to
interest as provided in Section 5.4 below. If the Customer's procedures require
that an invoice be submitted against a purchase order before payment can be
made, the Customer will be responsible for issuing such purchase order 30 days
before the payment due date.
5.2. Expenses. Customer shall reimburse all reasonable travel and other
--------
related expenses incurred by 2Bridge in performance of the Services.
5.3. Taxes. Customer shall pay or reimburse any and all federal, state,
-----
dominion, provincial or local sales, use, personal property, excise, or other
taxes, fees or duties arising from or related to this Agreement (other than
taxes based on 2Bridge's net income).
5.4. Interest. Customer shall pay 2Bridge a late fee of one and one-half
--------
percent (1.5%) per month, or the highest rate permitted by law, whichever is
less, on the outstanding balance of any fees or expenses not paid within thirty
(30) days of the date of invoice. However, nothing herein shall limit 2Bridge's
right to terminate this Agreement under Section 11.3. Customer shall reimburse
2Bridge for all reasonable costs incurred (including reasonable attorney's fees)
in collecting past due amounts.
5.5. Conflicting Terms. No terms, provisions or conditions of any
-----------------
purchase order or other business form or written authorization used by Customer
will have any effect on the rights, duties or obligations of the parties under,
or otherwise modify, this Agreement, regardless of any failure of 2Bridge to
object to such terms, provisions, or conditions.
5.6. No Offset. Fees and expenses due from Customer under this Agreement
---------
may not be withheld or offset by Customer for any reason.
6. Ownership of Work Product
-------------------------
6.1. Application.
-----------
(a) The Application has been specifically ordered and commissioned
by Customer. 2Bridge agrees that the Application, in its
entirety, is a "work made for hire" for copyright purposes, with
all copyrights in the complete Application owned by Customer.
(b) To the extent that the Application does not qualify as a work
for hire under applicable law, and to the extent that the
Application includes material subject to copyright, patent,
trade secret, or other proprietary right protection, 2Bridge
hereby assigns Customer, its successors and assigns, all rights,
title and interest in and to the Application including without
limitation all copyrights and equivalent rights in the
Application throughout the world, and in all renewals and
extensions of such rights that may be secured under the laws now
or hereafter in force and effect in the United States of America
or in any other country or countries.
-3-
<PAGE>
(c) At Customer's expense, 2Bridge shall execute and deliver such
instruments and take such other action as may be requested by
Customer to perfect or protect Customer's rights in the
Application and to carry out the assignments contemplated in
subparagraph (b) of this section. In this regard, 2Bridge agrees
to cooperate with Customer in the filing and prosecution of any
copyright or patent applications that Customer may elect to file
on the Application. Customer acknowledges that 2Bridge has taken
no action to assist in the registration of the copyrights or the
Application and will do so only and when requested by Customer.
6.2. 2Bridge Tools.
-------------
(a) Notwithstanding the foregoing, 2Bridge shall own and retain all
right, title and interest in the Software, 2Bridge Tools, and
any technology developed by 2Bridge hereunder which is not
specifically part of the Application, including without
limitation all intellectual property rights therein. Customer
acknowledges and agrees that the Application will be based upon
the Software and that licenses from 2Bridge to use the Software
will be required for the operation of the Application. Such
licenses shall be on 2Bridge's standard terms and conditions for
such licenses and will be granted separately.
(b) License Grant. Subject to Customer's separate license of the
-------------
Software, 2Bridge hereby grants to Customer a nontransferable,
nonexclusive license to use the 2Bridge Tools solely in
connection with its authorized use of the Software and the
Application.
7. Maintenance and Support. Maintenance and support of the Application is the
-----------------------
sole responsibility of Customer. Maintenance and support of the Software may be
contracted for separately by Customer at 2Bridge's then current rates and terms.
8. Limited Warranty and Limitation of Liability
--------------------------------------------
8.1. Limited Warranty. 2Bridge warrants that for a period of ninety (90)
----------------
days from 2Bridge's completion of the Application (the "Warranty Period"), the
Application will conform to the Specifications. If the Application is
demonstrated not to conform to the Specifications during the Warranty Period,
2Bridge will, at 2Bridge's option, undertake to correct the Application so it
conforms with such Specifications, or, if in 2Bridge's sole discretion, the
foregoing is not commercially practicable, terminate this Agreement and refund
the fees paid pursuant to Section 5 above.
8.2. Exclusive Remedies. The foregoing are Customer's sole and exclusive
------------------
remedies for breach of warranty. The warranty set forth above is made to and for
the benefit of Customer only. The warranty will apply only if: (i) the Software
and the Application have been properly installed and used at all times and in
accordance with the instructions for use; (ii) no modification, alteration or
addition has been made to the Application by persons other than 2Bridge; (iii)
the breach of Warranty is not caused, in whole or in part, by code, designs, or
other materials supplied by Customer for inclusion in the Application; and (iii)
the underlying operating system, browser, web server, or web server software has
not been updated, replaced, or otherwise modified.
8.3. Disclaimer. EXCEPT AS EXPRESSLY SET FORTH ABOVE, 2BRIDGE MAKES NO
----------
WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY, REGARDING OR RELATING TO THE
APPLICATION, SOFTWARE, 2BRIDGE TOOLS, DOCUMENTATION, OR ANY MATERIALS OR
SERVICES FURNISHED OR PROVIDED TO CUSTOMER UNDER THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION ANY MAINTENANCE AND SUPPORT. WITHOUT
-4-
<PAGE>
LIMITATION OF THE FOREGOING, 2BRIDGE SPECIFICALLY DISCLAIMS ALL IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINTERRUPTION
OF USE, AND FREEDOM FROM PROGRAM ERRORS WITH RESPECT TO THE APPLICATION,
SOFTWARE, 2BRIDGE TOOLS, DOCUMENTATION, AND OTHER MATERIALS AND SERVICES
DESCRIBED HEREIN. ANY BETA VERSIONS OF THE APPLICATION OR SOFTWARE PROVIDED TO
CUSTOMER ARE DELIVERED "AS IS," WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES.
8.4. Limitation of Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS
-----------------------
AGREEMENT OR OTHERWISE, 2BRIDGE SHALL NOT BE LIABLE OR OBLIGATED WITH RESPECT TO
THE SUBJECT MATTER OF THIS AGREEMENT OR UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY AMOUNTS IN EXCESS IN THE
AGGREGATE OF THE FEES PAID TO IT HEREUNDER. IN NO EVENT SHALL 2BRIDGE BE LIABLE
TO ANY CUSTOMER OR ANY THIRD PARTY FOR ANY LOST PROFITS OR COSTS OF PROCUREMENT
OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES RESULTING FROM THE USE OF THE APPLICATION, SOFTWARE, OR 2BRIDGE TOOLS OR
THE FAILURE OF ANY SUCH ITEMS TO PERFORM, OR FOR ANY OTHER REASON OR ON ANY
THEORY OF LIABILITY, EVEN IF 2BRIDGE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
8.5. Additional. THE PROVISIONS OF THIS SECTION 8 ALLOCATE RISKS UNDER
----------
THIS AGREEMENT BETWEEN CUSTOMER AND 2BRIDGE AND ARE A FUNDAMENTAL PART OF THE
BASIS OF 2BRIDGE'S BARGAIN HEREUNDER. 2BRIDGE WOULD NOT ENTER INTO THIS
AGREEMENT ABSENT SUCH LIMITATION. No action arising out of any breach or claimed
breach of this Agreement or transactions contemplated by this Agreement may be
brought by either party more than one (1) year after the cause of action has
accrued. For purposes of this Agreement, a cause of action will be deemed to
have accrued when a party knew or reasonably should have known of the breach or
claimed breach. No employee, agent, representative or affiliate of 2Bridge has
authority to bind 2Bridge to any oral representations or warranty concerning the
Application or the Software. Any written representation or warranty not
expressly contained in this Agreement will not be enforceable.
9. Indemnification for Infringement
--------------------------------
9.1. Indemnification. 2Bridge shall hold Customer harmless from
---------------
liability to third parties resulting from infringement by the Application of any
U.S. copyright or from misappropriation of any trade secret, provided 2Bridge is
promptly notified of any and all threats, claims and proceedings related thereto
and given reasonable assistance and the opportunity to assume sole control over
defense and settlement. 2Bridge will not be responsible for any settlement it
does not approve in writing. The foregoing obligations do not apply with respect
to the Application or portions or components thereof that are: (i) made in whole
or in part in accordance to Customer specifications or supplied to 2Bridge by
Customer for inclusion in the Application, (ii) modified after delivery by
2Bridge, (iii) combined with other products, processes or materials where the
alleged infringement relates to such combination, (iv) where Customer continues
allegedly infringing activity after being notified thereof or after being
informed of modifications that would have avoided the alleged infringement, or
(v) where Customer's use of Application is not strictly in accordance with this
Agreement. Customer will indemnify Company from all damages, settlements,
attorneys' fees and expenses related to any claim of infringement or
misappropriation excluded from Company's indemnity obligation by the preceding
sentence. In the event that Application is held or is believed by 2Bridge to
infringe, 2Bridge shall have the option, at its expense, to (i) modify the
Application to be non-infringing, (ii) obtain for Customer a license to continue
using the Application, or (iii) terminate this Agreement and refund to Customer
the amortized fees paid under
-5-
<PAGE>
this Agreement for the development of the Application, depreciated on a
straight-line basis over a five (5) year period. THE FOREGOING STATES THE ENTIRE
LIABILITY OF 2BRIDGE AND CUSTOMER'S EXCLUSIVE REMEDIES WITH RESPECT TO
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS.
10. Confidential Information.
------------------------
10.1. Treatment of Confidential Information. Each party hereto agrees
-------------------------------------
that it shall use Confidential Information solely in accordance with the
provisions of this Agreement. Neither party shall disclose the Confidential
Information of the other, or permit it to be disclosed, directly or indirectly,
to any third party both during the term of this Agreement and for a period of
five (5) years after termination hereof, without the other party's prior written
consent. Each party agrees to exercise due care in protecting the other's
Confidential Information from unauthorized use and disclosure.
10.2. Equitable Relief. In the event of actual or threatened breach of
----------------
the provisions of Section 10.1, the parties agree that the non-breaching party
will have no adequate remedy at law and will be entitled to immediate injunctive
and other equitable relief, without bond and without the necessity of showing
actual money damages.
11. Term and Termination
--------------------
11.1. Term. This Agreement will take effect on the Effective Date and
----
will remain in effect, unless earlier terminated in accordance with this
Agreement, until all of the Services have been completed and fees have been
paid.
11.2. Termination by Customer. This Agreement may be terminated by
-----------------------
Customer upon thirty (30) days' prior written notice to 2Bridge, with or without
cause, provided that no such termination will entitle Customer to a refund of
any portion of the fees paid by Customer to 2Bridge pursuant to Section 5 above.
In such event, Customer shall immediately pay 2Bridge all amounts due as of the
date of such termination for all work in progress.
11.3. Termination by 2Bridge. 2Bridge may, by written notice to
----------------------
Customer, terminate this Agreement if any of the following events ("Termination
Events") occur:
(a) Customer fails to pay any amount due 2Bridge within thirty (30)
days after 2Bridge sends an invoice to Customer for such
payment; or
(b) Customer is in material breach of any nonmonetary term,
condition or provision of this Agreement, which breach, if
capable of being cured, is not cured within thirty (30) days
after 2Bridge gives Customer written notice of such breach; or
(c) Customer (i) terminates or suspends its business, (ii) becomes
insolvent, admits in writing its inability to pay its debts as
they mature, makes an assignment for the benefit of creditors,
or becomes subject to direct control of a trustee, receiver or
similar authority, or (iii) becomes subject to any bankruptcy or
insolvency proceeding under federal or state statutes.
If any Termination Event occurs, termination will become effective
immediately or on the date set forth in the written notice of termination, and
Customer shall immediately pay to 2Bridge all amounts due as of the date of such
termination for all work in progress.
11.4. Survival. Any termination of this Agreement will not affect
--------
Sections 4.3, 6.1, 8, 9, 10, 11.4, 11.5, and 14, which shall survive the
termination or expiration of this Agreement. Section 6.2 shall survive the
expiration or termination of this Agreement for any reason other than a
Termination Event.
11.5. Return of Materials. Within thirty (30) days after the date of
-------------------
termination or discontinuance of this Agreement for any reason whatsoever, (i)
Customer shall return the Software, 2Bridge Tools,
-6-
<PAGE>
and all copies of the foregoing, in whole or in part, all Documentation relating
thereto, and any other Confidential Information in its possession that is in
tangible form, and (ii) 2Bridge shall return all Confidential Information and
other proprietary materials of Customer in its possession. Notwithstanding the
foregoing, 2Bridge may retain a reasonable number of copies of the Application
solely for its archives and internal use.
12. Nonassignment/Binding Agreement. Neither this Agreement nor any rights
-------------------------------
under this Agreement may be assigned or otherwise transferred by Customer, in
whole or in part, whether voluntary or by operation of law, including by way of
sale of assets, merger or consolidation, without the prior written consent of
2Bridge, which consent will not be unreasonably withheld. 2Bridge may
subcontract or assign portions of its obligations and rights under this
Agreement. Any such subcontract or assignment by 2Bridge is subject to
Customer's consent, which consent shall not be unreasonably withheld or delayed.
Subject to the foregoing, this Agreement will be binding upon and will inure to
the benefit of the parties and their permitted successors and assigns.
13. Notices. Any notice required or permitted under the terms of this
-------
Agreement or required by law must be in writing and must be (a) delivered in
person, (b) sent by first class registered mail, or air mail, as appropriate, or
(c) sent by overnight air courier, in each case properly posted, fully prepaid
to the appropriate address set forth herein, and sent to the attention of the
appropriate Contact Person. Either party may change its address for notice by
notice to the other party given in accordance with this section. Notices will
be considered to have been given at the time of actual delivery in person, three
(3) business days after deposit in the mail as set forth above, or one (1) day
after delivery to an overnight air courier service.
14. Miscellaneous
-------------
14.1. Force Majeure. Neither party will incur any liability to the other
-------------
party on account of any loss or damage resulting from any delay or failure to
perform all or any part of this Agreement if such delay or failure is caused, in
whole or in part, by events, occurrences, or causes beyond the control and
without negligence of the parties. Such events, occurrences, or causes will
include, without limitation, acts of God, strikes, lockouts, riots, acts of war,
earthquake, fire and explosions, but the inability to meet financial obligations
is expressly excluded.
14.2. Waivers; Enforcement. Any waiver of the provisions of this
--------------------
Agreement or of a party's rights or remedies under this Agreement must be in
writing to be effective. Failure, neglect, or delay by a party to enforce the
provisions of this Agreement or its rights or remedies at any time will not be
construed and will not be deemed to be a waiver of such party's rights under
this Agreement and will not in any way affect the validity of the whole or any
part of this Agreement or prejudice such party's right to take subsequent
action. No exercise or enforcement by either party of any right or remedy under
this Agreement will preclude the enforcement by such party of any other right or
remedy under this Agreement or that such party is entitled by law to enforce.
14.3. Severability. If any term, condition, or provision in this
------------
Agreement is found to be invalid, unlawful or unenforceable to any extent, the
parties shall endeavor in good faith to agree to such amendments that will
preserve, as far as possible, the intentions expressed in this Agreement. If the
parties fail to agree on such an amendment, such invalid term, condition or
provision will be severed from the remaining terms, conditions and provisions,
which will continue to be valid and enforceable to the fullest extent permitted
by law.
14.4. Entire Agreement. This Agreement (including the Exhibits,
----------------
Specifications, and any addenda hereto signed by both parties) contains the
entire agreement of the parties with respect to the subject matter of this
Agreement and supersedes all previous communications, representations,
understandings and agreements, either oral or written, between the parties with
respect to said subject matter, except as provided in Section 1.2 with respect
to the definition of "Confidential Information."
-7-
<PAGE>
14.5. Conflicting Terms. No terms, provisions or conditions of any
-----------------
purchase order, acknowledgment or other business form that Customer may use in
connection with the acquisition or licensing of the Software will have any
effect on the rights, duties or obligations of the parties under, or otherwise
modify, this Agreement, regardless of any failure of 2Bridge to object to such
terms, provisions or conditions.
14.6. Amendment. This Agreement may not be amended, except by a writing
---------
signed by both parties.
14.7. No Export. Customer shall comply with all export laws and
---------
restrictions and regulations of the Department of Commerce, the United States
Department of Treasury Office of Foreign Assets Control ("OFAC"), or other
United States or foreign agency or authority, and shall not export, or allow the
export or re-export of the Application in violation of any such laws,
restrictions, or regulations. Customer shall obtain and bear all expenses
relating to any necessary licenses and/or exemptions with respect to the export
from the U.S. of all material or items deliverable by 2Bridge to any location.
Customer may not export or re-export the Application without 2Bridge's prior
written consent.
14.8. Publicity. Customer acknowledges that 2Bridge may desire to use
---------
its name in press releases, product brochures and financial reports indicating
that Customer is a customer of 2Bridge, and Customer agrees that 2Bridge may use
its name in such a manner, subject to Customer's consent, which consent shall
not be unreasonably withheld or delayed.
14.9. Governing Law; Jurisdiction. This Agreement will be interpreted
---------------------------
and construed in accordance with the laws of the State of California and the
United States of America, without regard to conflict of law principles or the
United Nations Convention on Contracts for the International Sale of Goods. For
any disputes arising out of this Agreement, the parties consent to the personal
and exclusive jurisdiction of, and venue in, the state or federal court of San
Francisco County, California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
2BRIDGE CUSTOMER
By: By:
-------------------------------- ------------------------------
Name: Name:
------------------------------ ----------------------------
Title: Title:
----------------------------- ---------------------------
Date: Date:
------------------------------ ----------------------------
-8-
<PAGE>
EXHIBIT A
---------
1. Customer:
--------
Company Name:
------------------------------------------------------
Address:
------------------------------------------------------
------------------------------------------------------
Phone:
------------------------------------------------------
Fax:
------------------------------------------------------
2. Fee for Services:
----------------
------------------------------------------------------
3. Contact Person:
---------------
Customer:
------------------------------------------------------
2Bridge:
------------------------------------------------------
-9-
<PAGE>
EXHIBIT B
PROFESSIONAL SERVICES TO BE PROVIDED
STATEMENT OF WORK
This "Statement of Work" dated shall be subject to the terms
------------------
and conditions of the "Services Agreement" between 2Bridge, hereafter "2Bridge"
and , hereafter " ",
----------------------------- -----------------------------
dated .
-------------------
Project:
- --------
1. Project Objective and Primary Deliverable:
2. Development Process: All Deliverables developed according to the three-phase
process outlined below. Key tasks will include to:
. Phase I: Define, Design & Development
--------------------------------------
Deliverables: 2Share server installed, configured, and populated with
templates.
. Phase II: Uploading sample documents and Training
-------------------------------------------------
Deliverables: Completed system with all Navigation & Graphics customization
complete; Design & deployment program documents completed.
. Phase III: Final Test & Quality Assurance
-----------------------------------------
Deliverables: System complete and customer-tested. Documents will include
User Guide supplement, System Management Guide, Final
design & deployment documents.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and year first above written.
2Bridge
-------------------------------------
"2BRIDGE" " "
-----------------------------------
By: By:
--------------------------------- ----------------------------------
Print Name: Print Name:
------------------------- -------------------------
Print Title: Print Title:
------------------------ ------------------------
-10-
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of May 18, 1998, by and among 2BRIDGE SOFTWARE, a California corporation (the
"Company"), and the Investors set forth in Exhibit A attached hereto (each, an
---------
"Investor" and collectively, the "Investors").
NOW THEREFORE, in consideration of the promises herein made and on the terms and
subject to the conditions herein contained, the Company and the Investors agree
as follows:
1. Purchase and Sale of Stock. The Company will sell to the Investors,
--------------------------
severally and not jointly, and the Investors will purchase from the Company,
severally and not jointly, up to 7,195,127 shares of the Company's Series B
Preferred Stock (the "Series B Preferred") at the per share purchase price of
$1.4081, allocated among the Investors as provided in Exhibit A attached hereto.
---------
The Series B Preferred will be subject to the rights, preferences, privileges
and restrictions as set forth in the Company's Amended and Restated Articles of
Incorporation, attached hereto as Exhibit B (the "Articles").
---------
2. Closing. The purchase and sale of the Series B Preferred shall be
-------
made in one or more closings, the first of which will take place at 10:00 a.m.
on May 18, 1998, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California, or such other place and/or other date or dates
as the Company and the Investors mutually agree (which time and place are
designated the "Closing"). At each Closing, the Company will deliver to each
Investor a certificate representing the Series B Preferred which such Investor
is purchasing against delivery to the Company by the Investor of the applicable
purchase price set forth on Exhibit A attached hereto.
---------
3. Representations and Warranties of the Company to the Investors.
--------------------------------------------------------------
Except as set forth in Exhibit C attached hereto, the Company hereby
---------
represents and warrants to the Investors as follows:
3.1 Corporate Organization and Authority. The Company: (a) is a
------------------------------------
corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
California, and (b) has the corporate power and authority to (i) own and operate
its properties, (ii) carry on its business as now conducted and as proposed to
be conducted, (iii) execute and deliver this Agreement, the Amended and Restated
Investors' Rights Agreement in the form attached hereto as Exhibit D (the
---------
"Rights Agreement"), the Amended and Restated Co-Sale Agreement in the form
attached hereto as Exhibit E (the "Co-Sale Agreement") and the Amended and
---------
Restated Voting Agreement in the form attached hereto as Exhibit F (the "Voting
---------
Agreement") (collectively, the "Investment Agreements"), (iv) issue and sell the
Series B Preferred hereunder, (v) issue the Common Stock of the Company issuable
upon the conversion of the Series B Preferred, and (vi) carry out the provisions
of this Agreement, the Investment Agreements and the Articles. The Company is
duly qualified and is authorized to
<PAGE>
do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2 Capitalization. The Company's capitalization is as follows:
--------------
(a) upon the filing of the Articles in the form attached hereto
as Exhibit B in the Office of the Secretary of State of California prior to the
---------
Closing, the Company will be authorized to issue two classes of shares of
capital stock, designated respectively "Common Stock" and "Preferred Stock" with
30,000,000 total authorized shares of Common Stock, and 11,668,514 total
authorized shares of Preferred Stock, with the Preferred Stock consisting of
3,871,300 shares of Series A Preferred Stock and 7,797,214 shares of Series B
Preferred;
(b) immediately after the Closing, the number of issued and
outstanding shares will be 12,787,500 shares of Common Stock, 3,871,300 shares
of Series A Preferred Stock, and up to 7,195,127 shares of Series B Preferred.
Immediately after the Closing, there will be 2,697,500 shares of Common Stock
reserved for issuance under the Company's 1997 Stock Option Plan, duly adopted
by the Board of Directors and approved by the Company's shareholders. Of such
reserved shares of Common Stock, 37,500 shares have been issued upon the
exercise of options, 1,458,000 shares are subject to outstanding options, and
1,239,500 shares remain available for issuance. Except as specifically
contemplated herein, and as provided in the Articles, there will be no other
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal) proxy or shareholder agreements, or agreements of
any kind, oral or in writing, for the issuance, purchase or acquisition by the
Company of any shares of capital stock of the Company.
(c) all issued and outstanding shares of the Company's Series A
Preferred Stock and Common Stock (i) have been duly authorized and validly
issued, (ii) are fully paid and nonassessable, and (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities.
A list of shareholders of the Company which contains the name and number of
shares held by each shareholder, is attached to this agreement as Schedule 3.2.
3.3 No Subsidiaries. The Company does not own, nor does it 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.
3.4 Authorization. All action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations under this Agreement and the
Investment Agreements and for the authorization, sale,
-2-
<PAGE>
issuance and delivery of the Series B Preferred and the Common Stock of the
Company issuable upon the conversion of the Series B Preferred has been taken.
This Agreement and the Investment Agreements, when executed and delivered, each
constitutes legally valid and binding obligations of the Company enforceable
against the Company in accordance with its terms, except to the extent that such
enforcement may be subject to applicable federal or state bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or
other laws or court decisions relating to or affecting the rights of creditors
generally, and such enforcement may be limited by equitable principles of
general applicability.
3.5 Validity of Shares. The Series B Preferred are duly authorized
------------------
and, when issued, sold and delivered in accordance with the terms of and for the
consideration expressed in this Agreement, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws), fully-paid and non-assessable and will be free and clear
of all preemptive rights, rights of first refusal, liens, charges, restrictions,
claims and encumbrances imposed by or through the Company, except as
specifically set forth in the Articles, this Agreement or the Investment
Agreements. The Common Stock issuable upon the conversion of the Series B
Preferred has been duly and validly reserved for issuance and, when so issued,
will be duly authorized, validly issued (including, without limitation, issued
in compliance with applicable federal and state securities laws), fully paid and
nonassessable and will be free and clear of all preemptive rights, rights of
first refusal, liens, charges, restrictions on transfer, claims and encumbrances
imposed by or through the Company, except as specifically set forth in the
Articles, this Agreement, or the Investment Agreements.
3.6 No Conflict with other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement and the Investment Agreements will not result in
any event that 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 operation of any of its assets or
properties or result in any violation of, be in conflict with, or constitute a
default under: (a) any provision of the Articles or the Company's Bylaws; (b)
any provision of any judgment, decree or order to which the Company is a party
or by which it is bound; (c) any mortgage, indenture, license, contract,
obligation or commitment to which the Company is a party or by which it is
bound; or (d) any statute, rule or governmental regulation applicable to the
Company.
3.7 Litigation. There is no action, proceeding or investigation
----------
pending or, to the knowledge of the Company, threatened, or any basis therefor
known to the Company, that questions the validity of this Agreement, or the
Investment Agreements or the right of the Company to enter into any such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company. The Company is not a party to any such lawsuit or similar action or
proceeding, nor does the Company intend to initiate any such litigation.
-3-
<PAGE>
3.8 Title to Properties; Liens and Encumbrances. The Company has
-------------------------------------------
good and marketable title to all of its properties and assets, both real and
personal, subject to no mortgage, pledge, lien, security interest, conditional
sale agreement, encumbrance or charge. With respect to the properties 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.
3.9 Employee Agreement. All current employees and consultants of the
------------------
Company are parties to a written agreement ("Confidential Information and
Inventions Agreement") in the form previously furnished to Investors' counsel,
pertaining to (i) the disclosure and transfer to the Company of certain
inventions, developments and discoveries made or conceived by him or her during
the period of his or her employment with or performance of services for the
Company, and (ii) maintaining the confidentiality of proprietary information of
the Company. The Company, after reasonable investigation, is not aware that any
of its employees or consultants is in violation thereof, and the Company will
use commercially reasonable efforts to prevent any such violation.
3.10 Permits. The Company has all franchises, permits, licenses and
-------
other similar authority (collectively, "Permits") necessary for the conduct of
its business as now being conducted by it, the lack of which could 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 Permits for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any such Permits.
3.11 Patents, Copyrights and Trademarks. For purposes of this Section
----------------------------------
3.11, the term "Proprietary Rights" means patents, trademarks, service marks,
trade names, copyrights, trade secrets or other proprietary rights and
processes. To the best of its knowledge, the Company owns or possesses
sufficient legal rights to all Proprietary Rights necessary for its business as
now conducted and as proposed to be conducted, without any known infringement of
the rights of others. The Company has not received any communication alleging
that the Company has violated or, by conducting its business as proposed, would
violate any of the Proprietary Rights of any other person or entity. The
Company is not aware of any third party which is infringing or violating any of
its Proprietary Rights. There are no outstanding options, licenses, or
agreements of any kind relating to the Proprietary Rights of the Company other
than those incurred in the ordinary course of business, nor is the Company bound
by or a party to any options, licenses or agreements of any kind with respect to
the Proprietary Rights of any other person or entity other than those incurred
in the ordinary course of business. 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
their duties to the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor 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,
-4-
<PAGE>
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company. Set forth in the Schedule of
Exceptions attached hereto as Exhibit C is a listing of all patents and
trademarks of the Company.
3.12 Taxes. All federal, state, local and foreign tax returns
-----
required to be filed by the Company have been timely filed, or if not yet filed
the Company has been granted extensions of the filing dates, which extensions
have not expired. All taxes, assessments, fees and other governmental charges
upon the Company, or upon any of its properties, income or franchises, have been
paid or adequate reserves therefor have been set up and have been disclosed in
the Financial Statements (as described in Section 3.18 below) if any of such
taxes are being contested in good faith. If any of such tax returns have not
been filed or if any such taxes have not been paid or so reserved for, the
failure so to file or to pay would not result in a material adverse effect on
the business, properties, prospects or financial condition of the Company. The
Company knows of no proposed additional tax assessment that is not provided for
in the Financial Statements. The Company has no pending or, to the knowledge of
the Company, threatened tax audit.
3.13 Agreements; Actions: Obligations to Related Parties.
---------------------------------------------------
(a) Except for the agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock (including without limitation stock option agreements),
there are no agreements, understandings or proposed transactions between the
Company and any of its officers or directors or any affiliate thereof.
(b) There are no agreements understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, (ii) provisions restricting or affecting in any
material, adverse way the development, manufacture or distribution of the
Company's products or services, or (iii) indemnification by the Company with
respect to infringements of Proprietary Rights (other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
(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 any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements described in
Section 3.18 below) individually in excess of $50,000 or, in the case
indebtedness and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate, (iii) made any loans or advances to any
-5-
<PAGE>
person, other than ordinary advances for travel expenses, 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. For the purposes of
this subsection (b), 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 any minimum
dollar amount.
(d) Except for the agreements explicitly contemplated hereby, and
the Company's Articles and Bylaws, the Company is not a party to, and is not
bound by any contract, agreement or instrument which materially affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(e) There are no obligations of the Company to officers,
directors, shareholders, or employees of the Company other than (i) for payment
of salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company, (iii) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company), or (iv) general obligations that a corporation has to its
shareholders under California General Corporation Law, the Articles and the
Bylaws of the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.14 No Defaults, Violations or Conflicts. The Company is not in
------------------------------------
violation or default in any material respect of any term or provision of its
Articles, Bylaws, or of any instrument, judgment, order, writ, decree, license,
permit 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 violation or violations, either individually or in the aggregate,
would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. 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 or other agreement, which is necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company.
3.15 Insurance. The Company has obtained insurance as specified in
---------
Exhibit C. The Company is not aware of any pending or threatened claims against
- ---------
the Company for personal injuries or property damages which materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company.
3.16 Private Offering. The Company agrees that neither the Company
----------------
nor anyone acting on its behalf will offer any of the Series B Preferred or any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, anyone in such a way as to make the issuance and sale of the
Series B Preferred subject to the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
-6-
<PAGE>
3.17 Prior Registration Rights. Except as provided in the Rights
-------------------------
Agreement, the Company is not under any contractual obligation, and has not
granted any rights, to register under the Securities Act any of its securities
that are presently outstanding or may subsequently be issued under such
obligation.
3.18 Financial Statements. The Company has delivered to the Investors
--------------------
its audited financial statements (including balance sheet, income statement and
statement of cash flows) as of December 31, 1997 and for the fiscal year then
ended and its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of March 31, 1998 and for the three
month period then ended (collectively, the "Financial Statements"), as well as
the Report of Independent Auditors for 1997. The Financial Statements are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the period indicated, except as disclosed therein, and present fairly
the financial condition and results of operations of the Company as of the dates
and for the periods presented. Except as set forth in the Financial Statements,
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, individually or in the aggregate, are not material to the financial
condition of the Company.
3.19 Changes in Financial Condition. Since the date of the Financial
------------------------------
Statements, the Company has not (i) made any loans or advances to any person,
other than ordinary advances for travel and other ordinary employee related
expenses; (ii) sold, exchanged or otherwise disposed of any of its assets or
rights necessary for the conduct of its business as now being conducted by it,
the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company; nor has there been
(iii) any material and adverse change in the business assets, liabilities,
financial condition, prospects or operations of the Company; (iv) any
resignation or termination of any key officers of the Company, and the Company,
to the best of its knowledge, does not know of the impending resignation or
termination of employment of any such officers; (v) any material change, except
in the ordinary course of business, in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise; (vi) any
damage, destruction or loss, whether or not covered by insurance, materially and
adversely affecting the properties, business or prospects or financial condition
of the Company; (vii) any waiver by the Company of a valuable right or of a
material debt owed to it; (viii) any material change in any compensation
arrangement or agreement with any employee, officer, director or shareholder;
(ix) any declaration or payment of any dividend or other distribution of the
assets of the Company; (x) any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts sand for
current liabilities incurred in the ordinary course of business; (xi) any sale,
assignment or transfer of any patents, trademarks, copyrights; trade secrets or
other intangible assets, except in the ordinary course of business; or (xii) any
change in any material agreement to which the Company is a party or by which it
is bound which materially and adversely affects the business, assets,
Liabilities, financial condition, operations or prospects of the Company,
including compensation agreements with the Company's employees.
-7-
<PAGE>
3.20 Employee Compensation Plans. Except as set forth in Exhibit C or
--------------------------- ---------
as specifically contemplated in this Agreement, the Company is not party to or
bound by any currently effective employment contracts, deferred compensation
agreements, bonus plans, incentive plans, profit sharing plans, retirement
agreements or other employee compensation or severance agreements, including
without limitation any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974.
3.21 Employee Relations. The Company believes its relations with its
------------------
employees are satisfactory. The Company is not bound by or subject to any
written or oral, express or implied, contract, commitment or arrangement with
any labor union and the Company's employees are not represented by any labor
unions nor, to the Company's knowledge, is any union organization campaign in
progress. There is no strike or other labor dispute involving the Company
pending or, to the knowledge of the Company, threatened, which could have a
material and adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (in each case, 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. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. 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.
3.22 Brokers and Finders. No agent, broker, investment banker or
-------------------
other firm or person acting on behalf or under the authority of the Company is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee from the Company in connection with any of the transactions
contemplated by this Agreement.
3.23 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 Company's valid execution and
delivery of this Agreement or the Investment Agreements, or the offer, sale or
issuance of the Series B Preferred (and the Common Stock issuable upon the
conversion thereof)
-8-
<PAGE>
or the consummation of any other transaction contemplated hereby, except for the
filing of the Articles in the Office of the Secretary of State of California,
which will be filed by the Company prior to the Closing, and, the filing of a
Form D notice under Regulation D of the Securities Act, and any other post-sale
filings required by applicable state securities laws. The offer, sale and
issuance of the Series B Preferred (and of the Common Stock issuable upon the
conversion thereof) in conformity with the terms of this Agreement are exempt
from the registration requirements of Section 5 of the Securities Act and from
the qualification requirements of applicable state securities laws, assuming the
accuracy of the representations and warranties of the Investors as set forth in
Section 5 of this Agreement.
3.24 Environmental and Safety Laws. To its knowledge, the Company 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.
3.25 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Code Section 897(c)(2) and
any regulations promulgated thereunder.
3.26 Full Disclosure. The representations and warranties of the
---------------
Company contained in this Agreement and other provisions of this Agreement and
the Investor Agreements, the certificates prepared or supplied to the Investors
by the Company, and the other materials presented to the Investors by the
Company, do not contain any untrue statement of a material fact or omit any
material fact necessary to make the statements contained therein or herein (in
view of the circumstances under which they were made) not misleading. To the
Company's knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in this Agreement, the Exhibits hereto, the Investment Agreements or in the
other documents delivered to the Investors or their attorneys or agents in
connection herewith.
3.27 Investment Company Act. The Company is not an "investment
----------------------
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.28 Qualified Small Business Stock.
------------------------------
(a) As of and immediately following the Closing, the Series B
Preferred will meet each of the requirements for qualification as "qualified
small business stock" set forth in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code"), including without limitation the following:
(i) the Company will be a domestic C corporation, (ii) the Company will not have
made any purchases of its own stock described in Code Section 1202(c)(3)(B)
during the one-year period preceding the Closing, and (iii) the Company's (and
any predecessor's) aggregate gross assets, as defined by Code Section
1202(d)(2), at no time
-9-
<PAGE>
from the date of incorporation of the Company and through the Closing have
exceeded or will exceed $50 million, taking into account the assets of any
corporations required to be aggregated with the Company in accordance with Code
Section 1202(d)(3).
(b) As of the Closing, at least 80% (by value) of the assets of
the Company are used by it in the active conduct of one or more qualified trades
or businesses, as defined by Code Section 1202(e)(3), and the Company is an
eligible corporation, as defined by Code Section 1202(e)(4).
4. Representations and Warranties of the Investors.
-----------------------------------------------
Each Investor severally represents and warrants to the Company as
follows:
4.1 Authorization. When executed and delivered by the Investor, and
-------------
assuming execution and delivery by the Company, this Agreement will constitute a
valid obligation of the Investor, enforceable in accordance with its terms,
except to the extent that such enforcement may be subject to applicable federal
or state bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance or other laws or court decisions relating to or affecting
the rights of creditors generally, and such enforcement may be limited by
equitable principles of general applicability.
4.2 Brokers and Finders. No agent, broker, investment banker or other
-------------------
firm or person acting on behalf or under the authority of the Investor is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee from the Investor or the Company in connection with any of the
transactions contemplated by this Agreement.
5. Securities Laws.
---------------
5.1 California 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 AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING
AVAILABLE.
5.2 Securities Law Representations and Covenants of Investors.
---------------------------------------------------------
(a) The Company is entering into this Agreement with each
Investor in reliance upon the Investor's representation to the Company, which
the Investor's execution of this Agreement hereby confirms, that the Series B
Preferred to be received by the Investor and the shares of Common Stock issuable
upon the conversion of any Series B Preferred will be acquired
-10-
<PAGE>
for investment for the Investor's own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof in violation of
applicable securities laws. By executing this Agreement, each Investor further
represents that the Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer, or grant participations to
such person or to any third person, with respect to any of the Series B
Preferred or the shares of Common Stock issuable upon conversion of any of the
Series B Preferred.
(b) Each Investor understands and acknowledges that the offering
of the Series B Preferred pursuant to this Agreement will not be registered
under the Securities Act on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration pursuant to Section
3(b) or Section 4(2) of the Securities Act or Regulation D promulgated
thereunder, and that the Company's reliance upon such exemption is predicated
upon the Investor's representations set forth in this Agreement.
(c) Each Investor acknowledges and agrees that the Series B
Preferred and, if issued, the shares of Common Stock issued upon conversion of
the Series B Preferred must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Each Investor has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold, the
sale being through an unsolicited 'broker's transaction or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the number of shares being sold during any
three-month period not exceeding specified limitations.
(d) Each Investor represents that: (i) the Investor (or his or
her purchaser representative, if any) is an "accredited investor" under the
Securities Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Investor's
prospective investment in the Company, (ii) the Investor has the ability to bear
the economic risks of the Investor's prospective investment; (iii) the Investor
is able, without materially impairing its financial condition, to hold the
Series B Preferred for an indefinite period of time and to suffer complete loss
on its investment; (iv) the Investor is a resident of, or has its principal
office in the state indicated for the Investor as set forth on the Investor
Suitability Questionnaire supplied by the Investor to the Company on or before
the Closing; (v) the Investor understands and has fully considered for purposes
of this investment the risks of this investment and understands that (1) this
investment is suitable only for an investor who is able to bear the economic
consequences of losing its entire investment, (2) the Company has a limited
financial and operating history, (3) the Series B Preferred represent an
extremely speculative investment which involves a high degree of risk of loss,
and (4) there are substantial restrictions on the transferability of, and there
will be no public market for, the Series B Preferred or the Common Stock
issuable upon the conversion of any of the Series B Preferred; accordingly, it
may not be
-11-
<PAGE>
possible for the Investor to liquidate its investment in the Series B Preferred;
(vi) there have been no representations as to the possible future value, if any,
of the Series B Preferred; and (vii) the Investor has received all the
information it has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the Series B Preferred.
6. Conditions of Investors' Obligations at Closing.
-----------------------------------------------
The obligations of the Investors under Sections 1 and 2 of this
Agreement are subject to the fulfillment at or before the Closing of each of the
following conditions, any of which may be waived in writing by the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 3 of this Agreement will be true,
correct and complete on and as of the Closing with the same effect as if made on
and as of the Closing.
6.2 Performance. The Company will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Company at or before the Closing.
6.3 Minimum Commitment. The total purchase price set forth on
------------------
Exhibit A hereto shall not be an amount less than six million dollars
- ---------
($6,000,000).
6.4 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under all state securities or Blue Sky laws, including those of New
York, applicable to the offer and sale of the Series B Preferred to the
Investors.
6.5 Opinion of Company's Counsel. The Investors will have received
----------------------------
from Wilson Sonsini Goodrich & Rosati, counsel for the Company, a favorable
opinion, dated the date of the Closing, in the form attached hereto as Exhibit
-------
G.
- -
6.6 Proceedings Satisfactory: Compliance Certificate. All corporate
-------------------------------------------------
and legal proceedings taken by the Company in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions will be satisfactory to the Investors, in the reasonable exercise
of the judgment of the Investors. The Company will have delivered to the
Investors a certificate dated as of the Closing, signed by the Company's
President, certifying that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied.
6.7 Investors' Rights. The Company and each of the Investors will
-----------------
have executed and delivered an Investors' Rights Agreement in the form of
Exhibit D attached hereto.
- ---------
6.8 Co-Sale Agreement and Voting Agreement. Each of the Company,
--------------------------------------
Mansoor Zakaria, and each of the Investors will have executed and delivered a
Co-Sale Agreement in the form of Exhibit E and a Voting Agreement in the form of
---------
Exhibit F attached hereto.
- ---------
-12-
<PAGE>
6.9 Articles. The Articles in the form of Exhibit B attached hereto
-------- ---------
will have been filed with and accepted by the Office of the Secretary of State
of California.
6.10 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
Investment Agreements (except for such as may be properly obtained subsequent to
the Closing).
6.11 Reservation of Conversion Shares. The shares of Common Stock
--------------------------------
issuable upon conversion of the Series B Preferred shall have been duly
authorized and reserved for issuance upon such conversion.
7. Conditions of the Company's Obligations at Closing.
--------------------------------------------------
The obligations of the Company under Sections 1 and 2 of this
Agreement are subject to the fulfillment at or before the Closing of each of the
following conditions, any of which may be waived in writing by the Company:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Sections 4 and 5 will be true on and as
of the Closing with the same effect as though said representations and
warranties had been made on and as of the Closing.
7.2 Performance. The Investors will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Investors at or before the Closing, including without
limitation delivery to the Company of the pro rata purchase price for such
Investors' Series B Preferred as set forth in Section 1 above, or as set forth
on Exhibit A attached hereto, in the form of immediately available funds.
---------
7.3 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under the securities laws of the State of California and any other
applicable state as necessary to offer and sell the Series B Preferred to the
Investors.
8. Miscellaneous.
-------------
8.1 Entire Agreement; Successors and Assigns. This Agreement (and the
----------------------------------------
Exhibits hereto) constitutes the entire contract between the Company and the
Investors relative to the subject matter hereof, and any previous or
contemporaneous agreement between the Company and the Investors regarding the
subject matter of this Agreement is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.
-13-
<PAGE>
8.2 Expenses. The Company will pay reasonable fees and expenses of
--------
two special counsel to the Investors up to a maximum of $10,000 per counsel.
8.3 Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.
8.4 Headings. The headings of the Sections of this Agreement are for
--------
convenience and will not by themselves determine the interpretation of this
Agreement.
8.5 Notices. Any notice required or permitted hereunder will be
-------
given in writing and will be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by certified
mail, postage prepaid, return receipt requested, addressed (i) if to the
Company, as set forth below the Company's name on the signature page of this
Agreement, and (ii) if to an Investor, at such Investor's address as set forth
below its name on the signature page of this Agreement, or at such other address
as the Company or the Investor may designate by ten (10) days' advance written
notice to such Investor or the Company, respectively.
8.6 Amendment of Agreement: Waiver. This Agreement may be amended or
------------------------------
modified only upon the written consent of the Company and by the holders of at
least a majority of the then outstanding Series B Preferred. The obligations of
the Company and the rights of the holders of the Series B Preferred and the
shares of Common Stock issuable upon conversion of the Series B Preferred under
the Agreement may be waived only with the written consent of the holders of at
least a majority of the then outstanding Series B Preferred.
8.7 Finders Fees. Each of the Company and the Investors will
------------
indemnify the other against all liabilities incurred by the indemnifying party
with respect to claims related to investment banking or finders fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the indemnifying party,
and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
8.8 Invalid or Void Provisions. If any provision of this Agreement is
--------------------------
deemed invalid, illegal, or unenforceable in any jurisdiction, such provision
will be deemed amended to conform to applicable law so as to be valid, legal and
enforceable in such jurisdiction, and the validity, legality and enforceability
of such provision will not be affected or impaired thereby in any other
jurisdiction; if such provision cannot be amended without altering materially
the intention of the parties, it will be stricken and the remainder of this
Agreement will remain in full force and effect.
8.9 Cooperation. The parties agree that after the Closing, they will
-----------
from time to time, upon the request of any party hereto and without further
consideration, execute, acknowledge
-14-
<PAGE>
and deliver in proper form any further instruments and take such other actions
as such other party may reasonably require in order to effectively carry out the
intent of this Agreement.
8.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[This space intentionally left blank]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
2BRIDGE SOFTWARE
By: ________________________________
Mansoor Zakaria, President
[Signature Page to the Purchase Agreement]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
INVESTOR:
By: ________________________________
Printed Name:_______________________
Title:______________________________
[SIGNATURE PAGE TO THE PURCHASE AGREEMENT]
<PAGE>
- --------------------------------------------------------------------------------
2BRIDGE SOFTWARE
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
July 23, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock........................................... 1
2. Closing.............................................................. 1
2.1 Additional Closings............................................. 1
3. Representations and Warranties of the Company to the Investors....... 2
3.1 Corporate Organization and Authority........................... 2
3.2 Capitalization................................................. 2
3.3 No Subsidiaries................................................ 3
3.4 Authorization.................................................. 3
3.5 Validity of Shares............................................. 3
3.6 No Conflict with other Instruments............................. 3
3.7 Litigation..................................................... 4
3.8 Title to Properties; Liens and Encumbrances.................... 4
3.9 Employee Agreement............................................. 4
3.10 Permits........................................................ 4
3.11 Patents, Copyrights and Trademarks............................. 4
3.12 Taxes.......................................................... 5
3.13 Agreements; Actions: Obligations to Related Parties............ 5
3.14 No Defaults, Violations or Conflicts........................... 6
3.15 Insurance...................................................... 7
3.16 Private Offering............................................... 7
3.17 Prior Registration Rights...................................... 7
3.18 Financial Statements........................................... 7
3.19 Changes in Financial Condition................................. 7
3.20 Employee Compensation Plans.................................... 8
3.21 Employee Relations............................................. 8
3.22 Brokers and Finders............................................ 9
3.23 Governmental Consents.......................................... 9
3.24 Environmental and Safety Laws.................................. 9
3.25 Real Property Holding Corporation.............................. 9
3.26 Full Disclosure................................................ 9
3.27 Investment Company Act......................................... 10
3.28 Qualified Small Business Stock................................. 10
4. Representations and Warranties of the Investors...................... 10
4.1 Authorization................................................... 10
4.2 Brokers and Finders............................................. 10
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
5. Securities Laws...................................................... 10
5.1 California Securities Law....................................... 10
5.2 Securities Law Representations and Covenants of Investors....... 11
6. Conditions of Investors' Obligations at Closing...................... 12
6.1 Representations and Warranties................................. 12
6.2 Performance.................................................... 12
6.3 Blue Sky Compliance............................................ 12
6.4 Opinion of Company's Counsel................................... 12
6.5 Proceedings Satisfactory: Compliance Certificate.............. 12
6.6 Investors' Rights.............................................. 12
6.7 Co-Sale Agreement and Voting Agreement......................... 13
6.8 Articles....................................................... 13
6.9 Consents, Permits, and Waivers................................. 13
6.10 Reservation of Conversion Shares............................... 13
7. Conditions of the Company's Obligations at Closing................... 13
7.1 Representations and Warranties.................................. 13
7.2 Performance..................................................... 13
7.3 Blue Sky Compliance............................................. 13
8. Miscellaneous........................................................ 13
8.1 Entire Agreement; Successors and Assigns....................... 13
8.2 Expenses....................................................... 14
8.3 Governing Law.................................................. 14
8.4 Headings....................................................... 14
8.5 Notices........................................................ 14
8.6 Amendment of Agreement: Waiver................................. 14
8.7 Finders Fees................................................... 14
8.8 Invalid or Void Provisions..................................... 14
8.9 Cooperation.................................................... 14
8.10 Counterparts................................................... 15
</TABLE>
-ii-
<PAGE>
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of July 23, 1999, by and among 2BRIDGE SOFTWARE, a California corporation
(the "Company"), and the Investors set forth in Exhibit A attached hereto (each,
---------
an "Investor" and collectively, the "Investors").
NOW THEREFORE, in consideration of the promises herein made and on the
terms and subject to the conditions herein contained, the Company and the
Investors agree as follows:
1. Purchase and Sale of Stock. The Company will sell to the Investors,
--------------------------
severally and not jointly, and the Investors will purchase from the Company,
severally and not jointly, up to 9,376,935 shares of the Company's Series C
Preferred Stock (the "Series C Preferred") at the per share purchase price of $
2.1328, allocated among the Investors as provided in Exhibit A attached hereto.
---------
The Series C Preferred will be subject to the rights, preferences, privileges
and restrictions as set forth in the Company's Amended and Restated Articles of
Incorporation, attached hereto as Exhibit B (the "Articles").
---------
2. Closing. The purchase and sale of the Series C Preferred shall be made
-------
in one or more closings, the first of which will take place at 10:00 a.m. on
July 23, 1999, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California, or such other place and/or other date or dates as
the Company and the Investors mutually agree (which time and place are
designated the "Closing"). At each Closing, the Company will deliver to each
Investor a certificate representing the Series C Preferred which such Investor
is purchasing against delivery to the Company by the Investor of the applicable
purchase price set forth on Exhibit A attached hereto.
---------
2.1 Additional Closings. The Company may sell up to the balance of
-------------------
the 9,376,935 shares of Series C Preferred not sold at the Closing to such
purchasers as it shall select, at the price set forth in Section 1 above,
provided that the closing for the sale of such shares of Series C Preferred is
completed not later than sixty (60) days after the date of this Agreement. Upon
execution of a signature page counterpart and without need for an amendment
hereto or thereto except to add such purchaser's name to Exhibit A hereto, any
---------
such additional purchaser shall become a party to this Agreement, and shall be
deemed an "Investor" for purposes of this Agreement, and shall become a party
to: (i) the Second Amended and Restated Investors' Rights Agreement in the form
attached hereto as Exhibit D (the "Rights Agreement"); (ii) the Second Amended
---------
and Restated Co-Sale Agreement in the form attached hereto as Exhibit E (the
---------
"Co-Sale Agreement"); and (iii) the Second Amended and Restated Voting Agreement
in the form attached hereto as Exhibit F (the "Voting Agreement"), all dated of
---------
even date herewith, respectively, and shall have the rights and obligations
hereunder and thereunder.
-1-
<PAGE>
3. Representations and Warranties of the Company to the Investors.
--------------------------------------------------------------
Except as set forth in Exhibit C attached hereto, the Company hereby
---------
represents and warrants to the Investors as follows:
3.1 Corporate Organization and Authority. The Company: (a) is a
------------------------------------
corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
California, and (b) has the corporate power and authority to (i) own and operate
its properties, (ii) carry on its business as now conducted and as proposed to
be conducted, (iii) execute and deliver this Agreement, the Rights Agreement,
the Co-Sale Agreement, and the Voting Agreement (collectively, the "Investment
Agreements"), (iv) issue and sell the Series C Preferred hereunder, (v) issue
the Common Stock of the Company issuable upon the conversion of the Series C
Preferred, and (vi) carry out the provisions of this Agreement, the Investment
Agreements and the Articles. The Company is duly qualified and is authorized to
do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
3.2 Capitalization. The Company's capitalization is as follows:
--------------
(a) upon the filing of the Articles in the form attached hereto
as Exhibit B in the Office of the Secretary of State of California prior to the
---------
Closing, the Company will be authorized to issue two classes of shares of
capital stock, designated respectively "Common Stock" and "Preferred Stock" with
45,000,000 total authorized shares of Common Stock, and 21,368,514 total
authorized shares of Preferred Stock, with the Preferred Stock consisting of
3,871,300 total authorized shares of Series A Preferred Stock, 7,797,214 total
authorized shares of Series B Preferred, and 9,700,000 total authorized shares
of Series C Preferred Stock;
(b) immediately after the Closing, the number of issued and
outstanding shares will be 13,167,439 shares of Common Stock, 3,871,300 shares
of Series A Preferred Stock, 7,195,127 shares of Series B Preferred Stock and up
to 9,376,935 shares of Series C Preferred (up to 9,497,668 shares counting the
warrants to purchase shares of Series C Preferred Stock referred to below).
Immediately after the Closing, there will be 528,676 shares reserved for
issuance pursuant to Warrants to purchase Common Stock; 102,087 shares reserved
for issuance pursuant to Warrants to purchase Series B Preferred Stock; and
120,733 shares reserved for issuance as Warrants to purchase Series C Preferred
Stock. Immediately after the Closing, there will be 4,735,000 shares of Common
Stock reserved for issuance under the Company's 1997 Stock Option Plan, duly
adopted by the Board of Directors and approved by the Company's shareholders. Of
such reserved shares of Common Stock, 417,439 shares have been issued upon the
exercise of options, 3,109,099 shares are subject to outstanding options, and
1,208,462 shares remain available for issuance. Except as specifically
contemplated herein, and as provided in the Articles, there will be no other
outstanding
-2-
<PAGE>
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal) proxy or shareholder agreements, or agreements of any kind,
oral or in writing, for the issuance, purchase or acquisition by the Company of
any shares of capital stock of the Company.
(c) all issued and outstanding shares of the Company's Series A
Preferred Stock, Series B Preferred Stock, and Common Stock (i) have been duly
authorized and validly issued, (ii) are fully paid and nonassessable, and (iii)
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. No stock plan, stock purchase, stock option or other
agreement or understanding between the Company and any holder of any equity
securities or rights to purchase equity securities provides for acceleration in
the vesting provisions of such agreement or understanding as the result of any
merger, consolidated sale of stock or assets, change in control or any other
transaction(s) by the Company.
3.3 No Subsidiaries. The Company does not own, nor does it 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.
3.4 Authorization. All action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations under this Agreement and the
Investment Agreements and for the authorization, sale, issuance and delivery of
the Series C Preferred and the Common Stock of the Company issuable upon the
conversion of the Series C Preferred has been taken. This Agreement and the
Investment Agreements, when executed and delivered, each constitutes legally
valid and binding obligations of the Company enforceable against the Company in
accordance with its terms, except to the extent that such enforcement may be
subject to applicable federal or state bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or other laws or court decisions
relating to or affecting the rights of creditors generally, and such enforcement
may be limited by equitable principles of general applicability.
3.5 Validity of Shares. The Series C Preferred are duly authorized
------------------
and, when issued, sold and delivered in accordance with the terms of and for the
consideration expressed in this Agreement, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws), fully-paid and non-assessable and will be free and clear
of all preemptive rights, rights of first refusal, liens, charges, restrictions,
claims and encumbrances imposed by or through the Company, except as
specifically set forth in the Articles, this Agreement or the Investment
Agreements. The Common Stock issuable upon the conversion of the Series C
Preferred has been duly and validly reserved for issuance and, when so issued,
will be duly authorized, validly issued (including, without limitation, issued
in compliance with applicable federal and state securities laws), fully paid and
nonassessable and will be free and clear of all preemptive rights, rights of
first refusal, liens, charges, restrictions on transfer, claims and encumbrances
imposed by or through the Company, except as specifically set forth in the
Articles, this Agreement, or the Investment Agreements.
3.6 No Conflict with other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement and the Investment Agreements will not result in
any event that results in the
-3-
<PAGE>
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 operation of any of its assets or properties or result in any
violation of, be in conflict with, or constitute a default under: (a) any
provision of the Articles or the Company's Bylaws; (b) any provision of any
judgment, decree or order to which the Company is a party or by which it is
bound; (c) any mortgage, indenture, license, contract, obligation or commitment
to which the Company is a party or by which it is bound; or (d) any statute,
rule or governmental regulation applicable to the Company.
3.7 Litigation. There is no action, proceeding or investigation
----------
pending or, to the knowledge of the Company, threatened, or any basis therefor
known to the Company, that questions the validity of this Agreement, or the
Investment Agreements or the right of the Company to enter into any such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company. The Company is not a party to any such lawsuit or similar action or
proceeding, nor does the Company intend to initiate any such litigation.
3.8 Title to Properties; Liens and Encumbrances. The Company has good
-------------------------------------------
and marketable title to all of its properties and assets, both real and
personal, subject to no mortgage, pledge, lien, security interest, conditional
sale agreement, encumbrance or charge. With respect to the properties 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.
3.9 Employee Agreement. All current employees and consultants of the
------------------
Company are parties to a written agreement ("Confidential Information and
Inventions Agreement") in the form previously furnished to Investors' counsel,
pertaining to (i) the disclosure and transfer to the Company of certain
inventions, developments and discoveries made or conceived by him or her during
the period of his or her employment with or performance of services for the
Company, and (ii) maintaining the confidentiality of proprietary information of
the Company with no exceptions noted on such agreement. The Company, after
reasonable investigation, is not aware that any of its employees or consultants
is in violation thereof, and the Company will use commercially reasonable
efforts to prevent any such violation.
3.10 Permits. The Company has all franchises, permits, licenses and
-------
other similar authority (collectively, "Permits") necessary for the conduct of
its business as now being conducted by it, the lack of which could 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 Permits for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any such Permits.
3.11 Patents, Copyrights and Trademarks. For purposes of this Section
----------------------------------
3.11, the term "Proprietary Rights" means patents, trademarks, service marks,
trade names, copyrights, trade secrets or other proprietary rights and
processes. To the best of its knowledge, the Company owns or possesses
sufficient legal rights to all Proprietary Rights necessary for its business as
now
-4-
<PAGE>
conducted and as proposed to be conducted, without any known infringement of the
rights of others. The Company has not received any communication alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the Proprietary Rights of any other person or entity. The Company
is not aware of any third party which is infringing or violating any of its
Proprietary Rights. There are no outstanding options, licenses, or agreements of
any kind relating to the Proprietary Rights of the Company other than those
incurred in the ordinary course of business, nor is the Company bound by or a
party to any options, licenses or agreements of any kind with respect to the
Proprietary Rights of any other person or entity other than those incurred in
the ordinary course of business. 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
their duties to the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor 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 employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company. Set forth in the Schedule of
Exceptions attached hereto as Exhibit C is a listing of all patents and
trademarks of the Company.
3.12 Taxes. All federal, state, local and foreign tax returns required
-----
to be filed by the Company have been timely filed, or if not yet filed the
Company has been granted extensions of the filing dates, which extensions have
not expired. All taxes, assessments, fees and other governmental charges upon
the Company, or upon any of its properties, income or franchises, have been paid
or adequate reserves therefor have been set up and have been disclosed in the
Financial Statements (as described in Section 3.18 below) if any of such taxes
are being contested in good faith. If any of such tax returns have not been
filed or if any such taxes have not been paid or so reserved for, the failure so
to file or to pay would not result in a material adverse effect on the business,
properties, prospects or financial condition of the Company. The Company knows
of no proposed additional tax assessment that is not provided for in the
Financial Statements. The Company has no pending or, to the knowledge of the
Company, threatened tax audit.
3.13 Agreements; Actions: Obligations to Related Parties.
---------------------------------------------------
(a) Except for the agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock (including without limitation stock option agreements),
there are no agreements, understandings or proposed transactions between the
Company and any of its officers or directors or any affiliate thereof.
(b) There are no agreements understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its
-5-
<PAGE>
knowledge by which it is bound which may involve (i) obligations (contingent or
otherwise) of, or payments to, the Company in excess of $50,000, (ii) provisions
restricting or affecting in any material, adverse way the development,
manufacture or distribution of the Company's products or services, or (iii)
indemnification by the Company with respect to infringements of Proprietary
Rights (other than indemnification obligations arising from purchase or sale
agreements entered into in the ordinary course of business).
(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 any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements described in
Section 3.18 below) individually in excess of $50,000 or, in the case
indebtedness and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, 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. For the purposes of this subsection (b), 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 any minimum dollar amount.
(d) Except for the agreements explicitly contemplated hereby,
and the Company's Articles and Bylaws, the Company is not a party to, and is not
bound by any contract, agreement or instrument which materially affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(e) There are no obligations of the Company to officers,
directors, shareholders, or employees of the Company other than (i) for payment
of salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company, (iii) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company), or (iv) general obligations that a corporation has to its
shareholders under California General Corporation Law, the Articles and the
Bylaws of the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.14 No Defaults, Violations or Conflicts. The Company is not in
------------------------------------
violation or default in any material respect of any term or provision of its
Articles, Bylaws, or of any instrument, judgment, order, writ, decree, license,
permit 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 violation or violations, either individually or in the aggregate,
would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. 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 or other agreement, which is necessary for the conduct of its
business as now being conducted by it, the lack
-6-
<PAGE>
of which could materially and adversely affect the business, properties,
prospects, or financial condition of the Company.
3.15 Insurance. The Company has obtained insurance as specified in
---------
Exhibit C. The Company is not aware of any pending or threatened claims against
- ---------
the Company for personal injuries or property damages which materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company.
3.16 Private Offering. The Company agrees that neither the Company nor
----------------
anyone acting on its behalf will offer any of the Series C Preferred or any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, anyone in such a way as to make the issuance and sale of the
Series C Preferred subject to the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
3.17 Prior Registration Rights. Except as provided in the Rights
-------------------------
Agreement, the Company is not under any contractual obligation, and has not
granted any rights, to register under the Securities Act any of its securities
that are presently outstanding or may subsequently be issued under such
obligation. To the Company's knowledge, except as contemplated in the Voting
Agreement, no shareholder of the Company has entered into any agreement with
respect to the voting of equity securities of the Company.
3.18 Financial Statements. The Company has delivered to the Investors
--------------------
its audited financial statements (including balance sheet, income statement and
statement of cash flows) as of December 31, 1998 and for the fiscal year then
ended and its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of March 31, 1999 and for the three
month period then ended (collectively, the "Financial Statements"), as well as
the Report of Independent Auditors for 1998. The Financial Statements are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the period indicated, except as disclosed therein, and present fairly
the financial condition and results of operations of the Company as of the dates
and for the periods presented. Except as set forth in the Financial Statements,
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, individually or in the aggregate, are not material to the financial
condition of the Company.
3.19 Changes in Financial Condition. Since the date of the Financial
------------------------------
Statements, the Company has not (i) made any loans or advances to any person,
other than ordinary advances for travel and other ordinary employee related
expenses; (ii) sold, exchanged or otherwise disposed of any of its assets or
rights necessary for the conduct of its business as now being conducted by it,
the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company; nor has there been
(iii) any material and adverse change in the business assets, liabilities,
financial condition, prospects or operations of the Company; (iv) any
resignation or termination of any key officers of the Company, and the Company,
to the best of its knowledge, does not know of the impending resignation or
termination of employment of any such officers; (v) any material change, except
in the ordinary course of business, in the contingent obligations of the
-7-
<PAGE>
Company by way of guaranty, endorsement, indemnity, warranty or otherwise; (vi)
any damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the properties, business or prospects or financial
condition of the Company; (vii) any waiver by the Company of a valuable right or
of a material debt owed to it; (viii) any material change in any compensation
arrangement or agreement with any employee, officer, director or shareholder;
(ix) any declaration or payment of any dividend or other distribution of the
assets of the Company; (x) any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts sand for
current liabilities incurred in the ordinary course of business; (xi) any sale,
assignment or transfer of any patents, trademarks, copyrights; trade secrets or
other intangible assets, except in the ordinary course of business; or (xii) any
change in any material agreement to which the Company is a party or by which it
is bound which materially and adversely affects the business, assets,
Liabilities, financial condition, operations or prospects of the Company,
including compensation agreements with the Company's employees.
3.20 Employee Compensation Plans. Except as set forth in Exhibit C or
--------------------------- ---------
as specifically contemplated in this Agreement, the Company is not party to or
bound by any currently effective employment contracts, deferred compensation
agreements, bonus plans, incentive plans, profit sharing plans, retirement
agreements or other employee compensation or severance agreements, including
without limitation any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974.
3.21 Employee Relations. The Company believes its relations with its
------------------
employees are satisfactory. The Company is not bound by or subject to any
written or oral, express or implied, contract, commitment or arrangement with
any labor union and the Company's employees are not represented by any labor
unions nor, to the Company's knowledge, is any union organization campaign in
progress. There is no strike or other labor dispute involving the Company
pending or, to the knowledge of the Company, threatened, which could have a
material and adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (in each case, 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. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company. The Company has
complied in all
-8-
<PAGE>
material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment.
3.22 Brokers and Finders. No agent, broker, investment banker or other
-------------------
firm or person acting on behalf or under the authority of the Company is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee from the Company in connection with any of the transactions contemplated by
this Agreement.
3.23 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 Company's valid execution and
delivery of this Agreement or the Investment Agreements, or the offer, sale or
issuance of the Series C Preferred (and the Common Stock issuable upon the
conversion thereof) or the consummation of any other transaction contemplated
hereby, except for the filing of the Articles in the Office of the Secretary of
State of California, which will be filed by the Company prior to the Closing,
and, the filing of a Form D notice under Regulation D of the Securities Act, and
any other post-sale filings required by applicable state securities laws. The
offer, sale and issuance of the Series C Preferred (and of the Common Stock
issuable upon the conversion thereof) in conformity with the terms of this
Agreement are exempt from the registration requirements of Section 5 of the
Securities Act and from the qualification requirements of applicable state
securities laws, assuming the accuracy of the representations and warranties of
the Investors as set forth in Section 5 of this Agreement.
3.24 Environmental and Safety Laws. To its knowledge, the Company 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.
3.25 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Code Section 897(c)(2) and
any regulations promulgated thereunder.
3.26 Full Disclosure. The representations and warranties of the
---------------
Company contained in this Agreement and other provisions of this Agreement and
the Investor Agreements, the certificates prepared or supplied to the Investors
by the Company, and the other materials presented to the Investors by the
Company, do not contain any untrue statement of a material fact or omit any
material fact necessary to make the statements contained therein or herein (in
view of the circumstances under which they were made) not misleading. To the
Company's knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in this Agreement, the Exhibits hereto, the Investment Agreements or in the
other documents delivered to the Investors or their attorneys or agents in
connection herewith.
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<PAGE>
3.27 Investment Company Act. The Company is not an "investment
----------------------
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.28 Qualified Small Business Stock.
------------------------------
(a) As of and immediately following the Closing, the Series C
Preferred will meet each of the requirements for qualification as "qualified
small business stock" set forth in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code"), including without limitation the following:
(i) the Company will be a domestic C corporation, (ii) the Company will not have
made any purchases of its own stock described in Code Section 1202(c)(3)(B)
during the one-year period preceding the Closing, and (iii) the Company's (and
any predecessor's) aggregate gross assets, as defined by Code Section
1202(d)(2), at no time from the date of incorporation of the Company and through
the Closing have exceeded or will exceed $50 million, taking into account the
assets of any corporations required to be aggregated with the Company in
accordance with Code Section 1202(d)(3).
(b) As of the Closing, at least 80% (by value) of the assets of
the Company are used by it in the active conduct of one or more qualified trades
or businesses, as defined by Code Section 1202(e)(3), and the Company is an
eligible corporation, as defined by Code Section 1202(e)(4).
4. Representations and Warranties of the Investors.
-----------------------------------------------
Each Investor severally represents and warrants to the Company as follows:
4.1 Authorization. When executed and delivered by the Investor, and
-------------
assuming execution and delivery by the Company, this Agreement will constitute a
valid obligation of the Investor, enforceable in accordance with its terms,
except to the extent that such enforcement may be subject to applicable federal
or state bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance or other laws or court decisions relating to or affecting
the rights of creditors generally, and such enforcement may be limited by
equitable principles of general applicability.
4.2 Brokers and Finders. No agent, broker, investment banker or other
-------------------
firm or person acting on behalf or under the authority of the Investor is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee from the Investor or the Company in connection with any of the
transactions contemplated by this Agreement.
5. Securities Laws.
---------------
5.1 California 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
-10-
<PAGE>
THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN
EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
OR SUCH EXEMPTION BEING AVAILABLE.
5.2 Securities Law Representations and Covenants of Investors.
---------------------------------------------------------
(a) The Company is entering into this Agreement with each
Investor in reliance upon the Investor's representation to the Company, which
the Investor's execution of this Agreement hereby confirms, that the Series C
Preferred to be received by the Investor and the shares of Common Stock issuable
upon the conversion of any Series C Preferred will be acquired for investment
for the Investor's own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof in violation of applicable
securities laws. By executing this Agreement, each Investor further represents
that the Investor does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any of the Series C Preferred or
the shares of Common Stock issuable upon conversion of any of the Series C
Preferred.
(b) Each Investor understands and acknowledges that the offering
of the Series C Preferred pursuant to this Agreement will not be registered
under the Securities Act on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration pursuant to Section
3(b) or Section 4(2) of the Securities Act or Regulation D promulgated
thereunder, and that the Company's reliance upon such exemption is predicated
upon the Investor's representations set forth in this Agreement.
(c) Each Investor acknowledges and agrees that the Series C
Preferred and, if issued, the shares of Common Stock issued upon conversion of
the Series C Preferred must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Each Investor has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold, the
sale being through an unsolicited 'broker's transaction or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the number of shares being sold during any
three-month period not exceeding specified limitations.
(d) Each Investor represents that: (i) the Investor (or his or
her purchaser representative, if any) is an "accredited investor" under the
Securities Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Investor's
prospective investment in the Company, (ii) the Investor has the ability to bear
the economic risks of the Investor's prospective investment; (iii) the Investor
is able, without materially impairing its financial condition, to hold the
Series C Preferred for an indefinite period of time and to suffer complete loss
on its investment; (iv) the Investor is a resident of, or has its principal
office in the state indicated for the Investor as set forth on the Investor
Suitability Questionnaire supplied
-11-
<PAGE>
by the Investor to the Company on or before the Closing; (v) the Investor
understands and has fully considered for purposes of this investment the risks
of this investment and understands that (1) this investment is suitable only for
an investor who is able to bear the economic consequences of losing its entire
investment, (2) the Company has a limited financial and operating history, (3)
the Series C Preferred represent an extremely speculative investment which
involves a high degree of risk of loss, and (4) there are substantial
restrictions on the transferability of, and there will be no public market for,
the Series C Preferred or the Common Stock issuable upon the conversion of any
of the Series C Preferred; accordingly, it may not be possible for the Investor
to liquidate its investment in the Series C Preferred; (vi) there have been no
representations as to the possible future value, if any, of the Series C
Preferred; and (vii) the Investor has received all the information it has
requested from the Company and considers necessary or appropriate for deciding
whether to purchase the Series C Preferred.
6. Conditions of Investors' Obligations at Closing.
-----------------------------------------------
The obligations of the Investors under Sections 1 and 2 of this Agreement
are subject to the fulfillment at or before the Closing of each of the following
conditions, any of which may be waived in writing by the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 3 of this Agreement will be true,
correct and complete on and as of the Closing with the same effect as if made on
and as of the Closing.
6.2 Performance. The Company will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Company at or before the Closing.
6.3 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under all state securities or Blue Sky laws, including those of New
York, applicable to the offer and sale of the Series C Preferred to the
Investors.
6.4 Opinion of Company's Counsel. The Investors will have received
----------------------------
from Wilson Sonsini Goodrich & Rosati, counsel for the Company, a favorable
opinion, dated the date of the Closing, in the form attached hereto as Exhibit
-------
G.
- -
6.5 Proceedings Satisfactory: Compliance Certificate. All corporate
-------------------------------------------------
and legal proceedings taken by the Company in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions will be satisfactory to the Investors, in the reasonable exercise
of the judgment of the Investors. The Company will have delivered to the
Investors a certificate dated as of the Closing, signed by the Company's
President, certifying that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied.
6.6 Investors' Rights. The Company and each of the Investors will
-----------------
have executed and delivered an Investors' Rights Agreement in the form of
Exhibit D attached hereto.
- ---------
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<PAGE>
6.7 Co-Sale Agreement and Voting Agreement. Each of the Company,
--------------------------------------
Mansoor Zakaria, and each of the Investors will have executed and delivered a
Co-Sale Agreement in the form of Exhibit E and a Voting Agreement in the form of
---------
Exhibit F attached hereto.
- ---------
6.8 Articles. The Articles in the form of Exhibit B attached hereto
-------- ---------
will have been filed with and accepted by the Office of the Secretary of State
of California.
6.9 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
Investment Agreements (except for such as may be properly obtained subsequent to
the Closing).
6.10 Reservation of Conversion Shares. The shares of Common Stock
--------------------------------
issuable upon conversion of the Series C Preferred shall have been duly
authorized and reserved for issuance upon such conversion.
7. Conditions of the Company's Obligations at Closing.
--------------------------------------------------
The obligations of the Company under Sections 1 and 2 of this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions, any of which may be waived in writing by the Company:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Sections 4 and 5 will be true on and as
of the Closing with the same effect as though said representations and
warranties had been made on and as of the Closing.
7.2 Performance. The Investors will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Investors at or before the Closing, including without
limitation delivery to the Company of the pro rata purchase price for such
Investors' Series C Preferred as set forth in Section 1 above, or as set forth
on Exhibit A attached hereto, in the form of immediately available funds.
---------
7.3 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under the securities laws of the State of California and any other
applicable state as necessary to offer and sell the Series C Preferred to the
Investors.
8. Miscellaneous.
-------------
8.1 Entire Agreement; Successors and Assigns. This Agreement (and the
----------------------------------------
Exhibits hereto) constitutes the entire contract between the Company and the
Investors relative to the subject matter hereof, and any previous or
contemporaneous agreement between the Company and the Investors regarding the
subject matter of this Agreement is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.
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<PAGE>
8.2 Expenses. The Company will pay reasonable fees and expenses of
--------
one special counsel to the Investors, to be designated by Arbor Investors, up to
a maximum of $15,000.
8.3 Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.
8.4 Headings. The headings of the Sections of this Agreement are for
--------
convenience and will not by themselves determine the interpretation of this
Agreement.
8.5 Notices. Any notice required or permitted hereunder will be given
-------
in writing and will be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by certified
mail, postage prepaid, return receipt requested, addressed (i) if to the
Company, as set forth below the Company's name on the signature page of this
Agreement, and (ii) if to an Investor, at such Investor's address as set forth
below its name on the signature page of this Agreement, or at such other address
as the Company or the Investor may designate by ten (10) days' advance written
notice to such Investor or the Company, respectively.
8.6 Amendment of Agreement: Waiver. This Agreement may be amended or
------------------------------
modified only upon the written consent of the Company and by the holders of at
least a majority of the then outstanding Series C Preferred. The obligations of
the Company and the rights of the holders of the Series C Preferred and the
shares of Common Stock issuable upon conversion of the Series C Preferred under
the Agreement may be waived only with the written consent of the holders of at
least a majority of the then outstanding Series C Preferred.
8.7 Finders Fees. Each of the Company and the Investors will
------------
indemnify the other against all liabilities incurred by the indemnifying party
with respect to claims related to investment banking or finders fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the indemnifying party,
and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
8.8 Invalid or Void Provisions. If any provision of this Agreement is
deemed invalid, illegal, or unenforceable in any jurisdiction, such provision
will be deemed amended to conform to applicable law so as to be valid, legal and
enforceable in such jurisdiction, and the validity, legality and enforceability
of such provision will not be affected or impaired thereby in any other
jurisdiction; if such provision cannot be amended without altering materially
the intention of the parties, it will be stricken and the remainder of this
Agreement will remain in full force and effect.
8.9 Cooperation. The parties agree that after the Closing, they will
-----------
from time to time, upon the request of any party hereto and without further
consideration, execute, acknowledge and deliver in proper form any further
instruments and take such other actions as such other party may reasonably
require in order to effectively carry out the intent of this Agreement.
-14-
<PAGE>
8.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
2BRIDGE SOFTWARE
By:____________________________________
Mansoor Zakaria, Chairman and
Chief Executive Officer
[SIGNATURE PAGE TO THE PURCHASE AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INVESTOR:
By:________________________________
Printed Name:______________________
Title:_____________________________
[SIGNATURE PAGE TO THE PURCHASE AGREEMENT]
<PAGE>
- --------------------------------------------------------------------------------
2BRIDGE
SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
March 10, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock.......................................... 1
2. Closing............................................................. 1
2.1 Additional Closings........................................... 1
3. Representations and Warranties of the Company to the Investors...... 2
3.1 Corporate Organization and Authority.......................... 2
3.2 Capitalization................................................ 2
3.3 No Subsidiaries............................................... 3
3.4 Authorization................................................. 3
3.5 Validity of Shares............................................ 3
3.6 No Conflict with other Instruments............................ 4
3.7 Litigation.................................................... 4
3.8 Title to Properties; Liens and Encumbrances................... 4
3.9 Employee Agreement............................................ 4
3.10 Permits....................................................... 4
3.11 Patents, Copyrights and Trademarks............................ 4
3.12 Taxes......................................................... 5
3.13 Agreements; Actions: Obligations to Related Parties........... 5
3.14 No Defaults, Violations or Conflicts.......................... 6
3.15 Insurance..................................................... 7
3.16 Private Offering.............................................. 7
3.17 Prior Registration Rights..................................... 7
3.18 Financial Statements.......................................... 7
3.19 Changes in Financial Condition................................ 7
3.20 Employee Compensation Plans................................... 8
3.21 Employee Relations............................................ 8
3.22 Brokers and Finders........................................... 9
3.23 Governmental Consents......................................... 9
3.24 Environmental and Safety Laws................................. 9
3.25 Real Property Holding Corporation............................. 9
3.26 Full Disclosure............................................... 9
3.27 Investment Company Act........................................ 10
4. Representations and Warranties of the Investors..................... 10
4.1 Authorization................................................. 10
4.2 Brokers and Finders........................................... 10
5. Securities Laws..................................................... 10
5.1 California Securities Law..................................... 10
5.2 Securities Law Representations and Covenants of Investors..... 10
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
6. Conditions of Investors' Obligations at Closing..................... 11
6.1 Representations and Warranties................................ 12
6.2 Performance................................................... 12
6.3 Blue Sky Compliance........................................... 12
6.4 Opinion of Company's Counsel.................................. 12
6.5 Proceedings Satisfactory: Compliance Certificate............. 12
6.6 Investors' Rights............................................. 12
6.7 Co-Sale Agreement and Voting Agreement........................ 12
6.8 Articles...................................................... 12
6.9 Consents, Permits, and Waivers................................ 12
6.10 Reservation of Conversion Shares.............................. 12
7. Conditions of the Company's Obligations at Closing.................. 13
7.1 Representations and Warranties................................ 13
7.2 Performance................................................... 13
7.3 Blue Sky Compliance........................................... 13
8. Miscellaneous....................................................... 13
8.1 Entire Agreement; Successors and Assigns...................... 13
8.2 Expenses...................................................... 13
8.3 Governing Law................................................. 13
8.4 Headings...................................................... 13
8.5 Notices....................................................... 13
8.6 Amendment of Agreement: Waiver................................ 14
8.7 Finders Fees.................................................. 14
8.8 Invalid or Void Provisions.................................... 14
8.9 Cooperation................................................... 14
8.10 Counterparts.................................................. 14
</TABLE>
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<PAGE>
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of March 10, 2000, by and among 2BRIDGE, a California corporation (the
"Company") and the Investors set forth in Exhibit A attached hereto (each, an
---------
"Investor" and collectively, the "Investors").
NOW THEREFORE, in consideration of the promises herein made and on the
terms and subject to the conditions herein contained, the Company and the
Investors agree as follows:
1. Purchase and Sale of Stock. The Company will sell to the Investors,
--------------------------
severally and not jointly, and the Investors will purchase from the Company,
severally and not jointly, up to 2,500,000 shares of the Company's Series D
Preferred Stock (the "Series D Preferred") at the per share purchase price of
$6.4347, allocated among the Investors as provided in Exhibit A attached hereto.
---------
The Series D Preferred will be subject to the rights, preferences, privileges
and restrictions as set forth in the Company's Amended and Restated Articles of
Incorporation, attached hereto as Exhibit B (the "Articles").
----------
2. Closing. The purchase and sale of the Series D Preferred shall be made
-------
in one or more closings, the first of which will take place at 10:00 a.m. on
March 10, 2000, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California, or such other place and/or other date or dates
as the Company and the Investors mutually agree (which time and place are
designated the "Closing"). At the Closing, the Company will deliver to each
Investor a certificate representing the Series D Preferred which such Investor
is purchasing against delivery to the Company by the Investor of the applicable
purchase price set forth on Exhibit A attached hereto.
---------
2.1 Additional Closings. The Company may sell up to the balance of
-------------------
the 2,500,000 shares of Series D Preferred not sold at the Closing to such
purchasers as it shall select, at the price set forth in Section 1 above,
provided that the closing for the sale of such shares of Series D Preferred is
completed not later than sixty (60) days after the date of this Agreement. Upon
execution of a signature page counterpart and without need for an amendment
hereto or thereto except to add such purchaser's name to Exhibit A hereto, any
---------
such additional purchaser shall become a party to this Agreement, and shall be
deemed an "Investor" for purposes of this Agreement, and shall become a party
to: (i) the Amended and Restated Investors' Rights Agreement in the form
attached hereto as Exhibit C (the "Rights Agreement") and (ii) the Amended and
---------
Restated Co-Sale Agreement in the form attached hereto as Exhibit D (the "Co-
---------
Sale Agreement"), all dated of even date herewith, respectively, and shall have
the rights and obligations hereunder and thereunder.
-1-
<PAGE>
3. Representations and Warranties of the Company to the Investors.
--------------------------------------------------------------
The Company hereby represents and warrants to the Investors that, except as
set forth on the Schedule of Exceptions dated the date hereof (the "Schedule of
Exceptions") furnished to each Investor and special counsel for the Investors,
which exceptions shall be deemed to be representations and warranties as it made
hereunder:
3.1 Corporate Organization and Authority. The Company: (a) is a
------------------------------------
corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
California, and (b) has the corporate power and authority to (i) own and operate
its properties, (ii) carry on its business as now conducted and as proposed to
be conducted, (iii) execute and deliver this Agreement, the Rights Agreement and
the Co-Sale Agreement (collectively, the "Investment Agreements"), (iv) issue
and sell the Series D Preferred hereunder, (v) issue the Common Stock of the
Company issuable upon the conversion of the Series D Preferred, and (vi) carry
out the provisions of this Agreement, the Investment Agreements and the
Articles. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its business.
3.2 Capitalization. The Company's capitalization is as follows:
--------------
(a) upon the filing of the Articles in the form attached hereto
as Exhibit B in the Office of the Secretary of State of California prior to the
---------
Closing, the Company will be authorized to issue two classes of shares of
capital stock, designated respectively "Common Stock" and "Preferred Stock" with
47,000,000 total authorized shares of Common Stock, and 23,868,514 total
authorized shares of Preferred Stock, with the Preferred Stock consisting of
3,871,300 total authorized shares of Series A Preferred Stock, 7,797,214 total
authorized shares of Series B Preferred, and 9,700,000 total authorized shares
of Series C Preferred Stock and 2,500,000 total authorized shares of Series D
Preferred;
(b) immediately after the Closing, the number of issued and
outstanding shares will be 14,078,045 shares of Common Stock, 3,871,300 shares
of Series A Preferred Stock, 7,195,127 shares of Series B Preferred Stock and
9,367,973 shares of Series C Preferred Stock, and up to 1,114,800 shares of
Series D Preferred. Immediately after the Closing, there will be 528,676 shares
reserved for issuance pursuant to Warrants to purchase Common Stock; 102,087
shares reserved for issuance pursuant to Warrants to purchase Series B Preferred
Stock; and 132,455 shares reserved for issuance as Warrants to purchase Series C
Preferred Stock and 168,173 shares reserved as Warrants to purchase Series D
Preferred Stock. Immediately after the Closing, there will be 4,735,000 shares
of Common Stock reserved for issuance under the Company's 1997 Stock Option
Plan, duly adopted by the Board of Directors and approved by the Company's
shareholders. Of such reserved shares of Common Stock, 878,045 shares have been
issued upon the exercise of options, 3,110,740 shares are subject to outstanding
options, and 746,215 shares remain available for issuance. Except as
specifically contemplated herein, and as provided in the Articles,
-2-
<PAGE>
there will be no other outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal) proxy or
shareholder agreements, or agreements of any kind, oral or in writing, for the
issuance, purchase or acquisition by the Company of any shares of capital stock
of the Company; and
(c) all issued and outstanding shares of the Company's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common
Stock (i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable, and (iii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. No stock plan, stock
purchase, stock option or other agreement or understanding between the Company
and any holder of any equity securities or rights to purchase equity securities
provides for acceleration in the vesting provisions of such agreement or
understanding as the result of any merger, consolidated sale of stock or assets,
change in control or any other transaction(s) by the Company.
3.3 No Subsidiaries. The Company does not own, nor does it 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.
3.4 Authorization. All action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations under this Agreement and the
Investment Agreements and for the authorization, sale, issuance and delivery of
the Series D Preferred and the Common Stock of the Company issuable upon the
conversion of the Series D Preferred has been taken. This Agreement and the
Investment Agreements, when executed and delivered, each constitutes legally
valid and binding obligations of the Company enforceable against the Company in
accordance with its terms, except to the extent that such enforcement may be
subject to applicable federal or state bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or other laws or court decisions
relating to or affecting the rights of creditors generally, and such enforcement
may be limited by equitable principles of general applicability.
3.5 Validity of Shares. The Series D Preferred are duly authorized
------------------
and, when issued, sold and delivered in accordance with the terms of and for the
consideration expressed in this Agreement, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws), fully-paid and non-assessable and will be free and clear
of all preemptive rights, rights of first refusal, liens, charges, restrictions,
claims and encumbrances imposed by or through the Company, except as
specifically set forth in the Articles, this Agreement or the Investment
Agreements. The Common Stock issuable upon the conversion of the Series D
Preferred has been duly and validly reserved for issuance and, when so issued,
will be duly authorized, validly issued (including, without limitation, issued
in compliance with applicable federal and state securities laws), fully paid and
nonassessable and will be free and clear of all preemptive rights, rights of
first refusal, liens, charges, restrictions on transfer, claims and encumbrances
imposed by or through the Company, except as specifically set forth in the
Articles, this Agreement, or the Investment Agreements.
-3-
<PAGE>
3.6 No Conflict with other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement and the Investment Agreements will not result in
any event that 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 operation of any of its assets or
properties or result in any violation of, be in conflict with, or constitute a
default under: (a) any provision of the Articles or the Company's Bylaws; (b)
any provision of any judgment, decree or order to which the Company is a party
or by which it is bound; (c) any mortgage, indenture, license, contract,
obligation or commitment to which the Company is a party or by which it is
bound; or (d) any statute, rule or governmental regulation applicable to the
Company.
3.7 Litigation. There is no action, proceeding or investigation
----------
pending or, to the knowledge of the Company, threatened, or any basis therefor
known to the Company, that questions the validity of this Agreement or the
Investment Agreements or the right of the Company to enter into any such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company. The Company is not a party to any such lawsuit or similar action or
proceeding, nor does the Company intend to initiate any such litigation.
3.8 Title to Properties; Liens and Encumbrances. The Company has good
-------------------------------------------
and marketable title to all of its properties and assets, both real and
personal, subject to no mortgage, pledge, lien, security interest, conditional
sale agreement, encumbrance or charge. With respect to the properties 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.
3.9 Employee Agreement. All current employees and consultants of the
------------------
Company are parties to a written agreement ("Confidential Information and
Inventions Agreement") pertaining to (i) the disclosure and transfer to the
Company of certain inventions, developments and discoveries made or conceived by
him or her during the period of his or her employment with or performance of
services for the Company, and (ii) maintaining the confidentiality of
proprietary information of the Company with no exceptions noted on such
agreement. The Company, after reasonable investigation, is not aware that any of
its employees or consultants is in violation thereof, and the Company will use
commercially reasonable efforts to prevent any such violation.
3.10 Permits. The Company has all franchises, permits, licenses and
-------
other similar authority (collectively, "Permits") necessary for the conduct of
its business as now being conducted by it, the lack of which could 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 Permits for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any such Permits.
3.11 Patents, Copyrights and Trademarks. For purposes of this Section
----------------------------------
3.11, the term "Proprietary Rights" means patents, trademarks, service marks,
trade names, copyrights,
-4-
<PAGE>
trade secrets or other proprietary rights and processes. To the Company's best
knowledge, the Company owns or possesses sufficient legal rights to all
Proprietary Rights necessary for its business as now conducted and as proposed
to be conducted, without any known infringement of the rights of others. The
Company has not received any communication alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
Proprietary Rights of any other person or entity. The Company is not aware of
any third party which is infringing or violating any of its Proprietary Rights.
There are no outstanding options, licenses, or agreements of any kind relating
to the Proprietary Rights of the Company other than those incurred in the
ordinary course of business, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the Proprietary
Rights of any other person or entity other than those incurred in the ordinary
course of business. 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 their duties to
the Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor 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 employee is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned to
the Company. Set forth in the Schedule of Exceptions is a listing of all patents
and trademarks of the Company.
3.12 Taxes. All federal, state, local and foreign tax returns required
-----
to be filed by the Company have been timely filed, or if not yet filed the
Company has been granted extensions of the filing dates, which extensions have
not expired. All taxes, assessments, fees and other governmental charges upon
the Company, or upon any of its properties, income or franchises, have been paid
or adequate reserves therefor have been set up and have been disclosed in the
Financial Statements (as described in Section 3.18 below) if any of such taxes
are being contested in good faith. If any of such tax returns have not been
filed or if any such taxes have not been paid or so reserved for, the failure so
to file or to pay would not result in a material adverse effect on the business,
properties, prospects or financial condition of the Company. The Company knows
of no proposed additional tax assessment that is not provided for in the
Financial Statements. The Company has no pending or, to the knowledge of the
Company, threatened tax audit.
3.13 Agreements; Actions: Obligations to Related Parties.
---------------------------------------------------
(a) Except for the agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock (including without limitation stock option agreements),
there are no agreements, understandings or proposed transactions between the
Company and any of its officers or directors or any affiliate thereof.
-5-
<PAGE>
(b) There are no agreements understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, (ii) provisions restricting or affecting in any
material, adverse way the development, manufacture or distribution of the
Company's products or services, or (iii) indemnification by the Company with
respect to infringements of Proprietary Rights (other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
(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 any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements described in
Section 3.18 below) individually in excess of $50,000 or, in the case
indebtedness and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, 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. For the purposes of this subsection (c), 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 any minimum dollar amount.
(d) Except for the agreements explicitly contemplated hereby,
and the Company's Articles and Bylaws, the Company is not a party to, and is not
bound by any contract, agreement or instrument which materially affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
(e) There are no obligations of the Company to officers,
directors, shareholders, or employees of the Company other than (i) for payment
of salary for services rendered, (ii) reimbursement for reasonable expenses
incurred on behalf of the Company, (iii) for other standard employee benefits
made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company), or (iv) general obligations that a corporation has to its
shareholders under California General Corporation Law, the Articles and the
Bylaws of the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.14 No Defaults, Violations or Conflicts. The Company is not in
------------------------------------
violation or default in any material respect of any term or provision of its
Articles, Bylaws, or of any instrument, judgment, order, writ, decree, license,
permit or contract to which it is a party or by which it is bound or of any
provision of any federal or state statute, rule or regulation applicable to the
Company, which violation or violations, either individually or in the aggregate,
would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. The Company has
avoided every condition, and has not performed any act, the occurrence of which
-6-
<PAGE>
would result in the Company's loss of any right granted under any license,
distribution or other agreement, which is necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company.
3.15 Insurance. The Company has obtained insurance as specified in the
---------
Company's Schedule of Exceptions. The Company is not aware of any pending or
threatened claims against the Company for personal injuries or property damages
which materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company.
3.16 Private Offering. The Company agrees that neither the Company nor
----------------
anyone acting on its behalf will offer any of the Series D Preferred or any
similar securities for issuance or sale to, or solicit any offer to acquire any
of the same from, anyone in such a way as to make the issuance and sale of the
Series D Preferred subject to the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
3.17 Prior Registration Rights. Except as provided in the Rights
-------------------------
Agreement, the Company is not under any contractual obligation, and has not
granted any rights, to register under the Securities Act any of its securities
that are presently outstanding or may subsequently be issued under such
obligation. To the Company's knowledge, except as contemplated in the Second
Amended and Restated Voting Agreement, dated as of July 23, 1999, among the
Company, Mansoor Zakaria and the investors parties thereto (the "Voting
Agreement"), no shareholder of the Company has entered into any agreement with
respect to the voting of equity securities of the Company.
3.18 Financial Statements. The Company has delivered to the Investors
--------------------
its audited financial statements (including balance sheet, income statement and
statement of cash flows) as of December 31, 1998 and for the fiscal year then
ended and its unaudited financial statements (including balance sheet, income
statement and statement of cash flows) as of March 31, 1999 and for the three
month period then ended (collectively, the "Financial Statements"), as well as
the Report of Independent Auditors for 1998. The Financial Statements are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the period indicated, except as disclosed therein, and present fairly
the financial condition and results of operations of the Company as of the dates
and for the periods presented. Except as set forth in the Financial Statements,
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, individually or in the aggregate, are not material to the financial
condition of the Company.
3.19 Changes in Financial Condition. Since the date of the Financial
------------------------------
Statements, the Company has not (i) made any loans or advances to any person,
other than ordinary advances for travel and other ordinary employee related
expenses; (ii) sold, exchanged or otherwise disposed of any of its assets or
rights necessary for the conduct of its business as now being conducted by it,
the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of the Company; nor has there been
(iii) any material and adverse change in the business assets, liabilities,
financial condition, prospects or operations of the Company; (iv) any
resignation or
-7-
<PAGE>
termination of any key officers of the Company, and the Company, to the best of
its knowledge, does not know of the impending resignation or termination of
employment of any such officers; (v) any material change, except in the ordinary
course of business, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise; (vi) any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the properties, business or prospects or financial condition
of the Company; (vii) any waiver by the Company of a valuable right or of a
material debt owed to it; (viii) any material change in any compensation
arrangement or agreement with any employee, officer, director or shareholder;
(ix) any declaration or payment of any dividend or other distribution of the
assets of the Company; (x) any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business; (xi) any sale,
assignment or transfer of any patents, trademarks, copyrights, trade secrets or
other intangible assets, except in the ordinary course of business; or (xii) any
change in any material agreement to which the Company is a party or by which it
is bound which materially and adversely affects the business, assets,
liabilities, financial condition, operations or prospects of the Company,
including compensation agreements with the Company's employees.
3.20 Employee Compensation Plans. Except as specifically contemplated
---------------------------
in this Agreement, the Company is not party to or bound by any currently
effective employment contracts, deferred compensation agreements, bonus plans,
incentive plans, profit sharing plans, retirement agreements or other employee
compensation or severance agreements, including without limitation any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.21 Employee Relations. The Company believes its relations with its
------------------
employees are satisfactory. The Company is not bound by or subject to any
written or oral, express or implied, contract, commitment or arrangement with
any labor union and the Company's employees are not represented by any labor
unions nor, to the Company's knowledge, is any union organization campaign in
progress. There is no strike or other labor dispute involving the Company
pending or, to the knowledge of the Company, threatened, which could have a
material and adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (in each case, 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. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of its
present employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has occurred. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
-8-
<PAGE>
of the Company is terminable at the will of the Company. 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.
3.22 Brokers and Finders. No agent, broker, investment banker or other
-------------------
firm or person acting on behalf or under the authority of the Company is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee from the Company in connection with any of the transactions contemplated by
this Agreement.
3.23 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 Company's valid execution and
delivery of this Agreement or the Investment Agreements, or the offer, sale or
issuance of the Series D Preferred (and the Common Stock issuable upon the
conversion thereof) or the consummation of any other transaction contemplated
hereby, except for the filing of the Articles in the Office of the Secretary of
State of California, which will be filed by the Company prior to the Closing,
and, the filing of a Form D notice under Regulation D of the Securities Act, and
any other post-sale filings required by applicable state securities laws. The
offer, sale and issuance of the Series D Preferred (and of the Common Stock
issuable upon the conversion thereof) in conformity with the terms of this
Agreement are exempt from the registration requirements of Section 5 of the
Securities Act and from the qualification requirements of applicable state
securities laws, assuming the accuracy of the representations and warranties of
the Investors as set forth in Section 5 of this Agreement.
3.24 Environmental and Safety Laws. To its knowledge, the Company 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.
3.25 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Code Section 897(c)(2) and
any regulations promulgated thereunder.
3.26 Full Disclosure. The representations and warranties of the
---------------
Company contained in this Agreement and other provisions of this Agreement and
the Investment Agreements, the certificates prepared or supplied to the
Investors by the Company, and the other materials presented to the Investors by
the Company, do not contain any untrue statement of a material fact or omit any
material fact necessary to make the statements contained therein or herein (in
view of the circumstances under which they were made) not misleading. To the
Company's knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition, prospects or operations of the Company that have not been set forth
in this Agreement, the Exhibits hereto, the Investment Agreements or in the
other documents delivered to the Investors or their attorneys or agents in
connection herewith.
-9-
<PAGE>
3.27 Investment Company Act. The Company is not an "investment
----------------------
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
4. Representations and Warranties of the Investors.
-----------------------------------------------
Each Investor severally represents and warrants to the Company as follows:
4.1 Authorization. When executed and delivered by the Investor, and
-------------
assuming execution and delivery by the Company, this Agreement will constitute a
valid obligation of the Investor, enforceable in accordance with its terms,
except to the extent that such enforcement may be subject to applicable federal
or state bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance or other laws or court decisions relating to or affecting
the rights of creditors generally, and such enforcement may be limited by
equitable principles of general applicability.
4.2 Brokers and Finders. No agent, broker, investment banker or other
-------------------
firm or person acting on behalf or under the authority of the Investor is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee from the Investor or the Company in connection with any of the
transactions contemplated by this Agreement.
5. Securities Laws.
---------------
5.1 California 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 AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING AVAILABLE.
5.2 Securities Law Representations and Covenants of Investors.
---------------------------------------------------------
(a) The Company is entering into this Agreement with each
Investor in reliance upon the Investor's representation to the Company, which
the Investor's execution of this Agreement hereby confirms, that the Series D
Preferred to be received by the Investor and the shares of Common Stock issuable
upon the conversion of any Series D Preferred will be acquired for investment
for the Investor's own account, not as a nominee or agent, and not with a view
to the sale or distribution of any part thereof in violation of applicable
securities laws. By executing this Agreement, each Investor further represents
that the Investor does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participations to such
person or to any third person, with respect to any of the Series D Preferred or
the shares of Common Stock issuable upon conversion of any of the Series D
Preferred.
-10-
<PAGE>
(b) Each Investor understands and acknowledges that the offering
of the Series D Preferred pursuant to this Agreement will not be registered
under the Securities Act on the grounds that the offering and sale of securities
contemplated by this Agreement are exempt from registration pursuant to Section
4(2) of the Securities Act or Regulation D promulgated thereunder, and that the
Company's reliance upon such exemption is predicated upon the Investor's
representations set forth in this Agreement.
(c) Each Investor acknowledges and agrees that the Series D
Preferred and, if issued, the shares of Common Stock issued upon conversion of
the Series D Preferred must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Each Investor has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold, the
sale being through an unsolicited broker's transaction or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the number of shares being sold during any
three-month period not exceeding specified limitations.
(d) Each Investor represents that: (i) the Investor (or his or
her purchaser representative, if any) is an "accredited investor" under the
Securities Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Investor's
prospective investment in the Company, (ii) the Investor has the ability to bear
the economic risks of the Investor's prospective investment; (iii) the Investor
is able, without materially impairing its financial condition, to hold the
Series D Preferred for an indefinite period of time and to suffer complete loss
on its investment; (iv) the Investor is a resident of, or has its principal
office in the state indicated for the Investor as set forth on the Investor
Suitability Questionnaire supplied by the Investor to the Company on or before
the Closing; (v) the Investor understands and has fully considered for purposes
of this investment the risks of this investment and understands that (1) this
investment is suitable only for an investor who is able to bear the economic
consequences of losing its entire investment, (2) the Company has a limited
financial and operating history, (3) the Series D Preferred represent an
extremely speculative investment which involves a high degree of risk of loss,
and (4) there are substantial restrictions on the transferability of, and there
will be no public market for, the Series D Preferred or the Common Stock
issuable upon the conversion of any of the Series D Preferred; accordingly, it
may not be possible for the Investor to liquidate its investment in the Series D
Preferred; (vi) there have been no representations as to the possible future
value, if any, of the Series D Preferred; and (vii) the Investor has received
all the information it has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the Series D Preferred.
6. Conditions of Investors' Obligations at Closing.
-----------------------------------------------
-11-
<PAGE>
The obligations of each of the Investors under Sections 1 and 2 of this
Agreement are subject to the fulfillment at or before the Closing relevant to
such Investor of each of the following conditions, any of which may be waived in
writing by the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 3 of this Agreement will be true,
correct and complete on and as of the Closing with the same effect as if made on
and as of such Closing.
6.2 Performance. The Company will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Company at or before the Closing.
6.3 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under all state securities or Blue Sky laws applicable to the offer
and sale of the Series D Preferred to the Investors.
6.4 Opinion of Company's Counsel. The Investors will have received
----------------------------
from Wilson Sonsini Goodrich & Rosati, counsel for the Company, a favorable
opinion, dated the date of the Closing in form reasonably satisfactory to
counsel of the Investors.
6.5 Proceedings Satisfactory: Compliance Certificate. All corporate
-------------------------------------------------
and legal proceedings taken by the Company in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions will be satisfactory to the Investors, in the reasonable exercise
of the judgment of the Investors. The Company will have delivered to the
Investors a certificate dated as of the Closing, signed by the Company's
President, certifying that the conditions set forth in Sections 6.1 and 6.2 have
been satisfied.
6.6 Investors' Rights. The Company and each of the Investors will
-----------------
have executed and delivered an Investors' Rights Agreement in the form of
Exhibit C attached hereto.
- ---------
6.7 Co-Sale Agreement. Each of the Company, Mansoor Zakaria, and each
-----------------
of the Investors will have executed and delivered a Co-Sale Agreement in the
form of Exhibit D attached hereto.
---------
6.8 Articles. The Articles in the form of Exhibit B attached hereto
-------- ---------
will have been filed with and accepted by the Office of the Secretary of State
of California.
6.9 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
Investment Agreements (except for such as may be properly obtained subsequent to
the Closing).
6.10 Reservation of Conversion Shares. The shares of Common Stock
--------------------------------
issuable upon conversion of the Series D Preferred shall have been duly
authorized and reserved for issuance upon such conversion.
-12-
<PAGE>
7. Conditions of the Company's Obligations at Closing.
--------------------------------------------------
The obligations of the Company under Sections 1 and 2 of this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions, any of which may be waived in writing by the Company:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Sections 4 and 5 will be true on and as
of the Closing with the same effect as though said representations and
warranties had been made on and as of the Closing.
7.2 Performance. The Investors will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Investors at or before the Closing, including without
limitation delivery to the Company of the pro rata purchase price for such
Investors' Series D Preferred as set forth in Section 1 above, or as set forth
on Exhibit A attached hereto, in the form of immediately available funds.
---------
7.3 Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under the securities laws of the State of California and any other
applicable state as necessary to offer and sell the Series D Preferred to the
Investors.
8. Miscellaneous.
-------------
8.1 Entire Agreement; Successors and Assigns. This Agreement (and the
----------------------------------------
Exhibits hereto) and the Investment Agreements constitutes the entire contract
between the Company and the Investors relative to the subject matter hereof, and
any previous or contemporaneous agreement between the Company and the Investors
regarding the subject matter of such Agreements is superseded by such
Agreements. Subject to the exceptions specifically set forth in this Agreement,
the terms and conditions of this Agreement will inure to the benefit of and be
binding upon the respective executors, administrators, heirs, successors and
assigns of the parties.
8.2 Expenses. The Company will pay reasonable fees and expenses of
--------
one special counsel to the Investors up to a maximum of $5,000.
8.3 Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.
8.4 Headings. The headings of the Sections of this Agreement are for
--------
convenience and will not by themselves determine the interpretation of this
Agreement.
8.5 Notices. Any notice required or permitted hereunder will be given
-------
in writing and will be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by certified
mail, postage prepaid, return receipt requested, addressed (i) if to the
Company, as set forth below the Company's name on the signature page of this
Agreement, and (ii) if to an Investor, at such Investor's address as set forth
below its name on the signature page
-13-
<PAGE>
of this Agreement, or at such other address as the Company or the Investor may
designate by ten (10) days' advance written notice to such Investor or the
Company, respectively.
8.6 Amendment of Agreement: Waiver. This Agreement may be amended or
------------------------------
modified only upon the written consent of the Company and by the holders of at
least a majority of the then outstanding Series D Preferred. The obligations of
the Company and the rights of the holders of the Series D Preferred and the
shares of Common Stock issuable upon conversion of the Series D Preferred under
the Agreement may be waived only with the written consent of the holders of at
least a majority of the then outstanding Series D Preferred.
8.7 Finders Fees. Each of the Company and the Investors will
------------
indemnify the other against all liabilities incurred by the indemnifying party
with respect to claims related to investment banking or finders fees in
connection with the transactions contemplated by this Agreement, arising out of
arrangements between the party asserting such claims and the indemnifying party,
and all costs and expenses (including reasonable fees of counsel) of
investigating and defending such claims.
8.8 Invalid or Void Provisions. If any provision of this Agreement is
--------------------------
deemed invalid, illegal, or unenforceable in any jurisdiction, such provision
will be deemed amended to conform to applicable law so as to be valid, legal and
enforceable in such jurisdiction, and the validity, legality and enforceability
of such provision will not be affected or impaired thereby in any other
jurisdiction; if such provision cannot be amended without altering materially
the intention of the parties, it will be stricken and the remainder of this
Agreement will remain in full force and effect.
8.9 Cooperation. The parties agree that after the Closing, they will
-----------
from time to time, upon the request of any party hereto and without further
consideration, execute, acknowledge and deliver in proper form any further
instruments and take such other actions as such other party may reasonably
require in order to effectively carry out the intent of this Agreement.
8.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
2BRIDGE
By:__________________________________________
Mansoor Zakaria, Chairman and
Chief Executive Officer
[SIGNATURE PAGE TO THE PURCHASE AGREEMENT]
<PAGE>
2BRIDGE
SERIES D INVESTOR
SIGNATURE PAGE
TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
The undersigned hereby executes and delivers the Series D Preferred
Stock Purchase Agreement (the "Agreement") to which this Signature Page is
attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of said Agreement and Signature
Pages of the other parties named in said Agreement, shall constitute one and the
same document in accordance with the terms of the Agreement.
________________________________________
[Type or Print Name of Investor]
By:_____________________________________
Print Name:_____________________________
Title:__________________________________
(if applicable)
Address:________________________________
________________________________
<PAGE>
EXHIBIT 10.17
COMMON STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS.
No. 4
---
Void after November ___, 2004
AGORA DIGITAL, INC.
WARRANT TO PURCHASE 28,676 SHARES OF COMMON STOCK
_____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from Agora Digital, Inc., a California
corporation (the "Company"), 28,676 shares (as adjusted pursuant to Section 3
hereof) of the fully paid and nonassessable Common Stock, no par value (the
"Shares"), of the Company at the price of $0.8718 per share (the "Exercise
Price") (as adjusted pursuant to Section 3 hereof), subject to the provisions
and upon the terms and conditions hereinafter set forth.
This Warrant is subject to the following terms and conditions:
1. Method of Exercise; Payment.
---------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant
-------------
may be exercised by the Holder, in whole or in part, from time to time by the
surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
---------
of the Company, and by the payment to the Company of an amount equal to the
Exercise Price multiplied by the number of the Shares being purchased, which
amount may be paid, at the election of the Holder, by wire transfer or certified
check payable to the order of the Company. The person or persons in whose
name(s) any certificate(s) representing Shares shall be issuable upon exercise
of this Warrant shall be deemed to have become the holder(s) of record of, and
shall be treated for all purposes as the record holder(s) of, the Shares
represented thereby (and such Shares
<PAGE>
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this warrant pursuant
------------------
to Section 1(a) hereof, the Holder may elect to receive a number of Shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with Notice of Exercise in which alternative No. 1 is initiated by the
Holder. In such event, the Company shall issue to the Holder a number of Shares
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Common Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair market Value. For purposes of this Section 1, the fair
-----------------
market value of the Company's Common Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
- -------
market value;
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, fair market value of the Common Stock per share shall
be the price per share as determined by the Company's Board of Directors.
Receipt and acknowledgment of this warrant by the Holder shall be definitely
deemed to be an acknowledgment and acceptance of any such fair market value
determination by the Company's Board of Directors as the final and binding
determination of such value for purposes of this Agreement.
(d) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to the Holder within a reasonable time and, unless
this Warrant has been fully exercised or has expired, a new Warrant representing
the shares with respect to which this Warrant shall not have been exercised
shall also be issued to the Holder within such time.
2
<PAGE>
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
-----------
upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
2. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period
within which the rights represented by this Warrant may be exercised, the
Company shall at all times have authorized and reserved for issuance sufficient
shares of its Common Stock to provide for the exercise of the rights represented
by this Warrant.
3. Adjustment of Exercise Price and Number of Shares. Subject to the
-------------------------------------------------
provisions of Section 13 hereof, the number and kind of Shares purchasable upon
the exercise of this Warrant and the Exercise Price therefor shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Common Stock, or
shall issue a stock dividend on its outstanding shares of Common Stock, the
number of Shares issuable upon exercise of this Warrant immediately prior to
such subdivision or to the issuance of such stock dividend shall be
proportionately increased, and the Exercise Price shall be proportionately
decreased, and in the event that the Company shall at any time combine the
outstanding shares of Common Stock, the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
(b) Adjustments. If at any time the Company issues or sells any
-----------
shares of its Common Stock (other than shares of Common Stock issued on
conversion of Series A Preferred Stock or issued either directly or upon
exercise of options or warrants to employees, officers, directors and
independent contractors of the Company and its subsidiaries pursuant to stock
purchase or stock option plans, agreements or other similar arrangements that
are approved by the Board of Directors (the "Compensatory Shares") or issued
either directly or upon exercise of options or warrants issued in connection
with equipment lease financing or other similar financing arrangements approved
by the Board of Directors (the "Lease Financing Shares") for a consideration per
share less than the then effective Exercise Price, then and in each such case,
the Exercise Price for the Shares will be reduced to a price (calculated to the
nearest cent) determined by multiplying such applicable Exercise Price by a
fraction (a) the numerator of which will be the number of shares of Common Stock
outstanding (or so deemed) immediately prior to such issuance or sale plus the
number of shares of Common Stock which the aggregate consideration received by
the Company for such issuance or sale would purchase at such applicable Exercise
Price, and (b) the denominator of which will be the number of shares of Common
Stock outstanding (or so deemed) immediately after the
3
<PAGE>
Common Stock proposed to be issued or sold is issued or sold; provided that such
fraction will in no event be greater than one (1). For purposes of this Section
3(b), the Shares, the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, the Compensatory Shares, and the Lease Financing
Shares (to the extent issued or subject to outstanding options) will be deemed
to be outstanding on the date hereof.
For the purpose of making any adjustment in the Exercise Price as
provided above, the consideration received by the Company for any issuance or
sale of Common Stock will be computed:
(A) to the extent it consists of cash, as the amount of
cash received by the Company before deduction of any offering expenses payable
by the Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Common Stock is issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Common Stock.
If the Company (a) grants any rights or options (other than rights or
options issued in connection with the Compensatory Shares and the Lease
Financing Shares) to subscribe for, purchase, or otherwise acquire shares of
Common Stock, or (b) issues or sells any security convertible into shares of
Common Stock, then, in each case, the price per share of Common Stock issuable
on the exercise of the rights or options or the conversion of the securities
will be determined by dividing the total amount, if any, received or receivable
by the Company as consideration for the granting of the rights or options or the
issuance or sale of the convertible securities, plus the minimum aggregate
amount of additional consideration payable to the Company on exercise or
conversion of the securities, by the maximum number of shares of Common Stock
issuable on the exercise of conversion. Such granting or issuance or sale will
be considered to be an issuance or sale for cash of the maximum number of shares
of Common Stock issuable on exercise or conversion at the price per share
determined under this subsection, and the Exercise Price for the Shares will be
adjusted as above provided to reflect (on the basis of that determination) the
issuance or sale. No further adjustment of the Exercise Price for the Shares
will be made as a result of the actual issuance of shares of Common Stock on the
exercise of any such rights or options or the conversion of any such convertible
securities, except as set forth below.
Upon the redemption or repurchase of any such securities or the
expiration or termination of the right to convert into, exchange for, or
exercise with respect to, Common Stock, the Exercise Price for the Shares will
be readjusted to such price as would have been obtained had the adjustment made
upon their issuance been made upon the basis of the issuance of only the number
of such securities as were actually converted into, exchanged for, or exercised
with respect to, Common
4
<PAGE>
Stock. If the purchase price or conversion or exchange rate provided for in any
such security changes at any time, then, upon such change becoming effective,
the Exercise Price then in effect will be readjusted forthwith to such price as
would have been obtained had the adjustment made upon the issuance of such
securities been made upon the basis of (a) the issuance of only the number of
shares of Common Stock theretofore actually delivered upon the conversion,
exchange or exercise of such securities, and the total consideration received
therefor, and (b) the granting or issuance, at the time of such change, of any
such securities then still outstanding for the consideration, if any, received
by the Company therefor and to be received on the basis of such changed price or
rate.
(c) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock, or Series A Preferred Stock
(other than a subdivision, combination or merger or sale of assets transaction
provided for elsewhere in this Section D), provision shall be made so that the
Holder of this Warrant will thereafter be entitled to receive upon exercise of
this Warrant the number of shares of stock or other securities or property of
the Company or otherwise, to which a Holder of Common Stock 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 3 with
respect to the rights of the Holder of this Warrant after the recapitalization
to the end that the provisions of this Section 3 (including adjustment of the
Exercise Price then in effect and the number of shares issuable upon exercise of
this Warrant) shall be applicable after that event in as nearly an equivalent
manner as may be practicable.
(d) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Exercise Price pursuant to this Section 3, the
Company at its expense promptly will compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company,
upon the written request at any time of the Holder, will furnish or cause to be
furnished to Holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Exercise Price for the Shares at the time in effect, and
(iii) the number of shares of Common Stock which at the time would be received
upon the exercise of this Warrant by the Holder.
(e) Reservation of Stock Issuable Upon Exercise. The Company at all
-------------------------------------------
times will reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as from time to time will be
sufficient to effect the exercise of all then exercisable Shares; and if at any
time the number of authorized but unissued shares of Common Stock is not
sufficient to effect the exercise of all then unexercised Shares, in addition to
such other remedies as may be available to Holder for such failure, the Company
will take such corporate action as, in the opinion of its counsel, may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as will be sufficient for such purpose.
(f) Notices. Upon any adjustment of the Exercise Price and any
-------
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with
5
<PAGE>
Section 3 hereof, then, and in each such case, the Company, within thirty (30)
days thereafter, shall give written notice thereof to the Holder at the address
of such Holder as shown on the books of the Company which notice shall state the
Exercise Price as adjusted and, if applicable, the increased or decreased number
of Shares purchasable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation of each. Any written notice by the
Company required or permitted hereunder shall be given by hand delivery or first
class mail, postage prepaid, addressed to the Holder at the address shown on the
books of the Company for the Holder.
4. Registration Rights. The Company hereby covenants and agrees as
-------------------
follows:
(a) Definitions. As used in this Section 4, the following terms shall
-----------
have the following respective meanings:
(i) "Public Offering" means any registered offering of the
Company's securities solely for cash, other than a registration (i) on Form S-8
or any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities, or (ii) with respect to an employee benefit plan, or
(iii) solely in connection with a Rule 145 transaction under the 1933 Act.
"Initial Public Offering" means the Company's first Public Offering.
(ii) 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 1933 Act, and the
declaration or ordering of the effectiveness of such registration statement or
document by the SEC.
(iii) The term "Registrable Securities" means: (i) the Shares,
(ii) the Common Stock issued or issuable upon conversion of the Series A
Preferred Stock or the Common Stock Warrants dated as of January 17, 1997; and
(iii) any Common Stock of the Company issued (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued) by way of a
stock split, stock dividend, recapitalization, merger or other distribution with
respect to, or in exchange for, or in replacement of, such Preferred Stock or
Common Stock, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which its registration rights are not assigned.
(b) Piggy-back Registration Rights.
------------------------------
(i) Piggy-back Rights. If (but without any obligation to do
-----------------
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than Holder) any of its
securities in connection with a Public Offering, the Company shall promptly give
Holder written notice of such registration, at least 30 days prior to the filing
of any registration statement under the Securities Act of 1933, as amended
(hereinafter, the "1933 Act"), together with a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under applicable
state securities laws. Upon the written request of Holder given within 20 days
after delivery of such written notice by the Company, the Company shall, subject
6
<PAGE>
to the provisions of Section 4(b)(ii) below, use its best efforts to cause to be
registered under the 1933 Act all of the Shares that Holder has requested to be
registered. If Holder decides not to include all of its Shares in any
registration statement thereafter filed by the Company, Holder shall
nevertheless continue to have the right to include any of its Shares in any
subsequent registration statement or statements as may be filed by the Company
with respect to offerings of its securities, all upon the terms and conditions
set forth herein.
(ii) Underwriting Requirements in Piggy-back Registration. If
----------------------------------------------------
the registration statement under which the Company gives notice under this
Section 4(b) is for an underwritten offering, the Company shall so advise
Holder. The right of Holder to registration pursuant to Section 4(b)(i) above
shall be conditioned upon Holder's participation in such underwriting and the
inclusion of Holder's Shares in the underwriting to the extent provided herein.
Holders of Registrable Securities proposing to distribute their securities
through such underwriting (each, a "Participating Holder") shall (together with
the Company and any other holders of Company securities distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for underwriting by
the Company. Notwithstanding any other provision of this Section 4(b), if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude some or all Shares from such registration and
underwriting. Further, notwithstanding anything to the contrary herein, no
reduction shall be made with respect to securities offered by the Company for
its own account under this Section 4(b). The Company shall so advise all persons
requesting registration, and the number of shares of securities that may be
included in the registration and underwriting shall be allocated in the
following manner. The number of shares that may be included in the registration
and underwriting shall be allocated (i) first to the Company; (ii) second to the
Participating Holders, in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Participating Holders;
and (iii) third, to any other shareholders of the Company (other than
Participating Holders) on a pro rata basis. In no event shall the amount of
securities of the selling Participating Holders included in the registration be
reduced below twenty-five percent (25%) of the total amount of securities
included in such registration, unless such offering is the Initial Public
Offering and such registration does not include shares of any other selling
shareholders, in which event any or all of the Registrable Securities of the
Holders may be excluded in accordance with the immediately preceding sentence.
In no event will shares of any other selling shareholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than a majority of
the Registrable Securities proposed to be sold in the offering. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
5. Reports Under Securities Exchange Act of 1934 as amended (hereinafter
---------------------------------------------------------------------
"1934 Act"). With a view of making available to Holder the benefits of Rule 144
- -----------
promulgated under the 1933 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, the Company agrees to:
7
<PAGE>
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in SEC Rule 144, at all
times after 90 days following the effective date of the registration statement
filed by the Company in connection with its Initial Public Offering;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable Holder
to utilize Form S-3 for the sale of the Shares, such action to be taken as soon
as practicable after the end of the fiscal year in which the registration of the
Company's Initial Public Offering is declared effective;
(c) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act; and
(d) furnish to Holder, so long as Holder owns any Shares, 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 90 days after the
effective date of the registration statement filed by the Company in connection
with its Initial Public Offering), the 1933 Act and the 1934 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 or any state securities
authorities which permits the selling of any such securities without
registration or pursuant to such form.
6. Information Rights.
------------------
(a) As long as Holder holds the Shares, the Company will deliver it
the following information and reports:
(i) As soon as practicable after the end of each fiscal year
of the Company, and in any event within 90 days thereafter, an audited balance
sheet of the Company as of the end of such year and audited statements of
income, shareholders' equity and changes in statement of cash flow for such
year, which year end financial reports will be in reasonable detail and will be
accompanied by a report and opinion thereon of independent public accountants of
nationally recognized standing selected by the Company.
(ii) As soon as practicable after the end of each fiscal
quarter, and in any event within 45 days thereafter, balance sheets of the
Company and its subsidiaries, if any, as of the end of such quarter, and
statements of income and cash flow for each quarter and for the current fiscal
year to date, including comparisons to that fiscal year's Annual Plan of results
for the quarter, and year-to-date and to the prior year comparable period,
prepared in accordance with generally accepted accounting principles, with the
exception that no notes need be attached to such statements and year-end audit
adjustments need not be made.
8
<PAGE>
(b) Holder agrees to, and to use its best efforts to insure that its
authorized representatives, keep confidential the information provided to it
pursuant to Section 6(a) above and any other information furnished to it which
the Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Holder may disclose
such proprietary or confidential information to any partner, subsidiary or
parent of such Holder for the purpose of evaluating its investing in the Company
as long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 6.
7. Restrictions on Transfer.
------------------------
(a) Holder agrees not to make any disposition of all or any portion
of the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 7. If reasonably requested by the
Company, Holder shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the 1933 Act. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of the Shares or rights to
acquire Shares 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
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
8. Market Standoff Agreement. Holder agrees, in connection with the
-------------------------
Company's Initial Public Offering that, 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, grant any option for the purchase of, or
otherwise dispose of any Common Stock of the Company (other than those Common
Stock shares 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 underwriters; provided that such covenants shall apply only if
each officer and director of the Company who owns at least 1% of the Common
Stock of the Company (on a fully diluted basis) also agrees to such
restrictions. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the
9
<PAGE>
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.
9. Legends.
-------
(a) All certificates evidencing the Shares upon exercise of this
Warrant, will bear the following legends:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
HAVE BEEN TAKEN BY THE ISSUEE FOR INVESTMENT PURPOSES. SAID
SHARES MAY NOT BE SOLD OR TRANSFERRED UNLESS (A) THEY HAVE BEEN
REGISTERED UNDER SAID ACT, (B) THE TRANSFER AGENT (OR THE
COMPANY IF THEN ACTING AS ITS OWN TRANSFER AGENT) IS PRESENTED
WITH EITHER A WRITTEN OPINION SATISFACTORY TO COUNSEL FOR THE
COMPANY OR A "NO-ACTION" OR INTERPRETIVE LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH
SALE OR TRANSFER, (C) THEY ARE SOLD IN COMPLIANCE WITH RULE 144
OR RULE 144A UNDER THE ACT, OR (D) OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY IS PRESENTED TO THE COMPANY TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS AS SET FORTH IN WARRANT NO. ______ DATED
NOVEMBER ___, 1997, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(b) The certificates evidencing the Shares will also bear any legend
required by the Commissioner of Corporations of the State of California or
required pursuant to any state, local or foreign law governing such securities.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of Holder thereof if Holder shall have obtained an
opinion of counsel (which counsel may be counsel to the Company) reasonably
acceptable to the Company to the effect that the securities proposed to be
disposed of may lawfully be so disposed of without registration, qualification
or legend. Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
10
<PAGE>
(d) Subject to this Section 9, the Company may instruct its transfer
agent not to register the transfer of all or a part of this Warrant, or any of
the Shares, unless one of the conditions specified in the above legend is
satisfied.
10. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, 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.
11. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is not inconsistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does 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. This Warrant
constitutes a legal, valid and binding agreement of the Company, enforceable in
accordance with its respective terms.
(b) 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, 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 shall be made by the time required thereby.
(c) 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.
(d) Other Commitments to Register Securities. Except as set forth
----------------------------------------
herein and in the Investor Rights Agreement dated as of January 17, 1997, the
Company is not, pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the Securities Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, in reliance upon Section 4(2) thereof, and (ii)
the qualification requirements of the applicable state securities laws.
11
<PAGE>
(f) Compliance with Rule 144. At the written request of Holder, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) 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.
12. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) This Warrant is being acquired for its own account, for
investment 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
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
(b) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
13. Rights of Stockholders. Nothing contained herein be construed to
----------------------
confer upon Holder any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12
<PAGE>
14. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as
of (i) 5:00 p.m., California local time, on November ___, 2004; (ii) three (3)
years after the Company's Initial Public Offering; or (iii) a consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger with another corporation in which the Company's
stockholders immediately preceding such consolidation or merger own at least 50%
of the voting securities of the successor entity following such consolidation or
merger and which does not result in any reclassification of the Shares issuable
upon exercise of this Warrant); or (iv) a sale of all or substantially all of
the assets of the Company; provided, however, that Section 4-9 shall survive the
expiration of this Warrant and shall terminate as set forth in subsection (b)
below.
(b) Termination of the Company's Obligations.
----------------------------------------
(i) Notwithstanding any contrary provision of Section 4, the
Company shall not be required to effect any registrations under the 1933 Act or
under any state securities laws on behalf of Holder if the Company's Common
Stock is publicly traded on a national exchange (including NASDAQ) and in the
opinion of counsel for the Company, the offering or transfer by Holder in the
manner proposed (including, without limitation, the number of shares proposed to
be offered or transferred, the time of sale, and the method of offering or
transfer) is exempt from the registration requirements of the 1933 Act and the
securities laws of applicable states and the Company consents to such transfer,
if required. Sections 5 and 7 shall also terminate upon the date that the Shares
are publicly traded as set forth above.
(ii) The Company's obligations to deliver reports and other
information under Section 6 will terminate upon the closing of a sale of shares
of the Company's capital stock pursuant to the Company's Initial Public
Offering.
(iii) Section 8 shall terminate 180 days after the Company's
Initial Public Offering.
15. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the
jurisdiction and venue of those courts.
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are
13
<PAGE>
not assignable or transferable by Company or Holder, except for such permitted
transfers to successors in interest and in accordance with Section 7 herein, and
any attempt to assign or transfer the rights hereunder shall be void and of no
further effect. Upon a sale or transfer of the Shares pursuant to Section 7
herein, the rights granted to Holder in Sections 4, 5, and 6 herein shall
immediately terminate with respect to the transferred Shares unless Holder
obtains the written consent of Company to transfer those rights, which consent
shall not be unreasonably withheld.
(d) This Warrant 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.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this _______ day of November, 1997.
AGORA DIGITAL, INC.
By: _______________________________
Title: Chief Financial Officer
----------------------------
Acknowledged and Accepted:
COMDISCO, INC.
By:_________________________________
Title:______________________________
15
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: AGORA DIGITAL CORPORATION
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 1(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Common Stock pursuant to the terms of this Warrant.
(Initial here if the undersigned elects this alternative). ___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Common Stock of Agora Digital
Corporation pursuant to the terms of this Warrant, and tenders herewith payment
of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(Name)
___________________________________
___________________________________
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 12 of the attached Warrant are true and correct as of the date
hereof. In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
_____________________________________
(Signature and Date)
Title:_______________________________
<PAGE>
EXHIBIT A-1
-----------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : COMDISCO, INC.
COMPANY : AGORA DIGITAL CORPORATION
SECURITY : COMMON STOCK ISSUED UPON EXERCISE OF THE COMMON STOCK PURCHASE
WARRANT ISSUED ON NOVEMBER _____, 1997
AMOUNT : _______________ SHARES
DATE : ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
<PAGE>
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold 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, and in some circumstances two years, after the
party has held, 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, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
-------- -------
own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
___________________________________
(Signature)
By:________________________________
Title:_____________________________
Date:_______________________, 19___
2
<PAGE>
EXHIBIT 10.18
SERIES B PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES B PREFERRED STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES"), WILL BE
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
OF SERIES B PREFERRED STOCK ISSUABLE HEREUNDER OR ANY SHARES INTO WHICH SUCH
SHARES ARE CONVERTIBLE, (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
No. 5
Void after March 11, 2008
2BRIDGE SOFTWARE
WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED STOCK
____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from 2Bridge Software, a California
corporation (the "Company"), shares of the Company's fully paid and
nonassessable Series B Preferred Stock (the "Shares"), in the amounts and at the
price per share set forth in Section 1 below (as adjusted pursuant to Section 4
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
This Warrant is subject to the following terms and conditions:
1. Number and Price of Shares.
--------------------------
(a) The Holder shall have the right to purchase a number of Shares
equal to eighty-one thousand two hundred fifty dollars ($81,250), or 6.5% of the
$1,250,000 principal amount of the Note by and between the Company and the
Holder, divided by the Exercise Price, as defined in Section 1(b) below.
(b) The exercise price per Share ("Exercise Price") shall be equal
to: (i) the price at which the Company sells the Shares in an equity financing
completed on or before July 11, 1998, or (ii) if such a financing is not
completed by July 11, 1998, the average of the price at which the Company sells
the Shares and the original issue price of the Series A Preferred Stock of
$.8718.
<PAGE>
(c) An example of this formula is as follows: if the Company
completes a Series B Preferred Stock financing at $1.75 per share, the number
and Exercise Price of the Shares would be:
(i) $81,250/ $1.75 = 46,428 Shares, exercisable at $1.75 per
share, if the financing is completed within 120 days of the date of this
Warrant; or
(ii) $81,250/ ((1.75+ .8718)/2) = 81,250/ $1.3109 = 61,980
Shares, exercisable at $1.3109 per share, if the financing is completed more
than 120 days after the date of this Warrant.
(d) In the event the Company does not complete a round of Preferred
Stock financing within 180 days of the date of this Warrant, this Warrant shall
be exercisable for shares of the Company's Series A Preferred Stock, and all
references to the Shares and the Series B Preferred Stock herein shall mean the
Series A Preferred Stock of the Company. The Exercise Price shall be $.8718 for
any Series A Preferred Stock issued hereunder.
2. Method of Exercise; Payment.
---------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant
-------------
may be exercised by the Holder, in whole or in part, from time to time by: (i)
the surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
---------
of the Company; (ii) the execution of a Series B Preferred Stock Purchase
Agreement and all exhibits thereto, including without limitation an Amended and
Restated Investor Rights Agreement, Voting Agreement, and Co-Sale Agreement
(collectively, the "Series B Transaction Documents"); and (iii) by the payment
to the Company of an amount equal to the Exercise Price multiplied by the number
of the Shares being purchased, which amount may be paid, at the election of the
Holder, by wire transfer or certified check payable to the order of the Company.
The person or persons in whose name(s) any certificate(s) representing Shares
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant
------------------
to Section 2(a) hereof, the Holder may elect to receive a number of Shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant and the fully executed Series B
Transaction Documents at the principal office of the Company, together with the
Notice of Exercise in which alternative No. 1 is initiated by the Holder. In
such event, the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
2
<PAGE>
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Series B
Preferred Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. For purposes of this Section 2, the fair
-----------------
market value of the Company's Series B Preferred Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
- -------
market value multiplied by the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible;
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, the fair market value of the Series B Preferred Stock
per share shall be the price per share which the Company could obtain from a
willing buyer for shares sold by the Company from authorized but unissued shares
of Series B Preferred Stock as such price shall be agreed by the parties hereto,
or if agreement cannot be reached within five (5) business days of delivery of
the notice pursuant to Section 2(b) hereof, as shall be determined by a panel of
appraisers. One appraiser shall be selected by the Holder, one appraiser shall
be chosen by the Company and the third appraiser shall be chosen by the first
two appraisers. If the appraisers cannot reach agreement as to the fair market
value on the foregoing basis on or before the thirtieth (30th) day following the
Holder's notice of election pursuant to Section 2(b), then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall be the fair market value of a share of Series B Preferred Stock. In
the event that the Holder fails to choose an appraiser or the three appraisers
fail to deliver an appraisal on or before the thirtieth (30th) day after such
notice, the appraisal of the appraiser selected by the Company shall control and
shall be fair market value for the purposes of this Warrant. The cost of the
appraiser selected by each party shall be borne by that party and the cost of
the third appraiser shall be borne one-half (1/2) by each party. Appraisers
selected under this Section 2(c) must be unaffiliated with the Holder and the
Company and must have reasonable professional qualifications for the appraisal.
(d) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
3
<PAGE>
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
-----------
upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company shall
at all times have authorized and reserved for issuance sufficient shares of its
Series B Preferred Stock and Common Stock to provide for the exercise of the
rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
kind of Shares purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Series B Preferred
Stock, or shall issue a stock dividend on its outstanding shares of Series B
Preferred Stock, the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or to the issuance of such stock dividend
shall be proportionately increased, and the Exercise Price shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Series B Preferred Stock, the number of Shares
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) Price Adjustments. If at any time the Company issues or sells
-----------------
any shares of its Preferred Stock for a consideration per share less than the
then effective Exercise Price, then and in each such case, the Exercise Price
for the Shares will be reduced to a price (calculated to the nearest cent)
determined by multiplying such applicable Exercise Price by a fraction (a) the
numerator of which will be the number of shares of Preferred Stock outstanding
(or so deemed) immediately prior to such issuance or sale plus the number of
shares of Series B Preferred Stock which the aggregate consideration received by
the Company for such issuance or sale would purchase at such applicable Exercise
Price, and (b) the denominator of which will be the number of shares of
Preferred Stock outstanding (or so deemed) immediately after the Preferred Stock
proposed to be issued or sold is issued or sold; provided that such fraction
will in no event be greater than one (1). For purposes of this Section 4(b), the
Shares will be deemed to be outstanding on the date hereof.
4
<PAGE>
For the purpose of making any adjustment in the Exercise Price as
provided above, the consideration received by the Company for any issuance or
sale of Preferred Stock will be computed:
(A) to the extent it consists of cash, as the amount of
cash received by the Company before deduction of any offering expenses payable
by the Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Preferred Stock is issued or sold together with
other stock or securities or other assets of the Company for a consideration
which covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Preferred Stock.
No adjustment to the Exercise Price pursuant to this Section 4(b)
shall affect the number of Warrants to be issued pursuant to Section 1(a)
herein.
(c) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Series B Preferred Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4), provision shall be made so that the Holder of this
Warrant will thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company to
which a Holder of Series B Preferred Stock 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 Holder of this Warrant after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Exercise Price then in
effect and the number of shares issuable upon exercise of this Warrant) shall be
applicable after that event in as nearly an equivalent manner as may be
practicable.
(d) Merger. 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, other than
as provided for in Section 10(a) herein (a "Merger Event"), then as a part of
such Merger Event, lawful provision shall be made so that the Holder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of stock or other securities of the successor corporation resulting from
such Merger Event, equivalent in value to that which would have been issuable if
Holder 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 with respect to the rights and interest of the Holder after the Merger
5
<PAGE>
Event to the end that the provisions of this Warrant (including adjustments of
the Exercise Price and number of Shares purchasable) shall be applicable to the
greatest extent possible.
(e) Notices. Upon any adjustment of the Exercise Price and any
-------
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with Section 3 hereof, then, and in each such case,
the Company, within thirty (30) days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each. Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5. Restrictions on Transfer.
------------------------
(a) Holder agrees not to make any disposition of all or any portion
of the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 5. If reasonably requested by the
Company, Holder shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the 1933 Act. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of the Shares or rights to
acquire Shares 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
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(b) Notwithstanding the above, the Shares shall also be subject to
all restrictions on transfer set forth in the Series B Transaction Documents,
including without limitation a 180 day market standoff period upon the Company's
initial public offering.
6
<PAGE>
6. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, 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.
7. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is consistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does 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. This Warrant
constitutes a legal, valid and binding agreement of the Company, enforceable in
accordance with its respective terms.
(b) 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, 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 shall be made by the time required thereby.
(c) Holder's Additional Rights. The Series B Preferred Stock shall
--------------------------
have anti-dilution rights, registration rights, and information rights
substantially similar to those rights given to holders of the Company's Series A
Preferred Stock, which rights shall be set forth in the Series B Transaction
Documents.
(d) Other Commitments to Register Securities. Except as set forth
----------------------------------------
herein and in the Investor Rights Agreement dated as of January 17, 1997 and the
Warrants issued to Holder as of November __, 1997 and the date hereof, the
Company is not, pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the Securities Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, and (ii) the qualification requirements of the
applicable state securities laws.
(f) Compliance with Rule 144. At the written request of Holder, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) days after receipt of such
request, a written statement confirming the Company's
7
<PAGE>
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.
(g) The Company agrees to take all actions necessary to issue the
Series A Preferred Stock described in Section 1(d) herein if the Company has not
completed a Preferred Stock financing within 180 days of the date of this
Warrant, including without limitation obtaining all shareholder and director
consents, amending the Company's Articles of Incorporation, and amending any
Series A Preferred Stock transaction documents required to effect such issuance
to Holder.
8. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) Holder understands that no Series B Preferred Stock has been
authorized or issued as of the date hereof, and the Company can make no
assurances that such security will ever exist.
(b) This Warrant is being acquired for Holder's own account, for
investment 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
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
(c) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(d) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(e) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
9. Rights of Stockholders. Nothing contained herein shall confer upon
----------------------
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock,
8
<PAGE>
change of par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
10. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as
of the earlier of:
(i) 5:00 p.m., California local time, on March 11, 2008;
(ii) five (5) years after the Company's initial public offering
under the Securities Act of 1933, as amended;
(iii) the automatic conversion of the Series B Preferred Stock
of the Company into Common Stock of the Company, according to the terms of the
Series B Transaction Documents, provided that Company provides Holder with at
least thirty (30) days notice of such automatic conversion and that it gives
Holder an option in Holder's sole discretion to either exercise the Warrant or
cause Company to replace the Warrant with a Warrant to Purchase Common Stock on
substantially the same terms as those set forth herein;
(iv) a consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger with another
corporation in which the Company's stockholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the
successor entity following such consolidation or merger and which does not
result in any reclassification of the Shares issuable upon exercise of this
Warrant); or
(v) a sale of all or substantially all of the assets of the
Company.
11. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the jurisdiction
and venue of those courts. Notwithstanding the foregoing, any claim or dispute
involving questions of usury law as it applies to the Warrant shall be governed
by the laws of Illinois.
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
9
<PAGE>
(c) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are not assignable or transferable by Company
or Holder, except for such permitted transfers to successors in interest and in
accordance with Section 5 herein, and any attempt to assign or transfer the
rights hereunder shall be void and of no further effect.
(d) This Warrant and the other documents delivered pursuant hereto,
including without limitation the Series B Transaction Documents, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 11th day of March, 1998.
2BRIDGE SOFTWARE
By: /s/ Ronald Parks
-----------------------------
Title: CFO
--------------------------
Acknowledged and Accepted:
COMDISCO, INC.
By: /s/ James P. Labe
---------------------------------
JAMES P. LABE
Title: PRESIDENT
------------------------------
COMDISCO VENTURES DIVISION
10
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: 2BRIDGE SOFTWARE
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 2(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Series B Preferred Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative). ___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Series B Preferred Stock of
2Bridge Software pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Series B Preferred Stock in the name of the undersigned or in such other name as
is specified below:
_________________
(Name)
_________________
_________________
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Series B Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
-----------
___________________________
(Signature and Date)
Title:_____________________
<PAGE>
EXHIBIT A-l
-----------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : COMDISCO, INC.
COMPANY : 2BRIDGE SOFTWARE
SECURITY : SERIES B PREFERRED STOCK ISSUED UPON EXERCISE OF THE SERIES
B PREFERRED STOCK PURCHASE WARRANT ISSUED ON MARCH _____,
1998
AMOUNT : _______________ SHARES
DATE : ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
<PAGE>
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold 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, and in some circumstances two years, after the
party has held, 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, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
-------- -------
own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
___________________________________
(Signature)
By:________________________________
Title:_____________________________
Date:_______________________, 19___
2
<PAGE>
EXHIBIT 10.19
SERIES B PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES B PREFERRED STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES"), WILL BE
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
OF SERIES B PREFERRED STOCK ISSUABLE HEREUNDER OR ANY SHARES INTO WHICH SUCH
SHARES ARE CONVERTIBLE, (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
No. 6
Void after March 11, 2008
2BRIDGE SOFTWARE
WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED STOCK
_____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from 2Bridge Software, a California
corporation (the "Company"), shares of the Company's fully paid and
nonassessable Series B Preferred Stock (the "Shares"), in the amounts and at the
price per share set forth in Section 1 below (as adjusted pursuant to Section 4
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
This Warrant is subject to the following terms and conditions:
1. Number and Price of Shares.
--------------------------
(a) The Holder shall have the right to purchase a number of Shares
equal to sixty-two thousand five hundred dollars ($62,500), or 5% of the
$1,250,000 principal amount of the Note by and between the Company and the
Holder, divided by the Exercise Price, as defined in Section 1(b) below.
(b) The exercise price per Share ("Exercise Price") shall be equal
to: (i) the price at which the Company sells the Shares in an equity financing
completed on or before July 11, 1998, or (ii) if such a financing is not
completed by July 11, 1998, the average of the price at which the Company sells
the Shares and the original issue price of the Series A Preferred Stock of
$.8718.
<PAGE>
(c) An example of this formula is as follows: if the Company
completes a Series B Preferred Stock financing at $1.75 per share, the number
and Exercise Price of the Shares would be:
(i) $62,500/ $1.75 = 35,714 Shares, exercisable at $1.75 per
share, if the financing is completed within 120 days of the date of this
Warrant; or
(ii) $62,500/ ((1.75+ .8718)/2) = 62,500/ $1.3109 = 47,677
Shares, exercisable at $1.3109 per share, if the financing is completed more
than 120 days after the date of this Warrant.
(d) In the event the Company does not complete a round of Preferred
Stock financing within 180 days of the date of this Warrant, this Warrant shall
be exercisable for shares of the Company's Series A Preferred Stock, and all
references to the Shares and the Series B Preferred Stock herein shall mean the
Series A Preferred Stock of the Company. The Exercise Price shall be $.8718 for
any Series A Preferred Stock issued hereunder.
2. Method of Exercise; Payment.
---------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant
-------------
may be exercised by the Holder, in whole or in part, from time to time by: (i)
the surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
---------
of the Company; (ii) the execution of a Series B Preferred Stock Purchase
Agreement and all exhibits thereto, including without limitation an Amended and
Restated Investor Rights Agreement, Voting Agreement, and Co-Sale Agreement
(collectively, the "Series B Transaction Documents"); and (iii) by the payment
to the Company of an amount equal to the Exercise Price multiplied by the number
of the Shares being purchased, which amount may be paid, at the election of the
Holder, by wire transfer or certified check payable to the order of the Company.
The person or persons in whose name(s) any certificate(s) representing Shares
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant
------------------
to Section 2(a) hereof, the Holder may elect to receive a number of Shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant and the fully executed Series B
Transaction Documents at the principal office of the Company, together with the
Notice of Exercise in which alternative No. 1 is initiated by the Holder. In
such event, the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
2
<PAGE>
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Series B
Preferred Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. For purposes of this Section 2, the fair
-----------------
market value of the Company's Series B Preferred Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
- -------
market value multiplied by the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible;
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, the fair market value of the Series B Preferred Stock
per share shall be the price per share which the Company could obtain from a
willing buyer for shares sold by the Company from authorized but unissued shares
of Series B Preferred Stock as such price shall be agreed by the parties hereto,
or if agreement cannot be reached within five (5) business days of delivery of
the notice pursuant to Section 2(b) hereof, as shall be determined by a panel of
appraisers. One appraiser shall be selected by the Holder, one appraiser shall
be chosen by the Company and the third appraiser shall be chosen by the first
two appraisers. If the appraisers cannot reach agreement as to the fair market
value on the foregoing basis on or before the thirtieth (30th) day following the
Holder's notice of election pursuant to Section 2(b), then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall be the fair market value of a share of Series B Preferred Stock. In
the event that the Holder fails to choose an appraiser or the three appraisers
fail to deliver an appraisal on or before the thirtieth (30th) day after such
notice, the appraisal of the appraiser selected by the Company shall control and
shall be fair market value for the purposes of this Warrant. The cost of the
appraiser selected by each party shall be borne by that party and the cost of
the third appraiser shall be borne one-half (1/2) by each party. Appraisers
selected under this Section 2(c) must be unaffiliated with the Holder and the
Company and must have reasonable professional qualifications for the appraisal.
(d) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
3
<PAGE>
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
-----------
upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period
within which the rights represented by this Warrant may be exercised, the
Company shall at all times have authorized and reserved for issuance sufficient
shares of its Series B Preferred Stock and Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
kind of Shares purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Series B Preferred
Stock, or shall issue a stock dividend on its outstanding shares of Series B
Preferred Stock, the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or to the issuance of such stock dividend
shall be proportionately increased, and the Exercise Price shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Series B Preferred Stock, the number of Shares
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) Price Adjustments. If at any time the Company issues or sells any
-----------------
shares of its Preferred Stock for a consideration per share less than the then
effective Exercise Price, then and in each such case, the Exercise Price for the
Shares will be reduced to a price (calculated to the nearest cent) determined by
multiplying such applicable Exercise Price by a fraction (a) the numerator of
which will be the number of shares of Preferred Stock outstanding (or so deemed)
immediately prior to such issuance or sale plus the number of shares of Series B
Preferred Stock which the aggregate consideration received by the Company for
such issuance or sale would purchase at such applicable Exercise Price, and (b)
the denominator of which will be the number of shares of Preferred Stock
outstanding (or so deemed) immediately after the Preferred Stock proposed to be
issued or sold is issued or sold; provided that such fraction will in no event
be greater than one (1). For purposes of this Section 4(b), the Shares will be
deemed to be outstanding on the date hereof.
4
<PAGE>
For the purpose of making any adjustment in the Exercise Price as
provided above, the consideration received by the Company for any issuance or
sale of Preferred Stock will be computed:
(A) to the extent it consists of cash, as the amount of
cash received by the Company before deduction of any offering expenses payable
by the Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Preferred Stock is issued or sold together with
other stock or securities or other assets of the Company for a consideration
which covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Preferred Stock.
No adjustment to the Exercise Price pursuant to this Section 4(b)
shall affect the number of Warrants to be issued pursuant to Section 1(a)
herein.
(c) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Series B Preferred Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4), provision shall be made so that the Holder of this
Warrant will thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company to
which a Holder of Series B Preferred Stock 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 Holder of this Warrant after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Exercise Price then in
effect and the number of shares issuable upon exercise of this Warrant) shall be
applicable after that event in as nearly an equivalent manner as may be
practicable.
(d) Merger. 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, other than as provided for in Section
10(a) herein (a "Merger Event"), then as a part of such Merger Event, lawful
provision shall be made so that the Holder shall thereafter be entitled to
receive, upon exercise of the Warrant, the number of shares of stock or other
securities of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been issuable if Holder 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
with respect to the rights and interest of the Holder after the Merger
5
<PAGE>
Event to the end that the provisions of this Warrant (including adjustments of
the Exercise Price and number of Shares purchasable) shall be applicable to the
greatest extent possible.
(e) Notices. Upon any adjustment of the Exercise Price and any
-------
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with Section 3 hereof, then, and in each such case,
the Company, within thirty (30) days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each. Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5. Restrictions on Transfer.
------------------------
(a) Holder agrees not to make any disposition of all or any portion
of the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 5. If reasonably requested by the
Company, Holder shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the 1933 Act. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of the Shares or rights to
acquire Shares 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
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(b) Notwithstanding the above, the Shares shall also be subject to
all restrictions on transfer set forth in the Series B Transaction Documents,
including without limitation a 180 day market standoff period upon the Company's
initial public offering.
6
<PAGE>
6. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, 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.
7. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is consistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does 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. This Warrant
constitutes a legal, valid and binding agreement of the Company, enforceable in
accordance with its respective terms.
(b) 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, 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 shall be made by the time required thereby.
(c) Holder's Additional Rights. The Series B Preferred Stock shall
--------------------------
have anti-dilution rights, registration rights, and information rights
substantially similar to those rights given to holders of the Company's Series A
Preferred Stock, which rights shall be set forth in the Series B Transaction
Documents.
(d) Other Commitments to Register Securities. Except as set forth
----------------------------------------
herein and in the Investor Rights Agreement dated as of January 17, 1997 and the
Warrants issued to Holder as of November __, 1997 and the date hereof, the
Company is not, pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the Securities Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, and (ii) the qualification requirements of the
applicable state securities laws.
(f) Compliance with Rule 144. At the written request of Holder, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) days after receipt of such
request, a written statement confirming the Company's
7
<PAGE>
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.
(g) The Company agrees to take all actions necessary to issue the
Series A Preferred Stock described in Section 1(d) herein if the Company has not
completed a Preferred Stock financing within 180 days of the date of this
Warrant, including without limitation obtaining all shareholder and director
consents, amending the Company's Articles of Incorporation, and amending any
Series A Preferred Stock transaction documents required to effect such issuance
to Holder.
8. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) Holder understands that no Series B Preferred Stock has been
authorized or issued as of the date hereof, and the Company can make no
assurances that such security will ever exist.
(b) This Warrant is being acquired for Holder's own account, for
investment 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
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
(c) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(d) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(e) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
9. Rights of Stockholders. Nothing contained herein shall confer upon
----------------------
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock,
8
<PAGE>
change of par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
10. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as
of the earlier of:
(i) 5:00 p.m., California local time, on March 11, 2008;
(ii) five (5) years after the Company's initial public offering
under the Securities Act of 1933, as amended;
(iii) the automatic conversion of the Series B Preferred Stock
of the Company into Common Stock of the Company, according to the terms of the
Series B Transaction Documents, provided that Company provides Holder with at
least thirty (30) days notice of such automatic conversion and that it gives
Holder an option in Holder's sole discretion to either exercise the Warrant or
cause Company to replace the Warrant with a Warrant to Purchase Common Stock on
substantially the same terms as those set forth herein;
(iv) a consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger with another
corporation in which the Company's stockholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the
successor entity following such consolidation or merger and which does not
result in any reclassification of the Shares issuable upon exercise of this
Warrant); or
(v) a sale of all or substantially all of the assets of the
Company.
11. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the
jurisdiction and venue of those courts. Notwithstanding the foregoing, any
claim or dispute involving questions of usury law as it applies to the Warrant
shall be governed by the laws of Illinois.
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
9
<PAGE>
(c) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are not assignable or transferable by Company
or Holder, except for such permitted transfers to successors in interest and in
accordance with Section 5 herein, and any attempt to assign or transfer the
rights hereunder shall be void and of no further effect.
(d) This Warrant and the other documents delivered pursuant hereto,
including without limitation the Series B Transaction Documents, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 11th day of March, 1998.
2BRIDGE SOFTWARE
By: /s/ Ronald Parks
-------------------------------
Title: CFO
----------------------------
Acknowledged and Accepted:
COMDISCO, INC.
By: /s/ James P. Labe
------------------------------------------
JAMES P. LABE
Title: PRESIDENT
---------------------------------------
COMDISCO VENTURES DIVISION
10
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: 2BRIDGE SOFTWARE
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 2(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Series B Preferred Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative).
___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Series B Preferred Stock of
2Bridge Software pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Series B Preferred Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________________
(Name)
_______________________________________
_______________________________________
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Series B Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
-----------
_____________________________________
(Signature and Date)
Title:_______________________________
<PAGE>
EXHIBIT A-1
-----------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : COMDISCO, INC.
COMPANY : 2BRIDGE SOFTWARE
SECURITY : SERIES B PREFERRED STOCK ISSUED UPON EXERCISE OF THE SERIES
B PREFERRED STOCK PURCHASE WARRANT ISSUED ON MARCH _____,
1998
AMOUNT : _______________ SHARES
DATE : ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
<PAGE>
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold 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, and in some circumstances two years, after the
party has held, 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, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
-------- -------
own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
__________________________________
(Signature)
By: ______________________________
Title: ___________________________
Date: ______________________, 19__
2
<PAGE>
Exhibit 10.20
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: 2Bridge Software, A California Corporation
Number of Shares: 85,221 (subject to Section 1.7)
Class of Stock: Series B Preferred (subject to Section 1.7)
Initial Exercise Price: $1.4081 per share (subject to Section 1.7)
Issue Date: May 1, 1999
Expiration Date: May 1, 2006 (Subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and
for other good and valuable consideration, IMPERIAL BANCORP or its registered
assignee (together with its successors and assigns "Holder") is entitled to
purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares") of the corporation (together with its successors and
assigns, the "Company") at the initial exercise price per Share (the "Warrant
Price") all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth
of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
------------------
this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.5.
<PAGE>
1.3 Fair Market Value. If the Shares are traded regularly in a public
-----------------
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine the fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation, if
the valuation of such investment banking firm is greater than five (5%) percent
or more than that determined by the Board of Directors, then all fees and
expenses of such investment banking firm shall be paid by the Company. In all
other circumstances, such fees and expenses shall be paid by Holder.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.6 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.6.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
-----------
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.6.2. Assumption of Warrant. If upon the closing of any Acquisition
---------------------
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the Unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.
1.6.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
2
<PAGE>
1.7 Adjustment in Underlying Preferred Stock Price and Exercise Price. If
-----------------------------------------------------------------
on or before July 31, 1999, the Company sells and issues to any investors,
preferred stock with aggregate gross proceeds to the Company of at least
$6,000,000 (six million dollars), this Warrant shall concurrent with the
issuance of such shares of preferred stock automatically be adjusted to instead
be exercisable for shares of the same series and class and bearing the same
rights, preferences, and privileges, of such shares of stock, with the Warrant
Price hereunder adjusted to equal the per share purchase price of such stock,
and the number of such shares subject to this Warrant adjusted to equal (i) one
hundred twenty thousand dollars ($120,000)*, divided by (ii) such modified per
share Warrant Price.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
------------------------------------------
exchange, substitution, or other event that results in a change of the number
and/or class: of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The number of shares of common
----------------------------------
stock issuable upon conversion of the Shares issuable upon exercise of this
Warrant shall be subject to adjustment, from time to time, in the manner set
forth on Exhibit A, if attached, in the event of Diluting Issuances (as defined
on Exhibit A).
3
<PAGE>
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, 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 under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than the fair market value of the Shares as of the date
of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to effect any reclassification or recapitalization of common stock; (c) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (d) to offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (b) and (c) above; (2) in the case of the matters referred to in
(b) and (c) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such
4
<PAGE>
event); and (3) in the case of the matter referred to in (d) above, the same
notice as is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within one hundred fifty (150) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of. recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shall be subject to the registration rights set forth on
Exhibit B.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term: Notice of Expiration. This Warrant is exercisable, in whole or
--------------------------
in part, at any time and from time to time on or before the Expiration Date set
forth above.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder, if
5
<PAGE>
applicable). Unless the Company is filing financial information with the SEC
pursuant to the Securities Exchange Act of 1934, the Company shall have the
right to refuse to transfer any portion of this Warrant to any person who
directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, or sent by recognized overnight courier at such address as may have
been furnished to the Company or the Holder, as the case may be, in writing by
the Company or such Holder from time to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
2Bridge Software
By: /s/ Ronald Parks By:________________________________
-------------------------------
Name: Ronald Parks Name:______________________________
-----------------------------
Title: CFO Title:_____________________________
----------------------------
6
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ____________ shares of the
Common Stock of 2Bridge Software, A California corporation, pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised with
respect to ___________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
Chief Financial Officer
Controllers Department
Imperial Bancorp
P.O. Box 92991
Los Angeles, CA 90009
Or Registered Assignee
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
IMPERIAL BANCORP or Registered Assignee
_________________________________________
(Signature)
_____________________
(Date)
7
<PAGE>
EXHIBIT A
---------
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
Shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
8
<PAGE>
EXHIBIT B
---------
Registration Rights
-------------------
The Shares shall be deemed "registrable securities" or otherwise entitled
to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
Amended and Restated Investors' Rights Agreement dated May 18, 1998 among the
Company and the shareholders party thereto (holders of Series A and Series B
Preferred Stock)
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration thereunder without the
consent of Holder. By acceptance of the Warrant to which this Exhibit B is
attached, Holder shall not be deemed to be a party to the Agreement, but solely
entitled to the registration rights created thereby.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
9
<PAGE>
EXHIBIT 10.21
SERIES C PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES C PREFERRED STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES"), WILL BE
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
OF SERIES C PREFERRED STOCK ISSUABLE HEREUNDER OR ANY SHARES INTO WHICH SUCH
SHARES ARE CONVERTIBLE, (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
No. 7
Void after July 23, 2009
2BRIDGE SOFTWARE
WARRANT TO PURCHASE 58, 608 SHARES OF SERIES C PREFERRED STOCK
____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from 2Bridge Software, a California
corporation (the "Company"), shares of the Company's fully paid and
nonassessable Series C Preferred Stock (the "Shares"), in the amounts and at the
price per share set forth in Section 1 below (as adjusted pursuant to Section 4
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
This Warrant is subject to the following terms and conditions:
1. Number and Price of Shares.
--------------------------
(a) The Holder shall have the right to purchase 58,608 Shares, which
is equal to one hundred twenty-five thousand dollars ($125,000) divided by the
Exercise Price, as defined in Section 1(b) below.
(b) The exercise price per Share ("Exercise Price") shall be equal to
$2.1328 per Share.
<PAGE>
2. Method of Exercise; Payment.
---------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant
-------------
may be exercised by the Holder, in whole or in part, from time to time by: (i)
the surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
---------
of the Company; (ii) the execution of a Series C Preferred Stock Purchase
Agreement and all exhibits thereto, including without limitation an Amended and
Restated Investor Rights Agreement, Voting Agreement, and Co-Sale Agreement
(collectively, the "Series C Transaction Documents"); and (iii) by the
payment to the Company of an amount equal to the Exercise Price multiplied by
the number of the Shares being purchased, which amount may be paid, at the
election of the Holder, by wire transfer or certified check payable to the order
of the Company. The person or persons in whose name(s) any certificate(s)
representing Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant
------------------
to Section 2(a) hereof, the Holder may elect to receive a number of Shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant and the fully executed Series C
Transaction Documents at the principal office of the Company, together with the
Notice of Exercise in which alternative No. 1 is initiated by the Holder. In
such event, the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Series C
Preferred Stock.
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. For purposes of this Section 2, the fair
-----------------
market value of the Company's Series C Preferred Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western
2
<PAGE>
Edition of The Wall Street Journal for the ten trading days prior to the date of
-----------------------
determination of fair market value multiplied by the number of shares of Common
Stock into which each share of Series B Preferred Stock is convertible;
(ii) If the Company's Common Stock is not traded Over-The-Counter
or on an exchange, the fair market value of the Series C Preferred Stock per
share shall be the price per share which the Company could obtain from a willing
buyer for shares sold by the Company from authorized but unissued shares of
Series C Preferred Stock as such price shall be agreed by the parties hereto, or
if agreement cannot be reached within five (5) business days of delivery of the
notice pursuant to Section 2(b) hereof, as shall be determined by a panel of
appraisers. One appraiser shall be selected by the Holder, one appraiser shall
be chosen by the Company and the third appraiser shall be chosen by the first
two appraisers. If the appraisers cannot reach agreement as to the fair market
value on the foregoing basis on or before the thirtieth (30th) day following the
Holder's notice of election pursuant to Section 2(b), then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall be the fair market value of a share of Series C Preferred Stock. In
the event that the Holder fails to choose an appraiser or the three appraisers
fail to deliver an appraisal on or before the thirtieth (30th) day after such
notice, the appraisal of the appraiser selected by the Company shall control and
shall be fair market value for the purposes of this Warrant. The cost of the
appraiser selected by each party shall be borne by that party and the cost of
the third appraiser shall be borne one-half (1/2) by each party. Appraisers
selected under this Section 2(c) must be unaffiliated with the Holder and the
Company and must have reasonable professional qualifications for the appraisal.
(d) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
-----------
upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
3. Stock Fully Paid; Reservation of Shares. All of the Shares
---------------------------------------
issuable upon the exercise of the rights represented by this Warrant will, upon
issuance and receipt of the Exercise Price therefor, be fully paid and
nonassessable, and free from all preemptive rights, rights of first refusal or
first offer, taxes, liens and charges with respect to the issuance thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance sufficient shares of its Series C Preferred Stock and Common Stock to
provide for the exercise of the rights represented by this Warrant.
3
<PAGE>
4. Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
kind of Shares purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Series C Preferred
Stock, or shall issue a stock dividend on its outstanding shares of Series C
Preferred Stock, the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or to the issuance of such stock dividend
shall be proportionately increased, and the Exercise Price shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Series C Preferred Stock, the number of Shares
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) Price Adjustments. If at any time the Company issues or sells any
-----------------
shares of its Preferred Stock for a consideration per share less than the then
effective Exercise Price, then and in each such case, the Exercise Price for the
Shares will be reduced to a price (calculated to the nearest cent) determined by
multiplying such applicable Exercise Price by a fraction (a) the numerator of
which will be the number of shares of Preferred Stock outstanding (or so deemed)
immediately prior to such issuance or sale plus the number of shares of Series C
Preferred Stock which the aggregate consideration received by the Company for
such issuance or sale would purchase at such applicable Exercise Price, and (b)
the denominator of which will be the number of shares of Preferred Stock
outstanding (or so deemed) immediately after the Preferred Stock proposed to be
issued or sold is issued or sold; provided that such fraction will in no event
be greater than one (1). For purposes of this Section 4(b), the Shares will be
deemed to be outstanding on the date hereof.
For the purpose of making any adjustment in the Exercise Price as
provided above, the consideration received by the Company for any issuance or
sale of Preferred Stock will be computed:
(A) to the extent it consists of cash, as the amount of
cash received by the Company before deduction of any offering expenses payable
by the Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Preferred Stock is issued or sold together with
other stock or securities or other assets of the Company for a consideration
which covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Preferred Stock.
4
<PAGE>
No adjustment to the Exercise Price pursuant to this Section 4(b)
shall affect the number of Warrants to be issued pursuant to Section 1(a)
herein.
(c) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Series C Preferred Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4), provision shall be made so that the Holder of this
Warrant will thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company to
which a Holder of Series B Preferred Stock 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 Holder of this Warrant after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Exercise Price then in
effect and the number of shares issuable upon exercise of this Warrant) shall be
applicable after that event in as nearly an equivalent manner as may be
practicable.
(d) Merger. 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, other than as provided for in Section
10(a) herein (a "Merger Event"), then as a part of such Merger Event, lawful
provision shall be made so that the Holder shall thereafter be entitled to
receive, upon exercise of the Warrant, the number of shares of stock or other
securities of the successor corporation resulting from such Merger Event,
equivalent in value to that which would have been issuable if Holder 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
with respect to the rights and interest of the Holder after the Merger Event to
the end that the provisions of this Warrant (including adjustments of the
Exercise Price and number of Shares purchasable) shall be applicable to the
greatest extent possible.
(e) Notices. Upon any adjustment of the Exercise Price and any
-------
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with Section 3 hereof, then, and in each such case,
the Company, within thirty (30) days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each. Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5
<PAGE>
5. Restrictions on Transfer.
------------------------
(a) Holder agrees not to make any disposition of all or any portion
of the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 5. If reasonably requested by the
Company, Holder shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the 1933 Act. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of the Shares or rights to
acquire Shares 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
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(b) Notwithstanding the above, the Shares shall also be subject to
all restrictions on transfer set forth in the Series C Transaction Documents,
including without limitation a 180 day market standoff period upon the Company's
initial public offering.
6. Fractional Shares. No fractional shares of Common Stock will be issued
-----------------
in connection with any exercise hereunder, 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.
7. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is consistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does 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. This
6
<PAGE>
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(b) 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, 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 shall be made by the time required thereby.
(c) Holder's Additional Rights. The Series C Preferred Stock shall
--------------------------
have anti-dilution rights, registration rights, and information rights
substantially similar to those rights given to holders of the Company's Series C
Preferred Stock, which rights shall be set forth in the Series C Transaction
Documents.
(d) Other Commitments to Register Securities. Except as set forth
----------------------------------------
(i) herein, (ii) in the Investor Rights Agreement dated as of January 17, 1997,
(iii) the Warrants issued to Holder as of November 20, 1997, March 11, 1998,
July 23, 1999, and the date hereof, and (iv) the warrant issued to Imperial
Bank on May 1, 1999, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
Securities Act any of its presently outstanding securities or any of its
securities which may hereafter be issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, and (ii) the qualification requirements of the
applicable state securities laws.
(f) Compliance with Rule 144. At the written request of Holder, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) 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.
8. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) This Warrant is being acquired for Holder's own account, for
investment 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
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
7
<PAGE>
(b) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
9. Rights of Stockholders. Nothing contained herein shall confer upon
----------------------
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value, consolidation, merger, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
10. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as
of the earlier of:
(i) 5:00 p.m., California local time, on July 23, 2009;
(ii) five (5) years after the Company's initial public offering
under the Securities Act of 1933, as amended;
(iii) the automatic conversion of the Series C Preferred Stock of
the Company into Common Stock of the Company, according to the terms of the
Series C Transaction Documents, provided that Company provides Holder with at
least thirty (30) days notice of such automatic conversion and that it gives
Holder an option in Holder's sole discretion to either exercise the Warrant or
cause Company to replace the Warrant with a Warrant to Purchase Common Stock on
substantially the same terms as those set forth herein;
8
<PAGE>
(iv) a consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger with another
corporation in which the Company's stockholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the
successor entity following such consolidation or merger and which does not
result in any reclassification of the Shares issuable upon exercise of this
Warrant); or
(v) a sale of all or substantially all of the assets of the
Company.
11. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the
jurisdiction and venue of those courts. Notwithstanding the foregoing, any
claim or dispute involving questions of usury law as it applies to the Warrant
shall be governed by the laws of Illinois.
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are not assignable or transferable by Company
or Holder, except for such permitted transfers to successors in interest and in
accordance with Section 5 herein, and any attempt to assign or transfer the
rights hereunder shall be void and of no further effect.
(d) This Warrant and the other documents delivered pursuant hereto,
including without limitation the Series C Transaction Documents, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
9
<PAGE>
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
[The remainder of this page is intentionally left blank]
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
Issued this 23rd day of July, 1999.
2BRIDGE SOFTWARE
By: /s/ Ronald Parks
-----------------------
Title: CFO
--------------------
Acknowledged and Accepted:
COMDISCO, INC.
By:_________________________________
Title:______________________________
11
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: 2BRIDGE SOFTWARE
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 2(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Series C Preferred Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative). ___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Series C Preferred Stock of
2Bridge Software pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other name as
is specified below:
------------------------------------------------
(Name)
------------------------------------------------
------------------------------------------------
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Series C Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
-----------
___________________________________
(Signature and Date)
Title:_____________________________
<PAGE>
EXHIBIT A-l
-----------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : COMDISCO, INC.
COMPANY : 2BRIDGE SOFTWARE
SECURITY : SERIES C PREFERRED STOCK ISSUED UPON EXERCISE OF THE SERIES C
PREFERRED STOCK PURCHASE WARRANT ISSUED ON JULY 23, 1999
AMOUNT : _______________ SHARES
DATE : ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
<PAGE>
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold 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, and in some circumstances two years, after the
party has held, 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, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
-------- -------
own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
_________________________________
(Signature)
By:______________________________
Title:___________________________
Date:_____________________, 19___
2
<PAGE>
Exhibit 10.22
SERIES C PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES C PREFERRED STOCK WHICH MAY BE
PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES"), WILL BE
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
OF SERIES C PREFERRED STOCK ISSUABLE HEREUNDER OR ANY SHARES INTO WHICH SUCH
SHARES ARE CONVERTIBLE, (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
No.__
Void after July 23, 2002
2BRIDGE SOFTWARE
WARRANT TO PURCHASE 5,861 SHARES OF SERIES C PREFERRED STOCK
____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from 2Bridge Software, a California
corporation (the "Company"), shares of the Company's fully paid and
nonassessable Series C Preferred Stock (the "Shares"), in the amounts and at the
price per share set forth in Section 1 below (as adjusted pursuant to Section 4
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
This Warrant is subject to the following terms and conditions:
1. Number and Price of Shares.
--------------------------
(a) The Holder shall have the right to purchase five thousand eight
hundred sixty-one (5,861) Shares, which is equal to twelve thousand five hundred
dollars ($12,500) divided by the Exercise Price, as defined in Section 1(b)
below.
(b) The exercise price per Share ("Exercise Price") shall be equal to
$2.1328 per Share.
<PAGE>
2. Method of Exercise; Payment.
---------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant
-------------
may be exercised by the Holder, in whole or in part, from time to time by: (i)
the surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
---------
of the Company; (ii) the execution of a Series C Preferred Stock Purchase
Agreement and all exhibits thereto, including without limitation an Amended and
Restated Investor Rights Agreement, Voting Agreement, and Co-Sale Agreement
(collectively, the "Series C Transaction Documents"); and (iii) by the payment
to the Company of an amount equal to the Exercise Price multiplied by the number
of the Shares being purchased, which amount may be paid, at the election of the
Holder, by wire transfer or certified check payable to the order of the Company.
The person or persons in whose name(s) any certificate(s) representing Shares
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant
------------------
to Section 2(a) hereof, the Holder may elect to receive a number of Shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant and the fully executed Series C
Transaction Documents at the principal office of the Company, together with the
Notice of Exercise in which alternative No. 1 is initiated by the Holder. In
such event, the Company shall issue to the Holder a number of Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Series C
Preferred Stock.
B the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. For purposes of this Section 2, the fair
-----------------
market value of the Company's Series C Preferred Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
- -------
2
<PAGE>
market value multiplied by the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible;
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, the fair market value of the Series C Preferred Stock
per share shall be the price per share which the Company could obtain from a
willing buyer for shares sold by the Company from authorized but unissued shares
of Series C Preferred Stock as such price shall be agreed by the parties hereto,
or if agreement cannot be reached within five (5) business days of delivery of
the notice pursuant to Section 2(b) hereof, as shall be determined by a panel of
appraisers. One appraiser shall be selected by the Holder, one appraiser shall
be chosen by the Company and the third appraiser shall be chosen by the first
two appraisers. If the appraisers cannot reach agreement as to the fair market
value on the foregoing basis on or before the thirtieth (30th) day following the
Holder's notice of election pursuant to Section 2(b), then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall be the fair market value of a share of Series C Preferred Stock. In
the event that the Holder fails to choose an appraiser or the three appraisers
fail to deliver an appraisal on or before the thirtieth (30th) day after such
notice, the appraisal of the appraiser selected by the Company shall control and
shall be fair market value for the purposes of this Warrant. The cost of the
appraiser selected by each party shall be borne by that party and the cost of
the third appraiser shall be borne one-half (1/2) by each party. Appraisers
selected under this Section 2(c) must be unaffiliated with the Holder and the
Company and must have reasonable professional qualifications for the appraisal.
(d) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
-----------
upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period
within which the rights represented by this Warrant may be exercised, the
Company shall at all times have authorized and reserved for issuance sufficient
shares of its Series C Preferred Stock and Common Stock to provide for the
exercise of the rights represented by this Warrant.
3
<PAGE>
4. Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
kind of Shares purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Series C Preferred
Stock, or shall issue a stock dividend on its outstanding shares of Series C
Preferred Stock, the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or to the issuance of such stock dividend
shall be proportionately increased, and the Exercise Price shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Series C Preferred Stock, the number of Shares
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) Price Adjustments. If at any time the Company issues or sells any
-----------------
shares of its Preferred Stock for a consideration per share less than the then
effective Exercise Price, then and in each such case, the Exercise Price for the
Shares will be reduced to a price (calculated to the nearest cent) determined by
multiplying such applicable Exercise Price by a fraction (a) the numerator of
which will be the number of shares of Preferred Stock outstanding (or so deemed)
immediately prior to such issuance or sale plus the number of shares of Series C
Preferred Stock which the aggregate consideration received by the Company for
such issuance or sale would purchase at such applicable Exercise Price, and (b)
the denominator of which will be the number of shares of Preferred Stock
outstanding (or so deemed) immediately after the Preferred Stock proposed to be
issued or sold is issued or sold; provided that such fraction will in no event
be greater than one (1). For purposes of this Section 4(b), the Shares will be
deemed to be outstanding on the date hereof.
For the purpose of making any adjustment in the Exercise Price as
provided above, the consideration received by the Company for any issuance or
sale of Preferred Stock will be computed:
(A) to the extent it consists of cash, as the amount of
cash received by the Company before deduction of any offering expenses payable
by the Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Preferred Stock is issued or sold together with
other stock or securities or other assets of the Company for a consideration
which covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Preferred Stock.
4
<PAGE>
No adjustment to the Exercise Price pursuant to this Section 4(b)
shall affect the number of Warrants to be issued pursuant to Section 1(a)
herein.
(c) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Series C Preferred Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4), provision shall be made so that the Holder of this
Warrant will thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company to
which a Holder of Series B Preferred Stock 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 Holder of this Warrant after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Exercise Price then in
effect and the number of shares issuable upon exercise of this Warrant) shall be
applicable after that event in as nearly an equivalent manner as may be
practicable.
(d) Merger. 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, other than
as provided for in Section 10(a) herein (a "Merger Event"), then as a part of
such Merger Event, lawful provision shall be made so that the Holder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of stock or other securities of the successor corporation resulting from
such Merger Event, equivalent in value to that which would have been issuable if
Holder 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 with respect to the rights and interest of the Holder after the Merger
Event to the end that the provisions of this Warrant (including adjustments of
the Exercise Price and number of Shares purchasable) shall be applicable to the
greatest extent possible.
(e) Notices. Upon any adjustment of the Exercise Price and any
-------
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with Section 3 hereof, then, and in each such case,
the Company, within thirty (30) days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each. Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5
<PAGE>
5. Restrictions on Transfer.
------------------------
(a) Holder agrees not to make any disposition of all or any portion of
the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 5. If reasonably requested by the
Company, Holder shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such shares under the 1933 Act. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of the Shares or rights to
acquire Shares 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
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(b) Notwithstanding the above, the Shares shall also be subject to all
restrictions on transfer set forth in the Series C Transaction Documents,
including without limitation a 180 day market standoff period upon the Company's
initial public offering.
6. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, 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.
7. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is consistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does 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. This
6
<PAGE>
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(b) 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, 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 shall be made by the time required thereby.
(c) Holder's Additional Rights. The Series C Preferred Stock shall
--------------------------
have anti-dilution rights, registration rights, and information rights
substantially similar to those rights given to holders of the Company's Series C
Preferred Stock, which rights shall be set forth in the Series C Transaction
Documents.
(d) Other Commitments to Register Securities. Except as set forth (i)
----------------------------------------
herein, (ii) in the Investor Rights Agreement dated as of January 17, 1997,
(iii) the Warrants issued to Holder as of November 20, 1997, March 11, 1998,
April 30, 1999, and the date hereof, and (iv) the warrants issued to Imperial
Bank on May 1, 1999, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
Securities Act any of its presently outstanding securities or any of its
securities which may hereafter be issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, and (ii) the qualification requirements of the
applicable state securities laws.
(f) Compliance with Rule 144. At the written request of Holder, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) 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.
8. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) This Warrant is being acquired for Holder's own account, for
investment 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
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
7
<PAGE>
(b) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
9. Rights of Stockholders. Nothing contained herein shall confer upon
----------------------
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value, consolidation, merger, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
10. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as of
the earlier of:
(i) 5:00 p.m., California local time, on July 23, 2002;
(ii) five (5) years after the Company's initial public offering
under the Securities Act of 1933, as amended;
(iii) the automatic conversion of the Series C Preferred Stock of
the Company into Common Stock of the Company, according to the terms of the
Series C Transaction Documents, provided that Company provides Holder with at
least thirty (30) days notice of such automatic conversion and that it gives
Holder an option in Holder's sole discretion to either exercise the Warrant or
cause Company to replace the Warrant with a Warrant to Purchase Common Stock on
substantially the same terms as those set forth herein;
8
<PAGE>
(iv) a consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger with another
corporation in which the Company's stockholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the
successor entity following such consolidation or merger and which does not
result in any reclassification of the Shares issuable upon exercise of this
Warrant); or
(v) a sale of all or substantially all of the assets of the
Company.
11. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the
jurisdiction and venue of those courts. Notwithstanding the foregoing, any
claim or dispute involving questions of usury law as it applies to the Warrant
shall be governed by the laws of California.
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are not assignable or transferable by Company
or Holder, except for such permitted transfers to successors in interest and in
accordance with Section 5 herein, and any attempt to assign or transfer the
rights hereunder shall be void and of no further effect.
(d) This Warrant and the other documents delivered pursuant hereto,
including without limitation the Series C Transaction Documents, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
9
<PAGE>
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
[The remainder of this page is intentionally left blank]
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this ___ day of July, 1999.
2BRIDGE SOFTWARE
By: /s/ Ronald Parks
--------------------------
Title: CFO
----------------------
Acknowledged and Accepted:
COMDISCO, INC.
By:________________________
Title:_____________________
11
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: 2BRIDGE SOFTWARE
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 2(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Series C Preferred Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative).
___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Series C Preferred Stock of
2Bridge Software pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other name as
is specified below:
_____________________________________________
(Name)
_____________________________________________
_____________________________________________
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Series C Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
-----------
_____________________________________
(Signature and Date)
Title: ______________________________
<PAGE>
EXHIBIT A-l
-----------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : COMDISCO, INC.
COMPANY : 2BRIDGE SOFTWARE
SECURITY : SERIES C PREFERRED STOCK ISSUED UPON EXERCISE OF THE SERIES C
PREFERRED STOCK PURCHASE WARRANT ISSUED ON July 29, 1999
AMOUNT : _______________ SHARES
DATE : ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or
<PAGE>
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.
The Securities may be resold 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, and in some circumstances two years, after the
party has held, 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, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
-------- -------
own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
_________________________________
(Signature)
By: _____________________________
Title: __________________________
Date: _____________________, 19__
2
<PAGE>
EXHIBIT 10.23
SERIES C PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES C PREFERRED STOCK WHICH MAY
BE PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES"), WILL BE
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
OF SERIES C PREFERRED STOCK ISSUABLE HEREUNDER OR ANY SHARES INTO WHICH SUCH
SHARES ARE CONVERTIBLE, (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
No. 8
Void after October 21, 2009
2BRIDGE SOFTWARE
WARRANT TO PURCHASE 11,722 SHARES OF SERIES C PREFERRED STOCK
____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from 2Bridge Software, a California
corporation (the "Company"), shares of the Company's fully paid and
nonassessable Series C Preferred Stock (the "Shares"), in the amounts and at the
price per share set forth in Section 1 below (as adjusted pursuant to Section 4
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
This Warrant is subject to the following terms and conditions:
1. Number and Price of Shares.
--------------------------
(a) The Holder shall have the right to purchase 11,722 Shares, which
is equal to one hundred twenty-five thousand dollars ($25,000) divided by the
Exercise Price, as defined in Section 1(b) below.
(b) The exercise price per Share ("Exercise Price") shall be equal to
$2.1328 per Share.
<PAGE>
2. Method of Exercise; Payment.
---------------------------
(a) Cash Exercise. The purchase rights represented by this Warrant
-------------
may be exercised by the Holder, in whole or in part, from time to time by: (i)
the surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
---------
of the Company; (ii) the execution of a Series C Preferred Stock Purchase
Agreement and all exhibits thereto, including without limitation an Amended and
Restated Investor Rights Agreement, Voting Agreement, and Co-Sale Agreement
(collectively, the "Series C Transaction Documents"); and (iii) by the payment
to the Company of an amount equal to the Exercise Price multiplied by the number
of the Shares being purchased, which amount may be paid, at the election of the
Holder, by wire transfer or certified check payable to the order of the Company.
The person or persons in whose name(s) any certificate(s) representing Shares
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this Warrant
------------------
pursuant to Section 2(a) hereof, the Holder may elect to receive a number of
Shares equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant and the fully executed
Series C Transaction Documents at the principal office of the Company, together
with the Notice of Exercise in which alternative No. 1 is initiated by the
Holder. In such event, the Company shall issue to the Holder a number of Shares
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Series C
Preferred Stock.
B = the Exercise Price (as adjusted to the date of such
calculation).
(c) Fair Market Value. For purposes of this Section 2, the fair
-----------------
market value of the Company's Series C Preferred Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
- -------
market value multiplied by the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible;
-2-
<PAGE>
(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, the fair market value of the Series C Preferred Stock
per share shall be the price per share which the Company could obtain from a
willing buyer for shares sold by the Company from authorized but unissued shares
of Series C Preferred Stock as such price shall be agreed by the parties hereto,
or if agreement cannot be reached within five (5) business days of delivery of
the notice pursuant to Section 2(b) hereof, as shall be determined by a panel of
appraisers. One appraiser shall be selected by the Holder, one appraiser shall
be chosen by the Company and the third appraiser shall be chosen by the first
two appraisers. If the appraisers cannot reach agreement as to the fair market
value on the foregoing basis on or before the thirtieth (30th) day following the
Holder's notice of election pursuant to Section 2(b), then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall be the fair market value of a share of Series C Preferred Stock. In
the event that the Holder fails to choose an appraiser or the three appraisers
fail to deliver an appraisal on or before the thirtieth (30th) day after such
notice, the appraisal of the appraiser selected by the Company shall control and
shall be fair market value for the purposes of this Warrant. The cost of the
appraiser selected by each party shall be borne by that party and the cost of
the third appraiser shall be borne one-half (1/2) by each party. Appraisers
selected under this Section 2(c) must be unaffiliated with the Holder and the
Company and must have reasonable professional qualifications for the appraisal.
(d) Stock Certificates. In the event of any exercise of the rights
------------------
represented by this Warrant, certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
-----------
upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company shall
at all times have authorized and reserved for issuance sufficient shares of its
Series C Preferred Stock and Common Stock to provide for the exercise of the
rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
kind of Shares purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Series C Preferred
Stock, or shall issue a stock
-3-
<PAGE>
dividend on its outstanding shares of Series C Preferred Stock, the number of
Shares issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Series C Preferred Stock, the number of Shares issuable upon exercise of this
Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
(b) Price Adjustments. If at any time the Company issues or sells
-----------------
any shares of its Preferred Stock for a consideration per share less than the
then effective Exercise Price, then and in each such case, the Exercise Price
for the Shares will be reduced to a price (calculated to the nearest cent)
determined by multiplying such applicable Exercise Price by a fraction (a) the
numerator of which will be the number of shares of Preferred Stock outstanding
(or so deemed) immediately prior to such issuance or sale plus the number of
shares of Series C Preferred Stock which the aggregate consideration received by
the Company for such issuance or sale would purchase at such applicable Exercise
Price, and (b) the denominator of which will be the number of shares of
Preferred Stock outstanding (or so deemed) immediately after the Preferred Stock
proposed to be issued or sold is issued or sold; provided that such fraction
will in no event be greater than one (1). For purposes of this Section 4(b), the
Shares will be deemed to be outstanding on the date hereof.
For the purpose of making any adjustment in the Exercise Price as provided
above, the consideration received by the Company for any issuance or sale of
Preferred Stock will be computed:
(A) to the extent it consists of cash, as the amount of cash
received by the Company before deduction of any offering expenses payable by the
Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash, at
the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Preferred Stock is issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Preferred Stock.
No adjustment to the Exercise Price pursuant to this Section 4(b) shall
affect the number of Warrants to be issued pursuant to Section 1(a) herein.
(c) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Series C Preferred Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4), provision shall be made so that the Holder of this
Warrant will thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company to
which a Holder of Series B
-4-
<PAGE>
Preferred Stock 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 Holder of this Warrant after
the recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Exercise Price then in effect and the number of shares
issuable upon exercise of this Warrant) shall be applicable after that event in
as nearly an equivalent manner as may be practicable.
(d) Merger. 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, other than
as provided for in Section 10(a) herein (a "Merger Event"), then as a part of
such Merger Event, lawful provision shall be made so that the Holder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of stock or other securities of the successor corporation resulting from
such Merger Event, equivalent in value to that which would have been issuable if
Holder 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 with respect to the rights and interest of the Holder after the Merger
Event to the end that the provisions of this Warrant (including adjustments of
the Exercise Price and number of Shares purchasable) shall be applicable to the
greatest extent possible.
(e) Notices. Upon any adjustment of the Exercise Price and any
-------
increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with Section 3 hereof, then, and in each such case,
the Company, within thirty (30) days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each. Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5. Restrictions on Transfer.
------------------------
(a) Holder agrees not to make any disposition of all or any portion
of the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 5. If reasonably requested by the
Company, Holder shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such
-5-
<PAGE>
shares under the 1933 Act. Notwithstanding the foregoing, the restrictions
imposed upon the transferability of any of the Shares or rights to acquire
Shares 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
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(b) Notwithstanding the above, the Shares shall also be subject to
all restrictions on transfer set forth in the Series C Transaction Documents,
including without limitation a 180 day market standoff period upon the Company's
initial public offering.
6. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, 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.
7. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is consistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does 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. This Warrant
constitutes a legal, valid and binding agreement of the Company, enforceable in
accordance with its respective terms.
(b) 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, 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 shall be made by the time required thereby.
(c) Holder's Additional Rights. The Series C Preferred Stock shall
--------------------------
have anti-dilution rights, registration rights, and information rights
substantially similar to those rights given to holders of the Company's Series C
Preferred Stock, which rights shall be set forth in the Series C Transaction
Documents.
-6-
<PAGE>
(d) Other Commitments to Register Securities. Except as set forth
----------------------------------------
(i) herein, (ii) in the Investor Rights Agreement dated as of January 17, 1997,
(iii) the Warrants issued to Holder as of November 20, 1997, March 11, 1998,
July 23, 1999, and the date hereof, and (iv) the warrant issued to Imperial Bank
on May 1, 1999, the Company is not, pursuant to the terms of any other agreement
currently in existence, under any obligation to register under the Securities
Act any of its presently outstanding securities or any of its securities which
may hereafter be issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, and (ii) the qualification requirements of the
applicable state securities laws.
(f) Compliance with Rule 144. At the written request of Holder, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) 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.
8. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) This Warrant is being acquired for Holder's own account, for
investment 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
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
(b) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
-7-
<PAGE>
(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
9. Rights of Stockholders. Nothing contained herein shall confer upon
----------------------
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value, consolidation, merger, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
10. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as
of the earlier of:
(i) 5:00 p.m., California local time, on October 21, 2009;
(ii) five (5) years after the Company's initial public offering
under the Securities Act of 1933, as amended;
(iii) the automatic conversion of the Series C Preferred Stock
of the Company into Common Stock of the Company, according to the terms of the
Series C Transaction Documents, provided that Company provides Holder with at
least thirty (30) days notice of such automatic conversion and that it gives
Holder an option in Holder's sole discretion to either exercise the Warrant or
cause Company to replace the Warrant with a Warrant to Purchase Common Stock on
substantially the same terms as those set forth herein;
(iv) a consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger with another
corporation in which the Company's stockholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the
successor entity following such consolidation or merger and which does not
result in any reclassification of the Shares issuable upon exercise of this
Warrant); or
(v) a sale of all or substantially all of the assets of the
Company.
11. Miscellaneous.
-------------
(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Clara or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the jurisdiction
and venue of those courts. Notwithstanding the foregoing, any claim or dispute
involving questions of usury law as it applies to the Warrant shall be governed
by the laws of Illinois.
-8-
<PAGE>
(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are not assignable or transferable by Company
or Holder, except for such permitted transfers to successors in interest and in
accordance with Section 5 herein, and any attempt to assign or transfer the
rights hereunder shall be void and of no further effect.
(d) This Warrant and the other documents delivered pursuant hereto,
including without limitation the Series C Transaction Documents, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
[The remainder of this page is intentionally left blank]
-9-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 21st day of October, 1999.
2BRIDGE SOFTWARE
By: /s/ Ronald Parks
-----------------------------
Title: SVP and CFO
--------------------------
Acknowledged and Accepted:
COMDISCO, INC.
By:_________________________________
Title:_______________________________
-10-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: 2BRIDGE SOFTWARE
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 2(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Series C Preferred Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative). ___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Series C Preferred Stock of
2Bridge Software pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other name as
is specified below:
________________________
(Name)
________________________
________________________
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Series C Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
-----------
________________________
(Signature and Date)
Title: _________________
-11-
<PAGE>
EXHIBIT A-l
-----------
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: COMDISCO, INC.
COMPANY: 2BRIDGE SOFTWARE
SECURITY: SERIES C PREFERRED STOCK ISSUED UPON EXERCISE OF THE SERIES C
PREFERRED STOCK PURCHASE WARRANT ISSUED ON OCTOBER 21, 1999
AMOUNT: _______________ SHARES
DATE: ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions.
-12-
<PAGE>
The Securities may be resold 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, and in some circumstances two years, after the
party has held, 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, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
-------- -------
own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
-13-
<PAGE>
Exhibit 10.24
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: 2Bridge, a California corporation
Number of Shares: 10% Warrant coverage
Class of Stock: Series D Preferred
Initial Exercise Price: See Below.
Issue Date: November 15, 1999
Expiration Date: November 15, 2006, unless earlier terminated
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00, Silicon
Valley Bank ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall be equal to seventy percent (70%)
of the price per share at which the Company after the Issue Date first sells its
shares of capital stock in an offering in which the Company receives not less
than $1,000,000 (the "Next Round") and the Shares subject to this Warrant shall
be the class of securities sold in the Next Round. If the Next Round does not
occur on or before July 31, 2000, then, after such date, at the option of
Holder, the Shares shall be Series C Preferred Stock and the Warrant Price shall
be $2.1328. The number of Shares subject to the Warrant shall be the quotient
derived by dividing $100,000 by the Warrant Price.
If any amount is outstanding under the Loan Agreement between the Company
and Holder dated as of the Issue Date (the "Loan Agreement") after the Maturity
Date, as defined in the Loan Agreement, Holder may purchase additional Shares
equal to the number of Shares equal to the quotient derived by dividing $39,000
by the Warrant Price, hereunder on the day after the Maturity Date, and
additional Shares equal to the number of Shares equal to the quotient derived by
dividing $39,000 by the Warrant Price, for each 45-day period (or portion
thereof) from and including the day immediately after the Maturity Date that any
amount remains outstanding under the Loan Agreement.
ARTICLE 1. EXERCISE.
---------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
I to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant at any time the
fair market value of a Share exceeds the Warrant Price, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other securities otherwise issuable upon exercise of this
Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share. The fair market value of the Shares shall be determined
pursuant Section 1.4.
1
<PAGE>
1.3 No Rights as Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking or public accounting firm to undertake such valuation. If the valuation
of such investment banking or public accounting firm is greater than that
determined by the Board of Directors, then all fees and expenses of such
investment banking or accounting firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
-----------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
---------------------
successor entity may elect to assume the obligations of this Warrant, in which
case this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition any subsequent closing. The Warrant Price shall
be adjusted accordingly. If this Warrant is not assumed, and the fair market
value of one Share is greater than the Warrant Price, it shall be deemed to have
been converted into Shares pursuant to Section 1.2 hereof immediately prior to
the consummation of the Acquisition. If this Warrant is not assumed and is not
convertible pursuant to Section 1.2, it shall terminate immediately upon
consummation of the Acquisition if Holder fails to exercise the Warrant prior to
the Acquisition.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend On the Shares payable in common stock, or other securities or
subdivides the Shares in a transaction that increases the amount of common stock
into which the Shares are convertible, then upon exercise of this Warrant, for
each Share acquired, Holder shall receive, without cost to Holder, the total
number and kind of securities to which Holder would have been entitled had
Holder owned the Shares of record as of the date the dividend or subdivision
occurred.
2.2 Reclassification, Exchange or Substitution. Subject to Section 1.7,
------------------------------------------
upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event.
2
<PAGE>
Subject to Section 4.1, such an event shall include any automatic conversion of
the outstanding or issuable securities of the Company of the same class or
series as the Shares to common stock pursuant to the terms of the Company's
Articles of Incorporation upon the closing of a registered public offering of
the Company's common stock. The Company or its successor shall promptly issue to
Holder a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 Adjustments for Combinations Etc. If the outstanding Shares are
--------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares proportionately decreased.
2.4 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, 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 under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares other than as described above that adversely affects
Holder's rights under this Warrant, the Warrant Price shall be adjusted downward
and the number of Shares issuable upon exercise of this Warrant shall be
adjusted upward in such a manner that the aggregate Warrant Price of this
Warrant is unchanged.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) arid (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within one hundred twenty (120) days after the
end of each fiscal year of the Company, the annual financial statements of the
Company.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shill be subject to the registration rights granted to
any other holders of the Company's Series C Preferred Stock
3
<PAGE>
and Holder agrees to execute an Amended and Restated Rights Agreement within
thirty (30) days from the date of this Warrant.
ARTICLE 4. MISCELLANEOUS.
--------------
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above; provided
that the Warrant and all rights of Holder hereunder shall terminate immediately
prior to Holder's initial public offering unless this Warrant is exercised by
Holder or otherwise converted into Shares pursuant to Section 1.2 hereof
immediately prior to such initial public offering.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant shall be
-------------------------------------------
nontransferable, other than pursuant to (i) a transfer not involving a change in
beneficial ownership, (ii) a distribution without consideration of the Warrant
by the Holder to any of its partners or retired partners, or to the estate of
any of its partners or retired partners, or if the Holder is a limited liability
company, to any of its members or former members, or to the estate of any of its
members or former members, (iii) a pledge by Holder to its lenders in connection
with a grant by Holder of a security interest in substantially all of Holder's
personal property and (iv) any transfer by any Holder to (A) any individual or
entity with respect to which such Holder (or any person controlled by,
controlling or under common control with, such Holder) has the power to direct
investment decisions. This Warrant and the Shares issuable upon exercise of this
Warrant (and the securities issuable, directly or indirectly, upon conversion of
the Shares, if any) may not be transferred or assigned in whole or in part
without compliance with applicable federal and state securities laws by the
transferor and the transferee (including, without limitation, the delivery of
investment representation letters and legal opinions reasonably satisfactory to
the Company, as reasonably requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is to an
affiliate of Holder or if there is no material question as to the availability
of current information as referenced in Rule 144(c), Holder represents that it
has complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Sections 4.2 and 4.3,
------------------
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
The Company shall have the right to refuse to transfer any portion of this
Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4
<PAGE>
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
4.9 Equity Event. For purposes of this Warrant, an "equity event" shall
------------
mean the receipt by the Company of aggregate cash proceeds of at least
$1,000,000 from the sale of its capital stock or subordinated debt, other than
in a nonfinancing transaction to employees, officers, directors or consultants
of the Company.
4.10 Lock-Up. Holder agrees, if requested by the Company and an
-------
underwriter of Shares (or other securities) of the Company, not to sell, sell
short, pledge, grant an option with respect to or otherwise transfer or dispose
of any Shares (or other securities) of the Company held by the Holder during a
period of time determined by the Company and its underwriters (not to exceed one
hundred eighty (180) days) following the effective date of a registration
statement of the Company with respect to the foregoing, provided that all
executive officers, directors and holders of more than five percent (5%) of the
Company's capital stock who then hold shares (or other securities) of the
Company enter into similar arrangements.
2Bridge
By: /s/ Ronald Parks
------------------------------
Title: CFO
---------------------------
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ___________ shares of the
Common/Series _________ Preferred [strike one] Stock of _______________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ___________________________ of the Shares covered
by the Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
____________________________
(Name)
____________________________
____________________________
(Address)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws. In support thereof, the undersigned has executed the Investment
Representation Statement attached hereto as Exhibit A.
____________________________
(Signature)
______________________
(Date)
6
<PAGE>
Exhibit 10.25
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: 2Bridge, a California corporation
Number of Shares: 16.3% Warrant coverage
Class of Stock: Series D Preferred
Initial Exercise Price: See Below.
Issue Date: November 15, 1999
Expiration Date: November 15, 2006, unless earlier terminated
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00, SAND HILL
CAPITAL II, LP ("Holder") is entitled to purchase the number Of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall be equal to seventy percent (70%)
of the price per share at which the Company after the Issue Date first sells its
shares of capital stock in an offering in which the Company receives not less
than $1,000,000 (the "Next Round") and the Shares subject to this Warrant shall
be the class of securities sold in the Next Round. If the Next Round does not
occur on or before July 31, 2000, then, after such date, at the option of
Holder, the Shares shall be Series C Preferred Stock and the Warrant Price shall
be $2.1328. The number of Shares subject to the Warrant shall be the quotient
derived by dividing $330,260 by the Warrant Price.
If any amount is outstanding under the Loan Agreement between the Company
and Holder dated as of the Issue Date (the "Loan Agreement") after the Maturity
Date, as defined in the Loan Agreement, Holder may purchase additional Shares
equal to the number of Shares equal to the quotient derived by dividing $108,500
by the Warrant Price, hereunder on the day after the Maturity Date, and
additional Shares equal to the number of Shares equal to the quotient derived by
dividing $108,500 by the Warrant Price, for each 45-day period (or portion
thereof) from and including the day immediately after the Maturity Date that any
amount remains outstanding under the Loan Agreement.
ARTICLE 1. EXERCISE.
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duty executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant at any time the
fair market value of a Share exceeds the Warrant Price, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other securities otherwise issuable upon exercise of this
Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share. The fair market value of the Shares shall be determined
pursuant Section 1.4.
1
<PAGE>
1.3 No Rights as Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking or public accounting firm to undertake such valuation. If the valuation
of such investment banking or public accounting firm is greater than that
determined by the Board of Directors, then all fees and expenses of such
investment banking or accounting firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory 1o the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery Of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
---------------------
successor entity may elect to assume the obligations of this Warrant, in which
case this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly. If this Warrant is not assumed, and the fair market
value of one Share is greater than the Warrant Price, it shall be deemed to have
been converted into Shares pursuant to Section 1.2 hereof immediately prior to
the consummation of the Acquisition. If this Warrant is not assumed and is not
convertible pursuant to Section 1.2, it shall terminate immediately upon
consummation of the Acquisition if Holder fails to exercise the Warrant prior to
the Acquisition.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on the Shares payable in common stock, or other securities or
subdivides the Shares in a transaction that increases the amount of common stock
into which the Shares are convertible, then upon exercise of this Warrant, for
each Share acquired, Holder shall receive, without cost to Holder, the total
number and kind of securities to which Holder would have been entitled had
Holder owned the Shares of record as of the date the dividend or subdivision
occurred.
2.2 Reclassification, Exchange or Substitution. Subject to Section 1.7,
------------------------------------------
upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event.
2
<PAGE>
Subject to Section 4.1, such an event shall include any automatic conversion of
the outstanding or issuable securities of the Company of the same class or
series as the Shares to common stock pursuant to the terms of the Company's
Articles of Incorporation upon the closing of a registered public offering of
the Company's common stock. The Company or its successor shall promptly issue to
Holder a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares proportionately decreased.
2.4 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, 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 under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares other than as described above that adversely affects
Holder's rights under this Warrant, the Warrant Price shall be adjusted downward
and the number of Shares issuable upon exercise of this Warrant shall be
adjusted upward in such a manner that the aggregate Warrant Price of this
Warrant is unchanged.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within one hundred twenty (120) days after the
end of each fiscal year of the Company, the annual financial statements of the
Company.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shall be subject to the registration rights granted to
any other holders of the Company's Series C Preferred Stock
3
<PAGE>
and Holder agrees to execute an Amended and Restated Rights Agreement within
thirty (30) days from the date of this Warrant.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above; provided
that the Warrant and all rights of Holder hereunder shall terminate immediately
prior to Holder's initial public offering unless this Warrant is exercised by
Holder or otherwise converted into Shares pursuant to Section 1.2 hereof
immediately prior to such initial public offering.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant shall be
-------------------------------------------
nontransferable, other than pursuant to (i) a transfer not involving a change in
beneficial ownership, (ii) a distribution without consideration of the Warrant
by the Holder to any of its partners or retired partners, or to the estate of
any of its partners or retired partners, or if the Holder is a limited liability
Company, to any of its members or former members, or to the estate of any of its
members or former members, (iii) a pledge by Holder to its lenders in connection
with a grant by Holder of a security interest in substantially all of Holder's
personal property and (iv) any transfer by any Holder to (A) any individual or
entity with respect to which such Holder (or any person controlled by,
controlling or under common control with, such Holder) has the power to direct
investment decisions. This Warrant and the Shares issuable upon exercise of this
Warrant (and the securities issuable, directly or indirectly, upon conversion of
the Shares, if any) may not be transferred or assigned in whole or in part
without compliance with applicable federal and state securities laws by the
transferor and the transferee (including, without limitation, the delivery of
investment representation letters and legal opinions reasonably satisfactory to
the Company, as reasonably requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is to an
affiliate of Holder or if there is no material question as to the availability
of current information as referenced in Rule 144(c), Holder represents that it
has complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Sections 4.2 and 4.3,
------------------
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
The Company shall have the right to refuse to transfer any portion of this
Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4
<PAGE>
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
4.9 Equity Event. For purposes of this Warrant, an "equity event" shall
------------
mean the receipt by the Company of aggregate cash proceeds of at least
$1,000,000 from the sale of its capital stock or subordinated debt, other than
in a nonfinancing transaction to employees, officers, directors or consultants
of the Company.
4.10 Lock Up. Holder agrees, if requested by the Company and an
-------
underwriter of Shares (or other securities) of the Company, not to sell, sell
short, pledge, grant an option with respect to or otherwise transfer or dispose
of any Shares (or other securities) of the Company held by the Holder during a
period of time determined by the Company and its underwriters (not to exceed one
hundred eighty (180) days) following the effective date of a registration
statement of the Company with respect to the foregoing, provided that all
executive officers, directors and holders of more than five percent (5%) of the
Company's capital stock who then hold shares (or other securities) of the
Company enter into similar arrangements.
2Bridge
By: /s/ Ronald Parks
------------------------------
Title: CFO
---------------------------
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ______________ shares of the
Common/Series ___________ Preferred [strike one] Stock of _______________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _______________________ of the Shares covered by
the Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws. In support thereof, the undersigned has executed the Investment
Representation Statement attached hereto as Exhibit A.
_____________________________
(Signature)
___________________
(Date)
6
<PAGE>
Exhibit 10.26
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: 2Bridge, a California corporation
Number of Shares: 16.2% Warrant coverage
Class of Stock: Series D Preferred
Initial Exercise Price: See Below.
Issue Date: November 15, 1999
Expiration Date: November 15, 2006, unless earlier terminated
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00, TBCC
FUNDING TRUST II ("Holder") is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the "Shares") of the
corporation (the "Company") at the initial exercise price per Share (the
"Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall be equal to seventy percent (70%)
of the price per share at which the Company after the Issue Date first sells its
shares of capital stock in an offering in which the Company receives not less
than $1,000,000 (.the "Next Round") and the Shares subject to this Warrant shall
be the class of securities sold in the Next Round. If the Next Round does not
occur on or before July 31, 2000, then, after such date, at the option of
Holder, the Shares shall be Series C Preferred Stock and the Warrant Price shall
be $2.1328. The number of Shares subject to the Warrant shall be the quotient
derived by dividing $327,240 by the Warrant Price.
If any amount is outstanding under the Loan Agreement between the Company
and Holder dated as of the Issue Date (the "Loan Agreement") after the Maturity
Date, as defined in the Loan Agreement, Holder may purchase additional Shares
equal to the number of Shares equal to the quotient derived by dividing $105,000
by the Warrant Price, hereunder on the day after the Maturity Date, and
additional Shares equal to the number of Shares equal to the quotient derived by
dividing $105,000 by the Warrant Price, for each 45-day period (or portion
thereof) from and including the day immediately after the Maturity Date that any
amount remains outstanding under the Loan Agreement.
ARTICLE 1. EXERCISE.
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant at any time the
fair market value of a Share exceeds the Warrant Price, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other securities otherwise issuable upon exercise of this
Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share. The fair market value of the Shares shall be determined
pursuant Section 1.4.
1
<PAGE>
1.3 No Rights as Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking or public accounting firm to undertake such valuation. If the valuation
of such investment banking or public accounting firm is greater than that
determined by the Board of Directors, then all fees and expenses of such
investment banking or accounting firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
-----------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
---------------------
successor entity may elect to assume the obligations of this Warrant, in which
case this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition any subsequent closing. The Warrant Price shall
be adjusted accordingly. If this Warrant is not assumed, and the fair market
value of one Share is greater than the Warrant Price, it shall be deemed to have
been converted into Shares pursuant to Section 1.2 hereof immediately prior to
the consummation of the Acquisition. If this Warrant is not assumed and is not
convertible pursuant to Section 1.2, it shall terminate immediately upon
consummation of the Acquisition if Holder fails to exercise the Warrant prior to
the Acquisition.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on the Shares payable in common stock, or other securities or
subdivides the Shares in a transaction that increases the amount of common stock
into which the Shares are convertible, then upon exercise of this Warrant, for
each Share acquired, Holder shall receive, without cost to Holder, the total
number and kind of securities to which Holder would have been entitled had
Holder owned the Shares of record as of the date the dividend or subdivision
occurred.
2.2 Reclassification, Exchange or Substitution. Subject to Section 1.7,
------------------------------------------
upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event.
2
<PAGE>
Subject to Section 4.1, such an event shall include any automatic conversion of
the outstanding or issuable securities of the Company of the same class or
series as the Shares to common stock pursuant to the terms of the Company's
Articles of Incorporation upon the closing of a registered public offering of
the Company's common stock. The Company or its successor shall promptly issue to
Holder a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 Adjustments for Combinations Etc. If the outstanding Shares are
--------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares proportionately decreased.
2.4 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, 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 under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares other than as described above that adversely affects
Holder's rights under this Warrant, the Warrant Price shall be adjusted downward
and the number of Shares issuable upon exercise of this Warrant shall be
adjusted upward in such a manner that the aggregate Warrant Price of this
Warrant is unchanged.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) arid (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within one hundred twenty (120) days after the
end of each fiscal year of the Company, the annual financial statements of the
Company.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares shill be subject to the registration rights granted to
any other holders of the Company's Series C Preferred Stock
3
<PAGE>
and Holder agrees to execute an Amended and Restated Rights Agreement within
thirty (30) days from the date of this Warrant.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above; provided
that the Warrant and all rights of Holder hereunder shall terminate immediately
prior to Holder's initial public offering unless this Warrant is exercised by
Holder or otherwise converted into Shares pursuant to Section 1.2 hereof
immediately prior to such initial public offering.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant shall be
-------------------------------------------
nontransferable, other than pursuant to (i) a transfer not involving a change in
beneficial ownership, (ii) a distribution without consideration of the Warrant
by the Holder to any of its partners or retired partners, or to the estate of
any of its partners or retired partners, or if the Holder is a limited liability
company, to any of its members or former members, or to the estate of any of its
members or former members, (iii) a pledge by Holder to its lenders in connection
with a grant by Holder of a security interest in substantially all of Holder's
personal property and (iv) any transfer by any Holder to (A) any individual or
entity with respect to which such Holder (or any person controlled by,
controlling or under common control with, such Holder) has the power to direct
investment decisions. This Warrant and the Shares issuable upon exercise of this
Warrant (and the securities issuable, directly or indirectly, upon conversion of
the Shares, if any) may not be transferred or assigned in whole or in part
without compliance with applicable federal and state securities laws by the
transferor and the transferee (including, without limitation, the delivery of
investment representation letters and legal opinions reasonably satisfactory to
the Company, as reasonably requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is to an
affiliate of Holder or if there is no material question as to the availability
of current information as referenced in Rule 144(c), Holder represents that it
has complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holder's notice of proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Sections 4.2 and 4.3,
------------------
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
The Company shall have the right to refuse to transfer any portion of this
Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4
<PAGE>
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
4.9 Equity Event. For purposes of this Warrant, an "equity event" shall
------------
mean the receipt by the Company of aggregate cash proceeds of at least
$1,000,000 from the sale of its capital stock or subordinated debt, other than
in a nonfinancing transaction to employees, officers, directors or consultants
of the Company.
4.10 Lock-Up. Holder agrees, if requested by the Company and an
-------
underwriter of Shares (or other securities) of the Company, not to sell, sell
short, pledge, grant an option with respect to or otherwise transfer or dispose
of any Shares (or other securities) of the Company held by the Holder during a
period of time determined by the Company and its underwriters (not to exceed one
hundred eighty (180) days) following the effective date of a registration
statement of the Company with respect to the foregoing, provided that all
executive officers, directors and holders of more than five percent (5%) of the
Company's capital stock who then hold shares (or other securities) of the
Company enter into similar arrangements.
2Bridge
By: /s/ Ronald Parks
--------------------------
Title: CFO
-----------------------
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _______________ shares of the
Common/Series ________ Preferred [strike one] Stock of ____________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _______________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
____________________________
(Name)
____________________________
____________________________
(Address)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws. In support thereof, the undersigned has executed the Investment
Representation Statement attached hereto as Exhibit A.
____________________________
(Signature)
_______________________
(Date)
6
<PAGE>
EXHIBIT 10.27
2BRIDGE
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of, March 8, 2000, between 2Bridge, a
California corporation (the "Company") and Milton Berlinksi (the "Purchaser").
WHEREAS the Purchaser is a director of the Company and the Purchaser's
participation is considered by the Company to be important for the Company's
growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Company is willing to sell to the Purchaser
and the Purchaser desires to purchase shares of Common Stock of the Company
according to the terms and conditions contained herein.
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
-------------
the Purchaser hereby agrees to purchase an aggregate of 400,000 shares of the
Company's Common Stock (the "Shares"), at the price of $3.50 per share for an
aggregate purchase price of $1,400,000.
2. Closing. The purchase and sale of the Shares shall be made in one or
-------
more closings, the first of which will take place at 10:00 a.m. on March 8,
2000, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, California, or such other place and/or other date or dates as the
Company and the Purchaser mutually agree (which time and place are designated
the "Closing"). At the Closing, the Company will deliver to the Purchaser a
certificate representing the Shares which the Purchaser is purchasing against
delivery to the Company by the Purchaser of the applicable purchase price set
forth in Section 1 herein.
3. Stop-Transfer Notices. (a) 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.
(b) 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.
4. Purchaser Representations. In connection with the purchase of the
-------------------------
Shares, the Purchaser represents to the Company the following:
(a) Investment Intent; Capacity to Protect Interests.
------------------------------------------------
<PAGE>
(i) The Purchaser is acquiring the Shares solely for his own account
for investment and not with a view to or for sale in connection with any
distribution of the Shares or any portion thereof and not with any present
intention of selling, offering to sell or otherwise disposing of or distributing
the Shares or any portion thereof in any transaction other than a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Act"). The Purchaser also represents that the entire legal and beneficial
interest of the Shares is being acquired by, and will be held for, the
Purchaser's account only, and neither in whole or in part for any other person.
(ii) The Purchaser either has a pre-existing business or personal
relationship with the Company or any of its officers, directors or controlling
persons or by reason of the Purchaser's business or financial experience, or the
business or financial experience of the Purchaser's professional advisors who
are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, could be
reasonably assumed to have the capacity to evaluate the merits and risks of an
investment in the Company and to protect the Purchaser's own interests in
connection with this transaction.
(iii) The Purchaser represents that he is an "accredited investor"
under the Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Purchaser's
prospective investment in the Company.
(b) Economic Risk. The Purchaser realizes that the acquisition of the
-------------
Shares will be a highly speculative investment and involves a high degree of
risk, and the Purchaser is able, without significantly impairing his financial
condition, to hold the Shares for an indefinite period of time and to suffer a
complete loss of the Purchaser's investment.
(c) Restricted Securities. The Purchaser understands and acknowledges
---------------------
that:
(i) the Shares have not been registered under the Act, and the
Shares must be held indefinitely unless subsequently registered under the Act or
an exemption from such registration is available (such as Rule 144);
(ii) the share certificate representing the Shares will be stamped
with the legends specified in paragraph 6 hereof; and
(iii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(d) Disposition under the Act. The Purchaser understands that the Shares
-------------------------
are restricted securities within the meaning of Rule 144 promulgated under the
Act; that the exemption from registration under Rule 144 will not be available
in any event for at least one year after the later of the date the Shares were
sold by the Company or the date the Shares were sold by an affiliate of the
Company, within the meaning of Rule 144, and even then will not be available
unless adequate information concerning the Company is then available to the
public and other terms and conditions of Rule 144 are complied with; and that
any sale of the Shares may be made only in limited amounts
-2-
<PAGE>
in accordance with such terms and conditions. There can be no assurance that the
requirements of Rule 144 will be met, or that the Shares will ever be saleable.
(e) Further Limitations on Disposition. Without in any way limiting
----------------------------------
his representations set forth above, the Purchaser further agrees that the
Purchaser shall in no event make any disposition of all or any portion of the
Shares unless and until (i) there is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement, (ii) the resale provisions of Rule
144(k) are available in the opinion of counsel to the Company or (iii) (A) the
Purchaser shall have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, (B) the Purchaser shall have furnished the
Company with an opinion of the Purchaser's counsel to the effect that such
disposition will not require registration of such stock under the Act and (C)
such opinion of the Purchaser's counsel shall have been concurred in by counsel
for the Company, and the Company shall have advised the Purchaser of such
concurrence.
5. Company Representations. In connection with its sale of the Shares,
-----------------------
the Company hereby represents and warrants to the Purchaser the following:
(a) Corporate Organization and Authority. The Company: (i) is a
------------------------------------
corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
California, and (ii) has the corporate power and authority to (A) own and
operate its properties, (B) carry on its business as now conducted and as
proposed to be conducted, (C) execute and deliver this Agreement, (D) issue and
sell the Shares hereunder, (E) carry out the provisions of this Agreement.
(b) Authorization. All action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations under this Agreement and for the
authorization, sale, issuance and delivery of the Shares has been taken. When
executed and delivered, this Agreement will constitute a legally valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable federal or state bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance or other laws or court decisions relating to
or affecting the rights of creditors generally, and such enforcement may be
limited by equitable principles of general applicability.
(c) Validity of Shares. The Shares are duly authorized and, when
------------------
issued, sold and delivered in accordance with the terms of and for the
consideration expressed in this Agreement, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws), fully-paid and non-assessable and will be free and clear
of all preemptive rights, rights of first refusal, liens, charges, restrictions,
claims and encumbrances imposed by or through the Company, except as
specifically set forth in the Articles of Incorporation of the Company (the
"Articles") or in this Agreement.
-3-
<PAGE>
(d) No Conflict with other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement will not result in any event that 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 operation of any of its assets or properties or result in any
violation of, be in conflict with, or constitute a default under: (i) any
provision of the Articles or the Company's Bylaws; (ii) any provision of any
judgment, decree or order to which the Company is a party or by which it is
found; (iii) any mortgage, indenture, license, contract, obligation or
commitment to which the Company is a party or by which it is bound; or (iv) any
statute, rule or governmental regulation applicable to the Company.
(e) Private Offering The Company agrees that neither the Company nor
----------------
anyone acting on its behalf will offer any of the Shares or any similar
securities for issuance or sale to, or solicit any offer to acquire any of the
same from, anyone in such a way as to make the issuance and sale of the Shares
subject to the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act").
(f) 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 Company's valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares or the
consummation of any other transaction contemplated hereby, except for the filing
of a Form D notice under Regulation D of the Securities Act, and any other post-
sale filings required by applicable state securities laws. The offer, sale and
issuance of the Shares in conformity with the terms of this Agreement are exempt
from the registration requirements of Section 5 of the Securities Act and from
the qualification requirements of applicable state securities laws, assuming the
accuracy of the representations and warranties of the Purchaser as set forth in
Section 4 of this Agreement.
6. Conditions of Purchaser's Obligations at Closing. The obligations of
------------------------------------------------
the Purchaser under Sections 1 and 2 of this Agreement are subject to the
fulfillment at or before the Closing of each of the following conditions, any of
which may be waived in writing by the Purchaser:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 5 of this Agreement will be true,
correct and complete on and as of the Closing with the same effect as if made on
and as of such Closing.
(b) Performance. The Company will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Company at or before the Closing.
(c) Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under all state securities or Blue Sky laws applicable to the offer
and sale of the Shares to the Purchaser.
-4-
<PAGE>
(d) Proceedings Satisfactory: Compliance Certificate. All
--------------------------------------------------
corporate and legal proceedings taken by the Company in connection with the
transactions contemplated by this Agreement and all documents and papers
relating to such transactions will be satisfactory to the Purchaser, in the
reasonable exercise of the judgment of the Purchaser.
(e) 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 (except for such
as may be properly obtained subsequent to the Closing).
7. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company under Sections 1 and 2 of this Agreement are subject to the
fulfillment at or before the Closing of each of the following conditions, any of
which may be waived in writing by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 4 will be true on and as of the
Closing with the same effect as though said representations and warranties had
been made on and as of the Closing.
(b) Performance. The Purchaser will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Purchaser at or before the Closing, including without
limitation delivery to the Company of the purchase price for the Shares as set
forth in Section 2 above.
(c) Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under the securities laws of the State of California and any other
applicable state as necessary to offer and sell the Shares to the Purchaser.
8. 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 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
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE RESTRICTED STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
-5-
<PAGE>
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
--------------------------
requested by the managing underwriters in such offering, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of or make a distribution of any capital stock of the Company
held by or on behalf of the Purchaser or beneficially owned by the Purchaser in
accordance with the rules and regulations of the Securities and Exchange
Commission for a period of up to 180 days after the effective date of the
registration statement relating to the Company's initial public offering.
10. 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, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
12. Expenses. The Company will pay reasonable fees and expenses of one
--------
special counsel to the Purchaser up to a maximum of $2,000.
13. Registration Rights. To the extent permitted by Section 1.12 under
-------------------
the Rights Agreement (as defined below), the parties agree, after the Closing,
to execute an Investors' Rights Agreement in the form of Exhibit A attached
hereto.
14. General Provisions.
------------------
(a) This Agreement shall be governed by the laws of the State of
California as they apply to contracts entered into and wholly to be performed in
such state. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any dispute, claim or controversy of any kind (including but
not limited to tort, contract and statute) arising under, in connection with, or
relating to this Agreement shall at the request of either party be resolved
exclusively by binding arbitration in, San Francisco, California in accordance
with the Commercial rules of the American Arbitration Association then in
effect. The Purchaser and the Company agree to waive any objection to personal
jurisdiction or venue in any forum located in, San Francisco, California.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
-6-
<PAGE>
(c) Any notice, demand or request required or permitted to be given by
either the Company or the 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 to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
(d) 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 Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(e) 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.
(f) Each of the parties hereto agree upon request to execute any
further documents or instruments necessary or desirable to carry out the
purposes or intent of this Agreement.
(g) Purchaser has reviewed this Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
2BRIDGE, PURCHASER:
a California corporation
By:__________________________ _______________________________
Name: Milton Berlinski
Title:
_______________________________
(Address)
_______________________________
_______________________________
-8-
<PAGE>
Exhibit 10.28
2BRIDGE
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of, March 8, 2000, between 2Bridge, a
California corporation (the "Company") and David Braunschvig (the "Purchaser").
WHEREAS the Purchaser is a director of the Company and the Purchaser's
participation is considered by the Company to be important for the Company's
growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Company is willing to sell to the Purchaser
and the Purchaser desires to purchase shares of Common Stock of the Company
according to the terms and conditions contained herein.
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and
-------------
the Purchaser hereby agrees to purchase an aggregate of 50,000 shares of the
Company's Common Stock (the "Shares"), at the price of $3.50 per share for an
aggregate purchase price of $175,000.
2. Closing. The purchase and sale of the Shares shall be made in one or
-------
more closings, the first of which will take place at 10:00 a.m. on March 8,
2000, at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, California, or such other place and/or other date or dates as the
Company and the Purchaser mutually agree (which time and place are designated
the "Closing"). At the Closing, the Company will deliver to the Purchaser a
certificate representing the Shares which the Purchaser is purchasing against
delivery to the Company by the Purchaser of the applicable purchase price set
forth in Section 1 herein.
3. Stop-Transfer Notices. (a) 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.
(b) 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.
4. Purchaser Representations. In connection with the purchase of the
-------------------------
Shares, the Purchaser represents to the Company the following:
(a) Investment Intent; Capacity to Protect Interests.
------------------------------------------------
<PAGE>
(i) The Purchaser is acquiring the Shares solely for his own
account for investment and not with a view to or for sale in connection with any
distribution of the Shares or any portion thereof and not with any present
intention of selling, offering to sell or otherwise disposing of or distributing
the Shares or any portion thereof in any transaction other than a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Act"). The Purchaser also represents that the entire legal and beneficial
interest of the Shares is being acquired by, and will be held for, the
Purchaser's account only, and neither in whole or in part for any other person.
(ii) The Purchaser either has a pre-existing business or
personal relationship with the Company or any of its officers, directors or
controlling persons or by reason of the Purchaser's business or financial
experience, or the business or financial experience of the Purchaser's
professional advisors who are unaffiliated with and who are not compensated by
the Company or any affiliate or selling agent of the Company, directly or
indirectly, could be reasonably assumed to have the capacity to evaluate the
merits and risks of an investment in the Company and to protect the Purchaser's
own interests in connection with this transaction.
(iii) The Purchaser represents that he is an "accredited
investor" under the Act and has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
Purchaser's prospective investment in the Company.
(b) Economic Risk. The Purchaser realizes that the acquisition of the
-------------
Shares will be a highly speculative investment and involves a high degree of
risk, and the Purchaser is able, without significantly impairing his financial
condition, to hold the Shares for an indefinite period of time and to suffer a
complete loss of the Purchaser's investment.
(c) Restricted Securities. The Purchaser understands and acknowledges
---------------------
that:
(i) the Shares have not been registered under the Act, and the
Shares must be held indefinitely unless subsequently registered under the Act or
an exemption from such registration is available (such as Rule 144);
(ii) the share certificate representing the Shares will be
stamped with the legends specified in paragraph 6 hereof; and
(iii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(d) Disposition under the Act. The Purchaser understands that the
-------------------------
Shares are restricted securities within the meaning of Rule 144 promulgated
under the Act; that the exemption from registration under Rule 144 will not be
available in any event for at least one year after the later of the date the
Shares were sold by the Company or the date the Shares were sold by an affiliate
of the Company, within the meaning of Rule 144, and even then will not be
available unless adequate information concerning the Company is then available
to the public and other terms and conditions
-2-
<PAGE>
of Rule 144 are complied with; and that any sale of the Shares may be made only
in limited amounts in accordance with such terms and conditions. There can be no
assurance that the requirements of Rule 144 will be met, or that the Shares will
ever be saleable.
(e) Further Limitations on Disposition. Without in any way limiting
----------------------------------
his representations set forth above, the Purchaser further agrees that the
Purchaser shall in no event make any disposition of all or any portion of the
Shares unless and until (i) there is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement, (ii) the resale provisions of Rule
144(k) are available in the opinion of counsel to the Company or (iii) (A) the
Purchaser shall have notified the Company of the proposed disposition and shall
have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, (B) the Purchaser shall have furnished the
Company with an opinion of the Purchaser's counsel to the effect that such
disposition will not require registration of such stock under the Act and (C)
such opinion of the Purchaser's counsel shall have been concurred in by counsel
for the Company, and the Company shall have advised the Purchaser of such
concurrence.
5. Company Representations. In connection with its sale of the Shares,
-----------------------
the Company hereby represents and warrants to the Purchaser the following:
(a) Corporate Organization and Authority. The Company: (i) is a
------------------------------------
corporation duly organized, validly existing, authorized to exercise all its
corporate powers, rights and privileges, and in good standing in the State of
California, and (ii) has the corporate power and authority to (A) own and
operate its properties, (B) carry on its business as now conducted and as
proposed to be conducted, (C) execute and deliver this Agreement, (D) issue and
sell the Shares hereunder, (E) carry out the provisions of this Agreement.
(b) Authorization. All action on the part of the Company, its
-------------
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations under this Agreement and for the
authorization, sale, issuance and delivery of the Shares has been taken. When
executed and delivered, this Agreement will constitute a legally valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable federal or state bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance or other laws or court decisions relating to
or affecting the rights of creditors generally, and such enforcement may be
limited by equitable principles of general applicability.
(c) Validity of Shares. The Shares are duly authorized and, when
------------------
issued, sold and delivered in accordance with the terms of and for the
consideration expressed in this Agreement, will be duly and validly issued
(including, without limitation, issued in compliance with applicable federal and
state securities laws), fully-paid and non-assessable and will be free and clear
of all preemptive rights, rights of first refusal, liens, charges, restrictions,
claims and encumbrances
-3-
<PAGE>
imposed by or through the Company, except as specifically set forth in the
Articles of Incorporation of the Company (the "Articles") or in this Agreement.
(d) No Conflict with other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement will not result in any event that 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 operation of any of its assets or properties or result in any
violation of, be in conflict with, or constitute a default under: (i) any
provision of the Articles or the Company's Bylaws; (ii) any provision of any
judgment, decree or order to which the Company is a party or by which it is
found; (iii) any mortgage, indenture, license, contract, obligation or
commitment to which the Company is a party or by which it is bound; or (iv) any
statute, rule or governmental regulation applicable to the Company.
(e) Private Offering The Company agrees that neither the Company nor
----------------
anyone acting on its behalf will offer any of the Shares or any similar
securities for issuance or sale to, or solicit any offer to acquire any of the
same from, anyone in such a way as to make the issuance and sale of the Shares
subject to the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act").
(f) 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 Company's valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares or the
consummation of any other transaction contemplated hereby, except for the filing
of a Form D notice under Regulation D of the Securities Act, and any other post-
sale filings required by applicable state securities laws. The offer, sale and
issuance of the Shares in conformity with the terms of this Agreement are exempt
from the registration requirements of Section 5 of the Securities Act and from
the qualification requirements of applicable state securities laws, assuming the
accuracy of the representations and warranties of the Purchaser as set forth in
Section 4 of this Agreement.
6. Conditions of Purchaser's Obligations at Closing. The obligations of
------------------------------------------------
the Purchaser under Sections 1 and 2 of this Agreement are subject to the
fulfillment at or before the Closing of each of the following conditions, any of
which may be waived in writing by the Purchaser:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 5 of this Agreement will be true,
correct and complete on and as of the Closing with the same effect as if made on
and as of such Closing.
(b) Performance. The Company will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Company at or before the Closing.
-4-
<PAGE>
(c) Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under all state securities or Blue Sky laws applicable to the offer
and sale of the Shares to the Purchaser.
(d) Proceedings Satisfactory: Compliance Certificate. All corporate
------------------------
and legal proceedings taken by the Company in connection with the transactions
contemplated by this Agreement and all documents and papers relating to such
transactions will be satisfactory to the Purchaser, in the reasonable exercise
of the judgment of the Purchaser.
(e) 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 (except for such
as may be properly obtained subsequent to the Closing).
7. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company under Sections 1 and 2 of this Agreement are subject to the
fulfillment at or before the Closing of each of the following conditions, any of
which may be waived in writing by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 4 will be true on and as of the
Closing with the same effect as though said representations and warranties had
been made on and as of the Closing.
(b) Performance. The Purchaser will have performed or fulfilled all
-----------
agreements, obligations and conditions contained herein required to be performed
or fulfilled by the Purchaser at or before the Closing, including without
limitation delivery to the Company of the purchase price for the Shares as set
forth in Section 2 above.
(c) Blue Sky Compliance. The Company will have complied with and be
-------------------
effective under the securities laws of the State of California and any other
applicable state as necessary to offer and sell the Shares to the Purchaser.
8. 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 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
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE RESTRICTED STOCK
-5-
<PAGE>
PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS AND RIGHT
OF REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(c) Any legend required by any applicable state securities laws.
9. Market Stand-Off Agreement. The Purchaser hereby agrees, if so
--------------------------
requested by the managing underwriters in such offering, that, without the prior
written consent of such managing underwriters, the Purchaser will not offer,
sell, contract to sell, grant any option to purchase, make any short sale or
otherwise dispose of or make a distribution of any capital stock of the Company
held by or on behalf of the Purchaser or beneficially owned by the Purchaser in
accordance with the rules and regulations of the Securities and Exchange
Commission for a period of up to 180 days after the effective date of the
registration statement relating to the Company's initial public offering.
10. 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, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
11. Tax Consequences. The Purchaser has reviewed with the Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
12. Registration Rights. To the extent permitted by Section 1.12 under
-------------------
the Rights Agreement (as defined below), the parties agree, after the Closing,
to execute an Investors' Rights Agreement in the form of Exhibit A attached
hereto.
13. General Provisions.
------------------
(a) This Agreement shall be governed by the laws of the State of
California as they apply to contracts entered into and wholly to be performed in
such state. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any dispute, claim or controversy of any kind (including but not
limited to tort, contract and statute) arising under, in connection with, or
relating to this Agreement shall at the request of either party be resolved
exclusively by binding arbitration in, San Francisco, California in accordance
with the Commercial rules of the American Arbitration Association then in
effect. The Purchaser and the Company agree to waive any objection to personal
jurisdiction or venue in any
-6-
<PAGE>
forum located in, San Francisco, California. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
(c) Any notice, demand or request required or permitted to be given
by either the Company or the 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 to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
(d) 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 Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(e) 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.
(f) Each of the parties hereto agree upon request to execute any
further documents or instruments necessary or desirable to carry out the
purposes or intent of this Agreement.
(g) Purchaser has reviewed this Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
2BRIDGE, PURCHASER:
a California corporation
By: __________________________ _________________________________
Name: David Braunschvig
Title:
_________________________________
(Address)
_________________________________
_________________________________
<PAGE>
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated February 11,
2000, except for note 13, as to which the date is 2000, in the
Registration Statement (Form S-1) and the related Prospectus of 2Bridge, Inc.
for the registration of shares of its common stock.
Our audits also included the financial statement schedule of 2Bridge, Inc.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth herein.
Walnut Creek, California
March , 2000
----------------
The foregoing consent is in the form that will be signed upon the
effectiveness of the reverse stock split and approval of the certificate of
incorporation in the State of Delaware as described in Note 13 to the financial
statements.
Walnut Creek, California
March 13, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 4,860 8,817
<SECURITIES> 0 0
<RECEIVABLES> 321 2,716
<ALLOWANCES> 0 136
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,254 11,792
<PP&E> 1,241 3,245
<DEPRECIATION> 399 963
<TOTAL-ASSETS> 6,504 15,108
<CURRENT-LIABILITIES> 2,335 6,790
<BONDS> 0 0
13,414 34,170
0 0
<COMMON> 226 8,792
<OTHER-SE> (10,606) (35,159)
<TOTAL-LIABILITY-AND-EQUITY> 6,504 15,108
<SALES> 717 3,637
<TOTAL-REVENUES> 0 0
<CGS> 184 1,309
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,002 3,516
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 182 674
<INCOME-PRETAX> (7,256) (17,302)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,256) (17,302)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,256) (17,302)
<EPS-BASIC> (.84) (1.98)
<EPS-DILUTED> (0.84) (1.98)
</TABLE>
